What is Customer Co-Creation?

1. Introduction

New product development (NPD) is an important driver of corporate growth and profitability. Unfortunately, most new products fail to deliver on their objectives. Hence, marketing scholars and practitioners have duly devoted substantial attention toward improving NPD processes. This attention has led to several important advances, including the specification of the Stage-Gate model, the formulation of sophisticated NPD tools such as conjoint analysis and premarket launch forecasting, and advances in knowledge about how best to organize and manage NPD teams.

These core topics of NPD research and practice share an important but often unstated assumption that NPD is essentially an internal, firm-based activity. As recently it is observed that novel products and services are developed by manufacturers is deeply ingrained in both traditional expectations and scholarship. Hence, NPD research and practice largely operate under a firm-centered paradigm in which customers are viewed as having little active influence upon NPD activity. While this paradigm may have served academics and practitioners well in the past, it is currently being challenged by the emergence of empowered customers seeking greater input and control over NPD activity. This challenge is ushering in a new paradigm in which firms can enhance corporate growth and profitability by allowing customers to take a more active role in NPD activity.

In this newly emerging co-creation paradigm, customers are central and vital participants in the NPD process and, in some cases, are capable of creating new products with little help from firms. For example, many of today’s most successful computer applications, including Apache Linux, and Firefox, are open source projects that are managed by self-organizing communities of volunteer programmers.

Co-creation, in the context of a business, refers to a product or service design process in which input from consumers plays a central role from beginning to end. Less specifically, the term is also used for any way in which a business allows consumers to submit ideas, designs or content. Another meaning is the creation of value by ordinary people, whether for a company or not. Customer co-creation, in short, is open innovation with customers. It is a product or service development approach where users and customers are actively involved and take part in the design of a new offering. More specifically, customer co-creation is defined as an active, creative, and social process, based on collaboration between producers and customers. The idea of co-creation is to actively involve customers in the design or development of future offerings, often with the help of tools that are provided by the firm.

Co-creation activities are performed in an act of company-to-customer interaction which is facilitated by the company. The manufacturer is either empowering its customers to design a solution by themselves or is implementing methodologies to efficiently transfer an innovative solution from the customer into the company domain. Examples for methods include ideation contests, lead user workshops, consumer opinion platforms, toolkits for user innovation, or communities for social product development.

The process a company must tap into in order to really understand their customers is sometimes referred to as presumption. Prosumption is a process in which consumers co-design and co-produce their own products and services. Such processes blur the distinction between consumers and producers, which makes the quality of the consumer as, if not more important than the quality of the service provider. The acceptance of prosumption as a phenomenon implies that, rather than simply being passive constituents of an industry, customers become principal participants in the creation of and competition for value.

2. Literature Review

2.1. Need to Customer Co-Creation

Successful NPD requires two essential types of information which are information about customer needs and information about how best to solve these needs. Typically, customers have the most accurate and detailed knowledge about the first type of information, while manufacturers have the most accurate and detailed knowledge about the second type. This disparity creates a condition of information asymmetry.

Traditionally, firms have attempted to manage this asymmetry by engaging in various forms of marketing research to obtain better information about their customers’ needs. Under this approach, successful innovation rests on first understanding customer needs and then developing products to meet those needs. Unfortunately, customer needs are often idiosyncratic and tacit in nature and, hence, hard to accurately measure and coherently implement. It is suggested that consumers have deep and complex high fidelity needs; however, traditional market research methods often provide managers with only a cursory low fidelity signal of what customers want or need. As a result, most new product failures are attributed to a firm’s inability to accurately assess and satisfy customer needs.

