LIST OF ABBREVIATIONS
CHAPTER 1: INTRODUCTION
2.4. Value Co-Creation in Academic Literature
61 empirical approach.
With respect to the aim of the present research, the reason why SDL is significant to the development of a value capture framework is because the notion of co-creation is closely related with the customer’s role as a value creator. In addition to that, a research gap related to the specific platforms needed to support the collaborative interactions between customers and business organizations was identified in the above discussion. Therefore, the present research attempts to bridge this gap by a study of the interconnections between SDL, VCC and value capture through specific social media, with a focus on the development of a strategic framework for VCC through social media.
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relationships to produce the interaction as presented by Vargo and Lush (2007). Over the past decade, most research in marketing has emphasized the role of organizations as service providers, establishing a widely held view that service is the way of “reconceptualization and repositioning”
(Vargo & Lusch 2016) the organization which acknowledges the customer’s influence on economic change that enriches the markets. It also drives a provision for the organization to become more customer centric. However, research also acknowledges that the organization plays an important role in the discussion of SDL, since they can improve their market stature only they are capable of capturing this value.
While VCC is suggested through the service logic literature, Grönroos (2012) clarifies co-creation as a direct channel of interactions between co-creator (customer) and the organization, with the organization maintaining control over the integration of the data acquired. In addition, phenomenological characteristics mean that the service experience is "internal, subjective, event- specific, and context-specific" in the customer's daily life (Helkkula & Kelleher 2010, p.37). In addition, Meyer and Schwager (2007) point out that while service experiences may be based on internal experiences, they need to be associated with direct experiences in which service providers and customers interact directly. Therefore, we define indirect use experience as an experience that does not interact directly with the service provider and the customer. Some of the indirect outlets are corporate advertising, news reporting, commentary, and electronic word-of- mouth (Meyer &
Schwager 2007). Therefore, although a customer of the Experience Service is part of the service phenomenon, the customer may not be in direct contact with the service provider. For example, one customer may be affected by being informed of another customer's experience, which means that the customer may also be indirectly using the service (Helkkula & Kelleher 2010). Therefore, the indirect experience that still exists in the customer's daily life should include the analytical
63 service experience and value creation.
While value co-creation may not be new, what is new is the increase in the possibilities brought by the internet. In the past, value co-creation needed to be done in the same place and at the same time, such as the retail shopper had to be physically in the store to be helped by a sales person, which no longer applies, with shopping platforms such as Amazon freeing such exchange from the constraints of both time and space. International trade that formerly required letters of credit and time-consuming customs clearance can now use Automatic Clearing House (ACH) transactions that make payment instantaneous with service providers, such as FedEx, clearing customs while shipments are in the air. Hence, it is no longer true that people need to be in the same room at the same time in order to co- create value. Technology has freed co-creation from constrains of time and space to anytime anywhere co-creation of value.
While the graph of published research on co-creation from 2004 to 2014 below demonstrates the interest in the concept of VCC and its impact on SDL strategic thinking has been a topic of research for a decade longer (Figure 2.5).
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Figure 2. 5: Published Research on Co-Creation from 2004 to 2014(Adopted from Gummesson, Kuusela and Närvänen (2014)
The events regarding the conceptual evolution begin with the publication of Czepiel (1990) in which the author suggests that customer's participation may lead to greater customer satisfaction.
Furthermore, Kelley et al. (1990) propose that quality, emotional responses and employee’s performance are another way to view customer participation. The evolution continues with the publication by Normann and Ramirez (1993) in which the researchers note that successful companies focus on a value-creating system more than on themselves or even their industry.
Furthermore, Venkatesh et al. (1998) introduce the concept of “customerization” as a form of buyer-centric mass-customization, while explicitly stating for the first time that it would enable consumers to act as a co-producer. The aforementioned authors emphasize the important role of the customer as an actor in the value creation process, which contradicts the prior marketing views.
Nevertheless, Schrage (1995) argues that not all customers have the same capacity to bring some kind of knowledge to the organization. On a similar note, Bendapudi and Leone (2003) later conclude that "the assumption of greater customization under co-production may hold only when the customer has the expertise," however. This critique of the new focus on the customer provides a different viewpoint that the business organizations need to consider when devising their marketing efforts.
