3.1 Innovation Through Customer Involvement
Travel and tourism businesses operate in a sphere of increased competitiveness globally. Intensified global competition, fluctuations in tourism demand and the increase of customer expectations capture some of the most powerful business
challenges at present (Williams, 2012). To address these developments, businesses are forced to identify new means of developing competitive advantage (Walls, Okumus, Wang, & Kwun, 2011). This is particularly true for tourism firms which due to the dynamic and fast changing nature of tourism, are required to innovate at an accelerated pace (Zach, Gretzel, & Xiang, 2010). Exploring new ways of innovation has thus become an imperative.
The term innovation represents a complex concept with numerous definitional approaches contributing to its meaning. Generally it can be described as a process that introduces an idea to a problem that is perceived as new in a specific context. As such, it can be understood as the generation or implementation of new ideas, processes or services (Hjalager, 2010). Due to its complexity, the existing literature differentiates multiple levels, types and categories of innovation. For instance, it can range from radical innovation, introducing entirely new products and services, towards minor and incremental innovation, indicating an adaptation of pre-existing services (Ottenbacher
& Harrington, 2010). Moreover, Hjalager (2010) emphasises the need to distinguish between product and service innovation, process innovation, managerial, management and institutional innovation.
Innovation has been established in production-dominant sectors, such as finance, transport and telecommunications (De Jong & Vermeulen, 2003), while innovation in the service sector has been lagging behind (Droege, Hildebrand, & Heras Forcada, 2009). This is also the case for tourism, an industry in which innovation efforts have been described as rather slow (Pikkemaat & Peters, 2006) in spite of their importance (Hjalager, 2010; Shaw, Bailey, & Williams, 2011; Zach et al., 2010). In recent years, it has become more important than ever before for tourism businesses to innovate
effectively, as tourism offers and destination choices proliferate on a global scale (Hjalager, 2002; Ritchie & Crouch, 2003). However only more recently, the concept of innovation has received increasing attention, particularly in the field of new service development (Fitzsimmons & Fitzsimmons, 2000; Sigala, 2012b). In this growing body of literature, one of the key suggestions is the need for a proactive market orientation (Sanden, 2007) and a shift towards interaction-dense services (Ottenbacher &
Harrington, 2010).
In this vein, the notions of customer centricity, empowerment and involvement have been highlighted as main driving forces of the new service development (Sigala, 2012b). New service orientation is about putting the consumer in the centre and being
proactive by recognising consumers and addressing their needs before they emerge (Ramaswamy, 2009a). These developments have led to the wider acknowledgement of consumers and marked the beginning of a new paradigm in marketing, one that focuses on consumer centricity as a means to foster innovation, competitive advantage and growth (Shaw et al., 2011; Sigala, 2012a).
3.2 Customer Empowerment and the Rise of the Consumer
In today’s society, consumers are more empowered than ever before. In the late 1990s, people have shifted from merely buying manufactured products and services towards a growing pursuit of interactive consumption experiences (Morgan, Lugosi, & Ritchie, 2010). In services and tourism marketing, the concepts of the experience economy have long provided a valuable vehicle to design, stage and deliver experiences to
consumers, while fostering economic value and competitive advantage. Traditionally, the creation of services and experiences has been inspired by the underlying economic interest of how to increase turnover by selling experiences as new de-materialised commodities (Darmer & Sundbo, 2008; Stamboulis & Skayannis, 2003). However, the industrialisation, economic values and capitalist thinking primarily drove the business-focal perspective of producing experiences for consumers. With a radical shift in company-consumer relationships, the experience economy has therefore been raised to question, as an approach that does not sufficiently reflect the needs and wants of
contemporary consumers (Boswijk, Thijssen, & Peelen, 2007).