The ability of consumers to take a more active role in NPD has been significantly enhanced by recent technological advances, most notably the development and growth of the Internet. According to several researchers, consumers have traditionally lacked the technical skills and capabilities that NPD requires. However, the Internet has helped ameliorate this deficiency and empower customers in at least three ways. First, the Internet increases access to knowledge that can enhance consumers’ ability to engage in creative pursuits. For example, consumers interested in learning how to build an electric car can find several websites that contain detailed technical information and user-friendly tutorials on this topic. Hence, through these electronic archived data sources, knowledge that was once tacit and remote has now become codified and proximate. Second, the Internet also facilitates consumers’ ability to apply their knowledge by providing access to a variety of online design tools. For example, fans of popular computer games such as Half-Life and The Sims can access Internet-based programs that enable them to create their own modifications and extensions to these games. Similar types of online design tools can also be found for website development, podcasting, and digital audio/video production. Third, in addition to enriching the creative capabilities of individual consumers, the Internet enhances collective co-creation by connecting individual consumers with other stock holders in a manner that allows them to participate effectively in a co-creation community. These communities enable consumers to learn from and teach other consumer-creators and help form collective knowledge and memory systems that transcend the information and skills of any single individual. For example, open source computer software is typically developed via self-organized communities of thousands of contributors who work in a highly collaborative manner and play a variety of different roles. This collective information exchange enables these co-creation communities to create offerings that can equal or surpass traditional firm-based NPD activity in terms of development speed, creativity, and marketplace success.

Customers should assume the role of co-developer during the early phases of the service innovation process. Such a role enables customers to suggest the types of ideas that the company should develop, and may even help in the design of an early prototype. When innovation is democratized in such away that customers are encouraged to take the initiative, they will be able to share their inventiveness at locations in which consumption usually takes place.

The main claimed benefit of co-creation involves the possibility of developing a differentiated new service with unique benefits and enhanced value propositions for potential users.

2.2. Four Types of Customer Co-Creation

The NPD literature suggests that the early stages of developing a new product entail two essential activities which are the contribution of novel concepts and ideas, and the selection of which specific concepts and ideas should be pursued. In many firms, both of these activities are closely guarded and typically conducted by a small number of employees. In most cases, customers are not actively engaged in either activity. Thus, firms can engage in customer co-creation by releasing control of either the contributions made to the NPD process and/or the selection of these contributions. Consequently, the degree of customer autonomy across these two activities forms the conceptual basis for the typology.

Figure 1

As shown in Figure 1, it is depicted contribution and selection as two distinct NPD activities that vary in the degree to which a firm releases control and empowers its customers as active participants. The depiction acknowledges that the balance between control and empowerment lies along a continuum from low to high. Specifically, it is suggested that the type and format of NPD contributions can range from being essentially fixed by a firm to wholly open to customer input and that the selection of these contributions can be either directed by a firm or directed by customers. When arranged along two dimensions, these activities allow us to derive four distinct types of customer co-creation: (1) collaborating, (2) tinkering, (3) co-designing, and (4) submitting, with submitting at one extreme (fixed contribution and firm-led selection) and collaborating at the other (open contribution and customer-led selection). Although non-exhaustive, it is believed that this typology classifies a considerable body of co-creation activity.

2.2.1. Collaborating

Collaborating is defined as a process in which customers have the power to collectively develop and improve a new product’s core components and underlying structure. As shown in Figure 1, collaborating is conceptualized as the form of co-creation that offers customers the greatest power to contribute their own ideas and to select the components that should be incorporated into a new product offering. It is the opposite of submitting. The organization is very open to all types of contributions and it relies on the crowd to decide the winner submission.

At present, the best examples of collaborating can be seen in open source software initiatives such as Linux, Apache, and Firefox. In contrast to commercial software, which places considerable restrictions on consumer usage, open source software empowers users to make fundamental changes to a program’s basic structure that is source code. This openness also influences the way intellectual property is managed, as many open source licenses dictate that program changes be made freely available to other users. In recent years, open source applications have gained widespread adoption and market success.

2.2.2. Tinkering

Tinkering is defined as a process in which customers make modifications to a commercially available product and some of these modifications are incorporated into subsequent product releases. Tinkering is similar to collaborating in terms of allowing customers a relatively high degree of autonomy over NPD contributions. However, firms that employ tinkering usually retain a considerable degree of control over the selection of these contributions. In this type of co-creation, the customer can contribute in a very creative way to an idea but the contributions are selected by the company. It is having less open contributions than collaborating. Customers are allowed to tinker with the product, but only in certain ways, and to make their creations available to others, but only under certain conditions.