In two articles, Kambil, Ginsberg and Bloch (1996) and Kambil, Friesen and Sundaram (1999) ultimately phrase the term "co-creation". The first, "Reinventing Value Propositions", they presented the concept of co-creation as a strategy supporting the transformation of value propositions from working with customers or complementary resources. The latter, "co-creation:
a new source of value" presented co-creation as an important source of value enabled by the
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internet and analyzed what risks companies should consider when utilizing this strategy.
In the line of the evolution, the theoretical understanding of the customer’s role in the value creation process is enhanced through more detailed studies. In this respect, Bendapudi and Leone (2003) found that the first academic literature concerning "customer participation in production"
dates back to 1979. In addition to that, Prahalad and Ramaswamy (2004) popularized the concept of co-creation. In their book “The future of competition”, they further defined co-creation as the
"joint creation of value by the company and the customer; allowing the customer to co-construct the service experience to suit their context". At the same time, Vargo and Lush (2004a) introduced their "service-dominant logic" of marketing, with one of its "foundational premises" being "the customer is always a co- producer". According to the SDL strategy concept, value creation was now wholly the result of a collaborative production process involving customers. More than a decade later, Sjödin et al. (2019) present the contrasting view that the concept of value creation should not be a manufacturing process that customers control on their own. Conceptually, SDL describes service as “in its own right where the process of one actor using its resources for the benefit of another” (Vargo & Lusch 2008). A customer’s role is not only for purchasing the goods or services and consuming, but also to contribute to the organization through their experience. It is important that the information gathered from sharing experience is used to produce a better response in the market - ideas, feedback, recommendations; but the challenge is to improve the customer’s best interest. Social media enables the key survival for most organization to be informed with their customer virtually.
Furthermore, Kalaignanam and Varadarajan (2006) made the first analysis of the implications of advancing information technology as it applied to co-creation, stating that developments in IT considerably support the co-creation process. Another important contribution to this evolution is
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provided by Grönroos (2012) who regarded the idea of utility-oriented co-creation as a dominant value principle. The author took over the lead in marketing literature further stating that during the purchase process, value is balanced at one stage, according to the previous definition of value.
Another key finding of Grönroos (2012) is that the value of use changes throughout the life-cycle of the product. Moreover, Saarijarvi and Hannu (2013) found that value co-creation is not only a key concept in service marketing and organizational management, but also a concept that is often described as a shift in the definition of value. In the same vein, Ind and Coates (2013) point out that this participatory phase creates meaning for individuals and organizations together. This understanding emphasizes the fundamental role of VCC in the marketing knowledge and practice.
There were also some disagreements among several authors, with some defining value as a concept, while others did not. Hence, the concept of Saarijarvi and Hannu (2013) is very important as a holistic approach that can be used in future research projects. Additionally, the next year Saarijarvi and Hannu (2013) said the organization's role is to ensure that the value creation process supports the customer, integrates the right customer resources, and provides the right mechanism such that resource integration is enabled.
A continuing concern is that regardless of the value creation mechanism in place, managers should carefully evaluate whether it is appropriate to integrate customer resources into the organization’s customer value proposition. Aligning additional customer resources with the organization’s processes should always be considered a strategic issue and is closely related to the customer value the company is putting to the market.
There is also an abundance of co-creative research, with differing points of view. The majority of scholars look at the co-creation of service theory and innovation research from the perspective of service science (Saarijarvi & Hannu 2013). Service science is a term introduced by IBM (2011)
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with an interdisciplinary approach to the study, design and implementation of service systems, where specific arrangements for people and technology take action to add value to each other.
Services are the only means by which value can be transferred and enable customers to take advantage of their organizational skills, and co-creation is an essential part of the theory, as cooperation enables access to suppliers and beneficial markets (Vargo & Lusch 2004b). In a separate research, Vargo and Akaka (2009) also maintain that all economies have become service economies and that competitive advantage is based on all social and economic entities that become resource integrators. In fact, organizations cannot provide value, but only value solutions that customers are always interested in as value creators.
