Co-Creation: Implementation Strategies and Success Factors

I

2013

In fulfillment of qualifications for the Masters of Arts in MarketingSYLVAIN NAJJAR, MATRIKEL-NR. 299002

HWR BERLIN | Advisors: Carl-Heinz Moritz & Martin Dastig

Table of contents

1. Introduction.......................................................................................12. Contextual background.....................................................................4

2.1. Literature contributions and adjacent notions..............................................4

2.1.1. Literature review...................................................................................4

2.1.2. Neighboring concepts............................................................................6

2.2. Competitive landscape.................................................................................8

2.3. Ideological change.......................................................................................9

2.2.1. Traditional view of value creation.........................................................9

2.2.2. Co-creation approach to value creation...............................................11

2.4. Inherent advantages...................................................................................12

3. A customer-centric concept.............................................................153.1. Participant's motivation..............................................................................15

3.2. Co-creation implementation.......................................................................17

3.2.1. Before launch......................................................................................18

3.2.2. After launch.........................................................................................24

3.3. Customer loyalty........................................................................................30

3.3.1. Customer experience as the focus of co-creation.................................30

3.3.2. Empirical data.....................................................................................32

4. Success factors................................................................................344.1. Prior conditions..........................................................................................35

4.2. Challenges and risks..................................................................................37

4.3. Guidelines for the implementation.............................................................39

4.3.1. Project-related considerations..............................................................40

4.3.2. The bigger picture...............................................................................42

5. Conclusion.......................................................................................48References...........................................................................................51

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Table of figures

Figure 1 Customer database information categories.............................................15

Figure 2 The four dimensions of participant motives...........................................17

Figure 3 Stages of interactive value creation........................................................19

Figure 4 Weight-loss drugs sales during their first quarter (USA)........................34

III

1. Introduction

In this day and age, expectations of people have changed. Smart, connected and

more careful potential customers not only make more informed and researched

purchasing decisions, but are no longer satisfied by conventional approaches most

firms are following. People are aware of the current techniques of brand

communication and see through the sneaky tendencies of marketing, which leads

to the dismissal of commercial messages. They wish the companies acknowledge

their existence as intelligent and mature consumers who appreciate being listened

to and given the opportunity to express their creativity. Being involved in what is

created for them would cater to these aspirations. Meanwhile, firms are always

looking for new strategies that could be a source of sustainable growth, but they

struggle to connect with what their customers value. Client’s needs and desires

should lead the way of the market launches, not technology (Bhalla 2010, p.84).

Enterprises that no longer see their customers as passive recipients of internally

developed offerings have understood the importance of engaging the clients in

activities that create additional value for both parties. This emergence of co-

creation as a business practice leads to blurred limits between production and

consumption as people have the opportunity to participate in the development of

future offerings.

Co-creation has been discussed in the literature, but scholars don’t agree on a

clear definition of the concept yet. Therefore, we will develop our own definition.

Co-creation is the creation of mutual value that results from the voluntary

interaction and cooperation with or between customers, employees, partners,

vendors, suppliers or other stakeholders of an organization that leads to

compelling experiences, in an environment orchestrated by the organization. Most

co-creation measures are implemented at one or several stages of the product

development cycle, that range from the idea generation phase to customer support

after the offering has been launched. The intentional use of the term organization

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instead of firm intends to explain that co-creation measures can also be

implemented by NGO or government agencies. This definition also implies that

the organization initiates the co-creation, which is producer-led co-creation, as

opposed to consumer-led co-creation. In this paper, “co-creation” will always

refer to producer-led co-creation. The term collaboration will be used

interchangeably with co-creation. The research field of the paper is the co-creation

initiated by for-profit companies with end customers or potential customers in the

business-to-consumer market.

The following three research questions will guide the paper.

- How can co-creation be implemented at the different stages of the value

creation chain ? Based on an adapted process of value creation, the

opportunities firms have to experiment with collaboration are going to be

identified and highlighted.

- Why can this concept be used to increase customer loyalty ? The reasons

that make co-creation an opportunity to be a part of the marketing strategy

will be conveyed.

- What are the success factors involved in notable implementations of co-

creation ? Through the analysis of case studies, recurring factors that lead

to the success of collaborative measures have been observed.

Even though some short and basic tips are mentioned when the context is

appropriate, the paper does not intended to give organizational advice on how to

open internal processes and how to adapt the organizational structure. In this

regard, most research done on the topic of open innovation applies. The same is

true for the implementation of communication to convey a new philosophy

throughout the firm.

The next chapter will provide some background on the economy in which co-

creation originated and on the concept itself. First, a literature review will show

what has already been established in relation to the co-creation principle.

Concepts that are close to co-creation, but differ in some ways, will also be

detailed. Next, an overview of the current competitive landscape will show in

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which circumstances companies compete with each other and lead to why firms

should consider the implementation of collaborative measures. Because a co-

creation approach to value creation considerably differs from the traditional view

of the enterprise and the client’s role on the market, both points of view are going

to be elaborated. The resulting contrast will provide a better understanding of the

collaborative ideology that will be referred to occasionally. The last part of

chapter 2 draws the main advantages that co-creation entails from a non-customer

centric perspective.

Chapter 3 focuses on the implementation of co-creation. After an overview of the

two different types of motives behind participant’s motivation for taking part in

collaborative measures, implementation examples for each of the identified stages

of the value creation process will be presented. The objective is to insist on the

fact that all these phases offer collaborative opportunities. As the amount of

information is considerable, this part has been divided in two. The separation is

based on when the involvement of the customers takes place; before or after the

release of the offering. How co-creation leads to customer loyalty and as a

consequence can be part of a marketing strategy, is detailed in the last part of the

chapter. Empirical data will follow to highlight the returns that can be expected if

co-creation measures are tactfully implemented.

The next chapter is about formulating recommendations for companies, which

resulted from the analysis of 35 case studies. Common design considerations for

projects, which tend to lead to the success of the collaboration were worked out. It

was found to be essential in the context of this paper to develop the prior

conditions to be fulfilled within the firm. Without them, co-creation doesn’t have

a solid foundation. Even if all detailed guidelines are respected, the project will

likely fail due to the oversight of these crucial prerequisites. Furthermore,

challenges and risks that enterprises can face with co-creation are mentioned and

illustrated with examples, in order to lay the ground for the guidelines.

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2. Contextual background

An overview of the current literature regarding co-creation will show what has

been the focus of researches in the last years and how the concept has evolved.

The following part will describe the competitive landscape that urges enterprises

to find sustainable competitive advantages while looking for new ways for

differentiating themselves. A potential answer to these concerns that is hard to be

imitate, is co-creation. Thereafter, the core principle of co-creation will be

contrasted with the traditional view of value creation to underline how co-creative

firms have a different theoretical approach to value creation. In conclusion, some

of the main advantages of the implementation of collaborative measures from an

internal business perspective are going to be outlined in order to have an

understating of companies’ motivations.

2.1. Literature contributions and adjacent notions

2.1.1. Literature review

Co-creation was first mentioned in 1999 by Kambil and associates. Their

definition of the idea was follows: “engaging customers directly in the production

or distribution of value” (Kambil et al. 1999, p. 40). While this definition can be

seen as quite narrow because of the absence of other stakeholders like employees

and suppliers, it is nonetheless still relevant today. The theme was further

developed by Prahalad and Ramaswamy in 2004 in their book The Future of

Competition. Their main contribution is to have stressed the customer-centric

purpose of co-creation, namely the creation of “unique customer experiences”.

The authors observe that customer experience is central to value creation, strategy

and innovation. Interaction are defined as a prerequisite for co-creation to

occur. Co-creation is defined as “the practice of developing systems, products, or

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services through collaboration with customers, managers, employees, and other

stakeholders”. This is applicable to the private and the public sector.

In 2007, the book Wikinomics by Tapscott and Williams underlines the crucial

role of the internet as an enabling tool for collaboration across networks of

stakeholders, especially since the web 2.0 era, with platforms like chat rooms,

wikis, blogs, peer-to-peer networks, forums, social networks and podcasts. The

terminologies peer production and mass collaboration are used to describe the

collaborations that take place. Other authors use the terminology interactive value

creation to describe this idea (Piller/Reichwald 2009, p. 107). However in the

book, some examples illustrate how the web enables new business opportunities,

without necessarily collaborating with customers. According to the authors’

implications, the firm’s perspective is to outsource labor globally and therefore

primarily use co-creative measures to cut costs, as in most cases participants will

not be compensated for their contributions.

Building on The Future of Competition by also insisting on the customer

experience, Ramaswamy and Gouillart publish The Power of Co-Creation in

2010. They analyze in what way mutual value is obtained by both the client and

the company at different points of interaction in various platforms designed

around the customer experience. This publication encourages firms to create entire

network of suppliers, partners, employees and customers for collaboration. The

authors also stress the importance of the interactions among people inside and

outside of the company, because they lead to the generation of insights, learning

and innovation. The publication mentions that co-creation has implications for

supply chain management and human resources management as well, and repeats

that it can be used by NGOs and governments too. The book explores how to

transform companies from inside in a managerial perspective.

These books have demonstrated that through better awareness, better information

and more creativity, customers are empowered. Communication technologies

enables them to not only consume, but co-create by interacting with companies.

The implications of this change will be further examined in this chapter (2.3).

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However, the current literature fails to identify the different stages in the value

creation process that can be used to implement collaborative measures. We

elaborate what implementation strategies can be orchestrated at every phase.

Prerequisites and extended success factors have also yet to be thoroughly

identified.

2.1.2. Neighboring concepts

In the introduction, a definition of co-creation has been formulated. However, the

concept it often mixed up with neighboring terms and used as a synonym. The

purpose of this part is not to formulate comprehensive definitions or give credit to

the researches behind these other concepts but rather to explain the difference

between co-creation and these other ideas to ensure that the co-creation concept is

understood the way it has been intended to.

Companies using open innovation opened up their innovation process to

collaborators outside the company, like suppliers or customers, and work together

to find new applications. Co-creation is very similar in ideology and therefore,

some research done for open innovation applies to co-creation as well. However,

it differs in two major ways. First, co-created offerings don’t have to be

innovations. The collaborative way in which the offering is created might be

innovative, but the offering in itself does not have to be. Second, co-creation has a

focus on the experience of the participants and implementation measures are (or

should be) designed accordingly.

User innovation refers to people that modify current offerings or create new

products or substances to answer their particular need and do so without the

assistance of a firm (Financial Times Lexicon). Therefore, user innovations can be

created without any form of team effort. Their original intent is not to sell an idea

to a producer, but to create something that they need for themselves, because it

does not exist otherwise. The mountain biking industry originated this way in the

70s (Bhalla 2010, p. 7). Early users were the producers and the customers of their

own creation. Today, it has become a $100 billion global industry. A key

difference with co-creation, is that user innovation is user-driven while with co-

creation, the firm is the one initiating the collaboration.

