SlideShare ist ein Scribd-Unternehmen logo
1 von 10
Downloaden Sie, um offline zu lesen
CO-CREATION EXPERIENCES:
THE NEXT PRACTICE IN VALUE
CREATION
C. K. PRAHALAD AND VENKAT RAMASWAMY




C        onsumers today have more choices of products and services than ever

before, but they seem dissatisfied. Firms invest in greater product variety but
                                                                                              C. K. PRAHALAD
                                                                                              is the Harvey C. Fruehauf Professor
                                                                                              of Business Administration at the
are less able to differentiate themselves. Growth and value creation have                     University of Michigan Business

become the dominant themes for managers. In this paper, we explain this                       School in Ann Arbor;
                                                                                              e-mail: cprahalad@aol.com
paradox. The meaning of value and the process of value creation are rapidly

shifting from a product- and firm-centric view to personalized consumer

experiences. Informed, networked, empowered, and active consumers are
                                                                                              VENKAT RAMASWAMY
increasingly co-creating value with the firm. The interaction between the firm                is the Michael R. and Mary Kay

and the consumer is becoming the locus of value creation and value extrac-                    Hallman Fellow of Electronic Business

                                                                                              and Professor of Marketing at the
tion. As value shifts to experiences, the market is becoming a forum for
                                                                                              University of Michigan Business
conversation and interactions between consumers, consumer communities,                        School; e-mail: venkatr@umich.edu

and firms. It is this dialogue, access, transparency, and understanding of risk-

benefits that is central to the next practice in value creation.
                                                                                              This article is based on Prahalad and
                                                                                              Ramaswamy (2004), The Future of
© 2004 Wiley Periodicals, Inc. and Direct Marketing Educational Foundation, Inc.
                                                                                              Competition: Co-creating Unique Value

JOURNAL OF INTERACTIVE MARKETING VOLUME 18 / NUMBER 3 / SUMMER 2004                           with Customers, Harvard Business
Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/dir.20015   School Press.




                                                                                                                                5
INTRODUCTION                                                  defined as an aggregation of consumers, was a “tar-
                                                              get” for the firm’s offerings.2
The word “market” conjures up two distinct images.
On one hand, it represents an aggregation of con-             Needless to say, the traditional concept of a market
sumers. On the other hand, it is the locus of exchange        is company-centric. So is the process of value cre-
where a firm trades goods and services with the con-          ation. Consequently, firms conceptualize customer-
sumer. Implicit in this view is a critical assumption         relationship management as targeting and managing
that firms can act autonomously in designing products,        the “right” customers. Firms focus on the locus of
developing production processes, crafting marketing           interaction—the exchange—as the locus of economic
messages, and controlling sales channels with little or       value extraction. The interactions between companies
no interference from or interaction with consumers.1          and customers are not seen as a source of value cre-
Consumers get involved only at the point of exchange.         ation (Normann & Ramirez, 1994; Wikstrom, 1996).
Firms aggregate consumers into “meaningful seg-               Value exchange and extraction are the primary func-
ments” for ease of exchange. Both of these images of          tions performed by the market, which is separated
the market are being challenged by the emergence of           from the value creation process, as shown in Figure 1.
connected, informed, empowered, and active con-               It is no surprise that the flow of communications is
sumers. Consumers now seek to exercise their influ-           also from the firm to the consumer, as the market is a
ence in every part of the business system. Armed with         place where value is exchanged and the consumer has
new tools and dissatisfied with available choices, con-       to be persuaded such that the firm can extract the
sumers want to interact with firms and thereby                most value from transactions.
“co-create” value (Prahalad & Ramaswamy, 2004). The
changing nature of the consumer-company interaction           Informed, connected, empowered, and active con-
as the locus of co-creation (and co-extraction) of value      sumers are increasingly learning that they too can
redefines the meaning of value and the process of value       extract value at the traditional point of exchange.
creation. In this article, we discuss how the concept of      Consumers are now subjecting the industry’s value
a market is undergoing change and transforming the            creation process to scrutiny, analysis, and evaluation.
nature of the relationship between the consumer and           Consumer-to-consumer communication and dialogue
the firm.                                                     provides consumers an alternative source of informa-
                                                              tion and perspective. They are not totally dependent
CONSUMERS, MARKETS, FIRMS, AND                                on communication from the firm. Consumers can
VALUE CREATION: THE TRADITIONAL                               choose the firms they want to have a relationship
SYSTEM                                                        with based on their own views of how value should be
                                                              created for them.
In the traditional conception of process of value cre-
ation, consumers were “outside the firm.” Value cre-          Online auctions for hotel rooms and airline reserva-
ation occurred inside the firm (through its activities)       tions are just one example of this growing phenomenon.
and outside markets. The concept of the “value chain”         The popularity of businesses such as eBay suggests
epitomized the unilateral role of the firm in creating        that the auction is increasingly serving as the basis for
value (Porter, 1980). The firm and the consumer had           pricing goods and services online. From the customer’s
distinct roles of production and consumption, respec-         perspective, the advantage of the auction process is
tively. In this perspective, the market, viewed either        that prices truly reflect the utility to that customer, at
as a locus of exchange or as an aggregation of con-           a given point in time, of the goods and services being
sumers, was separate from the value creation process          purchased. That doesn’t necessarily mean that prices
(Kotler, 2002). It had no role in value creation. Its role    are lower, only that the customer pays according to her
was value exchange and extraction. The market,

                                                              2
                                                               We use the term “offering” to denote products and services. Our
1
 We use the terms “consumer” and “customer” interchangeably   point of view applies equally to conventional distinctions of
throughout the paper.                                         “products” versus “services.”




6      JOURNAL OF INTERACTIVE MARKETING
FIGURE 1
                      The Traditional Concept of a Market
                      Source: Prahalad and Ramaswamy (2004)



utility rather than according to the company’s cost of        the “Walmartization” of everything, from clothes to
production.                                                   DVD players.

As customers become more knowledgeable and                    Is there an antidote to this dilemma? We think so.
increasingly aware of their negotiating clout, more           Firms continually reduce costs and the consumers
businesses—from automakers to cosmetic surgery                negotiate away the cost reductions in price erosion.
clinics—will feel pressure to adopt an implicit (if not       But to find the antidote, companies must escape the
an explicit) negotiation. An auction is one approach to       firm-centric view of the past and seek to co-create
this negotiation process. Armed with knowledge                value with customers through an obsessive focus on
drawn from today’s increasingly transparent business          personalized interactions between the consumer and
environment, customers are much more willing than             the company. Further, doing so will require managers
in the past to negotiate prices and other transaction         to escape their product-centered thinking and instead
terms with companies. We are moving toward a world            focus on the experiences that customers will seek to
in which value is the result of an implicit negotiation       co-create. We need to challenge the traditional, dis-
between the individual consumer and the firm.                 tinct roles of both the consumer and the company and
Therefore, value creation, for an automaker, for              examine the impact of a convergence of the roles of
example, is the result of individualized negotiations         production and consumption; or the convergence of
with millions of consumers.                                   the roles of the company and the consumer.

The consequences of not recognizing this shift can be
high. As long as firms believe that the market can be
                                                              CO-CREATION EXPERIENCES AS THE
separated from the value creation process, firms in
search of sources of value will have no choice but to
                                                              BASIS FOR VALUE CREATION
squeeze as much costs from their “value chain” activ-         High-quality interactions that enable an individual
ities as possible. Meanwhile, globalization, deregula-        customer to co-create unique experiences with the
tion, outsourcing, and the convergence of industries          company are the key to unlocking new sources of
and technologies are making it much harder for man-           competitive advantage. Value will have to be jointly cre-
agers to differentiate their offerings. Products and          ated by both the firm and the consumer (see Table 1).
services are facing commoditization as never before.
Companies can certainly not escape being super effi-          In the traditional system, as firms decide the prod-
cient. However, if consumers do not see any differen-         ucts and services they will produce, by implication
tiation they will buy smart and cheap. The result is          they decide what is of value to the customer. In this




                                                                                        CO-CREATION EXPERIENCES    7
system, consumers have little or no role in value cre-                        as Disney and Ritz Carlton have found interesting
ation. During the last two decades, managers have                             ways to stage an experience for consumers (Pine &
found ways to partition some of the work done by                              Gilmore, 1999). In all variations of consumer involve-
the firm and pass it on to their consumers—be it                              ment, from self-checkout to participation in a staged
self-checkout (e.g., gas pumps, ATMs, supermarket                             experience, the firm is still in charge of the overall
checkout), involvement of a subset of customers in                            orchestration of the experience. Yes, they focus on con-
product development (e.g., industrial customers help                          sumer experience, but their consumers are basically
design the products they need as airlines do with                             treated as passive. Such companies disproportionate-
Boeing), or a range of variants in between.                                   ly influence the nature of the experience. They are
Consumers find some of these beneficial. Firms such                           primarily product-centric, service-centric, and, there-
                                                                              fore, company-centric. The focus is clearly on connect-
                                                                              ing the customer to the company’s offerings.