At present, tinkering is most apparent in the computer game industry, where user-generated contributions are not only widely tolerated, but actively encouraged. For example, many game manufacturers invite users to make alterations ranging from incremental changes, such as edits to a character’s physical appearance, to more radical innovations, such as the creation of a completely new computer game. In order to assist tinkerers in making these changes, several computer game manufacturers provide customers with free or low-cost design tools that are similar or even identical to those used by their in-house software developers. This strategy often leads to unexpected and innovative creations, widespread adoption by other gamers, and marketplace success for the firm that produced the base game. For example, over 90 percent of the content of the widely successful computer game, The Sims, is derived from tinkerer-based modifications.

2.2.3. Co-designing

Co-designing is defined as a process in which a relatively small group of customers provides a firm with most of its new product content or designs, while a larger group of customers helps select which content or designs should be adopted by the firm. As shown in Figure 1, co-designing is characterized by a relatively fixed contribution approach but a high degree of customer autonomy over the selection of these contributions. Customers have low control over the contribution but they are the ones that in the end select the best one. It is a type of co-creation process in which a number of customers, the co-designers, submit product designs to the firm, with a larger group of customers selecting which designs the firm will produce. With co-designing, there are often relatively strict submission requirements, so it is categorized as having fixed contribution.

One of the best examples of co-designing is the online clothing manufacturer Threadless.com. This firm actively solicits original T-shirt designs from current and potential customers and then invites its extensive network of online customers to evaluate and select a short list of prospective new products. Similarly, both the online news service Digg.com and the cable television channel Current TV acquire much of their content directly from their users. In contrast to the standard approach used by commercial news organizations, Digg.com eschews hierarchical editorial control and instead allows its community of over 300,000 registered reviewers to vote on the stories they deem worthy for display. Likewise, Current TV provides amateur film makers with the opportunity to upload their homemade documentaries and gives viewers the chance to select the clips that air on the network. This co-creation approach has been utilized across a wide variety of product categories, including sporting goods, household products, home appliances, and consumer packaged goods.

2.2.4. Submitting

Submitting is defined as a process in which customers directly communicate ideas for new product offerings to a firm. Submitting is differentiated from traditional forms of customer inquiry by both the degree of customer effort required and by the nature of the input that customers provide to the firm. In contrast to most traditional forms of customer inquiry, which simply ask customers to provide responses to a set of prearranged queries, submitting requires customers to expend considerable energy developing tangible ideas for new product offerings. In addition, while traditional inquiry approaches typically involve customers solely in concept ideation and evaluation, submitting often requires customers to translate general ideas into well-defined processes, detailed graphic depictions, or working new product prototypes. As shown in Figure 1, submitting is conceptualized as the form of co-creation that is characterized by the least amount of customer autonomy in terms of both NPD contribution and selection. Although submitting resembles co-designing, it differs from co-designing because in submitting, the firm retains full control over the NPD selection process. The firm is in control of both the contribution and the selection. It means that people can only contribute for a specific part of a product but not the whole. Concept of submitting is closest to traditional NPD in that the selection of ideas is entirely done by the firm and there are often strict criteria contributions must follow. Submitting is different from traditional market research in that the firm asks people to come up with their own detailed solutions or designs, rather than just answering pre-determined questions.

Firms that employ submitting-based co-creation actively solicit input from either current or potential customers. This solicitation often occurs in the form of online invitations for customer-generated content. For example, the Swedish appliance manufacturer Electrolux sponsors an annual submitting competition called Designlab in which participants are asked to submit technical designs and product prototypes for cutting-edge household appliances. This initiative attracts thousands of entries across dozens of countries. From these, Electrolux selects a small set of finalists and invites them to a six-day, company-sponsored retreat, where they participate in workshops, present their inventions, and compete for cash prizes. The Italian motorcycle manufacturer Ducati Motors employed a similar approach via its recent Design Your Dream Ducati contest that encouraged Ducati enthusiasts to submit innovative artistic and technical ideas to an executive team, which then selected the winning contributions.