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Crowdsourcing is an open call for solutions to a specific problem intended to

volunteers. The word is a combination of outsourcing and crowd. The tasks that

have once been executed by employees are being outsourced for financial or

creative reasons. Under certain conditions, crowdsourcing is an example of a co-

creative measure. If the company uses it to engage its customers in order to create

a relationship and if the participants’ experience has been carefully considered,

then it is collaboration. However, in the majority of instances this is not the case.

The Amazon Mechanical Turk is a suiting example. It’s a platform where

enterprises can posts little jobs (HITs for Human Intelligence Tasks) that

computers can’t do, like transcoding audio into text, attribute keywords to

pictures, or fill out short descriptions for videos. On average, these tasks are

compensated less than half a dollar for an hour worth of work. No interactions

take place. There is an impersonal one-sided flow of information from the

participant to the firm. No offering is being created based on a firm-customer

collaboration. This extreme case illustrates the wide range of application scenarios

for crowdsourcing, not all of which are co-creation measures.

Large number of people working together, but independently, on a single project,

is called mass collaboration. The projects are divided into smaller tasks, so that

participants can work in parallel without having to wait for each other. Open

source initiatives fall under this category. The project can be outsourced to by a

private company. In co-creation measures, customers interact, but rarely work

with each other on ambitious projects. In addition, no actual content has to be

created with co-creation, as the concept focuses on perceived value.

Dialog marketing uses measures that try to make the prospect react to the ad he or

she sees, by including a means of contacting the company. This can be an internet

address, a flyer that encourages to share the home and Email address or a phone

number. The manifestation of the prospect is called direct response. In dialog

marketing, no actual conversation is taking place between the company and its

customers. The information the firm collects on its customers enables it to

concentrate on showing only ads, sending magazines or coupons that are relevant

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to the customer, based on past purchases and geographical profiling data. This

individualized approach doesn’t offer the opportunity for an in depth exchange to

take place yet alone include the client in some operations. After having been

occupied with the subject of co-creation, seeing dialog marketing being defined as

an interactive communication with the target group surprises.

2.2. Competitive landscapeThe gradual removal of trade barriers and the development of transport and

communication technologies has facilitated international trade which in turn led to

the economic globalization. A wider range of products are offered to better

educated and more resourceful consumers (Bhalla 2010, p. 4) that have the tools

to easily compare prices and inform themselves. They are also making purchasing

decisions in markets opened to all companies regardless of their location. This

increases the price awareness of clients. As a considerable number of offerings are

interchangeable today because of how standardized products have become on a

global scale, the competition is fierce. This trend is facilitated by, the development

of adapted shipping logistics and the reduction of customs barriers (Business

Dictionary). The abundance of consumer choice resulting from it is producing

stress and dissatisfaction, as it increases the effort that goes into making a decision

(Schwartz 2005, p. 44). Information overload due to constant advertisement

messages, which is caused by the fact that companies can reach their target

customers wherever they are, doesn’t help (Kreutzer 2009, p. 16).

However, globalization is still beneficial to both parties involved in exchanges,

consumers and companies. Nevertheless, within this competitive environment

companies are becoming more vulnerable. To increase profits and gain market

share, organizations strive to have a solid knowledge of the competitive landscape

in which they operate in. They have to identify the business and products of their

rivals, the way they are handling their industry challenges and how customers

perceive them. Understanding the competitors who are offering similar products

or services, having a knowledge about customer’s behavior and their own

knowledge about the offerings is important to gain a competitive edge (Koch

2009). This observation, as business intelligence, is a conventional tool to stay

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updated on the market outlook and hopefully gain market share by leveraging the

observed trends.

Despite this knowledge, companies are always searching for sustainable

competitive advantages to assure their long term success and profitability, like

exclusive co-creation opportunities offered that are designed with the expectation

of the customers in mind and that contribute to their experience with the firm

(Ramaswamy/Gouillart 2010, p. 7). A differentiation based on a Unique Selling

Proposition (USP) is becoming obsolete, as the offerings in most product

categories are nearly, if not, identical (Kreutzer 2009, p. 158). This makes the

quest for a USP hard to achieve. A new concept has emerged to give companies

another way to be noticed and find new customers. The Unique Passion

Proposition (UPP) sees the employees as the major differentiation factor. They

become the agent in charge of deploying the company spirit and act according to

certain principles. Co-creation can be the idea that drives the firm’s passion. It is

not only a group of measures, but a philosophy. Employees can use every

interaction with customers, for instance call centers, to further develop co-creation

experiences and ideas that clients might have, in linking them with the product

development teams (Ramaswamy/Gouillart 2010, p. 57). Clients will notice how

serious and determined the organization and its employees are in offering them an

exclusive and integrated experience. Any doubts that tend to appear in the buying

process are likely to be reduced after observing that they are dealing with a

passion-driven firm (Kreutzer 2008, p.51). Facts and figures about the offering, as

often seen in USPs, don’t have the same reassuring effect. Non-monetary benefits,

like the relationship a company and its employees have with their customers

through co-creation measures, cannot be easily imitated by the competition. As a

consequence, they are a more sustainable differentiation.

2.3. Ideological change

2.2.1. Traditional view of value creation

For a lot of companies, value creation takes place inside the firm. Companies’ in-

house R&D departments work exclusively internally on a concept, based on their

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own talents, knowledge, capabilities and on input obtained through conventional

market research. The producer produces the offering and the clients buy and

consume it. Clients and producers are different economic entities. These

customers are to be found on the marketplace, therefore outside the firm, where

the offering is delivered in its final form. Clients have little choice but to accept it.

The firm decides which product or service to launch and thereafter design what

they think is of value to the customer, presumably with thoughts like “Nobody

knows more about our business than we do” and “What can our customers tell us

that we don’t already know” (Bhalla 2010, p. 117). In consequence, the value

creation process is closed. For instance, potential customers don’t get to

participate in the promotion of the offering. Rather, they only get to see the one-

way advertisement aimed at them.

In other words, from a traditional firm-centric mind-set, customers are mostly

passive in the process of value creation. Firms spend time and money researching,

observing and segmenting the market, in order to target people with their offering.

The resulting product is what drives the firm’s business, not the customer. The

interaction is limited to focus groups or surveys, which isn’t meaningful to the

customer and doesn’t contribute to enhance his experience with the firm. Another

common interaction scenario are the customer touch points that companies

establish. These have been created from an organizational perspective and are

often insufficient at providing long term relevance for clients

(Ramaswamy/Gouillart 2010, p. 6).

The striving for operative efficiency inside a network, which is part of the

traditional view of value creation, isn’t a sustainable competitive advantage

(Piller/Reichwald 2009, p.108). Companies have been starting to realize that they

no longer have the monopoly on resources or ideas (Bhalla 2010, p. 10), as well as

the potential advantages to no longer view clients and other stakeholders as

passive receivers of their products or services. One of these advantages is to know

the customer’s exceptions, an area in which managers have struggled with in the

past (Kreutzer/Merkle 2008, p. 57).

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2.2.2. Co-creation approach to value creation

Co-creation is a customer-centric approach to value creation. From a co-creation

perspective, the value becomes based on human experiences rather than features.

This leads to the decentralization of value creation, because clients play a role in

defining and delivering this value instead of just receiving the offering. As a

consequence, the value proposition is no longer unilaterally defined by the firm

(Ramaswamy/Gouillart 2010, p. 5). The clients’ interactions with the company go

beyond the conventional exchange of goods and services on a market connecting

buyers and sellers, as they become involved in the design and delivery of their

experience. Markets become ecosystems where clients and enterprises interact and

connect with each other in order to co-create value. A new role of companies is to

set up infrastructures and environments where the producer and the customer meet

to collaborate. The barrier between production and consumption gets less obvious,

as clients can become both the producer and the consumer of the offering. So the

value is partly generated by the participants, now seen as partners

(Schildhauer/Voss 2009, p. 261), which leads to offerings that emphasizes on their

actual needs.

Furthermore, the interaction itself that aims at creating value, is of additional

value because the interaction process and platform can provide a pleasant

experience (Prahalad/Ramaswamy 2004a, p. 10). The value is not a function of

product attributes and features (Vargo/Lusch 2004, p. 1). It rather focuses on the

co-creation of value through deeper relationships. People are no longer seen as

buying either goods or services, but products that provide value that depends on

their customer experience, which can be enhanced with co-creation (Roser T. et

al. 2009). The value cannot independently be created by the firm, as it markets the

offering with customers and not to them, in order to cater to their “dynamic needs”

(Vargo/Lusch 2004, p. 6). Clients become a valuable resource in this market-

driven approach.

The focus is on co-creating value by listening and engaging customers.

Considering this approach requires a change in the way enterprises think and

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behave and a transformation of the culture within the company in regard to

conceiving, designing and executing value (Ramaswamy/Gouillart 2010, p. 21).

Without the entire firm, preferably starting with the CEO, supporting the

transformation necessitated for the implementation of a co-creation spirit, returns

on collaborative measures are likely to be poor (Bhalla 2010, p. 117), for reasons

detailed in chapter 4.

2.4. Inherent advantagesBefore analyzing the advantages of co-creation on a customer level, let’s highlight

the main perks of this philosophy from a business perspective. One benefit of co-

creation which is the competitive advantage, which is by definition hard to

imitate, has been discussed in the competitive landscape earlier in this chapter

(2.2).

The most apparent reason is the new access to an inestimable innovation potential

due to the increased number of sources that are able to participate in this process.

Furthermore, the collaboration enables synergy effects like the cross-fertilization

of generated ideas through shared knowledge (Roser T. et al. 2009, p.13). The

finding of an innovative idea has a higher chance of occurring with more regular

and deeper conversations between co-creators from diverse backgrounds. As

Ramaswamy and Gouillart put it, “engaging minds in collaboration generate

creative solutions even the smartest minds alone may not find”

(Ramaswamy/Gouillart 2010, p. 30). The collective intelligence (Roschek 2009,

p. 382) of participants should be viewed as a key asset. Rich qualitative insights

may lead to opportunities they might not have been identified without listening to

customers discussing with the firm and among themselves. Improving the quality

of customer insights is a top priority for CEOs and CMOs (Deloitte 2010). Of

course, this information needs to be transferred to the relevant departments to act

upon it. In this aspect, co-creation measures that involve clients giving an opinion

and participating in the development of the offering, can be a complement to

classic market research. The identification of these yet unanswered needs and the

12

fact that the organization is looking at hundreds of ideas instead of several,

accelerates innovation.

Another considerable advantage is the reduction of the business risk. The success

of a product or service considerably depends on its ability to fulfill client’s wishes

and needs (Steinhoff 2009, p. 345). When using co-creation methods, the firm

knows what customers will think of the product that is in development. Ideally,

they have at least been involved in the idea selection phase or in the testing phase.

