IMPACT OF CO-CREATION FOR VALUE CREATION; A BASE FOR PRODUCER-CONSUMER SYNERGY
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ABSTRACT
The issue of service Quality in Nigeria has been of great concern as there have been public complaints about the quality of services provided by operators in the mobile telecommunication industry in Nigeria. And this had led to the commission imposing fines on the four major mobile telecommunication providers in Nigeria (Etisalat, MTN, Airtel and, Glo) in May 2012.This stemmed from lack of Co-creating, keying into the customer’s thoughts and seeing their wants.Co-creation is a strategic tool that emphasizes the generation of mutual and ongoing realization of mutual firm-customer value. This study thus examined Co-creation for Value Creation: a base for producer-consumer synergy using Etisalat Nigeria Plc, as the study. The study further examines the underlying dimensions of co-creation and its effects on behavioural consequences such as satisfaction and involvement in relation to value added. A sample survey was used as a research design. Data were gathered using a structured questionnaire to elicit information from 200 respondents (50 staff and 150 Customers). The analysis was done using frequency tables, percentage counts, Regression analysis and Pearson Correlation analysis. Major findings revealed that there is a significant relationship between Co-creation and Value Creation, there is also a significant relationship between producer-consumer synergy and customer purchase decision, and there is a significant relationship between Co-creation and customer Satisfaction. In addition, the study found out that there is no significant relationship between Co-creation and Customer retention. It was however recommended that Etisalat Nigeria plc management give an effective attention to adopting Co-creational activities for the organization so as to influence and maintain customer purchase.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
As early as the 18th century, Adam Smith (1776) identified users as a great source of
innovation: “One of the greatest improvements that have been made upon this machine [was] thediscovery of a boy who wanted to save his own labour”. Today, there are many examples
of companies attempting to collaborate with their customers in what is commonly referred to as co-creation (Vargo and Lusch, 2007) and viewing them as an important resource when developing new offerings (Prahalad and Ramaswamy, 2004).
As Smith noted, an important reason for such attempts is that users have innovative ideas about future offerings (Kristenssol., 2004). The key question is how companies should design their development processes to communicate with customers in order to gain access to future customer needs and ideas.
Prahalad, Venkatand Ramaswamy(2000) introduced the concept of Co-Creation in their 2000 Harvard Business review article“Co-Opting Customer Competence” In co-creation customers is not just customizing, they are engaging with vendors to create value. In 2004, Prahalad and Ramaswamy kept on working on their original ideas; they use extensively the word “Value Co-Creation”.
Co-created value arises in the form of personalised, unique experiences for the customer (Value-in-use) and ongoing revenue, learning and enhanced market performance drivers for the firm (Loyalty, relationship, customer word of mouth).
It is commonly perceived by academics (Zwick, Bonsu, &Darmody, 2008,) that the original concept of co-creation applied to business strategy and marketing was ‘coined’ by Prahaladand Ramaswamy (2000).
Co-creation is a strategic tool that emphasizes the generation of mutual and ongoing realization of mutual firm-customer value (Prahalad and Ramaswamy, 2004). When the customers is engaged/ involved willingly and unwillingly with the business process in any form by shared or personal resources, to provide meaningful output in the growth of the company. Co-creation reduces the risk factors in firms and industries. It involves higher intensity of customer engagement. Co-creation provides a newer ways of doing business. Through this customers can directly interact with firms and industries.
Co-creation is an upcoming topic and trend in Nigeria today. As competitors continue to compete for business, a fundamental importance on customer interaction is becoming noticed as a key aspect of maintaining an advantage in the market. In studying co-creation, researchers are interested in finding what factors affect Co-creation and value creation. There is also much emphasis on how and why customers participate in the co-creation process, and what are the customers’ thoughts and feelings about interacting in the value adding services.
The purpose of co-creation is for value to be created for both stakeholders (depending who is involved) and the setting. The goal is that the final product or service be valued more greatly after stakeholders have had the opportunity to add personal resources and have had input in the product or experience generating process. Co-creation involves changing the way the organization/provider interacts with individuals, including employees, customers or any stakeholder. It requires setting up new modes of engagement for these individuals, or experience environments, which allow these individuals to insert themselves in the value chain of the organization/provider. The idea of co-creation is to set free and combine the creative energies of many people, so that it transforms both their individual experience and the economics of the organization/provider that enabled it (Gouillart, 2010). In doing so, Customers collaborate with companies in order to empower themselves, exert influence, gain recognition and enjoy themselves. This is done so that Customers may voice their opinions about products and brands and serve as influencers that can shape brand conversations worldwide.
1.2 Statement of the Problem
Customers today have more choices of products and services than ever before, but they seem dissatisfied. Firms invest in greater product variety but are less able to differentiate themselves. Growth and value creation have become the dominant themes for managers. Co-creation in this context is a collaborative product development activity in which Customers actively contributes and selects various elements and gives new dimensions to products and services being offered. The end point of every organisations activity is the purchase and recommendation of itsproducts and services, thereforeco-creation is of paramount importance.