    TABLE 1                     The Concept of Co-Creation
                                                                              This firm-centric view of the world, refined over the
                                                                              last 75 years, is being challenged not by new competi-
                                                                              tors, but by communities of connected, informed,
WHAT CO-CREATION IS NOT                     WHAT CO-CREATION IS
                                                                              empowered, and active consumers. We believe that
• Customer focus                            • Co-creation is about joint      there is an emerging disconnect between the opportu-
• Customer is king or                        creation of value by the         nities for value creation and differentiation enabled
 customer is always right                    company and the customer. It
                                                                              by a networked, active, informed consumer (and con-
                                             is not the firm trying to
                                                                              sumer communities), their expectations and capabili-
                                             please the customer
                                                                              ties and the constraining force of the traditional con-
• Delivering good customer                  • Allowing the customer to        cept of a market. The more than 1.3 billion cell phones
  service or pampering the                   co-construct the service         and the proliferation of PCs around the world are cre-
 customer with lavish                        experience to suit her context   ating ubiquitous connectivity. For example, more than
 customer service
                                                                              70 million Americans have visited www.WebMD.com.
• Mass customization of                     • Joint problem definition and
                                                                              More than 500 chat rooms exist on just cancer alone. A
  offerings that suit the                    problem solving
                                                                              visit to the doctor today is qualitatively different than
 industry’s supply chain
• Transfer of activities from               • Creating an experience
                                                                              it was 10 years ago. Patients want to engage in dia-
 the firm to the customer as                  environment in which            logue. They want to understand the risk-benefits of
 in self-service                             consumers can have active        alternate modalities of treatment. They have access to
• Customer as product                        dialogue and co-construct        more information than ever before, regardless of qual-
  manager or co-designing                    personalized experiences;        ity. Consumers expect transparency. “Don’t hold back,
 products and services                       product may be the same          tell me the truth,” is often the approach. Doctors may
                                             (e.g., Lego Mindstorms) but      not like this. It takes time. It exposes them and the
                                             customers can construct          quality of their expertise. It is hard to hide behind
                                             different experiences            authority. However, the doctor now has a better
• Product variety                           • Experience variety
                                                                              patient. Because he or she understands and is
• Segment of one                            • Experience of one               involved, the patient is more willing to comply with the
                                                                              treatment modalities that they have jointly developed.
• Meticulous Market research                • Experiencing the business as
                                              consumers do in real time
                                            • Continuous dialogue             Put yourself in the position of a patient. What is of
• Staging experiences                       • Co-constructing personalized
                                                                              value here? Is it the medications, the hospital, the
                                              experiences                     equipment that is used, and the expertise of the doc-
                                                                              tor? Surely, all these are critical. But what differenti-
• Demand-side innovation for                • Innovating experience
                                                                              ates one hospital from another? One doctor from
  new products and services                   environments for new
                                                                              another? For the patient, it is the experience of co-
                                              co-creation experiences
                                                                              creating with the doctor a modality of treatment that
                                                                              takes into account his or her peculiar circumstances.



8        JOURNAL OF INTERACTIVE MARKETING
Patient A may live alone and find it difficult to follow                                  Dialogue

the diet regimen. She may need help. A different
patient with the same medical condition may have
totally different circumstances or context. His experi-
ence may depend on taking care of his children. He                      Transparency
                                                                                        Co-creation
                                                                                            of          Access
wants to indulge his children in the American ritual                                      Value


and must make it to the little league games without
appearing to be very sick. The traditional view of the
hospital and its product—medical treatment—has not                                      Risk-benefits
disappeared. Rather, what has emerged as the basis
for unique value to consumers is their experience                       FIGURE 2
(which is contextual). The quality of that experience                   Building Blocks of Interactions for
is dependent on the nature of the involvement the                       Co-creation of Value
customer (patient) has had in co-creating it with doc-
tors, counselors, and others. Individual involvement
                                                           ness to act on both sides. It is difficult to envisage a
can go beyond the treatment modality to the process
                                                           dialog between two unequal partners. So, for an
of diagnosis, therapy, counseling, and wellness indica-
                                                           active dialog and the development of a shared solu-
tors. It can vary from patient to patient, and depends
                                                           tion, the firm and the consumer must become equal
on how each patient chooses to co create his or her
                                                           and joint problem solvers. Dialog must center around
own unique experiences. What we need to create is an
                                                           issues of interest to both—the consumer and the firm
experience environment within which individual
                                                           and must have clearly defined rules of engagement.
patients (consumers) can create their own unique
                                                           For example, buyers and sellers engage in a dialogue
personalized experience. Thus, products can be com-
                                                           in eBay. The rules of engagement are evolving but
moditized but co-creation experiences cannot be.
                                                           clear at any point in time.

                                                           But dialog is difficult if consumers do not have the
BUILDING BLOCKS OF INTERACTIONS:                           same access and transparency to information. Firms
DIALOGUE, ACCESS, RISK-BENEFITS,                           have traditionally benefited from exploiting the infor-
AND TRANSPARENCY (DART)                                    mation asymmetry between them and the individual
                                                           consumer. Because of ubiquitous connectivity, it is
Let us look at what has changed. How do we build a         possible for an individual consumer to get access to as
system for co-creation of value? First, we have to start   much information as she needs from the community
with the building blocks of interactions between the       of other consumers as well as from the firm. Both
firm and consumers that facilitate co-creation experi-     access and transparency are critical to have a mean-
ences. Dialog, access, risk-benefits, and transparency     ingful dialog.
(DART) are emerging as the basis for interaction
between the consumer and the firm (see Figure 2).          More importantly, dialog, access, and transparency
These building blocks of consumer-company interac-         can lead to a clear assessment by the consumer of the
tion challenge the strong positions managers have          risk-benefits of a course of action and decision. Should
traditionally taken on labeling laws, disclosure of        I change my medication? What are the risks? Instead
risks (as in smoking or genetically modified plants),      of just depending on the doctor—the expert—the
transparency of financial statements, and open access      patient has the tools and the support structure to help
and dialog with consumers and communities.                 make that decision—not in some generic risk category
                                                           but “for me”—with a medical condition, a lifestyle, or
Dialog is an important element in the co-creation          social obligations. This is a personalized understand-
view. Markets can be viewed as a set of conversations      ing of risk-benefits.
between the customer and the firm (Levine, Locke,
Searls, & Weinberger, 2001). Dialog implies interac-       The progress towards DART cannot be stopped. The
tivity, deep engagement, and the ability and willing-      case of the patient-doctor interaction is not isolated.



                                                                                       CO-CREATION EXPERIENCES   9
We believe that the opportunities for value creation         example, video games could not exist without active
are enhanced significantly for firms that embrace the        co-creation with consumers. At the other extreme, tra-
concepts of personalized co-creation experience as the       ditional firms like John Deere are building extensive
source of unique value. Personalizing the co-creation        networks that allow farmers to share their experi-
experience differs from the concept of “customers as         ences, dialogue with the company and among them-
innovators.” Customers of a firm like General Electric       selves, and increase their productivity. The OnStar
Plastics assume much of the task of developing a cus-        network of GM is another case in point. The system
tom resin for a specific application. By providing           has the potential to allow individuals to construct their
access to tools and a library of compounds, GE shifts        own experience. GM provides the platform. As an indi-
effort and risk to its customers (Thomke & von               vidual, I can decide to seek advice on restaurants or
Hippel, 2002). When the process works well, both par-        ask them to alert me to breaking news or the progress
ties benefit. GE saves development time and reduces          of my favorite football team. These are all possibilities.
its risk, while customers can get what they want with        Individuals construct their own experiences. Ebay and
greater speed and accuracy. But as long as the process       Amazon are further examples of this trend—both facil-
remains firm centric and product centered, it is at          itate the process of personalized experiences, both
best a variant of the current dominant logic.                involve communities, both facilitate dialogue.

