Co-Creation vs. Co-Production

Co-creation clearly is a tool for creating value in relation to some market offerings. My study has showed how co-creation, involving both the consumer and the provider in an interwoven process, is not only a tool but a necessity for experiential value to result. The question is whether the customer perceives getting involved in the production process as something positive for all types of market offerings, regardless of category.

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; 2008; Vargo, Lusch, and Morgan 2006). Prahalad and Ramaswamy (2004) likewise claim co-creation is vital for creating value in all types of products. The question I asked – and my concern in the introduction was – are all products best seen as created and does co-creation always bring value? It is a rather sweeping claim. And again we seem to be presented with claims that are too abstract to really be useful and that risk disguising vital distinctions rather than illuminating them.

This becomes apparent if one moves down from the comfortable, smooth level of the abstract and tries to apply these thoughts to various actual products. Is a consumer who is utilizing an already made good (driving a car) or consuming the outcome of a service (like putting on a dry-cleaned suit) really co-creators of value? I don’t think I deserve too much credit for having co-created my car, although I enjoy driving it, or for co-creating my house although I live in it, or for co-creating the medical procedure that once saved my life, although I appreciate now being healthy. The goods, like cars, houses and mobile phones are physical objects most often created without the consumer’s presence or their direct input. Likewise, numerous services are executed without the consumer being present or providing input that makes any real difference to the outcome of the process, such as those provided by health services, postal services or energy suppliers. Enjoying the output can – to some extent and on a rather abstract level – be viewed as aspects of value creation, but it leaves out a substantial part of what it takes to create goods or services, as well as the range of value the products may represent. The situation is rather limited to the sense of value the consumer hopefully gets from enjoying the end result. But again, do we want to perceive customers as co-creators of value when they are not involved in the production and thus have no noticeable impact on the production process or on the outcome?

When buying a service a consumer typically purchases someone’s time and/or skills to perform a task, either because they want to be able to spend time and energy elsewhere, or because the service provider has special skills they themselves do not possess. The consumer is in fact often paying not to be there and do the job, but to have things taken care of anyway.

Utilitarian consumption’s main focus is on the outcome. Typically the quicker and less hassle it requires to obtain that outcome, the greater is the value the offering provides for the consumer. A service promises to provide one or more utilitarian benefits and a requirement to participate in the production can easily contradict precisely the benefit sought in the first place, such as saving time and effort or getting someone with specialized skills to take care of a task. If an offering providing some utilitarian benefit, then turns around and requires the customer to get involved in the production process, they risk not adding value but rather adding a burden to the consumer. When the consumer delivers the PC for repair or hires a company to clean the house, being asked to participate in producing the offering hardly represents a positive. On the contrary, in most cases this type of request would just be an annoyance or downright absurd. Requesting consumers to volunteer time and effort is likely to diminish the service’s overall value and my only work if it is compensated by other means (reduced prices, increased convenience or improved quality).

Again, how does that fit in with the notion that all value is co-create in services? As much as I agree that co-creation is vital to the understanding of how value is created in experience offerings, I believe the merits of co-creation need to be differentiated and nuanced. When does the apparent consumer’s value-creating element kick-in and take place? Is it during product development (market research, product testing or feedback)? Is the buyer of a manufactured and a mass-produced good doing any part in creating value during production of the good? Is a consumer co-creating value while sitting on the bus or lying on the operation table during the medical procedure? Is co-creation related to post-production – outcome based (enjoying landing in LA, life after a surgery)?

Foremost, I would like to call for the recognition that customer involvement and participation may well create a burden rather than value. The awareness and increased understanding of what provides customer value in the various categories is something managers need to constantly keep in mind when making priorities and trade-offs and when designing and positioning their offerings. The separation of consumer value into utilitarian and hedonic value 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.

The key elements that create utilitarian or experiential value appear to be distinct. The role of co-creation needs to be further investigated in order to decide when co-creation is suitable for adding value – and when it is not.

