Co-creation - Theoretical Analysis and Relevance to Business - Coursework Example

CO-CREATION Student’s Name: Institution: Value is a key concept in the current era of marketing. Gone are the days when marketing was just about creating publicity, advertising, and organization of resources towards the customer demands. The current marketing environment is composed of consumers who demand more than just quantity of products or services. Quality, safety, and convenience of such services or products also play a significant role. As such, there has been a continued rise in the number of players in different industries setting up stiff competition among firms. Challenged with market competition and realization of customer value (Fyrberg Yngfalk, 2013), therefore, many firms have effectively connected advanced research and development, design resources, and marketing activities by using value co-creation methods. Evaluating co-creation as a current issue in marketing, its relevance, application, and the relevant literature review, therefore, marks the basis of this piece. Customer value is generated throughout the business transaction continuum. That is, at the pre-purchase, purchase, and post-purchase levels (Grönroos, 2011). During these processes, customers play different roles. Co-creation grants customers a free rein environment to work with organizationprovided services and products in the creation of their own value offerings. Consumers actively participate in the generation of their personal significance, use and exchange with company’s resources (Vargo, Maglio, & Akaka, 2008).). In return, the organization’s long-standing marketing orthodoxy gains a new a shape by ensuring active interaction with next potential consumers. Instead of resisting this significant change in the locus of market value creation, major firms have shown positive response embracing the shift and seeking to manage consumer freedoms as a step to tap into consumers' productive capabilities. Theoretical Analysis and Relevance to Business Touted as one of the current issues in marketing propelling significant shifts in today’s business thinking, co-creation provides a reference frame for realizing significant business and marketing objective of value creation. Co-creation is premised on the conception that value-creation is realized through collective efforts a firm and its potential customers (Bharti, Agrawal, & Sharma, 2015). Both the customers and the company in question must show a willingness to work together in a co-creative business relationship. Therefore, integrating this business and marketing strategy require an enterprise to rethink its business model. Rather seeing customers as mere consumers and end users of products and services offered, a business must seek to create a strong rapport with consumers in a mutual relationship. Usually, this is achieved by the companies actively empowering consumers to participate in business process modeling by assuming the roles of innovative collaborators in the chain of production. Co-creation, thus, spotlights two important aspects of business networking: consumer-business relationship and consumer-consumer interaction. These relationships define the locus of value co-creation in marketing. Visioning and defining what the consumers will demand in the market is no longer a sole responsibility a business (Liljedal, 2016). Customer value is achieved jointly through the efforts of a business and its consumers. The customers air their demand packages, provide information they feel would helpful in meeting their demands while at the same time participating in the continuous manufacturing process (Vargo & Lusch. 2009). The role of the business is, therefore, to ensure there are sufficient resources within reach of their customers. With this, the spirit of collaboration in doing business is achieved enabling the company in question to manage ardent competitive advantage against its potential competitors. As much as there are several kinds of literaturespotlighting this turn of events in the contemporary business and marketing world with the advent of co-creation, its key causes are also discussed in many writings. Westergren (2011), for instance, attributes co-creation to a combination of such factors as rapidly changing market variables, increased business competition among industries, the convergence of technology, and ubiquitous connectivity. Further, consumer demands have currently taken a new twist. Consumers, today, are moving towards value realization. Only businesses that are capable of meeting their value standards find grounds to survive and thrive (Gronroos & Ravald, 2011). They realize superior organizational performance through increased consumer purchases and subscriptions for services they are offering in markets. Those who are unable to cope are edged or phased out of business since they lack the ability to attract and maintain consumers and subscribers of their services. Patently, this stems from the fact that consumers are information seekers (Fyrberg Yngfalk, 2013). They only resort to services, products or businesses that are willing and able to satisfy their needs at a given time. Co-creation is based on the flow of information between the business and the consumers. Therefore, there is a persistent need for both the consumers and the company in question to hold continuous dialogues to enable each side to assess the best choices or options available to them. For mutual benefit of both parties, however, transparency has to prevail (Kohtamäki & Rajala, 2016). The marketing company has to exclusively disclose to its potential consumers the lines of products and services in which it deals plus