Thanks to their different perspective and experiences, their feedback and opinions

help to eliminate projects that wouldn’t have been relevant to them. The company

avoids making poor decisions based on their idea of the market rather than reality

(Steinhoff 2009, p. 352). The resulting product incorporates the tweaks that have

been implanted thanks to the insights and concerns that have been detected by

customers before the final completion of the project. The offering has a higher

chance of being accepted on the market by the target group, because participants

from this target group addressed the main potential issues before the launch

(Walcher 2009, p. 141, Brecht 2009 p. 314, Ramaswamy/Gouillart 2010, p. 173).

Co-creation can lead enterprises to collect valuable data and have a deep

knowledge of their clients and by extension of their target group, including

preferences and needs (Helfrich 2009, p. 370). Firms should strive to construct a

detailed and up to date customer database for customer service, market research

and dialog marketing reasons. It should at least contain the address, the reaction

data and marketing measures information (Kreutzer 2009, p.64). The content of

these categories can be seen in figure 1. This database is ideally available and

editable at every customer touch point, to ensure good relationship tracking and

active requests monitoring. This enables the development of more relevant dialog

marketing campaigns and targeted new co-creation incentives, on the basis of the

client’s data. Exploiting this database leads to be selective as all clients are not

being treated equally. Clients, analyzed as being of great value for the firm,

should be considered more carefully and paid more attention to. This translates

into individually targeted highly relevant material and a higher willingness to

compromise. Treating customers differently is recommended (Kreutzer 2009, p.

13

46), as it enables the company to select the most loyal and involved clients for

activities like exclusive meetings or testing of an offering not yet available on the

market. It can in turn mobilize the attention of all customers, as the attendees

share their experience on social media platforms or blogs.

14

FIGURE 1 CUSTOMER DATABASE INFORMATION CATEGORIES1

1 Based on Kreutzer 2009, p. 64

15

3. A customer-centric concept

Reviewing the different factors that motivate customers to collaborate with firms

will lead to better understand them when designing co-creation measures. In the

following part, implementation concepts based on case studies will provide some

application possibilities of co-creative initiatives at different stages of the value

creation process and beyond. Finally, the influence of co-creation on customer

loyalty will make clear that it can be used as part of a marketing strategy.

3.1. Participant's motivation

The motivation of participants is an important aspect of co-creation

(Piller/Reichwald 2009, p.112). Why do people take part in co-creation measures?

After all, they are giving away potentially valuable information often without any

compensation. Customers will only participate in the process if they gain

something from it. Let’s go through the factors that lead clients to be part of

collaborative measures. This will lay the ground to understand what has to be

considered in the design of co-creation concepts.

Studies undertaken in the field of Web 2.0 show that customers are interested in

being asked about their opinion (Kreutzer 2009, p. 215). They have often an

unfulfilled desire of being heard and to collaborate (Ramaswamy/Gouillart 2010,

p. 30, Bhalla 2010, p. 5). This feeling is accentuated when they don’t find the

company’s offering convincing. Clients are even generally willing to engage with

the firms or brands that matter to them and are glad when they are offered the

opportunity to participate by using their knowledge and creativity

(Piller/Reichwald 2009, p.107, Schildhauer/Voss 2009, p. 261, Bhalla 2010, p.

10). Understanding the client at both rational and emotional levels is key to the

design of co-creation measures (Bhalla 2010, p. 43). If they are treated with

regards to certain conditions (detailed in chapter 4), participants will not feel

exploited. The will to participate has different roots, which are not exclusive from

one to another. The motivation of participants can have an extrinsic or intrinsic

origin. The consultancy company Promise, based in London, further identifies two

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sub-segments, which leads to four categories. The table below (figure 2)

summarizes them.

FIGURE 2 THE FOUR DIMENSIONS OF PARTICIPANT MOTIVES2

Self-orientation Other orientation

Extrinsic Material rewards Recognition

Intrinsic Enjoyment Altruism

Customers who are motivated extrinsically will participate in co-creative

measures to have a chance of winning a material reward, such as goods or money.

Their relationship to the company can be influenced with prizes, which makes

their loyalty volatile. To sustain their interest, periods without the opportunity to

co-create with the organization and obtain rewards should be limited. If we take

into consideration the relation that the extrinsically motivated customer has to

other clients, his contributions can also be originated in the desire to enhance his

reputation and his status, by letting people see that he is the author of several ideas

that have been selected for implementation. American apparel company

Threadless’ co-creation implementation illustrates both the “self-orientation” and

the “other orientation” of extrinsic motivation (Piller/Reichwald 2009, p.112). The

firm produces T-shirts designed by end-users. Every week, a design contests takes

place on its website. Out of 900 weekly submissions, the three designs that have

the most visitor’s votes are selected and produced by the company. On the online

platform, clients have the possibility to leave comments in order to give feedback

like improvement suggestions to the submitter, to allow for tweaks before the end

of the week. The prize for having its design produced is 3 000$. Besides this

material reward, the intangible benefit (“other orientation” category) is the

identity construction within a community. Artists for instance, that have designed

several successful T-shirts can show their acclaim when, for instance, looking for

a position in a creative agency. Another application could include the picture,

name, screen name and a short biography of a customer whose idea gave birth to a

new product on the packaging of a co-created product. Yet another way to

facilitate personal recognition is by having the recently evaluated and accepted

ideas and their authors on the home page of the engagement platform.2 Based on Roser et al. 2009, p. 17

17

Intrinsically motivated participants are favorable for long-term interest and

creativity as they tend to perform better and are less opportunist (Schattke/Kehr

2009, p. 132, Walcher 2009, p. 152). Their participation in collaborative projects

is to be associated with their genuine interest in the product category or industry

and its development, as well as their enjoyment of learning and sharing their

knowledge through co-creation experiences. They spend time participating,

because they value interacting with the firm and meeting other customers that like

the same products or services that matter to them and not because of possible

material rewards. Having the opportunity to be heard, to exercise their creativity

and to have fun in the completion of a task is fulfilling and satisfying to them

(Schattke/Kehr 2009, p. 124). The execution of a task itself is rewarding. In some

cases, even the opportunity in itself to co-create is enough of an incentive for the

customer to participate (Bhalla 2010, p. 95). This enthusiastic behavior can be

traced back to the client’s identification with the brand (Walcher 2009, p. 153).

Brands possess material and intangible assets. The material aspect are the

products, and intangible assets are values associated to it. The higher the

customer’s identification with the brand and its values is, the higher the chance he

will participate. In regard of the orientation to others, these participants like to be

helpful to others and to feel they belong to a group that share common interests.

Intrinsically motivated participation is more sustainable (Zerfaß/Möslein 2009, p.

420).

3.2. Co-creation implementationAn early question enterprises must think about is at what stage of the value

creation process (figure 3) they would like to implement collaborative measures.

To illustrate in what way co-creation measures can be implemented in each and

every one of these stages, case studies are presented. Some companies will appear

in two different stager or more, because they implemented collaborative measures

at more than one phase of the process, which is exemplary, as co-creation isn’t an

isolated measure. Dialog with potential consumers all along the value creation

process is a key to success (Brecht 2009, p. 315).

18

FIGURE 3 STAGES OF INTERACTIVE VALUE CREATION3

3.2.1. Before launch

Idea generation: In order to improve the existing offering or find ideas for new

products or services, the mind of the customers can be tapped. They are offered

the opportunity to formulate ideas for the business and, in case of idea

competitions, win praises if their input is selected to be implemented. Whether the

registered ideas are open for other clients to see and evaluate or whether they go

directly to an internal team to judge on pre-established criteria is up to the

company. The open approach is favorable in the context of co-creation, because

customers not only interact with the company, but also between themselves,

which leads to the fine tuning of ideas based on peer feedback and to the creation

of a community around the brand. Furthermore, popular ideas quickly emerge and

their feasibility can be analyzed in priority. Communities are groups who are like-

minded, share common interests and come together around ideas (Lithium 2012).

In today’s technology-enabled world, thousands of people meet in virtual spaces

and have conversation about what they are passionate about. If they work together

to achieve an objective, they can been referred to as collaborative communities.

Based on numerous case studies, this stage of the value creation process seems to

be the most used by companies starting to open up their processes to outside

contributors, possibly because its implementation requires limited efforts in

comparison to involving customer at later stages of the process as well. However,

only a limited number of idea generation projects go beyond the sourcing of ideas.

Idea generation measures like creative workshops or feedback sessions with

experts, lead users or customers (Steinhoff 2009, p. 349), and online platforms,

3 Based on Roser et al. 2009, p. 16

19

must be part of a bigger plan for collaborative interactions in order to provide

customers with meaningful interactions.

German coffee retailer Tchibo is an example of the implementation of co-creation

in the idea generation stage of the value creation process. Through a dedicated

website (Tchibo-ideas.de), customers can formulate ideas about anything that

would make life easier and better (Helfrich 2009, p. 372). The company and other

customers talk together about a possible solution, which can involve the creation

of a new product or service, by any inspired designer, that solves the debated issue

or need. If Tchibo sees potential in the solution, the firm cooperates with the

designer to produce the offering. In addition to a compensation of the designers’

whose ideas have been implemented (based on the number of products produced),

financial prizes are given to the ideas and solutions with the highest ratings. The

two most popular calls for a solution of all time are one about the wish that cell

phones would be more customizable before purchase on a hardware and software

level and one about the desire to be able to buy automated backscratcher. Tchibo

doesn’t only provide the platform. The company co-creates with customers when

it develops the new offering with the original designers, instead of simply taking

the idea and producing the offering internally.

American coffeehouse chain Starbucks decided to take a co-creative approach in

2008, when facing intense competition and the partial loss of its Starbucks

Experience culture due to too rapid expansion (Ramaswamy/Gouillart 2010, p.

20). This lead to the loss of some of its loyal customer base. The measure consists

in a web based platform, Mystarbucksidea.com, which enables visitors to express

their desires and remarks concerning the experience in the shops, underlining

what was currently missing in their opinion. The CEO wants customers to help the

management redefine the Starbuck Experience. Like most comparable

engagement platforms, users can see other people’s ideas, comment and vote if

they too find the idea relevant. To insist on the variety of areas in which

comments were welcome, said areas were listed on the website: ordering,

payment, pick-up, atmosphere, locations, social responsibility, community,

products, merchandising and loyalty program.

20

Several weeks after its launch, many constructive ideas were posted. Customers

suggested a new feature that the Starbucks Card should have, which would allow

it to store the client’s regular order to make the process of ordering faster. It’s

beneficial to Starbucks as well, as it means serving more customers faster.