The same applies to the conventional approach to             The transition from a firm-centric view to a co-
product or service customization. Starting from a tra-       creation view is not about minor changes to the tradi-
ditional firm-centric view of value creation, managers       tional system. Note what co-creation is not. It is
focus on providing products and services to a single         neither the transfer or outsourcing of activities to cus-
customer at low cost. This process leads to mass cus-        tomers nor a customization of products and services.
tomization, which combines the benefits of “mass”            Nor is it a scripting or staging of customer events
(large-scale production and marketing and therefore          around the firm’s various offerings (e.g., La Salle &
low cost) with those of “customization” (targeting a         Britton, 2002; Peppers & Rodgers, 1993; Schmitt,
single customer). The focus on product-feature devel-        1999; Seybold, 1998). That kind of company-customer
opment leads to increased product choice for con-            interaction no longer satisfies most consumers today.
sumers. On the Web, for example, consumers can cus-          The change that we are describing is far more funda-
tomize products and services ranging from business           mental. It involves the co-creation of value through
cards and computers to home mortgages and flower             personalized interactions based on how each individ-
arrangements, simply by choosing from a menu of fea-         ual wants to interact with the company. Co-creation
tures. But such customization tends to suit the com-         puts the spotlight squarely on consumer-company
pany’s supply chain, rather than a consumer’s unique         interaction as the locus of value creation. Because
desires and preferences.                                     there can be multiple points of interaction anywhere
                                                             in the system (including the traditional point of
Personalizing the co-creation experience means fos-          exchange), this new framework implies that all the
tering individualized interactions and experience out-       points of consumer-company interaction are critical
comes. It involves more than a company’s á la carte          for creating value. Since no one can predict the expe-
menu. A personalized co-creation experience reflects         rience a consumer will have at any point in time, the
how the individual chooses to interact with the expe-        task of the firm is one of innovating a robust experi-
rience environment that the firm facilitates. We are         ence environments (Prahalad & Ramaswamy, 2003).
suggesting a totally different process—one that              Hence, our view of value co-creation challenges both
involves individual consumers on their terms—a               images of a market: as an exchange of product and
broad challenge that business leaders must face              service offerings and as an aggregation of consumers.
(Prahalad & Ramaswamy, 2003).                                Traditional economics focuses squarely on the
                                                             exchange of products and services between the com-
Once we discard the “firm-centric” view of value cre-        pany and the consumer, placing value extraction by
ation and accept the “co-creation” view, the evidence of     the firm and the consumer at the heart of the interac-
this shift is visible in a wide variety of industries. For   tion. In the co-creation view, all points of interaction




10        JOURNAL OF INTERACTIVE MARKETING
between the company and the consumer are opportu-           learn to anticipate and lead, and further, to co-shape
nities for both value creation and extraction.              expectations and experiences?

The co-creation view also challenges the market as an       In co-creation, direct interactions with consumers and
aggregation of consumers for what the firm can offer.       consumer communities are critical. Consumer shifts
In the new value co-creation space, business man-           are best understood by being there, co-creating with
agers have at least partial control over the experience     them. Firms must learn as much as possible about the
environment and the networks they build to facilitate       customer through rich dialogue that evolves with the
co-creation experiences. But they cannot control how        sophistication of consumers. The information infra-
individuals go about co-constructing their experi-          structure must be centered on the consumer and
ences. Co-creation, therefore, forces us to move away       encourage active participation in all aspects of the co-
from viewing the market as an aggregation of con-           creation experience, including information search,
sumers and as a target for the firm’s offerings. Market     configuration of products and services, fulfillment,
research, including focus groups, surveys, statistical      and consumption. Co-creation is more than co-
modeling, video ethnography, and other techniques           marketing or engaging consumers as co-sales agents.
were developed in an effort to get a better under-          It’s about developing methods to attain a visceral
standing of consumers, identify trends, assess con-         understanding of co-creation experiences so that com-
sumer desires and preferences, and evaluate the rela-       panies can co-shape consumer expectations and expe-
tive strength of competitors’ positions. Within this        riences along with their customers.
framework, the ultimate concept in customer segmen-
tation is one-to-one marketing.                             Thus, in the emerging concept of a market, the focus
                                                            is squarely on consumer-company interaction—the
While debates rage about the adequacy of our mar-           roles of the company and the consumer converge. The
keting methodology, the underlying vision of con-           firm and the consumer are both collaborators and
sumers as targets (prey) is rarely questioned. But          competitors—collaborators in co-creating value and
what if the consumers were to turn the tables? What         competitors for the extraction of economic value. The
if consumers were to start investigating companies,         market as a whole becomes inseparable from the
products, and potential experiences in a systematic         value creation process, as shown in Figure 3.
way? Is it sufficient for companies to “sense and
respond” to customer demands? Do managers need              Co-creation converts the market into a forum where
market foresight—besides market insight? Must they          dialogue among the consumer, the firm, consumer




                       FIGURE 3
                       The Emerging Concept of the Market




                                                                                  CO-CREATION EXPERIENCES    11
consumers are separate, with distinct, predetermined
                            Transformation of the Relationship               roles, and, consequently, that supply and demand are
    TABLE 2                 Between Firms and Consumers                      distinct, but mirrored, processes oriented around the
                                                                             exchange of products and services between firms and
                                                                             consumers. We believe that, in time, new approaches
FROM                                         TO                              and tools consistent with a new experience-based view
• One-way                                    • Two-way                       of economic theory will emerge. We have identified
• Firm to consumer                           • Consumer to firm              and summarized some of the key points of departure
• Controlled by firm                         • Consumer to consumer          in Table 3.
• Consumers are “prey”                       • Consumer can “hunt”
• Choice    buy/not buy                      • Consumer wants to/can
                                                                             The new frame of value creation creates new compet-
                                               impose her view of choice
                                                                             itive space for firms. To compete effectively however,
• Firm segments and                          • Consumer wants to/is being
  targets consumers;                           empowered to co-construct
                                                                             managers need to invest in building new infrastruc-
  consumers must “fit                          a personalized experience     ture capabilities, as well as new functional and gover-
  into” firm’s offerings                       around herself, with firm’s   nance capabilities—capabilities that are centered on
                                              experience environment         co-creation through high-quality customer-company
                                                                             interactions and personalized co-creation experiences
                                                                             (see Prahalad & Ramaswamy, 2004). While the build-
Source: Adapted from Prahalad & Ramaswamy (2005).                            ing of new capabilities is critical, it is less difficult
                                                                             than changing one’s dominant logic. Unless we make
communities, and networks of firms can take place.                           a shift from a firm-centric to a co-creation perspective
The transformation of the relationship between firms                         on value creation, co-extraction of economic value by
and consumers is shown in Table 2.                                           informed, connected, empowered, and active commu-
                                                                             nities of consumers on the one hand and cost pres-
THE MARKET AS A FORUM FOR                                                    sures wrought by increased competition, competitive
CO-CREATION EXPERIENCES                                                      discontinuities, and commoditization on the other will
                                                                             only make it harder for companies to develop a sus-
Co-creation of value fundamentally challenges the
                                                                             tainable competitive advantage. The future belongs to
traditional distinction between supply and demand.
                                                                             those that can successfully co-create unique experi-
When the experience, along with the value inherent
                                                                             ences with customers.
in it, is co-created, the firm may still produce a phys-
ical product. But the focus shifts to the characteristics
of the total experience environment. Now demand is
                                                                             IMPLICATIONS FOR INTERACTIVE
contextual. Given that customers cannot predict their
experiences, co-creation of value may well imply the
                                                                             MARKETING
death of traditional forecasting. Instead, the focus                         As we move rapidly to a co-creation experience as the
shifts to capacity planning, the ability of the experi-                      basis of value, the fundamental interaction between
ence network to scale up and down rapidly, and for                           the firm and the consumer changes in character and
the system to reconfigure resources in real time to                          importance. As we have discussed, the interaction
accommodate shifting consumer desires and person-                            becomes the locus of value creation; the interaction
alization of co-creation experiences. Such a system                          can be anywhere in the system, not just at the con-
may be highly demanding, yet it promises incredible                          ventional point of sale or customer service. In the tra-
efficiency gains as well. We must view the market as                         ditional view of marketing, interaction is where the
a space of potential co-creation experiences in which                        firm markets its offerings to extract economic value
individual constraints and choices define their will-                        from the consumer (based on the value the firm has
ingness to pay for experiences. In short, the market                         already created through its value chain). This firm-
resembles a forum for co-creation experiences.                               centric and product-centric view is deep-rooted and
                                                                             manifests itself at all the interfaces and touchpoints
The market as a forum challenges the basic tenet of                          between firms and customers. Firms manage cus-
traditional economic theory: that the firm and the                           tomer relationships leaving little room for customers



12             JOURNAL OF INTERACTIVE MARKETING
TABLE 3                 The Market as a Target for the Firm’s Offerings Versus a Forum for Co-Creation Experiences



THE MARKET AS A TARGET                                                       THE MARKET AS A FORUM
The firm and the consumer are separate, with distinct                        The firm and the consumer converge; the relative “roles of the moment”
predetermined roles.                                                         cannot be predicted.

Supply and demand are matched; price is the clearing mechanism.              Demand and supply are emergent and contextual. Supply is associated
Demand is forecast for products and services that the firm can supply.       with facilitating a unique consumer experience on demand.

Value is created by the firm in its value chain. Products and services are   Value is co-created at multiple points of interaction. Basis of value is
exchanged with consumers.                                                    co-creation experience.

Firm disseminates information to consumers.                                  Consumers and consumer communities can also initiate a dialogue
                                                                             among themselves.

Firm chooses which consumer segments to serve, and the distribution          Consumer chooses the nodal firm and the experience environment to
channels to use for its offerings.                                           interact with and co-create value. The nodal firm, its products and
                                                                             services, employees, multiple channels, and consumer communities come
                                                                             together seamlessly to constitute the experience environment for
                                                                             individuals to co-construct their own experiences.

Firms extract consumer surplus. Consumers are “prey,” whether as             Consumers can extract the firm's surplus. Value is co-extracted. Consumers
“groups” or “one-to-one.” Firms want a 360-degree view of the customer,      expect a 360-degree view of the experience that is transparent in the
but remain opaque to customers. Firms want to “own” the customer             consumer's language. Trust and stickiness emerge from compelling
relationship and lifetime value.                                             experience outcomes. Consumers are competitors in extracting value.