The co-creation method adds an additional macro perspective to explain how co-creation occurs within different systems. The service perspective also depends on the difference between the customer service philosophy and the service provider philosophy. Within the framework of day- to-day operations and value-building procedures, customers are responsible for creating value by combining their resources with suppliers. This allows the provider to create value as long as the customer can participate in the value creation activities of the provider (Grönroos 2011).
Researchers have explored the aspects of what could be termed virtual innovation, where technology enables customers to participate in the creation of value creators (Gustafsson, Kristensson & Witell 2012) and discussed how co-creation activities, such as innovations, relate to co-creation. Similarly, Singaraju et al. (2016) refers to value co-creation as an innovation that takes place not only in the activities of the organization, but also in the co-creation of self- employed organizations, where people and communities, even if they voluntarily create value- added work, are funded by the organization as a forum. The customer’s new role in these processes is defined by Bourdreau and Couillard (1999), where the customer/employee is considered the
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primary source of value and is responsible for creating value. These new customers are neither partners nor co- producers, but unnamed resources whose work benefits other customers and ultimately gain market advantage. Shamim and Ghazali (2014) note that while customers are motivated by co-creation activities businesses are engaged in productive activities.
Conversely, Waseem, Biggemann and Garry (2017) argue that customers decide whether and when to interact with brands interact, and also point out that the customer’s participation is not entirely neutral, but rather stems from the notion that the customers’ interests benefit even if financial reasoning does not always inspire these causes (Healy & McDonagh 2013). Hence, simple feedback or interaction with the organization makes sense. Brodie et al. (2011) argue that the focus should be on the discovery of the creative process itself, especially in the process of interaction (Healy & McDonagh 2013). Customer engagement is the secret to this engagement and innovation experience.
Ultimately, co-creation and relationships bring together a set of participants that focus on the relationships between the organization and its customers, whether it is between the organization and business, business-to-business (B2B), or the organization and its end customer (B2C), and that the benefits that these relationships can bring in value-added resources and benefits. Cheung and To (2016) point out that value creation between organizations is the result of the development of relations, and Bourdreau and Couillard (1999) further proposed to include not only participants in the vendor network, but to extend the network to stakeholders.
For these authors, the lack of advantage for B2B suppliers is to create value within the customer network. In terms of B2C relationships, Payne and Holt (1999) believes that the experience of relationships with brands is critical to co-creating and managing brand experiences, emphasizing the need for customer support to create experiences through emotional stimulation, awareness, and
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the promotion of communication of action to achieve the process.
Pathak, Ashok and Tan (2021) suggest a framework for value co-creation based on four specific groups of factors – customer context, organizational context, technology context and environmental context or C-O-T-E, which result in diverse forms of co-creation – co-creation of ideas, co-design, co-research, co-marketing and feedback loop, which are leading to co-conception for competition (Figure 2.6). Co-conception of competition is understood at the deep constructive relationship between the organization and its customers which leads to advancement of the organizational capabilities and offering, which allows the business organization to evolve and strengthen its competitive power (Frow et al. 2015). Even though the C-O-T-E framework is empirically validated in the context of service industries, its main limitation is that it is developed from B2B perspective.
Figure 2. 6: Value Co-Creation Framework(Pathak, Ashok & Tan 2021, p. 19) 2.4.2. Types of Co-Creation
Understanding the different types of co-creation is important to understanding the different roles that co-creation plays, with how customers and organizations work together determining the type
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of co-creation. Past researchers have argued that co-creation is not just about building customer relationships but focuses on the active participation of customers and user-generated content (Hollebeek & Macky 2019; Lusch & Nambisan 2015; Muntinga, Moorman & Smit 2011). Brodie et al. (2013) highlight the importance of user-generated content and active participation in social media.