Another request that emerged was the opportunity to send in orders by phone or

via the internet. Healthy food options was a popular idea as well, and so was

having ice cubes made out of coffee to avoid diluting the cold drinks when

melting. A team of employees, called Idea Partners, are trained to be the hosts of

the discussion, taking part of the conversations, reporting popular wishes to the

relevant departments and indicating on the platform how the customer-initiated

projects were doing, in the case they were selected for implementation. Twenty

months after the launch of this platform, 50 different ideas had been approved.

This continuous dialog enables the brand and the values associated to it to be co-

created. Customers enjoy the experience of interacting and being listened to by the

firm’s employees, and benefit from an improved experience in the store, thanks to

the implementation of client’s suggestions.

When a system to report ideas from clients to the company is in place, the

employees in charge of answering customers’ phone calls through hotlines could

be trained to do the following: When customers call to make a complaint, they

could be informed that they can use the established platform to formulate an

improvement idea based on their negative experience and thereby enter the

competition (Walcher 2009, p. 150). To further encourage them to do so, the

potential prizes can be highlighted as well.

Idea selection: In this phase, all the ideas collected are processed in order to find

the ones that have the most potential and are realizable. The firm can chose an

internal jury or a few customers for the evaluation. However, giving to everyone

the opportunity to vote through an open platform is a more common practice. In

2006, a special unit of the firm Vodafone chose the first option (Brecht 2009, p.

314). In order to evaluate ideas, about 300 customers were selected, based on

socio-demographic factors and consumption habits, like text messaging and

21

roaming. These criteria are representative of the target group that the new product

or service was aiming. The resulting data is processed to determine if the

evaluated product or service is likely to be accepted and bought. If the feedback

was more mixed than the company had hoped, improvement suggestions are

analyzed. In the case none of them solves the main worries of the clients, the idea

is abandoned and the team moves on to another one. A more open practice in this

phase would be to let customers evaluate each other’s ideas by providing them

with several criteria, for example usefulness, novelty or willingness to buy

(Steinhoff 2009, p. 349). The obtained results reflect customer preference and will

identify unanswered needs or wishes that multiple clients have. In addition, co-

creation considerably accelerates the decision-making process companies would

normally go through if online collaboration with customers didn’t take place

(Stumpp 2013).

Product development: Traditionally, customer input at American sportswear and

equipment company Nike Inc. during the processes of designing the product

would be limited to traditional market research and focus groups. In 2006,

wishing to give the opportunity to clients to co-create their products, Nike has

developed an online tool to enable customers to design their own sneakers

(Ramaswamy/Gouillart 2010, p. 18). NikeID allows them to define the size, the

style, the color of eight components of the shoe as well as to inscribe a word of

choice on the tongue of the shoe. The designs can be ordered and shared in order

to be evaluated by peers. This implementation of co-creation is called mass

customization. In addition to this online platform providing customization

options, NikeID Studio corners were established in selected Niketown retail

stores, where customers were engaged face-to-face. Clients can tell the firm what

shapes, colors and materials they value and would like to be incorporated in future

offerings. This way, Nike learns what personalization options are important to its

customers and why, while creating unique experiences for customers. Computers

logged in to the Nike ID website are also available in these corners. The

advantage of creating ones design at the shop is that the different materials can be

felt before making a decision. The same year, the company invited shoe designers

to create mock ups of soccer shoes and compete with each other. The customers

22

were the ones voting for their favorite designs. The winning mock-ups were then

produced and offered to the clients. These measures, combined with the Joga.com

platform, a social networking website created by Nike on which users can spend

time speaking about soccer, upload videos to show off their soccer skills and can

comment and rate other contributions, allowed the company to cultivate customer

relationships at multiple levels and in a way that emphasizes on their experience.

Danish toy manufacturer Lego also employs co-creation at the product

development phase. The Lego Factory (later renamed Design byMe) project in

2005 was the first co-creative measure implemented by the company

(Ramaswamy/Gouillart 2010, p. 51). It consisted of a software available free of

charge, that enabled the creative user to design a virtual Lego construction to

create the perfect product for himself. The customer could upload his design to a

dedicated gallery in order to share with other designers. For some, the virtual

conception of their ultimate toy is all the fun. For others, actually possessing what

they designed matters more. For a fee, the company offers the possibility to

produce the virtual mock-up. The designer’s picture will appeared on the

packaging. The most popular designs were being mass-produced, with credit

given to the original conceiver.

Lego’s Mindstorms robotics product line is their third co-creation implementation.

This toolkit consists of a microcomputer and snap-on bricks like accelerometer,

light, gyroscopic, infrared, ultrasonic and sound sensors. It permits customers to

build an automated and completely customized Lego robot. The robot’s function

and capabilities depends on the code that the user wrote. Concrete real-world

applications ranged from sorting machines to land rovers, or even intruder alarms.

The second generation, Lego took the co-creating approach further by opening up

its design. The firm invited enthusiasts to participate in the programming of the

new user interface (UI) of the software. The new kit included capabilities for

motion and touch and gyroscopes and accelerometers. The innovative tools

provided allow clients to articulate and discover what is of value to them. The

most precious experience enabled by the kit is the ability for customers to channel

their creative tendencies and become designers.

23

Testing & refinement: At this stage, the new offering has been created, it is usable

and but not quite ready to be implemented. Before the launch, the organization

wishes to test its product or service first, in order to be able to fine-tune it before it

is made widely available. Customers should be included in this phase, as they are

the target group and are likely to have remarks about usage scenarios that might

have been overlooked internally. This is what Vodafone did, in the same program

as their evaluation implementation (Brecht 2009, p. 314). Here too, participants

had been selected by the company, instead of asking for volunteers. A new service

was offered for a two months testing period, to stage a real-world usage. This

allowed the gathering of consumption data to assess the service’s penetration and

usage intensity, as well as the influence that it is has on the use of other already

established services. At the end of the testing period, a selection of participants

were asked for in-depth feedback and for their willingness to buy the service via

phone interviews. So the findings were based on real world usage context of

current customers. This method lead to more insights than results based on tests in

a lab or input by participants in a quantitative survey, which are examples of

conventional testing would have.

In 2007 in India, Finnish phone manufacturer company Nokia started to invite

heavy users and hackers to test upcoming mobile phone software

(Ramaswamy/Gouillart 2010, p. 60). The idea originated from the fact that

developers, no matter how thorough they are, have not the ability to predict all the

circumstances in which the device will be used. This leads to bugs that only occur

in a specific environments that cannot be reproduced when this stage happens

internally, especially considering the high number of products getting launched

every year. The selected customers were asked to make bug reports to allow the

company to identify and correct the issue. Some users ended up changing the code

of the software to repair the issue they faced themselves. After meeting with

Nokia in the firm headquarters to show their tweaking, their update of the

software was implemented in the final version. The users co-created value with

the company which led to a more stable software that benefits both parties.

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3.2.2. After launch

Commercialization: When co-creation is used in the commercialization phase of

the value creation process, customers are given the opportunity to advertise the

offering while having fun. In a lot of cases, consumer-generated advertising is a

substitute for a more traditional full-scale marketing campaign that would cost a

lot more while being less effective at differentiating itself from other

advertisement content. So called participative marketing campaigns are the middle

ground, where customers can take part in an agency orchestrated campaign.

Besides the cost factor, another reason to use co-creation at this stage of the value

creation process is that people trust peers more than they do companies. A survey

conducted in 2007 by Hitwise, an online competitive intelligence firm, shows that

MySpace, a social network that by definition is based around content generated by

users, sends more users to retail websites than MSN and Yahoo do together

(Bhalla 2010, p. 21). Getting information from actual users with actual

experiences to share is more relevant and believable for potential customers. In

the case of Threadless, the customers were not only in charge of creating and

voting on the design of the t-shirts. They were also encouraged to participate in

the promotion of the platform by taking pictures of themselves or friends wearing

Threadless T-shirts to make for an illustration in the catalog (Piller/Reichwald

2009, p. 106). This enables people with a different kind of creativity like staging a

scene for photographic purposes or editing a picture on specialized software, to

co-create just as much as the designers did.

The product Alli, launched in 2007 by the firm GlaxoSmithKline (GSK), is a

weight-loss pill that “promotes weight loss by decreasing the abortion of fat in the

intestines” (Ramaswamy/Gouillart 2010, p. 60). Before its launch, 400 overweight

people were given access to the drug for purposes detailed in the next part of this

chapter (the usage stage). Several months later, GSK launched an advertising

campaign for this product. 90 participants among the 400 early testers were

offered the opportunity to create YouTube-style videos of their story, talking

about their experience in adopting a new lifestyle, a change that is mandatory for

the product to work. Seven of them were flown over to New York for filming with

25

professionals4 (Johnsen 2007, p. 46). Segments of the seven recorded videos were

used to create 30 second television commercials. The stories could be watched in

their entirety on the Alli website. Hearing about other people’s struggles with the

same problem and seeing them talk about overcoming their difficulties is more

relevant to potential clients than any other type of the firm’s advertisement can be.

In 2006, for the second generation of the Lego Mindstorms product line, the 2.0

NXT, the firm gave selected customers, from a large pool of applicants, early

access to the next generation product (Ramaswamy/Gouillart 2010, p. 54).

Mindstorms 2.0 NXT is based on new software. Its user interface was jointly

programmed with enthusiasts. It provides a new range of sensors and motion

capabilities. Selected participants were encouraged to report their first impressions

on a message board by mentioning their experience and by uploading pictures of

their smart invention. Potential customers could see all the different applications

the kit could be used for and obtain a precise idea of the product’s true

capabilities. Conventional marketing techniques would not have made the wide

variety of possibilities offered by the offering clear, because a single team could

not have thought about so many different concepts.

Usage: In 2006, Nike introduced Nike Plus in association with Apple

(Ramaswamy/Gouillart 2010, p.8). It consists of an offering of chips containing a

wireless transmitter that communicates with the Apple device. The information

being transferred is the time, distance and average speed of customer’s run, as

well as the calories burned. If a record is broken on the usual run, a

congratulations message is played on the device. Once the exercise is finished, the

client can go online to a dedicated platform and upload the data to his account in

order to analyze it through automated and colorful charts to see how he or she is

doing in comparison to the pre-established goal, or track the progress they have

made in comparison to any previous time period (for example last month). Thanks

to a partnership between Nike and Google, the customer can save individual

trajectories and link them to the data.

4 The criteria that helped make this selection have not been disclaimed

26

All this data can be shared at will to obtain comments on your performance from

peers, show others how close to the self-imposed goal one is or suggest some

pleasant running trajectories with annotations like lighting conditions in the

evening and nature of the road terrain. This information tends to lead to

interactions like discussions on a special section with other passionate runners on

broader topics related to running. It’s a good place to ask for personal advice from

experienced users, simply tell stories, give tips or talk about sportswear. This way,

when being in a different city for a few days, the user can check out what are most

popular running places in the neighborhood and quickly start exercising. The

website also offers the possibility to challenge other users on the number of miles

run in a month for instance. The music that clients listen to while running can also

be shared with other users. Nike also engages the users in offering them the

possibility to take part of events that the company sponsors, like a five km run in

the streets of New York on Valentine’s Day.