Companies determine, define, and sustain the brand.                          The experience is the brand. The brand is co-created and evolves
                                                                             with experiences.



Source: Prahalad & Ramaswamy (2004).




to have a voice, inject their view of how they want to                       and changing managerial practices. How does a firm
(individually and collectively) interact with firms and                      engage in a dialog? How do you understand the
consumer communities, and co-create value that cus-                          underlying expectations of millions of consumers and
tomers are, by design, “willing to pay for.”                                 their utility functions? The infrastructures and the
                                                                             governance processes that are emerging in a wide
But co-creation demands that both managers and                               range of industries is an indication of implicit negoti-
consumers make the necessary adjustments. For                                ations (e.g., Expedia, eBay, Amazon, and others). The
example, both must recognize that the interaction                            system allows for the consumers to inject or state
between the two—the locus of value creation—must                             their expectations and their willingness to monetize
be built on critical building blocks. It must start from                     their own experiences and makes it explicit. The firm
access and transparency. Firms have traditionally                            also has a way of accepting or rejecting that specific
opposed transparency. The fight against product                              transaction at that time. What is emerging is that
labeling is well known. Releasing information regard-                        dialog requires us to invest time and effort to under-
ing the likely risks is often mandated. It must become                       stand the economics of experience and develop sys-
voluntary. Further, transparency and access are of lit-                      tems to come to agreements rapidly. Finally, firms
tle value if the firms do not create the infrastructure                      must recognize that the more educated the consumer,
for dialog. This requires investment in technology but                       the more likely it is that she will make an intelligent
more important, investments in socializing managers                          choice and make tradeoffs that are appropriate to her



                                                                                                            CO-CREATION EXPERIENCES               13
context. This does not take away the responsibility of        Normann, R., & Ramirez, R. (1994). Designing Interactive
the company to deny some choices. As everyone                   Strategy: From Value Chain to Value Constellation.
                                                                Chichester, UK: Wiley.
knows, the barman has the obligation to know when
to stop serving drinks.                                       Peppers, D., & Rogers, M. (1993). The One to One Future:
                                                                Building Relationships One Customer at a Time. New
                                                                York: Doubleday.
Consumers have to also learn that co-creation is a
                                                              Pine, B.J., II, & Gilmore, J.H. (1999). The Experience
two-way street. The risks cannot be one sided. They
                                                                 Economy: Work Is Theater and Every Business a Stage.
must take some responsibility for the risks they con-            Boston: Harvard Business School Press.
sciously accept. The tobacco company has the obliga-
                                                              Porter, M.E. (1980). Competitive Strategy: Techniques for
tion to educate consumers on the risks of smoking and            Analyzing Industries and Competitors. The Free Press.
develop cessation programs. But if a consumer per-            Prahalad, C.K., & Ramaswamy, V. (2003). The New Frontier
sists in smoking, he must take responsibility for his            of Experience Innovation. Sloan Management Review,
own actions. In cases where the consumer is unlikely             Summer, 12–18.
to have the expertise to make that choice, they must          Prahalad, C.K., & Ramaswamy, V. (2004). The Future of
accept the choice made for them by a neutral party               Competition: Co-Creating Unique Value with
such as the Federal Drug Administration. The gover-              Customers. Boston: Harvard Business School Press.
nance issues that will mediate the interactions and           Prahalad, C.K., & Ramaswamy, V. (2005). Building New
create mutually beneficial results for the consumer              Strategic Capital for Co-Creation. Strategy + Business,
and the firm is the goal. This we believe is the next            forthcoming.
practice of value creation.                                   Schmitt, B.H. (1999). Experiential Marketing: How to Get
                                                                 Customers to Sense, Feel, Think, Act, and Relate to Your
                                                                 Company and Brands. New York: Free Press.
REFERENCES                                                    Seybold, P.B. (1998). Customers.com: How to Create a
Kotler, P. (2002). Marketing Management. Englewood               Profitable Business Strategy for the Internet and
  Cliffs, NJ: Prentice Hall.                                     Beyond. New York: Times Books.
LaSalle, D., & Britton, T.A. (2002). Priceless: Turning       Thomke, S., & Von Hippel, E. (2002). Customers as
  Ordinary Products into Extraordinary Experiences.             Innovators: A New Way to Create Value. Harvard
  Boston: Harvard Business School Press.                        Business Review, April, 74–81.
Levine, R., Locke, C., Searls, D., & Weinberger, D. (2001).   Wikstrom, S. (1996). Value Creation by Company-
   The Cluetrain Manifesto: The End of Business as Usual.       Consumer Interaction. Journal of Marketing
   Cambridge, MA: Perseus Publishing.                           Management, 12, 359–374.




14        JOURNAL OF INTERACTIVE MARKETING

Weitere ähnliche Inhalte

Was ist angesagt?

2011 07 12 Mc Kinsey Were All Marketers Now
2011 07 12 Mc Kinsey Were All Marketers Now2011 07 12 Mc Kinsey Were All Marketers Now
2011 07 12 Mc Kinsey Were All Marketers Now
Larry Taylor Ph.D.
 
The most-valuable-retail-brands-brand z
The most-valuable-retail-brands-brand zThe most-valuable-retail-brands-brand z
The most-valuable-retail-brands-brand z
Em Kay
 
Measuring brandhealth
Measuring brandhealthMeasuring brandhealth
Measuring brandhealth
dat0105
 
Marketing prgogram session(1)
Marketing prgogram session(1)Marketing prgogram session(1)
Marketing prgogram session(1)
Khaled Bekhet
 
Chap01 An Introduction To Integrated Marketing Communications
Chap01  An Introduction To Integrated Marketing CommunicationsChap01  An Introduction To Integrated Marketing Communications
Chap01 An Introduction To Integrated Marketing Communications
Phoenix media & event
 
Marketing management
Marketing managementMarketing management
Marketing management
Khánh Nhân
 
The Royalty Of Loyalty Crm, Quality And Retention
The Royalty Of Loyalty Crm, Quality And RetentionThe Royalty Of Loyalty Crm, Quality And Retention
The Royalty Of Loyalty Crm, Quality And Retention
Donovan Mulder
 
Marketing book review kunal
Marketing book review kunalMarketing book review kunal
Marketing book review kunal
kunalwardhan25
 

Was ist angesagt? (19)

Marketing service design
Marketing service designMarketing service design
Marketing service design
 
2011 07 12 Mc Kinsey Were All Marketers Now
2011 07 12 Mc Kinsey Were All Marketers Now2011 07 12 Mc Kinsey Were All Marketers Now
2011 07 12 Mc Kinsey Were All Marketers Now
 
The most-valuable-retail-brands-brand z
The most-valuable-retail-brands-brand zThe most-valuable-retail-brands-brand z
The most-valuable-retail-brands-brand z
 
Sustaining Value Creation through Knowledge of Customer Expectations
Sustaining Value Creation through Knowledge of Customer ExpectationsSustaining Value Creation through Knowledge of Customer Expectations
Sustaining Value Creation through Knowledge of Customer Expectations
 
B2b branding
B2b brandingB2b branding
B2b branding
 
Measuring brandhealth
Measuring brandhealthMeasuring brandhealth
Measuring brandhealth
 
Marketing prgogram session(1)
Marketing prgogram session(1)Marketing prgogram session(1)
Marketing prgogram session(1)
 
Lean co creation paper !!!
Lean co creation paper !!!Lean co creation paper !!!
Lean co creation paper !!!
 
An empirical study on the promotional mix and brand equity
An empirical study on the promotional mix and brand equityAn empirical study on the promotional mix and brand equity
An empirical study on the promotional mix and brand equity
 
BrandZ Top 20 Retail Brands
BrandZ Top 20 Retail BrandsBrandZ Top 20 Retail Brands
BrandZ Top 20 Retail Brands
 
5 1-1
5 1-15 1-1
5 1-1
 
Chap01 An Introduction To Integrated Marketing Communications
Chap01  An Introduction To Integrated Marketing CommunicationsChap01  An Introduction To Integrated Marketing Communications
Chap01 An Introduction To Integrated Marketing Communications
 
How B2B companies talk past their customers
How B2B companies talk past their customersHow B2B companies talk past their customers
How B2B companies talk past their customers
 
Marketing management
Marketing managementMarketing management
Marketing management
 
The Royalty Of Loyalty Crm, Quality And Retention
The Royalty Of Loyalty Crm, Quality And RetentionThe Royalty Of Loyalty Crm, Quality And Retention
The Royalty Of Loyalty Crm, Quality And Retention
 
Media Prominence: a leading indicator of brand value
Media Prominence: a leading indicator of brand valueMedia Prominence: a leading indicator of brand value
Media Prominence: a leading indicator of brand value
 
Dynamic Value Discrimination in Recurring Consumer Relationships: Re-centeri...
Dynamic Value Discrimination in Recurring Consumer Relationships:  Re-centeri...Dynamic Value Discrimination in Recurring Consumer Relationships:  Re-centeri...
Dynamic Value Discrimination in Recurring Consumer Relationships: Re-centeri...
 