any information it deems essential for its mutual relationship with the consumers. Customers, on the other hands, have to be clear and honest with the company regarding what they capable of doing as well as those activities in which they can hardly participate. By granting the consumers necessary resources and information, the company in question is already in full dialogue participation (Lambert & Enz, 2012). It is then the role of the customer to re-work the resources based on their personal propositions out of the company’s orbit. The summation of this collaborative effort is can more beneficial that what a business can realize as a sole operant in the business scene. Therefore, from this theoretical analysis, it is clear that co-creation is fresh business strategy worth of embracing in the current business world. Both the consumer and business have specific roles to play. Companies must be ready to create transparent communication atmosphere where customers are heartened to be sociable, creative and active in expressing their knowledge, skills, and ability to co-creatively generate value. More on co-creation will be spotlighted on the subsequent section: a literature review. Literature Review There are a lot to picture on the topic of co-creation. Clearly, it has been a controversial subject for many literary writings. This section, therefore, aims to bring some of the famous literature regarding value co-creation as an emergent issue within the marketing practice. Over ten articles and journals have been review with regard to theconception of the topic and funder mental like customer roles, customer value, and customer integration or interaction. Conception: The notion value co-creation in marketing has attracted and continues to attract the attention of different scholars from various disciplines. Since 2004, different scholars and research institutes have attempted to conceptualize this controversial business topic: co-creation (Prahalad & Ramaswamy, 2004; Kohtamäki & Rajala, 2016; Vargo & Lusch, 2004). Prahalad and Ramaswamy (2004), for instance, define value co-creation as a process of creating value through the joint effort of the company in question and the customer. Four years later, Vargo, Maglio and Akaka (2008) came up with a new conception of co-creation. They contend that value co-creation occurs when the existing resources are integrated with those available from a range service systems. In this kind of interaction, each service systems obtain resources from other related systems that may include private, internal and market-facing systems, through exchange mechanisms. Other authors who share Maglio and Akaka’s conception of value co-creation include Edvardsson, Tronvoll, and Gruber (2011), Gronroos and Ravald (2011). Lambert and Enz (2012), however, have a different stand regarding the aspect of value co-creation. They argue that value co-creation denotes a social and economic process in which players have distinguished roles that condition their perceptions and behaviors. In their view, therefore, consumers and marketing organizations act independently. There is no element of collective or joint participation in pursuit of a specific objective. However, to add onto Prahalad and Ramaswamy’s contention, Vargo (2008), note that with co-creation marketing value is achieved through customer or resource usability. That is, ‘value in use,' which is often established inimitably and phenomenologically by the beneficiary. Besides, market players are seen as ‘resource integrators’ implying that value is co-produced by players (Vargo 2008). Consumer roles: Aside from the conception of co-creation, much literature has also delved on specific roles of the market actors, especially, the customers. Kohtamäki and Rajala, (2016), for instance, base their argument on value co-contribution and relationship shared between customer and organization to identify major roles of customers in the game of co-creation as co-producer, buyer, co-developer, and user. The buyer role is performed by consumers who market the producer’s resources by providing feedback after purchase and use. As co-developers, consumers endeavor to promote the service provider’s capabilities. With the co-producer role, however, the service providers or producers grant the customers opportunity to participate in co-production and service delivery. Apart from the authors mentioned above, some other researchers have also actively contributed in the identification customer roles in the co-creation marketing process. Yang, Chiang and Cheng (2014), for instance, identify five consumer roles as a self-reliant customizer, technology-savvy networker, bargain-hunting independent, engaged problem solver, and comprehensive help seeker. As self-reliant customizers, consumers enjoy seeking customized services and consider the search as a significant test. As a technology-savvy networker, however, a consumer depends on the personal ability to intermingle with others to provide opinions helpful business adjustment or network setting in an organization (Yang, Chiang &Cheng, 2014). In the engaged problem solver role, the consumer shows a positive will to cooperate with service clerks who treat them problem solvers as they can easily identify the weakness and strengths of the service being provided. In relation to other researchers work on the same subject, Park and Lee (2015) also come up with three consumer roles in the customer-to-customer interrelation between strangers: reactive helper, help seeker, and pro-active helper. As help seeker consumers aggressively looks for vital information and assistance from immediate parties. The reactive helper and pro-active helper