In the past decade, society has undergone a transformation towards the centricity of individuals and their human experiences in quest for personal growth (Prahalad &
Ramaswamy, 2004). This has led to the emergence of a ‘prosumer society’ recognising consumers as being actively involved, not only in the consumption but also in the
production of products, services and experiences (Ritzer & Jurgenson, 2010). This novel mind-set has especially been fostered by Prahalad and Ramaswamy (2004) who argue that consumers want to have a say in co-shaping their own experiences. They expect a sense of balance between themselves and the provider, who traditionally was the sole experience stager (Binkhorst, 2006; Ramaswamy & Gouillart, 2008). By doing so, consumers have become prosumers, protagonists, post-consumers or consum-actors actively involved in the entire value chain.
Consumers use their new power to share their opinions, complain, negotiate, endorse, interact and co-create experiences (Cova & Dalli, 2009). This means that the roles of companies and consumers are no longer distinct (Ramaswamy, 2011). The new principles of customer involvement foster consumers as empowered individuals to collaborate as a resource in processes traditionally performed by the company.
Consumers want to contribute with their own resources, which allow them to transform a simple service encounter into an experience (Cova & Dalli, 2009). In this changed paradigm, the consumer as an individual, rather than the company, is regarded as the
starting point (Sanden, 2007) and the central element driving the co-creation process (Binkhorst & Den Dekker, 2009).
3.3 Customer Centricity and the Co-creation Paradigm
The increased consumer involvement has opened a new era in marketing, widely acknowledged as the co-creation paradigm. Co-creation describes a collective and collaborative process, a joint value creation between the company and the consumer (Cova & Dalli, 2009; Payne, Storbacka, & Frow, 2008; Prahalad & Ramaswamy, 2004; Vargo & Lusch, 2006; Xie, Bagozzi, & Troye, 2008). While Prahalad and
Ramaswamy (2004) were among the first to introduce the notion of co-creation. A wide body of literature has contributed to advancing the theoretical foundations and current understanding of experience co-creation (Binkhorst & Den Dekker, 2009; Edvardsson, Enquist, & Johnston, 2005; Huang & Hsu, 2010; Payne et al., 2008; Prahalad &
Ramaswamy, 2004; Ramaswamy, 2009a, 2009b, 2011; Ramaswamy & Gouillart, 2008;
Vargo & Lusch, 2004). These studies have analysed the diverse roles of consumers in the consumption, production and interaction with businesses and have added to a more differentiated view of the concept.
In contributing to the wider debate on this paradigm, recent work has produced a wealth of terminologies, extending and refining co-creation. For instance, scholars have conceptualised prosumption (Ritzer & Jurgenson, 2010), co-creation (Prahalad &
Ramaswamy, 2004), co-production (Etgar, 2008), service-dominant logic (Vargo &
Lusch, 2004), customer-to-customer co-creation (Huang & Hsu, 2010), crowdsourcing (Geiger, Rosemann, & Fielt, 2011) as well as the notions of working consumers,
collaborative innovation, consumer agency and consumer tribes (Cova & Dalli, 2009).
Despite the emergence of new literature in the field, existing terminologies are rather fluid, often used interchangeably, while clear differentiations and boundaries between single concepts are difficult to define (Chathoth, Altinay, Harrington, Okumus, & Chan, 2013). Therefore, the following section aims to provide an overview to the reader of the dominant concepts to allow for a more differentiated understanding of co-creation processes. Next, the three concepts of crowdsourcing, co-production and co-creation are assessed.
3.3.1 Customer Involvement Process: Crowdsourcing
Crowdsourcing has been defined as a term that embraces a number of approaches based on the integration of a large and open crowd of people (Geiger et al., 2011). While the principal idea of crowdsourcing has existed for a long time, the term has only been coined in 2006 when it has emerged as a popular concept in numerous industries.
Crowdsourcing can be described as an activity, traditionally company-led, that is now outsourced to a wider crowd, by openly calling individuals to participate (Geiger et al., 2011). Drawing upon the involvement of consumers it is a “crowd of people who
help solve a problem that is defined by the system owners” (Doan, Ramakrishnan, &
Halevy, 2011).