An Extended Customer Focused Model of the Marketing Mix
An Extended Customer Focused Model of the Marketing Mix An Extended Customer Focused Model of the Marketing Mix
An Extended Customer Focused Model of the Marketing Mix
 
Marketing book review kunal
Marketing book review kunalMarketing book review kunal
Marketing book review kunal
 

Ähnlich wie Inovacao experience cocreation

Apparel Retail and Brand Advocacy
Apparel Retail and Brand AdvocacyApparel Retail and Brand Advocacy
Apparel Retail and Brand Advocacy
22squared
 
inside out customer-centricity white paper
inside out customer-centricity white paperinside out customer-centricity white paper
inside out customer-centricity white paper
Michael Lowenstein
 
Sse valuechaintovalueconstellation group4_a_2011
Sse valuechaintovalueconstellation group4_a_2011Sse valuechaintovalueconstellation group4_a_2011
Sse valuechaintovalueconstellation group4_a_2011
21164
 
Service Quotations from Valuing Your Customers
Service Quotations from Valuing Your CustomersService Quotations from Valuing Your Customers
Service Quotations from Valuing Your Customers
Angus Jenkinson
 
A conceptual framework for customer value within a distribution system
A conceptual framework for customer value within a distribution systemA conceptual framework for customer value within a distribution system
A conceptual framework for customer value within a distribution system
fredrickaila
 
Introduction to marketing
Introduction to marketingIntroduction to marketing
Introduction to marketing
meze069
 
Social CRM – Insight into the customer decision journey Mark Tamis
Social CRM – Insight into the customer decision journey Mark TamisSocial CRM – Insight into the customer decision journey Mark Tamis
Social CRM – Insight into the customer decision journey Mark Tamis
OpenKnowledge srl
 

Ähnlich wie Inovacao experience cocreation (20)

The Future of PR & Communications
The Future of PR & Communications The Future of PR & Communications
The Future of PR & Communications
 
2nd Annual Digital Marketing & Advertising Asia (DIGMA) 2014 - What’s Next: 5...
2nd Annual Digital Marketing & Advertising Asia (DIGMA) 2014 - What’s Next: 5...2nd Annual Digital Marketing & Advertising Asia (DIGMA) 2014 - What’s Next: 5...
2nd Annual Digital Marketing & Advertising Asia (DIGMA) 2014 - What’s Next: 5...
 
Brand activation
Brand activationBrand activation
Brand activation
 
Marketing Is Dead
Marketing Is DeadMarketing Is Dead
Marketing Is Dead
 
Apparel Retail and Brand Advocacy
Apparel Retail and Brand AdvocacyApparel Retail and Brand Advocacy
Apparel Retail and Brand Advocacy
 
Apparel Retail and Brand Advocacy
Apparel Retail and Brand AdvocacyApparel Retail and Brand Advocacy
Apparel Retail and Brand Advocacy
 
The Co-creation Connection
The Co-creation ConnectionThe Co-creation Connection
The Co-creation Connection
 
inside out customer-centricity white paper
inside out customer-centricity white paperinside out customer-centricity white paper
inside out customer-centricity white paper
 
Sse valuechaintovalueconstellation group4_a_2011
Sse valuechaintovalueconstellation group4_a_2011Sse valuechaintovalueconstellation group4_a_2011
Sse valuechaintovalueconstellation group4_a_2011
 
1. Experiential Marketing.pdf
1. Experiential Marketing.pdf1. Experiential Marketing.pdf
1. Experiential Marketing.pdf
 
Personal value propositions
Personal value propositionsPersonal value propositions
Personal value propositions
 
Perspectives in Contemporary Marketing
Perspectives in Contemporary MarketingPerspectives in Contemporary Marketing
Perspectives in Contemporary Marketing
 
Unconventional Business Models.
Unconventional Business Models.Unconventional Business Models.
Unconventional Business Models.
 
Service Quotations from Valuing Your Customers
Service Quotations from Valuing Your CustomersService Quotations from Valuing Your Customers
Service Quotations from Valuing Your Customers
 
A conceptual framework for customer value within a distribution system
A conceptual framework for customer value within a distribution systemA conceptual framework for customer value within a distribution system
A conceptual framework for customer value within a distribution system
 
Introduction to marketing
Introduction to marketingIntroduction to marketing
Introduction to marketing
 
Insight Into The Customer Journey
Insight Into The Customer JourneyInsight Into The Customer Journey
Insight Into The Customer Journey
 
Social CRM – Insight into the customer decision journey Mark Tamis
Social CRM – Insight into the customer decision journey Mark TamisSocial CRM – Insight into the customer decision journey Mark Tamis
Social CRM – Insight into the customer decision journey Mark Tamis
 
The Brand University - How to make a sustainable, successful brand
The Brand University - How to make a sustainable, successful brandThe Brand University - How to make a sustainable, successful brand
The Brand University - How to make a sustainable, successful brand
 
Unconventional Business Models.
Unconventional Business Models.Unconventional Business Models.
Unconventional Business Models.
 

Mehr von Symnetics Business Transformation

Mehr von Symnetics Business Transformation (20)

Palestra_André_Coutinho_CIOLeaders_BH
Palestra_André_Coutinho_CIOLeaders_BHPalestra_André_Coutinho_CIOLeaders_BH
Palestra_André_Coutinho_CIOLeaders_BH
 
Formulação_Gestão_AMCHAM_GO
Formulação_Gestão_AMCHAM_GOFormulação_Gestão_AMCHAM_GO
Formulação_Gestão_AMCHAM_GO
 
Gestão da Estratégia - Congresso de Gestão de Pessoas - RH RIO
Gestão da Estratégia - Congresso de Gestão de Pessoas - RH RIOGestão da Estratégia - Congresso de Gestão de Pessoas - RH RIO
Gestão da Estratégia - Congresso de Gestão de Pessoas - RH RIO
 
Inovação e transformaçao_do_negócio_encontro_cio_business_leaders
Inovação e transformaçao_do_negócio_encontro_cio_business_leadersInovação e transformaçao_do_negócio_encontro_cio_business_leaders
Inovação e transformaçao_do_negócio_encontro_cio_business_leaders
 
Artigo: Hackeando os Negócios - Strategic Design
Artigo: Hackeando os Negócios - Strategic DesignArtigo: Hackeando os Negócios - Strategic Design
Artigo: Hackeando os Negócios - Strategic Design
 
Artigo: Economia Circular
Artigo: Economia CircularArtigo: Economia Circular
Artigo: Economia Circular
 
Consumo compartilhado
Consumo compartilhadoConsumo compartilhado
Consumo compartilhado
 
Convergência tecnológica
Convergência tecnológicaConvergência tecnológica
Convergência tecnológica
 
Ativismo e novos modelos de representação
Ativismo e novos modelos de representaçãoAtivismo e novos modelos de representação
Ativismo e novos modelos de representação
 
Como aumentar a vendas, reduzir custos e elevar as margens de lucro de uma em...
Como aumentar a vendas, reduzir custos e elevar as margens de lucro de uma em...Como aumentar a vendas, reduzir custos e elevar as margens de lucro de uma em...
Como aumentar a vendas, reduzir custos e elevar as margens de lucro de uma em...
 
Como acelerar o movimento de inovação nas empresas?
Como acelerar o movimento de inovação nas empresas? Como acelerar o movimento de inovação nas empresas?
Como acelerar o movimento de inovação nas empresas?
 
Apresentaçao BIG - Business Insights Group - 1º encontro de 2016
Apresentaçao BIG - Business Insights Group - 1º encontro de 2016Apresentaçao BIG - Business Insights Group - 1º encontro de 2016
Apresentaçao BIG - Business Insights Group - 1º encontro de 2016
 
Case CNI - Confederação Nacional das Indústrias
Case CNI - Confederação Nacional das IndústriasCase CNI - Confederação Nacional das Indústrias
Case CNI - Confederação Nacional das Indústrias
 
Case Villares Metals
Case Villares MetalsCase Villares Metals
Case Villares Metals
 
Resumo dos encontros do BIG - Business Insights Group
Resumo dos encontros do BIG - Business Insights Group Resumo dos encontros do BIG - Business Insights Group
Resumo dos encontros do BIG - Business Insights Group
 
Material produzido para o Terceiro encontro do BIG - Business Insights Group
Material produzido para o Terceiro encontro do BIG - Business Insights GroupMaterial produzido para o Terceiro encontro do BIG - Business Insights Group
Material produzido para o Terceiro encontro do BIG - Business Insights Group
 
Material produzido no Segundo encontro do BIG - Business Insights Group
Material produzido no Segundo encontro do BIG - Business Insights GroupMaterial produzido no Segundo encontro do BIG - Business Insights Group
Material produzido no Segundo encontro do BIG - Business Insights Group
 
Material produzido para o Segundo encontro do BIG - Business Insights Group
Material produzido para o Segundo encontro do BIG - Business Insights GroupMaterial produzido para o Segundo encontro do BIG - Business Insights Group
Material produzido para o Segundo encontro do BIG - Business Insights Group
 