are two types of help-seeker reactions. The former offers advice to the organization on request, whereas the latter actively provides unsolicited advice even without request. Customer Interaction: Co-creation provide a level ground for the participation of all market actors. Consumers are viewed as resources (Vargo, Maglio, & Akaka, 2008). Significant to this contention is a study by Prahalad and Ramaswamy (2004) which found out that service providing firms often strive to transform consumers from a “dormant audience” to “active business players” as a way to create and maintain a strong competitive advantage in the market. Two years later, another study established that involving customers in marketing chains enables a business to generate new resources helpful in co-creating new products and services (Golfetto & Gibbert, 2006). As the authors put it, this process involves idea generation, product support, product testing as well as service process improvement. Liljedal (2016) also maintains that engaging potential consumers in a co-creative market exploration not only provide a business with timely information but also shortens the time it would take to market a product. Customer participation is, therefore, seen to eliminate many forms of market uncertainties like user demands and negative market response (Bharti, Agrawal, & Sharma, 2015). Evidently, these are achieved by strengthening the feedback loops production and consumption cycles (Edvardsson, Tronvoll & Gruber, 2011). Lately, Vargo and Lusch (2008)observed the consumer as a value co-creator (operant resource) and not a value consumer (“operand” resource). On the same note, Gronroos and Ravald (2011)assert participation, loyalty and cooperation of consumers build on customer voluntary performance (CVP). According to these researchers, CVP is a flexible client reaction or behavior that may assist a firm to provide quality services. The behavior may in forms of complaints or compliments. However, what matters the most is how the firm would incorporate it in designing a business or marketing strategy. Customer Value: Most con-creation studies discuss customer value from the angle of origin. For instance, the ancient good-dominant logic siders contend that value emanates from five sources. That is, value-in-exchange, value-in-facilities, value-in-transaction, value-in-transformation, and value-in-distribution (Yang, Chiang & Cheng, 2014)). For the service-dominant logic siders, however, customer value originate from one particular source which is value-in-use (Vargo & Lusch, 2008). Based on these findings, therefore, numerous customer value can be singled out based on the industry of business operation. A clear example is the cigarette industry in which Park and Lee (2015) identify five major forms of customer value as a social value, emotional value, conditional value and epistemic value. In relation, Lambert and Enz (2012) also distinguishes four types of customer value in business as cost or sacrifice value, experiential or hedonistic value, functional or instrumental value, and symbolic or expressive value. Based on this literature, customer value can be understood as a dynamic construct with both extrinsic and intrinsic elements. Industry Application (450) Though it is a newly thought business strategy in the current century, co-creation has been actively incorporated bya number of companies in business process modeling and also as a way marketing their products and services. Clear points in the case are the Apple Company with their Apple iPhone and the Samsung Electronics with their Application Processor (AP) chips. These two companies, therefore, centerlines the exploration of this section. Apple iPhone: With less than ten years in the smart phone market, Apple iPhone has achieved great miles in terms of customer satisfactions and sales. With the understanding that smartphone market is highly competitive with different players like Symbian, Microsoft, and Nokia staking their market interest, Apple decided to make their products and services more consumer-friendly through co-creation marketing. For so long, this company has adhered to co-creation business principles. Consumers are often invited in the co-production process as by participating creation and merchandising Apple applications. Through the iPhone site together with the Apple App Store consumers are usually actively encouraged to use the company’s advanced technologies to create values that befit their interest. The App Store provides a central point in which the company’s mobile App co-developers display their products. Currently, the Apple App Store has almost 90, 000 third party applications offered freely or charged at lower prices which are convenient to the consumers (Grönroos, 2011). With this interface, therefore, consumers can freely add software to their devices to enhance their experience or improve the value they retrieve using iPhone devices. Significant to the company, however, is the fact that it has been able to outstrip most of the players in smartphone market through the application of co-creation business approach and ensuring customer value. Samsung Electronics Ltd: Samsung is one of the primary players inSmartphone Application Processor (AP) market. The company also provide a wide range of electronic equipment like TV sets, tablets, refrigerators, and mobile phones. Though the electronic industry has been actively competitive, Samsung has successfully applied co-creation strategy to find its ways through a cloud of many business rivals like Techno and Qualcomm Incorporated. The company creates customer value through consumer website from which they receive customer feedback on the