The Co-Creation of Value

A base for viewing production and consumption as a more parallel process – as well as including psychological aspects to the interaction – can be found in post-modern theory. In post-modern theory the relationship between consumption and production has been severely questioned. The separation of the two is broken down (Firat and Venkatesh 1995). Here the consumer is seen as involved in the production and in the creation of product meaning. The consumer is also “produced” through consumption, as consumption is seen as an act of identification. The co-creation of meaning is particularly crucial to experience products.

Through their effort in the co-creation of meaning, customers are becoming active participants in creating the experience product. “Postmodernism exposes the contradictions and elevates consumption to a level on par with production, where consuming is also viewed as a value producing activity” (Firat and Venkatesh 1995, 242).

This notion is particularly suitable in consumption of experience offerings – not only is the consumer an active co-creator to the extent of their physical participation, as when paddling a raft as part of a team, or gaily shouting with the crowd at a football game; consumers are also co-creating mentally when interpreting the dark and muffled noises at the ghost house as scary, finding beauty in an abstract painting in a gallery or identifying with the struggle of the soon to be hero when watching a play. Through the interaction between the experience provider’s facilities’ props and activities and the consumer’s body and mind, co-created sensations and emotions arise, resulting in an offering where the consumer’s mental processes and reactions can hardly be separated from the offering’s general value.

This new role for the consumer or maybe “prosumer” (a term originally coined by Toffler in 1980 for stressing the more active role of the customer) is significantly different from the passive mass market consumer of postwar consumerism (Cohen 2004). This breakdown of production and consumption, along with altered consumer/prosumer roles and co-creation of value, appears most evident in relation to experiential consumption. This is because of the experience offering’s paradox, that although the provider can offer access to activities and environments meant to trigger an experience, the experience itself does, and can only take place, within the mind of the consumer. Feelings arise inside consumers’ heads through a complex interaction between the stimuli outside the individual and through that person’s personality, current mood, previous history, etc. Experiential consumption has to be co-created, and consumers themselves clearly play a significant role as contributors to the value creation. The basic dynamics of this process have been described in the following paragraph by Poulsson and Kale (2004); an experience offering is a result of the interaction between a subject (the customer) and an object (the experience provider), and the act of co-creation between the two. In explaining experiences – on the consumer side of the dyad, we need to consider: 1) the feelings and sensations that take place in the customer during the experience encounter, and on the provider side, 2) the tools and processes that are used by the experience provider to create those feelings and sensations, and finally, 3) the joint contribution that develops through the interaction.

As mentioned before, the 2004 AMA definition of marketing views value as created rather than exchanged. This does indeed open for a range of interesting questions. Such as, who creates this value? Does the producer of the offering create value, or is value rather created in the consumers themselves as they consume the product, or maybe both? Does it depend on the product? Does the importance of the contribution of each party differ between a tangible good and an intangible offering, whether the offering provides utilitarian or hedonic value?

Increasingly it has been suggested that value should be seen as co-created (Prahalad and Ramaswamy 2004a; Sheth and Uslay 2007).

However, what does “co-creation” actually imply? What is being co-created by whom and when? When is the consumer involved in the process, doing what and for what reason? Co-creation is a term that comes with some history and has been discussed in various contexts and so has previously had somewhat different connotations. Customer participation has been defined as “the degree to which the customer is involved in producing and delivering the service” (Dabholkar 1990). Co-creation and customer involvement have further been noted as important for innovation and product development (Thrift 2006; Matthing, Sanden, and Edvardsson 2004). The main focus in the early literature was on co-production as a source for productivity gains (C. H. Lovelock and Young 1979; Mills, Chase, and Margulies 1983). Here focus is on customer participation in the construction of goods and services, and suggesting how customers can be managed to participate in production and delivery through self-service (e.g. self-serve in grocery stores and gas stations). However, Prahalad and Ramaswamy (2004a; 2004b) view co-creation not merely as a tool for cost reduction and productivity gains, but rather in relation to value creation. They used the term co-creation to signify that customers move from being passive audiences to active co-creators of experiences. They

describe co-creation in the experience economy as a setting where the provider constructs the context and the consumer is part of it (e.g. Disneyland). The consumer is involved and engaged, but the context is firm driven. Taking it one vital step further, Bendapudi & Leone (2003) argued that consumer co-production extends to the construction of meaning as well, indicating that co-creation is not only about customer involvement and participation in a physical sense, but may also include psychological aspects.

Some of the recent claims regarding value co-creation tend to view the merits of customer involvement in an all-encompassing way and as uniformly beneficial. Service-dominant logic in marketing proclaims that customers are always co-creators of value (Vargo and Lusch 2004; Vargo, Lusch, and Morgan 2006; Vargo and Lusch 2008). Prahalad and Ramaswamy (2004a) likewise claim co-creation is vital for creating value in all types of products. Are all products best seen as co-created and does co-creation always bring value? It is a rather sweeping claim. And again we seem to be presented claims that are too abstract to really be useful and that might lead to disguising vital distinctions rather than illuminating them. The terminology and the value creating process have to be broken down into a more specific level to give any real meaning. How are customers involved? Are they involved in the making of a good or the delivery of the service itself? Or do they get value and enjoyment from the involvement in itself? Or does co-creating of value simply imply that the consumer must be there at the end of the line to value the benefit of using a good they have bought or to appreciate the outcome of a service performed for them? Might they not sometimes get value from receiving what they seek simply from getting it at a lower price or quicker? When do consumers receive anything positive from their involvement? Does it not depend on the type of consumption, on the type of economic offering? Again, may it not then be connected to the utilitarian vs. hedonic divide?

Addis and Holbrook (2001) pointed out that every product has a connected consumption event – that is that the consumer will experience/feel something during the time when they use/consume a product. This consumption event and their experience during it might be hardly noticeable (as when using a printer) or highly noticeable and significant to the product’s overall value (as in the case of the thrills had during a river rafting trip). Hence, they explain how the consumption experience can range from being mundane and hardly noticeable to a very significant part of the product’s value for the customer and that it corresponds to the product’s utilitarian or hedonic value.

The separation of consumer value into utilitarian and hedonic values shows that different product categories answer to separate needs/wants and provide the customer with distinct kinds of value. Not only does this difference extend to the kind of value the offering delivers, but also to what elements are required to provide and create value. This may lead us to ask whether the elements that create utilitarian vs. experiential value are the same or rather different ones? It may be the key to understanding the role the consumption event plays in experiential versus utilitarian consumption, whether the consumption event is a source and core to the products value or just a necessary requirement to obtain a sought after outcome.

The role of co-creation needs to be further investigated and differentiated, and it has to be decided if and when co-creation is suitable for adding value and when it is not.