2.3. Differences between Customer Co-Creation and Traditional View

Co-creation can be seen as a new way of thinking about the economical concept of value. Customer co-creation is described as a consumer-centric view in opposition to the traditional company-centric view. In the traditional view, the consumer is not part of the value creation process, while in the consumer-centric view the consumer plays a key role in it. In the traditional view, the company decides on the methods and structure of the process, while in the consumer-centric view the consumer can influence those. In the traditional view, the goal is to extract value money from consumers in the form of money, while in the consumer-centric view, the goal is to create value together for both consumer and company. In the traditional view, there is one point of exchange controlled by the company, while in the consumer-centric view, there are multiple points of exchange where company and consumers come together.

Collaboration within design and market research and social science is changing. Product design is moving from a user-centered design process to that of participatory experiences. It’s a shift in attitude from designing for users to one of designing with users. It is a new design movement that will require new ways of thinking, feeling and working. Participatory experience is not simply a method or set of methodologies, it is a mindset and an attitude about people. It is the belief that all people have something to offer to the design process and that they can be both articulate and creative when given appropriate tools with which to express themselves.

Listening to what people say tells us what they are able to express in words or explicit knowledge. But it only provides what they want us to hear. Watching what people do and seeing what they use provides us with observable, sometimes unconscious information or observed experience. Seeing and appreciating what people dream shows us how their future could change for the better. It is another form of tacit knowledge that can reveal latent needs that people are not aware of having.

Traditional market research techniques use responsive market orientation which concerns a firm’s attempts to discover, understand and satisfy the expressed needs of its customers. However, customer co-creation uses proactive market orientation which is described as a customer-driven process in which the firm must discover, understand and satisfy the latent needs of its customers or discover new market opportunities.

Traditional market research techniques concentrate on capturing customers’ previous experiences with a product or service, have been designed so that the participants respond to stimuli from the company. On the other side, customer co-creation assists in the development of innovative new services that build on gaining greater access to customers’ underlying values and behaviors.

In traditional market research techniques, reactive methods capture consumers’ spoken needs. On the other hand, in customer co-creation, proactive methods seek to capture a wider range of information, in the form of both spoken needs and unspoken or so-called latent needs. Market research techniques that give customers greater leeway to take the initiative and make their own discoveries, and in which value is co-created with the customer, are more likely to contribute to the success of new development projects.

One of the main problems with reactive methods is that they focus on understanding the customer’s perception of existing concrete attributes rather than their value-serving benefit with using traditional market research techniques. However, in customer co-creation, customers provide an organization with information that has been already processed by customers that have a stronger set of skills related to value-in-use. A future market offering that is being developed is more likely to yield satisfied customers, since proactive research techniques capture a wider range of customer information.

Customers participating in traditional market research methods have had to rely on their memories of previous experiences in order to produce ideas. Therefore, traditional market research techniques seem restricted by the fact that users have difficulty imagining or remembering scenarios in which they have experienced certain needs. In spite of this, participants in the co-creation condition appear to have derived their ideas from an experience that has triggered their understanding of how value-in-context can be created, and they generate ideas about where usage takes place or is assumed to take place.

Proactive market research techniques have a greater influence on the profits of new products and services than reactive market research techniques. Furthermore, the use of a proactive market research technique is more likely to lead to original ideas than a reactive market research technique.

3. Conclusion

This paper investigates the topic of customer co-creation and reveals its hidden parts to show and tell its importance during new product development (NPD) process with reviewing previous paper in the literature. Moreover, how customer co-creation reduces the risk in NPD, is mentioned. Additionally, the article tries to show what is difference between customer co-creation and traditional market research techniques with reviewing former studies.

In the introduction part, what is NPD process and the place of customer co-creation in NPD, are mentioned. Moreover, in the literature review part, there are three headers which are need to customer co-creation, four types of customer co-creation, and differences between customer co-creation and traditional view. In the need to customer co-creation part, why NPD process need to customer co-creation and what are advantages of customer co-creation during NPD, are explained. Furthermore, what are four types of customer co-creation are expressed. Next, what are differences between customer co-creation and traditional view are revealed.

To sum up, customer co-creation increases the percentage of success of new produced product via revealing the real needs of customers. Owing to this, recently released product development approaches such as the lean product development base on customer co-creation to develop new products. Customer co-creation is start point of new era of product development. There are many studies in literature, but there are also many unknown subparts. Because of this, the number of studies about customer co-creation should be increased.

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