In all the options involving interactions with other peers, additional value is co-

created in the usage phase through the interactions and this makes running an even

more enjoyable experience for customers. In this case, Nike’s role after the sale is

to provide the tools, the platform and coaches to give professional advice to

customers in need of it. The enterprise recognized, that researching gear, buying

shoes and sometimes contacting customer service are not the only factors that

define the running experience (Ramaswamy/Gouillart 2010, p.14). Not only has

Nike changed how it interacts with buyers, it has also enabled a comprehensive

system of interactions. This system allows the firm to collect deep qualitative

insights into the difficulties that can be faced by users, their running habits, allows

them to quickly identify new trends and build a solid relationship with its

customers. The gathered data will be taken into consideration during the

development of future products and the tweaking of the platform’s features.

The second example of co-creation in the usage stage of the value creation process

is the product Alli, the weight-loss pill. The drug is meant to be a complement to a

low-fat, low-calorie diet and regular exercise, not a substitution of those things.

Therefore, behavioral change is an integral part of consuming the product. If the

27

drug is taken when the user eats more than the recommended 15 grams of fat in a

meal, unpleasant treatment effects will be experienced that will have a negative

impact on the customer’s experience. GSK wanted to build a client base for whom

the offering had worked in order to invite them to share their experience of the

product and help others determine if the drug was the appropriate solution for

them.

To start the project, 400 overweight women and men were selected to form a

group of early users called the Alli First Team. They obtained the drug before its

public release. The intent was for them to share their personal experiences and

have a discussion on how best to support other customers to help them succeed, so

that they become part of a group that go through the same struggle. An online

platform was created for this purpose. This implementation would help GSK to

promote new behavioral models and at the same time manage consumer

expectations, as potential customers would quickly be informed by users that Alli

is not a magic pill and must be consumed in conjunction with healthier habits.

Upon learning this fact, people that are not highly motivated to lose weight would

understand that this offering is not suited for them. Based on the insights provided

by the First Team, another, more educational website, was created prior to the

product launch. It contains clear information on how the drug works in the body,

advice for healthy eating (such as recipes), exercise, tips about managing hunger

and upon registration with a key provided with the product, an individually

tailored online action plan (Myalliplan). Developed by nutrition and weight

management experts, it enables the user to record food, lifestyle information and

connection to a social network of other users. The sum of this information and

interactions aims at helping customers develop skills to lose weight and keep it

off. Without the informational website, the action plan and the customer platform,

Alli would be a far less valuable offering.

The usage stage of the value creation process can also be enriched with user

generated content (UGC). However, most instances of user generated content on

their own, like blogs, wikis and YouTube, don’t have anything to do with co-

creation, as the concept can be defined as all content that hasn’t been added by a

28

platforms’ creators. French video game developer Nadeo uses UGC as a co-

creation measure for its Trackmania series, which are racing games where players

from around the world can race against each other. Online multiplayer

possibilities is nothing new however. Where Nadeo stands out, is that since the

original title in 2003, a big focus of the games has been to let users create their

own racing tracks through elaborate map editor tools. Once finished, the map can

be uploaded for anyone to see. Players can try it out alone seeking to break world

records regarding to the time it took to cross the finish line, or drive with players

independently from their real world location. Because the game has been designed

to receive content by the users from the start, the firm’s strategy to involve

customers at the usage stage was based on co-creation principles.

Customer support: The amount of firms having created a forum for users to help

and support each other in order to control the costs of the traditional customer

support department is countless, especially with technological products, may they

be hardware or software-related. Interacting with other users that bought the same

product to solve issues leads to a better experience and avoids hassles like long

waiting times on hotlines. However, in some cases like serious hardware

dysfunction, these interactions can’t help the customer at solving the issue,

because the product has to be repaired. In 2007, Nokia found a way to involve

their clients in the customer support stage of the value creation process in India

(Ramaswamy/Gouillart 2010, p. 59). The firm realized that best way to make sure

that the problem description was accurate in their database was to let customers

access the repair request file in order to edit it by providing additional information

on the issue. Such information could be what they were doing when the problem

first occurred, or that this issue has surfaced for the third time in six months. This

implementation avoided several calls to ensure the information was correct,

thereby reducing costs while improving the repair time and the experience of the

customer. In the process the repair stages have been made more transparent.

However, some implementations of co-creation go beyond these seven stages of

value creation and aim at simply engaging the customer. This is the case with the

firm Caja Navarra (CAN), a Spanish savings bank designed to support local

29

communities through social contribution. The civic bank’s board used to decide

where the money should go (Ramaswamy/Gouillart 2010, p. 224). Over the

course of three years starting in 2004, CAN progressively gave their customers

more and more control over the firm’s relationship with the NGOs. The first

measure was to let customers decide which social initiative they wanted the bank

to support, from a selection of seven that have been traditionally supported by

CAN. The firm personalized their client’s credit cards to reflect their choices,

reinforcing their identification with the project and generating an emotional

connection. Observations showed that customers chose to direct the profits to

projects like disability and care as well as cooperation, rather than initiative that

CAN had supported in the past, such as sports and leisure. One year later, the firm

increased the customers’ options and allowed them to not only select a category,

but a specific organization and project as well. The most chosen one the first year

of the implementation of this opportunity was emergency aid in natural disasters

and crises.

Before the next step, that took place one year later, the firm had already 88% of its

client base selecting a specific project by an organization. To be as transparent as

they could, CAN wanted to give customers a higher degree of insight into its

social investment. So the company send letters to the customers having chosen a

project to support, to inform them on the amount of profit the firm had made with

their money and how much as a consequence the customers had contributed to the

cause they selected, in cash figures. This level of transparency is unusual in this

industry. An online tool was implemented to provide potential customers with

estimated amount of money the bank would make from them, based on their funds

and the chosen product, and therefore how much they could contribute to a

project.

In the search of yet more transparency, CAN asks organizations receiving funding

to explain in person to its clients how they have invested the money, what results

have been obtained and what challenges are they currently facing. For this

purpose and after some adjustments, the firm’s branches were used as engagement

platforms for the live meetings. In the first year alone (2007), 200 social

30

organizations went to CAN branches to inform customers of the status of different

projects financed by the contributions the bank made thanks to the profit

accomplished with the clients. The projects are located both inside and outside

Spain. The clients’ attendance strengthens the commitment of the customers to

“their” project, because they learn about it, see it progress, and interact with the

organization itself and consequently make more informed choices.

Finally CAN made it possible for its customers to visit the projects or work as

volunteers in the organization of their choice by putting them in touch. In the first

year, 2 750 volunteers accounted for 22 000 hours, fostering collective action as

people can meet around a common cause. CAN’s desire is to link their

engagement platforms and the initiatives. This is how CAN engages its customers.

This example illustrates that what is at the core of the co-creation measures

doesn’t have to be the offering itself. CAN’s customers work as partners. The firm

isn’t limited by its traditional role. The resulting unique customer experience is a

sustainable competitive advantage.

The selected instruments must be integrated in the overall marketing strategy for

coherence purposes. Firms sometimes outsource different communication

activities to different creative agencies, which may lead to shortcomings in the

execution of the new measures, as not all departments and customer touch points

are aware of the new approach to customer involvement and prepared to answer to

the generated interest (Kreutzer 2009, p. 19). Therefore, marketing managers need

to ensure, that all parties involved are on the same page and have been properly

briefed.

3.3. Customer loyalty

3.3.1. Customer experience as the focus of co-creation

Firms know that keeping current customers is just as important as finding new

prospects. Customer satisfaction is often a Key Performance Indicator (KPI) that

firms tend to calculate to evaluate their achievement. Nonetheless, it has been

31

pointed out that satisfied customers are not necessarily loyal, only very satisfied

clients are (Kreutzer 2009, p. 167). This is why it is recommended to work on

making customers loyal, rather than spend time and money on measures to ensure

they are satisfied. Customer loyalty has been declining across many industries in

the last few years (Ramaswamy/Gouillart 2010, p. 3). Co-creation can be applied

as a retention strategy that aims at increasing customer loyalty. Customer

retention can be defined as all measures employed by a company to have a lasting

relationship with the client and ideally increase its share of wallet (Kreutzer 2009,

p. 175). It tries to achieve this goal through pleasant experiences. It is important to

keep in mind, that customer satisfaction isn’t only the result of the purchase and

use of a product or service. It is rather the sum of all experiences that have been

had around the offering, including prior interactions and expectations (Kreutzer

2009, p. 167). Early involvement increases chances of purchase

(Ramaswamy/Gouillart 2010, p. 77). Therefore, to have loyal customers, the

emotional and creative link to the product or brand in general is as important as

the offering itself.

During the prospect acquisition, firms rely too much on the factual level of their

offering (Kreutzer 2009, p. 154). Features, numbers and various facts are

underlined. However, potential customers will most likely not be excited about the

product or service, as they often have a considerable amount of alternatives to

choose from. This is why the sometimes forgotten relationship level is decisive. A

positive and meaningful relationship is hard to imitate and becomes a

differentiation factor that customers notice, as they are always looking for

pleasant feelings (Kreutzer 2009, p. 155). The more effective way to accomplish

that is to create unique customer experiences. The customer experience can be

seen as the result of all the interactions that a customer has with the firm

(Ramaswamy/Gouillart 2010, p. 248).

Clients are not only searching to have an enjoyable time once they are in

possession of a good, but also like to live a special experience during the buying

process (Walcher 2009, p. 153), like the opportunity to alter the design and the

consumption of their purchases. The participation to co-creation can provide an

32

emotional, creative and social experience, which positively influence the

participant’s attitude towards the brand. Other intangible benefits are the clients

attachment to the product or service because they developed a relationship with it

before its availability and the reduction of perceived complexity of the offering, as

they co-created it themselves (Kreutzer 2009, p. 267). This shows how crucial an

orchestrated experience is. Under the consideration of several conditions

discussed in the next chapter, co-creation can result in a deep relationship and

profound knowledge of customers that benefit both parties. The resulting trust and

loyalty goes beyond the reach of conventional marketing. It becomes clear in this

context, that the role of marketing should include the encouragement and support

of creative exchanges with clients (Zerfaß 2009, p. VI), by encouraging the

enterprise to listen and cultivate relationships.

To foster customer retention, the intentional creation of switching costs is helpful

(Kreutzer 2009, p. 177). The customers should feel that by deciding to buy the

offering of a competing firm, they will lose something valuable, like their close

relationship with the brand. Through meaningful and memorable co-creation

experiences, these switching costs appear. The clients who enjoy enterprises’ new

approach to customer involvement, will find it harder to switch to another firm

that offers comparable products, as the collaborative experience they enjoyed has

become part of the value proposition and is likely to be missing from the

alternative offering. The more solid the relation to the customer is, the more

difficult it will be for competitors to break (Kreutzer 2009, p.55).