The importance of social media has become ever more obvious, allowing customers to create, modify, access, and link content to support the creation of experience value, a common idea is a way for customers to come up with innovative ideas that can help an organization gain a competitive advantage (Cabiddu, De Carlo & Piccoli 2014). Today, with the incorporation of two- way real or virtual communication between organizations and their customers, the ability to tailor products to their needs in a collaborative design is a reality (Payne, Storbacka & Frow 2008).
In addition to product customization, there are numerous other applications found within the customer digital platform arena. Co-production is where customers and organizations work together to produce products and services, and aims to reduce prices by engaging customers in the organization processes (Saarijarvi & Hannu 2013). In contrast, co-promotion as a way a customer participates in an organization’s promotional activities through a partnership with an organization (Payne, Storbacka & Frow 2008). Furthermore, co-pricing is where customers and organizations make pricing decisions together while co-distribution is evident when customers work with the organization to distribute products (Payne, Storbacka & Frow 2008).
Without question, research shows that co-creation can be a source of value; new value that can be gained by transferring ideas, knowledge, information and experience from one actor to another.
Therefore, the mechanisms that can be used to assess the value of common experiences are an important area of research in the context of online co-creation.
71 2.4.3. Co-Creation and Social Media
By definition, social media refers to “web-based and mobile technologies that allow the creation and generation of user-generated content” (Choi, Seo & Yoon 2017). Kaplan and Haenlein (2010) describe social media as “a group of internet-based applications based on the ideological and technical basis of Web 2.0”. At the same time, Cabiddu, De Carlo and Piccoli (2014) calls social media a mobile phone or browser app that allows users to “create, edit, access, and link content with others.” Some typical examples of social media are blogs, wikis and social networks.
Similarly, social media is the medium for effective communication and collaboration between organizations and individual customers (Rathore, Ilavarasan & Dwivedi 2016). Moreover, social media has an impact on business models in which integrating such technologies enhances organizational capabilities and provides greater opportunities for interacting with customers (Guha, Harrigan & Soutar 2017). The advantages of using social networks also allow organizations to remain in their “physical worlds” while continuing to interact with virtual worlds (Nambisan 2002). Curran and Lennon (2011) also recommend that that organizations include social media in all of their functions.
Conceptually, social media is a platform for providing communication assistance to users from different backgrounds, experiences and values (Abeza et al. 2017). However, because most social media platforms today adopt an open concept, it can affect how organizations get value (Cheung et al. 2020). The implementation of the social media is opening new opportunities for business organizations to effectively include their clients in the value co-creation activities (Martini et al 2014). Clearly, customers are the main players in creating value in social media. Though, this may provide different levels of personal interpretation based on personal experience that encourages
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value creation on social media. However, Lepak, Smith and Taylor (2007) explain that that value creation depends on how much “value” an individual user contributes. Customers with different backgrounds, knowledge and even experience in social media may stay in touch for longer. In addition, new content creates a way to develop new value that organizations can use and prepare (Culnan, McHugh & Zubillaga 2010). From a co- creation perspective, social media ensures that users not only generate content, but also share personal insights into products and services.
It is useful to draw attention to how co-creation platforms actually work. As an example, take Apple Inc., a well-known brand in the field of communications technology. Apple is introducing a platform through content applications that allows customers to develop their own applications.
Ramaswamy and Gouillart (2014) further explain Apple’s partnership with potential developers to participate in creating communities and brainstorming, in a book called “The Power of Co- Creation.” It allows developers to share their information with designated teams, personalize interactions with specific topics of interest, and analyze the user experience. Using their own skills, knowledge and design, they can develop their own applications and submit them to Apple (Ramaswamy & Gouillart 2014). Based on the value of using value and exchanging value creation experience, it is possible to address and identify current trends and generate new ideas and new adventures through their personal experience. In this sense, the customer becomes a developer.
ThinkLab, InnovationLab, and Ideation platforms are also common examples of creative paradigm-based designs. It represents the internal media operating under the “oversight”
organization. When compared to other social media platforms such as Facebook and Twitter, they are the basis of marketing. As creation, participants are customers who understand the organization’s products and services, have knowledge, and are interested in being part of the community. As a result, customers in online platforms and co-creation activities (Zwass 2010)