Ainhamento de programas e projetos à estratégia_Organizações_Públicas
 Ainhamento de programas e projetos à estratégia_Organizações_Públicas Ainhamento de programas e projetos à estratégia_Organizações_Públicas
Ainhamento de programas e projetos à estratégia_Organizações_Públicas
 
Design estratégico a partir do futuro
Design estratégico a partir do futuroDesign estratégico a partir do futuro
Design estratégico a partir do futuro
 

Kürzlich hochgeladen

Jual Obat Aborsi ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan Cytotec
Jual Obat Aborsi ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan CytotecJual Obat Aborsi ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan Cytotec
Jual Obat Aborsi ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan Cytotec
ZurliaSoop
 
Mckinsey foundation level Handbook for Viewing
Mckinsey foundation level Handbook for ViewingMckinsey foundation level Handbook for Viewing
Mckinsey foundation level Handbook for Viewing
Nauman Safdar
 
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai KuwaitThe Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
daisycvs
 
Structuring and Writing DRL Mckinsey (1).pdf
Structuring and Writing DRL Mckinsey (1).pdfStructuring and Writing DRL Mckinsey (1).pdf
Structuring and Writing DRL Mckinsey (1).pdf
laloo_007
 

Kürzlich hochgeladen (20)

Over the Top (OTT) Market Size & Growth Outlook 2024-2030
Over the Top (OTT) Market Size & Growth Outlook 2024-2030Over the Top (OTT) Market Size & Growth Outlook 2024-2030
Over the Top (OTT) Market Size & Growth Outlook 2024-2030
 
Call 7737669865 Vadodara Call Girls Service at your Door Step Available All Time
Call 7737669865 Vadodara Call Girls Service at your Door Step Available All TimeCall 7737669865 Vadodara Call Girls Service at your Door Step Available All Time
Call 7737669865 Vadodara Call Girls Service at your Door Step Available All Time
 
Escorts in Nungambakkam Phone 8250092165 Enjoy 24/7 Escort Service Enjoy Your...
Escorts in Nungambakkam Phone 8250092165 Enjoy 24/7 Escort Service Enjoy Your...Escorts in Nungambakkam Phone 8250092165 Enjoy 24/7 Escort Service Enjoy Your...
Escorts in Nungambakkam Phone 8250092165 Enjoy 24/7 Escort Service Enjoy Your...
 
Unveiling Falcon Invoice Discounting: Leading the Way as India's Premier Bill...
Unveiling Falcon Invoice Discounting: Leading the Way as India's Premier Bill...Unveiling Falcon Invoice Discounting: Leading the Way as India's Premier Bill...
Unveiling Falcon Invoice Discounting: Leading the Way as India's Premier Bill...
 
Falcon Invoice Discounting: Empowering Your Business Growth
Falcon Invoice Discounting: Empowering Your Business GrowthFalcon Invoice Discounting: Empowering Your Business Growth
Falcon Invoice Discounting: Empowering Your Business Growth
 
Uneak White's Personal Brand Exploration Presentation
Uneak White's Personal Brand Exploration PresentationUneak White's Personal Brand Exploration Presentation
Uneak White's Personal Brand Exploration Presentation
 
joint cost.pptx COST ACCOUNTING Sixteenth Edition ...
joint cost.pptx  COST ACCOUNTING  Sixteenth Edition                          ...joint cost.pptx  COST ACCOUNTING  Sixteenth Edition                          ...
joint cost.pptx COST ACCOUNTING Sixteenth Edition ...
 
Jual Obat Aborsi ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan Cytotec
Jual Obat Aborsi ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan CytotecJual Obat Aborsi ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan Cytotec
Jual Obat Aborsi ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan Cytotec
 
Mckinsey foundation level Handbook for Viewing
Mckinsey foundation level Handbook for ViewingMckinsey foundation level Handbook for Viewing
Mckinsey foundation level Handbook for Viewing
 
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai KuwaitThe Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
 
Structuring and Writing DRL Mckinsey (1).pdf
Structuring and Writing DRL Mckinsey (1).pdfStructuring and Writing DRL Mckinsey (1).pdf
Structuring and Writing DRL Mckinsey (1).pdf
 
CROSS CULTURAL NEGOTIATION BY PANMISEM NS
CROSS CULTURAL NEGOTIATION BY PANMISEM NSCROSS CULTURAL NEGOTIATION BY PANMISEM NS
CROSS CULTURAL NEGOTIATION BY PANMISEM NS
 
Dr. Admir Softic_ presentation_Green Club_ENG.pdf
Dr. Admir Softic_ presentation_Green Club_ENG.pdfDr. Admir Softic_ presentation_Green Club_ENG.pdf
Dr. Admir Softic_ presentation_Green Club_ENG.pdf
 
Buy Verified TransferWise Accounts From Seosmmearth
Buy Verified TransferWise Accounts From SeosmmearthBuy Verified TransferWise Accounts From Seosmmearth
Buy Verified TransferWise Accounts From Seosmmearth
 
Organizational Transformation Lead with Culture
Organizational Transformation Lead with CultureOrganizational Transformation Lead with Culture
Organizational Transformation Lead with Culture
 
SEO Case Study: How I Increased SEO Traffic & Ranking by 50-60% in 6 Months
SEO Case Study: How I Increased SEO Traffic & Ranking by 50-60%  in 6 MonthsSEO Case Study: How I Increased SEO Traffic & Ranking by 50-60%  in 6 Months
SEO Case Study: How I Increased SEO Traffic & Ranking by 50-60% in 6 Months
 
Horngren’s Cost Accounting A Managerial Emphasis, Canadian 9th edition soluti...
Horngren’s Cost Accounting A Managerial Emphasis, Canadian 9th edition soluti...Horngren’s Cost Accounting A Managerial Emphasis, Canadian 9th edition soluti...
Horngren’s Cost Accounting A Managerial Emphasis, Canadian 9th edition soluti...
 
Cracking the 'Career Pathing' Slideshare
Cracking the 'Career Pathing' SlideshareCracking the 'Career Pathing' Slideshare
Cracking the 'Career Pathing' Slideshare
 
Falcon Invoice Discounting: Tailored Financial Wings
Falcon Invoice Discounting: Tailored Financial WingsFalcon Invoice Discounting: Tailored Financial Wings
Falcon Invoice Discounting: Tailored Financial Wings
 
Falcon Invoice Discounting: Aviate Your Cash Flow Challenges
Falcon Invoice Discounting: Aviate Your Cash Flow ChallengesFalcon Invoice Discounting: Aviate Your Cash Flow Challenges
Falcon Invoice Discounting: Aviate Your Cash Flow Challenges
 