3.3.2. Empirical data

Evaluating concrete results of co-creation activities on sales is challenging. It is

not possible to dissociate the factors that lead to an offering’s success, such as

links between a firm’s individual activities and the performance of a product line.

Nonetheless, if the sales of a company are higher in the time period after the

implementation of co-creation measures in comparison to previous years and that

the market growth has been stable, we assume the observed growth to be a direct

33

result of the collaboration. Three of the case studies analyzed in the previous part

will be overviewed in regard to their contribution to the firms’ performance.

By the end of 2007, Nike’s market share of running shoe in the USA was 57%, as

opposed to 47% one year earlier and 40 million miles were uploaded by 600 000

runners (Ramaswamy/Gouillart 2010, p. 10). At the same time, conventional

advertising expenditures fell by 55%. Instead, the company kept investing in the

development of the Nike Plus online platform. In mid-2009 the same market share

reached 61% and 150 million miles had been uploaded by 1.3 million runners.

Further collected data showed that customers connected to the platform three

times a week on average. The platform Nike Plus had over 2 million registered

users in 2009 and is the largest community of runners ever created. All the

enterprise’s co-creation measures have been undeniably been well received.

GSK sold 156 million Alli packages in the first six weeks of market availability in

the USA and two million in the first four months (figure 4), making it the most

successful launch of any weight loss drug in terms of units and sales (Johnsen

2007, p. 46). Regarding the two dedicated websites, five million unique visitors

were welcomed and generated 125 000 posts. Early 2009 the product was

introduced in Europe and it was the most successful launch for GSK on that

territory, with revenues of $92 million in one quarter. The supportive approach the

company decided to take was an excellent strategy.

34

FIGURE 4 WEIGHT-LOSS DRUGS SALES DURING THEIR FIRST QUARTER

(USA)5

Let’s see how CAN’s financial performance increased after it progressively rolled

out several collaborative ideas. Between 2001 and 2007, profits went up 2.8 times,

from 64€ million to 182€ million (Ramaswamy/Gouillart 2010, p. 231).

Resources managed increased 1.8 times, from 6.5€ billion to 11.86€ billion. In

2006 the bank’s ranking went from 16th to 5th in margin per employee in Spain. An

impressive observation is that the activity didn’t go decrease nor stagnate in 2008

and 2009 during economic downturn, which allowed the firm to give a total of

3.3€ billions in loans. The attachment customers developed towards CAN thanks

to all its effort to collaborate with them and social organizations led to their

indisputable loyalty.

5 Johnsen 2007, p. 46

35

4. Success factors

The purpose of this chapter is to draw a picture of the aspects that help co-creation

projects succeed. The first part deals with decisive prerequisites to the launch of

any co-creation effort. These points have to be thoroughly examined in a

company, before time and resources are spent thinking about the possible

implementation of collaborative measures. Without such initial verification, the

co-creation project is off to a bad start because of enterprise related affaires. Then,

examples of rather unsuccessful co-creation measures, missteps and other

potential challenges will lay the ground for the final part that is about developing

guidelines to increase chances of positive co-creation experiences.

4.1. Prior conditionsThe classical Marketing-mix based on 4 “p”s, namely product, price, place and

promotion can arguably be perceived as being outdated, as not enough importance

is accorded to employees, which play an often underrated role in the success of a

company. Therefore, a fifth “p”, for people, could be added to the equation

(Kreutzer 2009, p. 4).  Before thinking about co-creating measures with

customers, employees must be given the same opportunity. A company that starts

to listen to the voices of its customers without enabling employees to express their

own ideas and recommendations first, is likely to go through difficulties when

trying to implement the co-creative measures (Ramaswamy/Gouillart 2010, p. 84,

Bhalla 2010, p. 117). People inside the organization will find it unfair and their

attitude towards participants won’t be encouraging. Bhalla formulates it the

following way: “It is impossible to be open externally without first collaborating

internally” (Bhalla 2010, p. 126). Let the employees help shape and tune the co-

creation measures. This way, the change to co-creation itself will have been co-

36

created (Stern 2011) and they will be motivated by it and open up to the change

that the involvement of customers during various stages of product development

brings with it. This idea is not to be mixed up with a permanent internal employee

suggestion system.

As already discussed, in co-creation, the interaction with the firm creates value.

These interactions can be anywhere in the value creation process, not just at

conventional points of sale or customer service. To ensure employees at customer

touch points have a co-creative approach while interacting with customers, a

specific training session or meeting should be implemented. A memo cannot

possibly explain clearly the whole concept, the objectives, the strategy and the

measures. Employees are the host of the discussion. Their role in the success of

co-creation initiatives is crucial. Managers must make sure that the support which

customer-facing employees will need actually exists and is at their disposal

(Ramaswamy/Gouillart 2010, p. 33). Managers also have the responsibility to

ensure that all personnel is on board with the opening of specific processes to the

public. In some cases, departments that lose their autonomy might prevent the

smooth progress of co-creation (Füller 2012). This can be the case of the qualified

artist in charge of ad or packaging design. Suddenly, he or she has to learn to

work with hundreds of outsiders to create materials that were his or her

responsibility. The artist’s mission transforms to one of compromise and

supervision.

Product managers and engineers may also have a hard time accepting that users

can contribute to the development of the offering in order to improve it in ways

which the company didn’t think of prior to the opening of the value creation

process. Even suggestions from the own marketing department sometimes are not

given proper consideration in the R&D department. On a corporate level, the “Not

Invented Here” (NIH) phenomenon can come in the way of co-creation. This idea

describes the unwillingness of employees to consider innovations that originated

outside the company. The origin of this mentality is the belief that ideas that

didn’t come from own departments are needless, inferior and impossible to

implement (Walcher 2009, p. 150). These limits are a major obstacle to the

implementation of co-creative measures (Piller/Reichwald 2009, p. 118). The

37

necessity to have all departments and managers briefed and on board with the

philosophy thus becomes evident.

The ability to integrate and apply the external knowledge shouldn’t be taken for

granted (Enkel 2009, p. 186). Firms that are thinking about using co-creation

measures and don’t already use open innovation to work on new products or

services will not have the necessary internal organization in place to transfer the

feedback and the ideas to the relevant team or orchestrate the collaboration. As the

lack of follow-through is one of the most negative outcomes a failed co-creation

measure can have (Bhalla 2010, p. 23), this potential issue should not be ignored.

It requires skill to absorb new knowledge, combine it with existing one, and

process it for business applications. In addition, it is important to carefully

allocate complementary responsibilities to different teams. Upper management

has to take into consideration the new responsibilities that the employees in these

teams will have and balance their workload accordingly (Enkel 2009, p. 190).

Furthermore, willingness to learn and flexibility is needed to regularly adapt the

organization, as the implementation of co-creation evolves and is applied at

different stages of the value creation process. When the co-created offering is a

new product or service, particular care should be taken to coordinate the R&D and

marketing departments at the earliest stages to ensure they are on the same track

and don’t make decisions without consulting other involved departments first.

4.2. Challenges and risksRamaswamy and Gouillart identify two areas that often cause the failure of

attempts at co-creation (Ramaswamy/Gouillart 2010 p. 82). The first one is not

having the right platform. Some critical design flaws can make the platform itself

a barrier to the involvement of the customer. The second most common reason

behind disappointing co-creation results is the absence of a compelling

engagement experience for the participants. As discussed in chapter 3, this should

be at the center of the design of any co-creation project. Merely providing an open

platform doesn’t guarantee that customers’ experiences in using it will be good.

However, there are other just as important reasons behind the failure of

38

collaboration projects. Through the analysis of the following examples of

missteps, some preliminary guidelines should become evident.

In 2006, American retail chain giant Wal-Mart attempted to engage teenagers

(Rosmarin R. 2006). They were invited to create their own page on a new “social”

network called The Hub. Other available features were the upload of photos and

videos and the creation of shopping lists. The platform closed after only 10 weeks

of existence. Two factors contributed to this failed attempt at co-creating value.

First, the usability of the platform was intentionally very limited. Users simply did

not have the possibility to contact with each other via E-mail. The giving out of

other personal information like phone numbers and last names was also

prohibited. Trying to build a network that doesn’t allow interactivity between

users outside of the platform has a low chance of acceptance. The companies’ role

in such platforms is to facilitate the engagement, not to control it. The second

considerable flaw was that members were flooded with advertisement and

promotional offers (Bhalla 2010, p. 28). The firm used this platform to post

conventional promotion programs and merchandising, rather than gaining

valuable insight in the aspirations and desires of this target group by starting a

conversation with the teens. Clear separation of content and advertising is

necessary to foster credibility (Kreutzer 2009, p. 302).

In addition, user comments that promoted the website’s and retail store’s products

were suspected to be written by employees who created fake member profiles (PC

Mag 2006), which in turn led the users to question their authenticity. As no way to

contact the other members existed, any chance for transparency was impossible.

Finally, parental approval was mandatory for the creation of an account and they

were sent notifications in relation to their kid’s activity on the platform. These

fundamental mistakes show that Wal-Mart’s philosophy didn’t change in the

slightest, as their motives were purely short term financial ones, as opposed to

long term customer engagement. They likely created the social network to imitate

observed practices in other industries, rather than the realization of the importance

of listening and interacting with clients (Bhalla 2010, p. 28).

Again in 2006, American automotive manufacturer General Motors (GM) used

consumer generated advertising for its upcoming new Tahoe SUV

39

(Schildhauer/Voss 2009, p. 267). People were asked to produce 30 seconds TV

ads. Facilitating materials like sound clips and high resolution images of the

vehicle and brand logo were provided. Out of the 30 000 submitted entries, that

were available for anyone to watch, a few had a negative tone and were mocking

the environmental impact of the car, as well as its quality (Sandoval 2006). Even

though the number of criticizing videos was by far lower than the number of clips

that showed which spirit the firm was aiming for (20% versus 80% respectively),

they spread a lot faster. GM chose not to remove these contributions. As a

response, the company commented on some of the points that were criticized by

underlining their efforts in these particular areas. Nonetheless, the press described

this attempt at co-creation as catastrophic. This misadventure can be led back to

ague rules of participation. If the company had clearly stated that negative and

ironic videos would not be admitted, it would have discouraged some potentially

critical participants, because the firm would have had the legitimacy to screen the

uploaded files to block those particular ads before they went public.

Dutch retail chain and franchise Spar wanted to reinforce its presence online. For

this purpose, a contest to design the shopping bags was launched. Approximately

5 382 entries were submitted and 56 873 evaluations took place (Schwab 2010).