As easy and simple as it may all sound, co-creation in all its nitty-gritties is not being applied in organisations today owing to a lot of reasons , organisations are reluctant to adopt the practice of co-creation either because they find the process as being too cumbersome timewasting and inconclusive or see its non-adoption as a way to save precious resources and finances that otherwise would have been spent on Customers information research gathering and application; in other words being “penny wise pound foolish” because at the end of the day they still leave Customers with this inept feeling of dissatisfaction and an inexplicable desire to want more out of the product. This research seeks to redress these unfounded notions that organisations have towards co-creating and making them view it as a new avenue for value creation. Furthermore, many Organizations will not believe setting up platforms for co-creation will be worth the effort without realizing benefits which come from it.
The problem of this study stems from the fact that many organisations do not Co-create and are less willing to involve themselves in Co-creational activities despite the innumerable benefits that co-creating would offer the Organisation. Additionally, since the concept is relatively new, there are many concepts which are not yet agreed upon and many scholars hold to their own personal beliefs and ideas depending on the information and data they collected, there is a wide variety of opinion and hypotheses that this research seeks to explore.
In light of the above mentioned issues this is what this research in essence seeks to address in order to gain new ground and insight towards co-creation and co-interaction of organisations with prospective and potentialcustomers and ways of improving value creation.
1.3 Objectives of the Study
The objectives of this study are based on illuminating the innumerable benefits of producer-Customer synergy for value creation. The purpose of this research is to examine how co-creation provides a base for producer-consumer synergy in order to create value.
Other objectives of the study include:
- To investigate whether co-creation between producer and customer, will bring about Value Creation.
- To explore if producer-customer synergy will influence Customers Purchase Decision.
- To find out whether producer-Customers synergy willbring about an increased customer satisfaction.
- To ascertain whether Co-creation will enhance Customer retention.
1.4 Research Questions
For the purpose of this research the following questions shall be critically examined
- Can Co-creation between producer and consumer bring about value creation?
- Will Co-creation affect and influence Customers Purchase Decision?
- How will Producer-Consumer Synergy bring about an Increased Customer satisfaction?
- Will Co-creation enhance Customer Retention?
1.5 Research Hypothesis
Hypothesis 1
Co-creation between producer and consumer does not bring about value creation
Hypothesis 2
Co-creation does not affect and influence Customers Purchase Decision
Hypothesis 3
Producer and Consumer synergizing does not bring about an increased Customer satisfaction
Hypothesis 4
Co-creation will not enhance Customer Retention
1.7 Significance of the Study
The importance of this study is derived from its objectives. This study will be useful to management in understanding how co-creation will form a base for producer Customers synergy and how it can be incorporated into an organisations process for value creation.
Its significance also transcends to enlighten us on how co-creation is vital in the overall growth of the organisation, maintaining the organisation market share; and increasing organisational profitability.
More so, the study becomes significant in the sense that it has the potential of making contribution to the existing body of literature in Co-creation.
In Addition, the findings from this study would enable students of Management, lecturers, Management and customers of Etisalat Nigeria as well as Other Organisations to understand how much Co-creation has on Customers satisfaction.
1.7 Scope and Delimitations of the Study
Due to the large number of Organisations in Nigeria, the scope of the study will cover and will be limited to the available information gotten from selected organizations and corporations in Nigeria and the general consuming populace
1.8 Limitations of the Study
The major limitations to the study are:
Co-creation is such a multifaceted phenomenon, that in order to gain a deeper understanding of a specific area, choices will be made to focus the scope of the study. This research would be focused on value creation as a dyadic outcome between producer and Customers synergizing, rather than as the activities of a value network.
The focus of this study will be on the communicative aspects, from a customer’s perspective and limited to the communication aspects that involve co-creation activities. This research takes a focus on co-creation from a customer-organization interactive position, taking into cognizance that by customer one can refer to any cooperative stakeholder and by organization meaning any productive network or institution
This research will also focus on, examining, merging and arguing the most relevant literature regarding co-creation and developing an organic understanding of the concept, its characteristics and criticisms. Also, the after effects of co-creation are unknown as currently even the antecedents are undefined. If benefits of co-creation cannot be determined, then it will be harder for suppliers to entice Customers to participate in the co-creation process and some suppliers will not believe setting up platforms for co-creation will be worth the effort without realizing benefits which come from it.
1.9 Definitions of Terms
Co-creation
Co-creation is a management initiative, or form of economic Strategy, that brings different parties together (for instance, a company and a group of customers), in order to jointly produce a mutually valued outcome
Service Quality
An assessment of how well a deliveredservice conforms to the client’sexpectations. Service businessoperators often assess the service quality provided to their customers in order to improve their service, to quickly identify problems, and to better assess client satisfaction.
Customer retention
Customer retention is the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship. A company’s ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace.
Services
This has often been defined as the intangible opposite of goods. A service does not primarily consist of goods supplied, but rather of capabilities and competences made available for the client in the aim of organizing a solution to a problem
Customers’ value creating processes
This refers to the customer’s consumption and usage processes, in which value-in-use emerges for the customer. In case of a business customer, these value creating processes may also be used to refer to business processes. In result, the customer’s value creating processes can be defined as a series of activities undertaken by the customer to achieve personal or organizational goals.
Value creation
Value Creation is defined as turning potential resources into meaningful benefits. I’ll use a broad definition in this paper, based on which value may be created independently by the customer, or jointly in a process of co-creation. Value creation consists of the service provider offering the customer a value foundation in the form of resources, to which the customer adds their own resources in order to create value for themselves.
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