The crowd thus consists of people who are undefined or preselected, representing one large network of people who, to different extents, make an integrative and
aggregated contribution to a defined purpose or goal (Howe, 2006). With the rise of the Web 2.0, crowdsourcing has reached its peak of application by opening numerous involvement processes, such as crowd wisdom and collective intelligence, user generated content, crowd voting and crowdfunding initiatives (Howe, 2006).
Crowdsourcing has become an effective means for companies to outsource processes, which traditionally occurred internally, to a crowd of individuals aimed at performing specific goals.
3.3.2 Customer Involvement Process: Co-production
Co-production has become a widely used term, reflecting the notion of customer involvement (Chathoth et al., 2013). Co-production has been recognised as a key mechanism between companies and consumers in exchange (Bitner, Faranda, Hubbert,
& Zeithaml, 1997) and defined as an interactive nature of services (Yen, Gwinner, &
Su, 2004). Co-production has been applied in numerous industries, in which customers have become participants of service encounters, such as hairdressing, consultation or education. Essentially, co-production practices require the consumer to be physically present to receive the service, while being asked to provide information that is used to deliver the service more effectively (Yen et al., 2004). Co-production is thus a
company-centric approach of customer involvement (Payne et al., 2008), in which the company retains the main role, while consumers are offered a limited choice in
contributing to a pre-designed service bundle (Chathoth et al., 2013).
Examples in tourism include hotel personalisation, where customers can choose from a selection of defined options, such as pillows, meals or newspapers to best fit their personal needs and preferences. This approach allows for a-priori definitions of what “suits needs of what is available”, while latent needs of consumers remain unmet.
For instance, if a hotel offers hard and soft pillows, the hotel does not find
idiosyncratic needs but only knows the customer’s favourite choice of the available (Chathoth et al., 2013). As much potential of real consumer involvement is missed in co-production, co-creation allows for a more bottom-up approach.
3.3.3 Customer Involvement Process: Co-creation
In today’s economy, companies and consumers are collaborating more and more (Romero & Molina, 2011). Co-creation is a customer-centric approach based on the principles of putting consumers first and recognising them as the starting point of experience and value creation (Vargo & Lusch, 2004). Co-creation, based on the underlying premise of value-in-use in the service dominant logic (S-D logic), suggests
that experiences and value are created with the consumer rather than for the consumer (Vargo & Lusch, 2004). The concept is built on two main foundations as it (a) involves the consumer’s participation in the creation of the core offering and (b) “value can only be created with and determined by the user in the ‘consumption’ process and through use” (Vargo & Lusch, 2006, p. 284).
This means that value does not automatically exist in products and services, but for value to emerge, experiences need to be co-created by consumers themselves (Payne et al., 2008). As a result, co-creation goes beyond co-production, which partially ignores the real potential of consumers, and recognises them as the main actor of co-creation.
Moreover, due to the impact of ICTs, consumers are more connected than ever before.
This has led to the emergence of co-creation as a collective, collaborative and dynamic process that occurs not only between companies and consumers but also among
connected consumer communities and stakeholders (Baron & Harris, 2010; Baron &
Warnaby, 2011; Huang & Hsu, 2010).
In outlining the main principles of crowdsourcing, co-production and co-creation, several key differences can be highlighted. Co-creation takes co-production one step further in that it allows for a predominantly consumer-centric approach. It not only facilitates dual company-consumer co-creation but also enables co-creation outside the company domain. In contrast to crowdsourcing, which serves a particular company purpose, co-creation puts the individual consumer in experience and value creation first. Crowdsourcing is distinct in that it mainly focuses on the collective rather than the individual, whereas co-production and co-creation primarily focus on the individual’s involvement in and value of the service and experience creation. The increasing
proliferation of ICTs has thereby played a key role. Technology has contributed to transforming the level of customer involvement in product and service development and the integration of consumers as a key resource in innovation processes. It is with this premise in mind that the chapter now turns to discuss innovation through technology-facilitated co-creation. Having reviewed the theoretical developments of different consumer involvement processes, the next section interlinks technology and co-creation and explores how it can be effectively used as a source of innovation and competitive advantage in the tourism and hospitality industry.