Put Your Customers to Work? Not So Fast!
With the support of new technologies, companies are gradually realizing the importance and benefits of co-creation, where the value of a service is increasingly co-created by the firm and the customer. Consumers are increasingly put to work for the services they demand, from carrying their own food in fast-food restaurants to creating product design ideas and Super Bowl commercials. Consumers become more and more involved in the production process as “prosumers” who produce and consume at the same time. As co-creation tends to enhance customer satisfaction, as well as reduce firms’ operating costs, why not?
On the other hand, co-creation of value should not be one-sided. While co-creation benefits firms, it should also provide commensurate value to the customers in order for the practice to be attractive and sustainable. What do consumers get when they assemble a piece of furniture or install a cable service themselves instead of having a service provider doing it? Sense of competence? Convenience of not waiting? What if consumers don’t have a strong desire for those psychological benefits? Or what if those psychological benefits are not sufficient to compensate for the effort consumers put into the co-creation process? For example, would consumers be willing to make their own beds while staying in a hotel? What else could motivate them? The answer might be, “show me the money!” Financial incentives may possibly be an important factor in motivating consumers to cooperate with service providers to co-create.
In a forthcoming research article in the Journal of Service Research, along with a colleague Rajneesh Suri, at Drexel University, we set out to examine how consumers trade-off between being served by and co-creating with the service provider when co-creation involves effort. The result: minimum psychological benefits. In other words, how do consumers value their effort in the context of service co-creation?
What do consumers expect back in savings, or what are they willing to pay for their own efforts? In a series of studies, we find that consumers place more value on their own effort. Overall, they expect to save more when they perform the work themselves relative to the amount they are willing to pay for the service provider to do the same amount of work. However, the monetary value consumers put on their own efforts vary greatly with the nature of the service option and individual consumer preferences. Consumers are willing to lower their “asking price” (i.e., the amount requested to save by co-creating) when their demand for co-created service is high, such as when there is a budget constraint making saving more attractive, or when they are expected to do it anyway. On the other hand, consumers tend to jack up the price when they sense that the service provider benefits from the co-creation significantly, such as when the labor cost is high, or when they know that the service provider is not able to perform the service without the consumers’ participation.
By examining consumers’ valuation of their own effort, this research sheds light on the role of monetary incentive plays in co-creation. To encourage consumer co-creation, service providers should make sure the appropriate benefits to the consumer are provided, including both psychological and financial benefits. It is also good news for service providers who can clearly identify consumer segments that are more or less willing to trade their efforts in order to expand their markets and provide different service options..
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Lan Xia is an Associate Professor in the Marketing Department at Bentley University. She completed her PhD in Marketing at University of Illinois Urbana-Champaign in 2003. Her major areas of research include behavioral pricing, price fairness perceptions, service pricing, consumer information processing, and online consumer behaviors. Her work has appeared in Journal of Marketing, Journal of retailing, Journal of Consumer Psychology, Journal of Interactive Marketing, Journal of Economic psychology, Journal of Service Research, and International Journal of Electronic Commerce.
To read the article Trading Effort for Money. Consumers’ Cocreation Motivation and the Pricing of Service Options, visit the Journal of Service Research website.
The Journal of Service Research is edited by Mary Jo Bitner, Professor of Marketing at the Center for Services Leadership in the W. P. Carey School of Business at Arizona State University, and published by Sage in Thousand Oaks, California.
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