Some of them were, not surprisingly, very sophisticated. A surprising fact was

that the entries originated from nearly 100 countries. However, the retail chain

only operates in 30 countries. This figure confirms the impressive reach of such

contests and the willingness to participate of not only customers, but users of the

web in general. The winning design was selected by a jury made of Spar

employees, therefore without any involvement of the participants. They ended up

very surprised and disappointed with the choice of the committee and shared their

dissatisfaction on the platform. This incident created frustration and irritation on

the newly developed online platform and consequently led to the loss of trust. In

this case the problem was not the Terms & Conditions of the contest. Users knew

that a jury would have the final say. The lack of transparency of the selection was

the real issue: On which criteria was the committee going to evaluate the designs?

An information containing the justification and explaining the process of selection

would have helped the participants understand the choice.

40

When products are developed in collaboration with players outside of the

organization, the cost of coordinating and integrating of all the value creation

input of co-creation process increases significantly. In addition, having multiple

external contributors at various stages of the value creation process makes the

management of the whole chain challenging. Another challenge is the question of

the intellectual property regarding customer generated ideas. American greeting

cards manufacturer Hallmark Cards has been using co-creation measures to

generate deep insights, develop new products, extend the existing product line and

encourage creativity of its customers. The firm requires that all clients

participating in these measures sign a document which states that all ideas

resulting from the customer’s participation are Hallmark’s property (Bhalla 2010,

p. 169). In the case of Tchibo (see part 3.2), the firm shared the revenue stream

from produced offerings based on an idea that originated on the platform with the

participant. As long as they are stated from the start, both approaches can work.

Once these challenges are acknowledged, firms can implement preemptive

countermeasures to minimize the risks. The following part covers the

considerations that enterprises interested in the concept should know before

implementing any measures.

4.3. Guidelines for the implementationIn successful examples of co-creation, companies have respected several attributes

to create the best customer experience possible. To find those attributes, 35 case

studies6, were analyzed to seek out what the successful implementations had in

common. Together with the fulfillment of the prior conditions detailed previously

in this chapter, this paper provides the necessary considerations when designing a

co-creation measure. First, elements that are directly linked to specific projects

will be clarified. Second, aspects in relation to the firm’s general approach

towards co-creation are revealed.

6 Provided in the books by Bhalla, Ramaswamy/Gouillart and Zerfaß/Möselein

41

4.3.1. Project-related considerations

The first crucial consideration is to test the idea on a small scale before its full

deployment. This enlightened experimentation can take place with the employees

and later on include a few top customers before rolling it out more widely over

time. This concept is already being extensively used in software development,

where during a program’s alpha stage, people involved with its creation test it.

After taking care of observed unwanted occurrences, the beta stage typically

opens up to a selection of volunteers that were not involved in the development of

the software. In the context of experimenting with the future implementation of a

customer-firm collaboration, the co-creation measure itself is co-created. This will

lead to the early detection of issues that hinder the experience or the ability to

comfortably participate to the project. If these problems occur later on, customers

may not give the firm a chance to rectify some aspects of the measure before

giving up on participating. Even after the public availability of the measure, the

participation experiences should be monitored through ongoing customer

feedback at various touch points. This applies to every new co-creation project as

it allows for continuous improvement.

The next project-dependent element that needs thought is the reward system. It

should be carefully planned, as it has a direct influence on the customer’s

participation. There are several things to consider. Companies can offer material

and immaterial rewards. In both cases, the organization must know its customers

to understand what is relevant to them. In the case of non-financial material

rewards, it is preferable that the items have a link to the brand, its values and the

domain in which the client has been involved. However, high material gain

doesn’t necessarily lead to high customer engagement (Walcher, 2009, p. 151), as

participants often value receiving credit for ideas and enjoy seeing their

contribution being used. Also, if a previously intrinsically rewarded task becomes

the object of a material prize once, studies show that participants are unlikely to

perform the same task if not rewarded with prizes again (Schattke/Kehr 2009,

131). Immaterial rewards can consist of the participant being listed on the

company website to create personal recognition, being invited to headquarters to

further discuss his input and being congratulated by company officials, being

offered the opportunity of an exclusive factory visit or seeing a preview of an

42

unreleased offering. These firm-centric options would not have been otherwise

accessible to the customer. These are most suitable for the purpose of the creation

of a lasting relationship with the customer, because the interaction conveys

partnership and creates emotions.

Once co-creation is in place, a fundamental point to keep the customers interest in

participating and engaging is to provide transparency (Füller 2012). This

transparency has to be respected at multiple levels. In an idea or design contest for

instance, the organization should have clear information on the intellectual

property of generated ideas. The enterprise should also announce their internal

process of selection that will decide the winners, unless the ideas are peer

evaluated. If an idea isn’t selected, the firm should take time provide feedback to

the participants, naming the reasons for their decision. Customers will see that

their efforts were taken seriously (Walcher 2009, p. 152) and feel respected

(Bhalla 2010, p. 14). If the selection is done by peers, the firm may for

understandable reasons choose to not implement popular options, despite their

high rating by the community. In this case it is imperative that the company

publicly justifies in detail the choice they made and explains why the idea or

design wasn’t feasible or appropriate. Otherwise, the participants will be

frustrated to observe that ultimately, despite the company appearing to care about

their input, actually didn’t change their way of thinking and never planned to let

the customers have any say (Füller 2012). If the firm is not genuinely interested in

their feedback and is only implementing a platform for conversation in order to

imitate companies that successfully co-created insights with their customers, its

clients’ engagement will be very brief and unsustainable. While short term sales

may not be affected right away, as not all clients are disappointed participants, the

image of the company will suffer and negative word of mouth related to

participants’ negative experience is likely to spread.

On the contrary, if a suggestion is chosen to be implemented, regular updates on

the status of the project should be made to keep the participants informed on the

status quo of their idea (Bhalla 2010, p. 28). Transparency should be respected in

each co-creation activity related choice that the company makes. A remarkable

example to illustrate how far a firm can go to be transparent is the Starbucks

Shared Planet initiative. It originated with the realization that a lot of customers

43

wished to see the company’s commitment to environmental issues and social

responsibility increase. A website was created where clients could see what

commitments Starbucks intended to keep, ranging from the way it obtains coffee

to minimizing the environmental impact of its activity. The involvement of the

enterprise with local communities was also reported. The online platform offers

numerous possibilities of interaction with customers. The goals and related KPIs

are publicly stated and progress in each objective is reported

(Ramaswamy/Gouillart 2010, p. 25). Customers can track them and even discuss

about possible additional goals they wish to see. Another example of this idea is

the display of a progress bar for the implementation status of accepted ideas with

a deadline the company is aiming at. Such transparent behavior during co-creation

measures can in the long term lead to increased customer retention, which can be

translated into more Re-, Up- and Cross-Selling as well as recommendations to

others (Walcher 2009, p. 152).

4.3.2. The bigger picture

Online engagement platforms are a requirement in most co-creative efforts. Some

authors argue, that co-creation cannot be sustained without them

(Ramaswamy/Gouillart 2010, p. 20). Such platforms usually enable customers to

discuss about topics vaguely linked to the firm’s offering or philosophy amongst

themselves and with the company, as well as to take part in co-creative measures.

It’s imperative that the platform provides a satisfying experience and has

specifically created for this purpose. But building the perfect co-creative platform

right out of the gate is nearly impossible. The design should be loose enough to

allow appropriate modification and extension. As the project grows and by

observing the type of interactions that take place, additional functionality and

features may be needed. Therefore, creating an engagement platform involves

experimentation and learning, as the role of the co-creators often evolve over

time, depending on how quickly the company introduces new opportunities for

collaboration. Freedom and space are also essential for online engagement

platforms (Bhalla 2010, p. 28). In this context, freedom refers to the ability for

users to take advantage of the website to do more than what has been created for

or is expected from them, such as contacting other members via personal means or

44

contribute to it in a way that wasn’t planned initially. Space is related to the

presence of the company in the platform and its degree of control over it. The firm

should avoid wanting to be in the center of all discussions and control it too

closely. However, moderators are necessary to supervise that the atmosphere

remains polite and positive. Let the users decide what industry related topics

matter most to them and how they would like to talk about it with peers. As

engagement platforms can be as versatile as the product itself, a website, the retail

stores, the call center or the mobile phone (Ramaswamy/Gouillart 2010, p. 247), it

is important to link them and allow design interaction possibilities between them

in order to create an integrated front. Physical engagement platforms for co-

creation exist, but they are too project-specific and industry-dependent to be

compared for similarities that tend to make them successful.

A noteworthy observation that resulted from various case studies was the idea of

selflessness that some co-creating firms have. They spend money and time on

projects, features or platforms, without closing access to them to people who

aren’t financially contributing in any way. They seem to care about helping the

community, beyond the absence of short-term return on investment. Take for

instance Tchibo ideas. Even posts that were asking for a product that could not be

fulfilled by the company’s portfolio were welcome. The firm had no issue with

other interested companies going on the platform to check if there were ideas that

might be turned into a project for them (Helfrich 2009, p. 372) and is not asking

for a finder’s or enabler’s fee. In the case of CAN, the Spanish civic bank, when

the branches’ interior was partly reorganized to accommodate for the welcoming

of supported NGOs, the premises were not only laid out in a way to facilitate

these presentations. In fact, community spaces were established in the branches.

In these spaces, customers and non-customers alike can have coffee, read the

newspaper, form book clubs and meet with them, connect to the internet via free

Wi-Fi and enjoy occasional shows and concerts for kids and grown-ups. Finally,

Starbucks allows its advertisement and informative videos to be embedded

anywhere on the web, in contrast to many firms that fear that their content might

be added on websites they don’t wish to be associated with

(Ramaswamy/Gouillart 2010, p. 24). Having an open approach to company-

generated content or locations and share knowledge is what we call selflessness, it

45

can in the long term benefit the community and the environment in which the

enterprise operates.

When possible, seeking out relevant partners can add more substance to some co-

creation measures. Partners can be retailers, other firms, or experts in the

company’s industry. Originally, Nike partnered up with Apple because the firm

realized that a large number of runners were listening to music while jogging.

Nike got Apple to co-finance the whole project (Ramaswamy/Gouillart 2010,

p.13). A very different partnership took place on the forum category of its Nike

Plus platform. Nike invited famous professional soccer players to answer user’s

questions. Illustrating a partnership with specialized dealers is Japanese

electronics maker Brother with its sewing machine business on the American

market. Typically, these stores were a place where offerings were on display.

Brother wanted the shops to become locations for learning and exchange

(Ramaswamy/Gouillart 2010, p. 98). This desire was based on insight which

suggested that young homemakers often wanted to learn about sewing but didn’t

know where to begin. The firm sent educators to dealers to teach them how to

undertake projects with the shop’s customers, may they be beginners, enthusiasts

or friends. The customers are also offered the opportunity to take classes in the

shop, no matter what brand of product they own (selflessness). This enables them

to engage with experienced and skillful dealer-salespeople. Enterprises can work

with partners, from distributors to firms in other industries to enlarge the scope of

their co-creation efforts.