Inovacao experience cocreation

  • 1. CO-CREATION EXPERIENCES: THE NEXT PRACTICE IN VALUE CREATION C. K. PRAHALAD AND VENKAT RAMASWAMY C onsumers today have more choices of products and services than ever before, but they seem dissatisfied. Firms invest in greater product variety but C. K. PRAHALAD is the Harvey C. Fruehauf Professor of Business Administration at the are less able to differentiate themselves. Growth and value creation have University of Michigan Business become the dominant themes for managers. In this paper, we explain this School in Ann Arbor; e-mail: cprahalad@aol.com paradox. The meaning of value and the process of value creation are rapidly shifting from a product- and firm-centric view to personalized consumer experiences. Informed, networked, empowered, and active consumers are VENKAT RAMASWAMY increasingly co-creating value with the firm. The interaction between the firm is the Michael R. and Mary Kay and the consumer is becoming the locus of value creation and value extrac- Hallman Fellow of Electronic Business and Professor of Marketing at the tion. As value shifts to experiences, the market is becoming a forum for University of Michigan Business conversation and interactions between consumers, consumer communities, School; e-mail: venkatr@umich.edu and firms. It is this dialogue, access, transparency, and understanding of risk- benefits that is central to the next practice in value creation. This article is based on Prahalad and Ramaswamy (2004), The Future of © 2004 Wiley Periodicals, Inc. and Direct Marketing Educational Foundation, Inc. Competition: Co-creating Unique Value JOURNAL OF INTERACTIVE MARKETING VOLUME 18 / NUMBER 3 / SUMMER 2004 with Customers, Harvard Business Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/dir.20015 School Press. 5
  • 2. INTRODUCTION defined as an aggregation of consumers, was a “tar- get” for the firm’s offerings.2 The word “market” conjures up two distinct images. On one hand, it represents an aggregation of con- Needless to say, the traditional concept of a market sumers. On the other hand, it is the locus of exchange is company-centric. So is the process of value cre- where a firm trades goods and services with the con- ation. Consequently, firms conceptualize customer- sumer. Implicit in this view is a critical assumption relationship management as targeting and managing that firms can act autonomously in designing products, the “right” customers. Firms focus on the locus of developing production processes, crafting marketing interaction—the exchange—as the locus of economic messages, and controlling sales channels with little or value extraction. The interactions between companies no interference from or interaction with consumers.1 and customers are not seen as a source of value cre- Consumers get involved only at the point of exchange. ation (Normann & Ramirez, 1994; Wikstrom, 1996). Firms aggregate consumers into “meaningful seg- Value exchange and extraction are the primary func- ments” for ease of exchange. Both of these images of tions performed by the market, which is separated the market are being challenged by the emergence of from the value creation process, as shown in Figure 1. connected, informed, empowered, and active con- It is no surprise that the flow of communications is sumers. Consumers now seek to exercise their influ- also from the firm to the consumer, as the market is a ence in every part of the business system. Armed with place where value is exchanged and the consumer has new tools and dissatisfied with available choices, con- to be persuaded such that the firm can extract the sumers want to interact with firms and thereby most value from transactions. “co-create” value (Prahalad & Ramaswamy, 2004). The changing nature of the consumer-company interaction Informed, connected, empowered, and active con- as the locus of co-creation (and co-extraction) of value sumers are increasingly learning that they too can redefines the meaning of value and the process of value extract value at the traditional point of exchange. creation. In this article, we discuss how the concept of Consumers are now subjecting the industry’s value a market is undergoing change and transforming the creation process to scrutiny, analysis, and evaluation. nature of the relationship between the consumer and Consumer-to-consumer communication and dialogue the firm. provides consumers an alternative source of informa- tion and perspective. They are not totally dependent CONSUMERS, MARKETS, FIRMS, AND on communication from the firm. Consumers can VALUE CREATION: THE TRADITIONAL choose the firms they want to have a relationship SYSTEM with based on their own views of how value should be created for them. In the traditional conception of process of value cre- ation, consumers were “outside the firm.” Value cre- Online auctions for hotel rooms and airline reserva- ation occurred inside the firm (through its activities) tions are just one example of this growing phenomenon. and outside markets. The concept of the “value chain” The popularity of businesses such as eBay suggests epitomized the unilateral role of the firm in creating that the auction is increasingly serving as the basis for value (Porter, 1980). The firm and the consumer had pricing goods and services online. From the customer’s distinct roles of production and consumption, respec- perspective, the advantage of the auction process is tively. In this perspective, the market, viewed either that prices truly reflect the utility to that customer, at as a locus of exchange or as an aggregation of con- a given point in time, of the goods and services being sumers, was separate from the value creation process purchased. That doesn’t necessarily mean that prices (Kotler, 2002). It had no role in value creation. Its role are lower, only that the customer pays according to her was value exchange and extraction. The market, 2 We use the term “offering” to denote products and services. Our 1 We use the terms “consumer” and “customer” interchangeably point of view applies equally to conventional distinctions of throughout the paper. “products” versus “services.” 6 JOURNAL OF INTERACTIVE MARKETING
  • 3. FIGURE 1 The Traditional Concept of a Market Source: Prahalad and Ramaswamy (2004) utility rather than according to the company’s cost of the “Walmartization” of everything, from clothes to production. DVD players. As customers become more knowledgeable and Is there an antidote to this dilemma? We think so. increasingly aware of their negotiating clout, more Firms continually reduce costs and the consumers businesses—from automakers to cosmetic surgery negotiate away the cost reductions in price erosion. clinics—will feel pressure to adopt an implicit (if not But to find the antidote, companies must escape the an explicit) negotiation. An auction is one approach to firm-centric view of the past and seek to co-create this negotiation process. Armed with knowledge value with customers through an obsessive focus on drawn from today’s increasingly transparent business personalized interactions between the consumer and environment, customers are much more willing than the company. Further, doing so will require managers in the past to negotiate prices and other transaction to escape their product-centered thinking and instead terms with companies. We are moving toward a world focus on the experiences that customers will seek to in which value is the result of an implicit negotiation co-create. We need to challenge the traditional, dis- between the individual consumer and the firm. tinct roles of both the consumer and the company and Therefore, value creation, for an automaker, for examine the impact of a convergence of the roles of example, is the result of individualized negotiations production and consumption; or the convergence of with millions of consumers. the roles of the company and the consumer. The consequences of not recognizing this shift can be high. As long as firms believe that the market can be CO-CREATION EXPERIENCES AS THE separated from the value creation process, firms in search of sources of value will have no choice but to BASIS FOR VALUE CREATION squeeze as much costs from their “value chain” activ- High-quality interactions that enable an individual ities as possible. Meanwhile, globalization, deregula- customer to co-create unique experiences with the tion, outsourcing, and the convergence of industries company are the key to unlocking new sources of and technologies are making it much harder for man- competitive advantage. Value will have to be jointly cre- agers to differentiate their offerings. Products and ated by both the firm and the consumer (see Table 1). services are facing commoditization as never before. Companies can certainly not escape being super effi- In the traditional system, as firms decide the prod- cient. However, if consumers do not see any differen- ucts and services they will produce, by implication tiation they will buy smart and cheap. The result is they decide what is of value to the customer. In this CO-CREATION EXPERIENCES 7
  • 4. system, consumers have little or no role in value cre- as Disney and Ritz Carlton have found interesting ation. During the last two decades, managers have ways to stage an experience for consumers (Pine & found ways to partition some of the work done by Gilmore, 1999). In all variations of consumer involve- the firm and pass it on to their consumers—be it ment, from self-checkout to participation in a staged self-checkout (e.g., gas pumps, ATMs, supermarket experience, the firm is still in charge of the overall checkout), involvement of a subset of customers in orchestration of the experience. Yes, they focus on con- product development (e.g., industrial customers help sumer experience, but their consumers are basically design the products they need as airlines do with treated as passive. Such companies disproportionate- Boeing), or a range of variants in between. ly influence the nature of the experience. They are Consumers find some of these beneficial. Firms such primarily product-centric, service-centric, and, there- fore, company-centric. The focus is clearly on connect- ing the customer to the company’s offerings. TABLE 1 The Concept of Co-Creation This firm-centric view of the world, refined over the last 75 years, is being challenged not by new competi- tors, but by communities of connected, informed, WHAT CO-CREATION IS NOT WHAT CO-CREATION IS empowered, and active consumers. We believe that • Customer focus • Co-creation is about joint there is an emerging disconnect between the opportu- • Customer is king or creation of value by the nities for value creation and differentiation enabled customer is always right company and the customer. It by a networked, active, informed consumer (and con- is not the firm trying to sumer communities), their expectations and capabili- please the customer ties and the constraining force of the traditional con- • Delivering good customer • Allowing the customer to cept of a market. The more than 1.3 billion cell phones service or pampering the co-construct the service and the proliferation of PCs around the world are cre- customer with lavish experience to suit her context ating ubiquitous connectivity. For example, more than customer service 70 million Americans have visited www.WebMD.com. • Mass customization of • Joint problem definition and More than 500 chat rooms exist on just cancer alone. A offerings that suit the problem solving visit to the doctor today is qualitatively different than industry’s supply chain • Transfer of activities from • Creating an experience it was 10 years ago. Patients want to engage in dia- the firm to the customer as environment in which logue. They want to understand the risk-benefits of in self-service consumers can have active alternate modalities of treatment. They have access to • Customer as product dialogue and co-construct more information than ever before, regardless of qual- manager or co-designing personalized experiences; ity. Consumers expect transparency. “Don’t hold back, products and services product may be the same tell me the truth,” is often the approach. Doctors may (e.g., Lego Mindstorms) but not like this. It takes time. It exposes them and the customers can construct quality of their expertise. It is hard to hide behind different experiences authority. However, the doctor now has a better • Product variety • Experience variety patient. Because he or she understands and is • Segment of one • Experience of one involved, the patient is more willing to comply with the treatment modalities that they have jointly developed. • Meticulous Market research • Experiencing the business as consumers do in real time • Continuous dialogue Put yourself in the position of a patient. What is of • Staging experiences • Co-constructing personalized value here? Is it the medications, the hospital, the experiences equipment that is used, and the expertise of the doc- tor? Surely, all these are critical. But what differenti- • Demand-side innovation for • Innovating experience ates one hospital from another? One doctor from new products and services environments for new another? For the patient, it is the experience of co- co-creation experiences creating with the doctor a modality of treatment that takes into account his or her peculiar circumstances. 8 JOURNAL OF INTERACTIVE MARKETING
