Companies can involve their customers in developing new products and services. Ideas and products which are co-created will more closely match customer needs.
KNOWLEDGE @BI: Consumer Co-Creation
Social networking and consumer involvement have been the most prominent trends in business in last years. Yet, firms still struggle with realizing and tapping the potential of those trends.
One such untapped potential is consumer empowerment in collaborative new product development, in which consumers actively contribute in creating a new product offer of a firm. This collaboration between consumers and firms is known as co-creation.
Numerous examples exist in which companies have invited consumers to use and improve the beta versions of their products, to participate in contests for new tastes of chips or milk products (e.g. Tine’s milk flavor contests), or to co-create new solutions for improving the existing products from cars (e.g. Peugeout design contests) to phones (Nokia’s contest in 2005) or packaging (Heineken’s bottle design contests).
Attractive business approach
Firms should consider co-creation as an attractive business approach for several reasons. In particular, companies are always in search for ways to improve competitive advantage. Ideas and products which are co-created will more closely match customer needs because they involve customers in value creation.
This leads to lower risk of commercial failure of such products and increased competitiveness. Moreover, through co-creation firms can increase productivity and efficiency through cost reduction since co-creation allows firms to replace costly inputs from employees and marketing agencies with consumers’ input.
However, the benefits of co-creation do not come without its costs. Opening costly and strategically critical elements of a new-product development to public leaves firms with diminished control over the process and its outcomes. Arming the co-creators with in-house tools and knowledge may pose a competitive threat to the firm.
Involving the Customers
Therefore, firms that rely on secrets to protect their proprietary knowledge may be reluctant to engage in co-creation. On the other hand, we worn that many companies have engaged in co-creation activities without establishing the necessary infrastructure to handle large volume of consumer input/information which may often lead to information overload.
Since co-creation demands effort and input from consumers, not-acknowledging and responding to this input may backfire to create negative word-of-mouth or, more likely today, a negative word-on-Web which travels much faster.
Therefore, firms need to be aware of the potential that co-creation may bring, involve customers in one way or another, but also be aware of the impediments and requirements of successful co-creation.
Triggering Consumer Participation
One essential issue companies intending to use co-creation must deal with is designing proper incentives that trigger consumer participation.
In his research, BI faculty Alexander Vossen examines the effectiveness and the interplay of different incentives in evoking consumer co-creation behavior. He finds that simply offering money, as most firms currently do, is not always a solution as the possible crowd of participants is very heterogeneous and their motives differ.
Companies need to take various other ways of compensating and addressing consumers’ in co-creation into account when deciding which incentives will be offered.
High impact article
The article “Consumer Cocreation in New Product Development”, coauthored by BI faculty Matilda Dorotic, has been included in the list of top 20 most cited marketing articles (March issue 2014), the list produced by University of Florida, US (link http://bear.warrington.ufl.edu/centers/mks/). This event prompted us to highlight the importance of consumer co-creation for firms.
Interested in Consumer Co-Creation?
If you and your company are interested in developing and pursuing a specific co-creation project or a more general strategy, both Matilda Dorotic (E-mail: matilda.dorotic@bi.no) and Alexander Vossen (E-mail: alexander.vossen@bi.no) are happy to give you more information. This may also include insights on how to choose the right kind of co-creation method, such as a onetime innovation contest or a long term community, and how to select the right topic, such as identifying the most promising product or service for co-creation and deciding whether to aim at getting ideas for improving existing products or designing a new product.
Reference:
Wayne D. Hoyer, Rajesh Chandy, Matilda Dorotic, Manfred Krafft, and Siddharth S. Singh, (2010), “Consumer Cocreation in New Product Development”, Journal of Service Research, 13(3), 283-296)
This article is published in BI Marketing Magazine Nr. 1-2014 (Link to E-Magazine). BI Marketing Magazine is a Science Communication Magazine published by the Department of Marketing at the BI Norwegian Business School.