It is important not to impose participation to co-creative measures, be it the

creation of products or the dialog with the community. It is up to them to decide

when they feel like submitting suggestions, joining a project or evaluating their

peers’ ideas. Participation must remain voluntary and shouldn’t be a condition to

get access to specific products or services. In the case where several measures are

in place, clients should be able to select if and at what stage they want to

collaborate (Walcher 2009, p. 148). In the variety of options offered in the Nike

Plus program, the user has the choice to share his running data, his playlists and

46

his city of residence with peers, but it is not mandatory to use the product. The

best case study that illustrates this idea perfectly is Crushpad7.

“Crushpad is a custom winemaking company founded in 2004 in San

Francisco. The company’s business architecture consists of several linked

engagement platforms through which individuals or businesses can work with

Crushpad staff and affiliated businesses to make their own wine. The

company’s customers include wine enthusiasts and amateur wine-makers,

professional winemakers, wine retailers, wine bars, and restaurateurs.

From the start, Crushpad had two incarnations: a physical facility in San

Francisco were the grapes are processed and fermented, and a community

website where people make decisions about the winemaking and track

progress. Customers are encouraged to visit Crushpad both in person and

online as frequently as they can, in order to participate actively in the full

experience of wine-making and understand all aspects of it. To facilitate this

participation the company has broken down the process of winemaking into

five steps – creating a plan, growing and monitoring the grapes, picking and

processing the grapes, aging the wine, and labeling the bottles – with more than

thirty specifications.

There are six major engagement platforms in Crushpad’s co-creative

ecosystem:

1. A wine-definition platform engages individuals around two key questions:

What varietal do I want to make ? and What style of wine do I want to make ?

(A big, fruit-forward wine or a more reserved, subtle wine.) Crushpad suggests

that one of the easiest ways to start as a customer is to say, “I’d like to make a

wine like X, but different in the following ways.” Crushpad’s Winemaker’s

Minute video podcasts demystify winemaking and explain its arts and science

in a straightforward way.

2. A vineyard-selection platform involves people in two key questions: What

location is conductive to growing the preferred varietal ? And which vineyard

7 In agreement with the first supervisor, the complete case study is inserted. Provided by Ramaswamy/Gouillart 2010, p. 107

47

should I choose ? Video podcasts provide behind-the-scenes looks at prominent

West Coast vineyards and in-the-field tutorials from top vineyard managers.

Customers can buy small lots of grapes from high-end vineyards through

Crushpad or they can purchase their grapes on their own.

3. A wine-harvest-platform then engages individuals and small businesses

around the critical question of when to pick. The key issue is ripeness, and

Crushpad provides analytical tools and methods to determine ripeness (e.g.,

measuring the sugars, acidity, and pH) and physiological maturity (e.g., visible

characteristics such as skin and stem color, skin and pulp texture, seed color,

berry flavor, and the ease with which the berry can be pulled off the stem).

Crushpad experts give advice on climate considerations (in cooler climates

pick grapes when sugars reach an acceptable weight, and in warmer climates

before acidity falls too low) and hang time (longer hang time will usually drive

more physiological ripeness, but in warmer climates this comes at the risk of

higher alcohol and lower acidity).

Crushpad engages customers to help determine their wine style and manage

risk, and then collaborates with the growers to determine how to select a

picking day together. The company provides a high level of transparency

throughout, with winery webcams called the Crushpad Cam and instant

messaging with knowledgeable employees, as well as facilitating social

interactions with fellow customers.

Through Crushpad’s online social network, Crushnet.com, and the Crushpad

Cam, customers can monitor the activities at the vineyard. Videos capture the

picking and sorting process, which are streamed live to the web. And after the

fruit is delivered to the winery, customers can come in the winery and help

destem, crush, ferment, and press the grapes. Video also monitors the activity

in the winery, allowing customers to chat live with those working the crush.

4. A wine-aging platform engages customers in decisions about the type of

cask to age the wine in and how long to age it, as well as whether to allow,

encourage, or block malolactic fermentation (a secondary fermentation that

happens naturally), and when to remove the lees, which are the solids left after

fermentation that fall to the bottom of the barrel during aging. As this process

48

proceeds, Crushpad encourages customers to take part in tastings and in

making blending decisions, and to participate in racking wines from barrel to

barrel.

5. A bottling, packaging, and labeling platform allows customers to choose

the type of bottle and bottle closure, and to design the label. Most people have

a more difficult time making packaging decisions than the actual winemaking

decisions, so Crushpad provides access to a packaging team that helps

customers work through their ideas.

6. Crushnet offers an ongoing social community platform for individuals and

winemaking groups wanting to share their experiences of winemaking and

exchange tips. Vineyards are also part of this engagement platform, so

customers can have conversation with growers. The platform features user-

generated videos, allows photo posts, and hosts many forums.”

One the most admirable accomplishment of Crushpad is that all the platforms are

designed in such a way that its customers can engage as often or rarely as they

want at any given stage of the development process. The amount of flexibility and

the degree of freedom offered is astonishing, because the choice of the extent to

which they want to participate is true for the online spaces as well as the physical

facility of the firm. Clients can even buy their own grapes and come to pick up the

finished goods. The offering couldn’t have been more co-created. To sum up, the

central idea is that individuals should be allowed to choose the interactions they

want to have. This requires different options to be available to them.

The engagement platform and other communication channels should be built in

such a way, that participants can reach out to the company, rather than passively

wait for the firm to contact them (Ramaswamy/Gouillart 2010, p. 10). This means

that the possibility to initiate contact needs to be reciprocal. It is the baseline for

an ongoing conversation. Even if a co-creation initiative focuses on the experience

of the co-creators, there are always insights to be made through dialog about these

experiences. In addition, the dialog should continue after the completion of

specific projects like a contest. Their ending is not a reason to close down the

communication with customers, as co-creation is about more than the

implementation of isolated measures. The philosophy transcends individual

49

products or services. The means of communication must continue to exist and for

continuous customer engagement and market research reasons firms should pay

attention to it.

5. Conclusion

Customer centricity still hasn’t made it to the top of strategic agendas in most

companies (Bhalla 2010, p. 165). The focus is on brand equity and shareholder

value. The paper clearly shows how value is increasingly co-created by the firm

and the client and what factors lead to successful implementations. In parallel to

the creative participation of customers, meaningful and ongoing conversations

take place with the enterprise. The core change in ideology is how the customers

are perceived. Co-creation is an attitude that strongly believes that clients are

knowledgeable and can be active. Regarding them as a key asset has the

consequence that they are approached as potential partners. Even some firms that

try to implement collaborative measures are having difficulties to adopt this point

of view, so it must be harder for enterprises that have yet to start thinking about

this concept. A change in the management’s mindset is necessary. Usually

customers appreciate to finally have the opportunity to contribute and companies

can gain access to dormant potential in order to gain valuable insights.

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The answers to the original research questions are as follows. Co-creation can be

implemented at various stages of the value creation process by designing

platforms that enable interactions between the company and the customers, as

well as between the users themselves. The application of collaborative measures

can go beyond the simple sourcing and selection of ideas. Customers can be

invited to help the product development, refine the offering, participate in the

commercialization, contribute to the usage scenarios or even assume some

responsibilities of customer support. An interesting finding is that firms can and

should use co-creation measures at several stages of the process simultaneously or

offer more than only one possibility to participate in a given phase. As the

Crushpad case study shows, a single phase in the value creation process (here:

product development) can be divided into six different and interesting

collaboration opportunities.

This concept can be used to increase customer loyalty because early involvement

in the creation of a product or service increases chances of purchase by allowing

clients to have an emotional and creative attachment to the offering or the brand.

The deep relationship with the enterprises becomes valuable to customers that

notice the firm’s effort and authenticity. Therefore, loyalty is further increased

when: a) co-creation is used as a differentiation factor to stage a more interactive

buying process and b) competitors don’t offer comparable experiences. This is

one reason why the customer experience should be the starting point in designing

co-creation implementations. Enjoyable and rewarding experiences improves

customer retention. The more customers identify with a brand, the higher their

willingness to participate becomes. Implications for the marketing department

often working to gain trust and loyalty are considerable, as co-creation can be

seen and implemented as a new technique that fosters ongoing dialog and long

lasting relationships that benefits both.

To succeed, co-creation must be a company-wide strategy. Unfortunately, even if

it is, employees may not accept it and prevent the smooth implementation of

collaborative measures. Two reasons can lead to this reaction. First, employees

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may feel dispossessed by relying on external contribution to improve the

company’s offering, sometimes even delegating tasks they were responsible for.

Second, passionate employees will have a hard time accepting the idea that

customers do now have a say in the offering and its commercialization if they

were not given the opportunity to express their own wishes and suggestions first.

This issue can be addressed in two ways. By collaborating with employees on the

design of co-creation project itself, they will have an opportunity to be part of it.

In addition, as co-creation measures need testing and fine-tuning before their

launch, employees can test the platform and the adapted process structures.

Starting a collaborative project with the wrong intentions has little chance of

success. If the company doesn’t have a genuine interest in listening to customers

and engaging them to have deep conversations, the participation of clients will not

be sustainable. They notice if the firm really cares about their input or just asks for

it to give them the impression that they listen. This illustrates how communication

is two way street. Opening a channel for customer to send in suggestions is not

enough. The company must be transparent by providing updates on the status of

projects like accepted ideas, give feedback on rejected suggestions, announce

winners and justify contest outcomes if the selection happened internally. It is

important to keep in mind that the implementation of collaborative measures can

very well happen progressively. In the case studies where company had

established two, three or four different ways for their clients to co-create, these

opportunities have never be rolled simultaneously. In most cases, one year

occurred between each addition of a new collaborative measure. Other success

factors include selflessness, optional participation, and a carefully planned reward

system.

This topic is limited in that is focuses on the customer side of co-creation. An

equally challenging task is the in-house promotion of the ideology and the

restructuration of parts of the organization so that external input can be processed

efficiently. Furthermore, involving clients in the value-chain leads to a blurring of

boundaries between R&D, marketing and market research (Roser et al. 2009, p.

4), so obstacles have considerable opportunities to arise. Concerning our paper,

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the empirical overview is too limited to draw useful conclusions on the tangible

impact of collaboration on customer retention. There are too many variables to

undeniably demonstrate what specific activities lead to increased performance.

For further research, we identified a need to diagnose different kinds of customer

experiences and to find a way to measure them. This would permit the observation

of their individual influence on motivation, brand identification and word-of-

mouth recommendations. The results would help the design of collaborative

measures further by making it more efficient, because less time would be spend

experimenting and adapting.

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