I propose that the customer’s view on participation as positive or negative will be related to, and differ along, the hedonic verses utilitarian consumption divide. I suggest that, to clarify matters, one may use co-production for customer participation in services where the goal is cost reduction and productivity gains. Co-creation may then be kept to value creation and the co-creation of mental experiences and experiential value.

5.3.4 Concluding Remarks

An important key and starting point for the whole experience economy discourse was the following Pine and Gilmore (1998, 97) statement: “Economists have typically lumped experiences in with services, but experiences are as distinctive economic offerings, as different from services as services are from goods”. Following this, there have been debates concerning whether experiences should be classified as part of services or not. Particular differences between the categories have been recognized (Nilsen and Dale 2013), but, generally those that have discussed the issue have so far concluded that the differences are not clear enough to justify seeing them as a separate category (Holbrook 2000; Zeithaml and Bitner 2006; Nilsen and Dale 2013). Nevertheless, the experience economy discourse has continued to relate to the view of experiences as a distinct category, although how the question of how to distinguish between the two categories has been muddled and unclear. It is a complex issue, due the fact that service and experiences can be considered as part of the service sector, as they have in common the typical service criteria of intangibility, perishability, etc. (Poulsson and Kale 2004). What has been complicating and blurring the distinction even more is the fact that services (and goods) are often used as part of the production and staging of experience offerings. Hence the differences between experiences and services may appear confusing and unclear if viewing them merely from the provider side and with a production perspective. However, if we look at intangible offerings from a customer perspective and use the customer’s tendency to distinguish between offerings with utilitarian as opposed to hedonic value, the differences and contradictions with regard to what customers want and appreciate from services versus experiences become evident.

When attempting to categorize, there is a general principle that one looks for similarities within a category as well as for differences between categories – that you strive to group together elements that have common attributes as well as to distinguish between elements considered to be different with regard to one or more central properties between those within and those outside the group (Bowker and Star 1999). In my study, I have likewise first searched for commonalties and characteristics within and across the multiple experience offerings within the category, while now I have taken steps to distinguish between the categories of services and experiences on several vital dimensions.

The differentiating factors I have presented are time, involvement, predictability and people. I have further argued that these dimensions are vital, in that they are not only different, but also largely contradictory. This is crucial, as it means that these factors differ in such a way that – although the elements tend to be positive and contribute to value for the consumer in services – the same factors may actually diminish the value of an experience and vice versa. The fact that the comparison has brought forth opposing differences with regard to central dimensions is taken as further support for the rationale of viewing services and experiences as distinct categories.

The previous difficulty in conceptually differentiating between services and experiences may also be related to the frequent use of several terms that overlap both conceptually and semantically. Consequently, I have debated and sought to straighten out some of the mix-up,

overlap and possible misconceptions related to the concepts of consumption event, customer experiences and experience offerings. Furthermore, I have brought up my reservation against seeing all products as co-created and customers as co-creators of value (Vargo and Lusch 2004; 2008; Prahalad and Ramaswamy 2004a). I have suggested a more nuanced and differentiated use of the concept of co-production and co-creation in accordance with the services and experience’s distinction.

This studies conclusion supports Pine and Gilmore’s claim that services and experiences are distinct categories and evaluate the view as a productive and necessary perspective for understanding these offerings’ true value. However, the basis and rationale for the separation is based on a rather different fundament. My claim is that it is the utilitarian/hedonic distinction that explains and justifies why it makes sense to divide intangible offerings into these two separate categories. What the Richer Matrix implies is that service and experiences are distinct because they cater to different needs and wants. This explains why consumers seek quite dissimilar benefits in services verses experiences settings. The Richer Matrix further visualizes the categories as counterparts that are both able and apt for generating profits. Experiences are not to be viewed as “upgraded” versions or on a higher level than services. Profitability will depend on understanding what contributes to value in each of the categories and how to optimize the factors and tradeoffs between time, involvement, predictability and people in order to maximize overall value. Providers that understand what is crucial for the customer’s sense of value – and thus produce offerings with elevated levels of either utilitarian or experiential benefits in the most cost-effective way – will reap justified profits, whether this be by providing services or experiences.