services they are offering in the market. Usually, this provides the company with a clue on possible areas of re-adjustments, thus, improving customer experience with their products. Another way through which the company has actively incorporated consumers into their business process modeling is continuous innovation and release of Electronics and Applications Processors based on the consumers’ needs. Criticisms Regardless of being widely accepted a new line of thinking in the contemporary business scene, co-creation leaves a number of questions unanswered (Cova, Dalli & Zwick, 2011). For instance, one would wish to understand what the state of affairs would be like when the roles of producers and those of the consumers remain blurred. According to the recent evaluation by Vargo and Lusch (2011), co-creation approach creates a picture in which both companies in question (producers) and their potential customers are busily value creating and service providing which is deeply unrealistic. In ideal situations, it very rare for consumers and producers to participate in a co-creative process at the same time because of many reasons. First, like other people in the society, consumers of a particular product or service may also have other activities or chores to which they have to attend. Helping another organization or persons find pleasure in their own dealings may not concern them so much. Instead, they weigh options available to them to see those companies that are already well-positioned to serve their interest. Second, regardless of the claim that co-creation approach is often premised on the transparency of both actors, this, however, may not be the case. Obviously, the suppliers may be unlikely to trust the consumers’ with their resources in co-production because they doubt the capability of their customers in the production process (Cova, Dalli, & Zwick, 2011). Thus, with this conception, the co-creation process is unlikely to be a success. In another argument by market scientist, Edvardsson, Tronvoll and Gruber (2011), co-creation is critiqued from the angle of company-generated ambiances. Although it is conceivable that a company using the co-creation approach always strive to create a sociable, technical and cultural environment for sharing knowledge, skills, and information with consumers, there is no one-size-fits-all technique for creating this kind of environment (Edvardsson, Tronvoll &Gruber, 2011). Consequently, as some companies will be a position to facilitate co-creation, others are unlikely to make it. Implication for Australian and Other World Businesses For Australian and other world businesses, co-creation hints numerous aspects in regards to marketing, product development, customer satisfaction and creating competitive advantage. With regard to marketing, businesses must understand that their potential customers are eagerly waiting for the release of new products. Because of this enthusiasm, the cost of marketing is likely to reduce as much expensive marketing strategies are not necessary. Further, due to active customer-company and customer-to-customer interactions, the speed of market penetration and expansion for a newly produced product is likely to be hastened to make marketing an easy process. With new product development, the implication is that a company that has embraced co-creation a stands a higher chance of reducing the cost of research and development. Obtaining information directly from consumers is efficient and less costly than using traditional R&D methods (Vargo & Lusch, 2011). However, to benefit effectively from co-creation, firms must be ready to be transparent with their prospective consumers. In addition to transparency, co-creation gives an implication that customer satisfaction plays a significant role in business success. Thus, a business must strive to obtain new customer while retaining the old ones by creating a favorable environment in which they are allowed to actively participate in value co-creation by providing information, expressing their thoughts and skills the manufacturing process. Co-creation, thus, rings a new bell for businesses in the contemporary. It unearths the fact that consumers are, indeed, important players in business process modeling. Apart from providing significant data, they come in as co-creators and innovators of business strategies by expressing their knowledge and skills. These constructs are helpful in forming a formidable competitive advantage in highly contested markets. As mentioned earlier, APPLE and SAMSUNG are some of the companies that have successfully employed co-creation technique in managing their consumers. As such, it is important for businesses operating in the contemporary society to realize the significance of their consumers by actively integrating them in the process modeling through co-creation. References Bharti, K., Agrawal, R., & Sharma, V. (2015). Value co-creation. International Journal Of Market Research, 57(4), 571-603. doi:10.2501/IJMR-2015-000 Cova, B., Dalli, D., & Zwick, D. (2011). Critical perspectives on consumers’ role as ‘producers’: Broadening the debate on value co-creation in marketing processes. Marketing Theory, 11(3), 231-241. Edvardsson, B., Tronvoll, B. & Gruber, T. (2011) Expanding understanding of service exchange and value co-creation: a social construction approach. Journal of the Academy of Marketing Science, 39, 2, pp. 327-339. Fyrberg Yngfalk, A. (2013). ‘It’s not us, it’s them!’ – Rethinking value co-creation among multiple actors. Journal Of Marketing Management, 29(9-10), 1163-1181. doi:10.1080/0267257X.2013.79631 Golfetto, F., & Gibbert, M. 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