  • 5. Patient A may live alone and find it difficult to follow Dialogue the diet regimen. She may need help. A different patient with the same medical condition may have totally different circumstances or context. His experi- ence may depend on taking care of his children. He Transparency Co-creation of Access wants to indulge his children in the American ritual Value and must make it to the little league games without appearing to be very sick. The traditional view of the hospital and its product—medical treatment—has not Risk-benefits disappeared. Rather, what has emerged as the basis for unique value to consumers is their experience FIGURE 2 (which is contextual). The quality of that experience Building Blocks of Interactions for is dependent on the nature of the involvement the Co-creation of Value customer (patient) has had in co-creating it with doc- tors, counselors, and others. Individual involvement ness to act on both sides. It is difficult to envisage a can go beyond the treatment modality to the process dialog between two unequal partners. So, for an of diagnosis, therapy, counseling, and wellness indica- active dialog and the development of a shared solu- tors. It can vary from patient to patient, and depends tion, the firm and the consumer must become equal on how each patient chooses to co create his or her and joint problem solvers. Dialog must center around own unique experiences. What we need to create is an issues of interest to both—the consumer and the firm experience environment within which individual and must have clearly defined rules of engagement. patients (consumers) can create their own unique For example, buyers and sellers engage in a dialogue personalized experience. Thus, products can be com- in eBay. The rules of engagement are evolving but moditized but co-creation experiences cannot be. clear at any point in time. But dialog is difficult if consumers do not have the BUILDING BLOCKS OF INTERACTIONS: same access and transparency to information. Firms DIALOGUE, ACCESS, RISK-BENEFITS, have traditionally benefited from exploiting the infor- AND TRANSPARENCY (DART) mation asymmetry between them and the individual consumer. Because of ubiquitous connectivity, it is Let us look at what has changed. How do we build a possible for an individual consumer to get access to as system for co-creation of value? First, we have to start much information as she needs from the community with the building blocks of interactions between the of other consumers as well as from the firm. Both firm and consumers that facilitate co-creation experi- access and transparency are critical to have a mean- ences. Dialog, access, risk-benefits, and transparency ingful dialog. (DART) are emerging as the basis for interaction between the consumer and the firm (see Figure 2). More importantly, dialog, access, and transparency These building blocks of consumer-company interac- can lead to a clear assessment by the consumer of the tion challenge the strong positions managers have risk-benefits of a course of action and decision. Should traditionally taken on labeling laws, disclosure of I change my medication? What are the risks? Instead risks (as in smoking or genetically modified plants), of just depending on the doctor—the expert—the transparency of financial statements, and open access patient has the tools and the support structure to help and dialog with consumers and communities. make that decision—not in some generic risk category but “for me”—with a medical condition, a lifestyle, or Dialog is an important element in the co-creation social obligations. This is a personalized understand- view. Markets can be viewed as a set of conversations ing of risk-benefits. between the customer and the firm (Levine, Locke, Searls, & Weinberger, 2001). Dialog implies interac- The progress towards DART cannot be stopped. The tivity, deep engagement, and the ability and willing- case of the patient-doctor interaction is not isolated. CO-CREATION EXPERIENCES 9
  • 6. We believe that the opportunities for value creation example, video games could not exist without active are enhanced significantly for firms that embrace the co-creation with consumers. At the other extreme, tra- concepts of personalized co-creation experience as the ditional firms like John Deere are building extensive source of unique value. Personalizing the co-creation networks that allow farmers to share their experi- experience differs from the concept of “customers as ences, dialogue with the company and among them- innovators.” Customers of a firm like General Electric selves, and increase their productivity. The OnStar Plastics assume much of the task of developing a cus- network of GM is another case in point. The system tom resin for a specific application. By providing has the potential to allow individuals to construct their access to tools and a library of compounds, GE shifts own experience. GM provides the platform. As an indi- effort and risk to its customers (Thomke & von vidual, I can decide to seek advice on restaurants or Hippel, 2002). When the process works well, both par- ask them to alert me to breaking news or the progress ties benefit. GE saves development time and reduces of my favorite football team. These are all possibilities. its risk, while customers can get what they want with Individuals construct their own experiences. Ebay and greater speed and accuracy. But as long as the process Amazon are further examples of this trend—both facil- remains firm centric and product centered, it is at itate the process of personalized experiences, both best a variant of the current dominant logic. involve communities, both facilitate dialogue. The same applies to the conventional approach to The transition from a firm-centric view to a co- product or service customization. Starting from a tra- creation view is not about minor changes to the tradi- ditional firm-centric view of value creation, managers tional system. Note what co-creation is not. It is focus on providing products and services to a single neither the transfer or outsourcing of activities to cus- customer at low cost. This process leads to mass cus- tomers nor a customization of products and services. tomization, which combines the benefits of “mass” Nor is it a scripting or staging of customer events (large-scale production and marketing and therefore around the firm’s various offerings (e.g., La Salle & low cost) with those of “customization” (targeting a Britton, 2002; Peppers & Rodgers, 1993; Schmitt, single customer). The focus on product-feature devel- 1999; Seybold, 1998). That kind of company-customer opment leads to increased product choice for con- interaction no longer satisfies most consumers today. sumers. On the Web, for example, consumers can cus- The change that we are describing is far more funda- tomize products and services ranging from business mental. It involves the co-creation of value through cards and computers to home mortgages and flower personalized interactions based on how each individ- arrangements, simply by choosing from a menu of fea- ual wants to interact with the company. Co-creation tures. But such customization tends to suit the com- puts the spotlight squarely on consumer-company pany’s supply chain, rather than a consumer’s unique interaction as the locus of value creation. Because desires and preferences. there can be multiple points of interaction anywhere in the system (including the traditional point of Personalizing the co-creation experience means fos- exchange), this new framework implies that all the tering individualized interactions and experience out- points of consumer-company interaction are critical comes. It involves more than a company’s á la carte for creating value. Since no one can predict the expe- menu. A personalized co-creation experience reflects rience a consumer will have at any point in time, the how the individual chooses to interact with the expe- task of the firm is one of innovating a robust experi- rience environment that the firm facilitates. We are ence environments (Prahalad & Ramaswamy, 2003). suggesting a totally different process—one that Hence, our view of value co-creation challenges both involves individual consumers on their terms—a images of a market: as an exchange of product and broad challenge that business leaders must face service offerings and as an aggregation of consumers. (Prahalad & Ramaswamy, 2003). Traditional economics focuses squarely on the exchange of products and services between the com- Once we discard the “firm-centric” view of value cre- pany and the consumer, placing value extraction by ation and accept the “co-creation” view, the evidence of the firm and the consumer at the heart of the interac- this shift is visible in a wide variety of industries. For tion. In the co-creation view, all points of interaction 10 JOURNAL OF INTERACTIVE MARKETING
  • 7. between the company and the consumer are opportu- learn to anticipate and lead, and further, to co-shape nities for both value creation and extraction. expectations and experiences? The co-creation view also challenges the market as an In co-creation, direct interactions with consumers and aggregation of consumers for what the firm can offer. consumer communities are critical. Consumer shifts In the new value co-creation space, business man- are best understood by being there, co-creating with agers have at least partial control over the experience them. Firms must learn as much as possible about the environment and the networks they build to facilitate customer through rich dialogue that evolves with the co-creation experiences. But they cannot control how sophistication of consumers. The information infra- individuals go about co-constructing their experi- structure must be centered on the consumer and ences. Co-creation, therefore, forces us to move away encourage active participation in all aspects of the co- from viewing the market as an aggregation of con- creation experience, including information search, sumers and as a target for the firm’s offerings. Market configuration of products and services, fulfillment, research, including focus groups, surveys, statistical and consumption. Co-creation is more than co- modeling, video ethnography, and other techniques marketing or engaging consumers as co-sales agents. were developed in an effort to get a better under- It’s about developing methods to attain a visceral standing of consumers, identify trends, assess con- understanding of co-creation experiences so that com- sumer desires and preferences, and evaluate the rela- panies can co-shape consumer expectations and expe- tive strength of competitors’ positions. Within this riences along with their customers. framework, the ultimate concept in customer segmen- tation is one-to-one marketing. Thus, in the emerging concept of a market, the focus is squarely on consumer-company interaction—the While debates rage about the adequacy of our mar- roles of the company and the consumer converge. The keting methodology, the underlying vision of con- firm and the consumer are both collaborators and sumers as targets (prey) is rarely questioned. But competitors—collaborators in co-creating value and what if the consumers were to turn the tables? What competitors for the extraction of economic value. The if consumers were to start investigating companies, market as a whole becomes inseparable from the products, and potential experiences in a systematic value creation process, as shown in Figure 3. way? Is it sufficient for companies to “sense and respond” to customer demands? Do managers need Co-creation converts the market into a forum where market foresight—besides market insight? Must they dialogue among the consumer, the firm, consumer FIGURE 3 The Emerging Concept of the Market CO-CREATION EXPERIENCES 11
  • 8. consumers are separate, with distinct, predetermined Transformation of the Relationship roles, and, consequently, that supply and demand are TABLE 2 Between Firms and Consumers distinct, but mirrored, processes oriented around the exchange of products and services between firms and consumers. We believe that, in time, new approaches FROM TO and tools consistent with a new experience-based view • One-way • Two-way of economic theory will emerge. We have identified • Firm to consumer • Consumer to firm and summarized some of the key points of departure • Controlled by firm • Consumer to consumer in Table 3. • Consumers are “prey” • Consumer can “hunt” • Choice buy/not buy • Consumer wants to/can The new frame of value creation creates new compet- impose her view of choice itive space for firms. To compete effectively however, • Firm segments and • Consumer wants to/is being targets consumers; empowered to co-construct managers need to invest in building new infrastruc- consumers must “fit a personalized experience ture capabilities, as well as new functional and gover- into” firm’s offerings around herself, with firm’s nance capabilities—capabilities that are centered on experience environment co-creation through high-quality customer-company interactions and personalized co-creation experiences (see Prahalad & Ramaswamy, 2004). While the build- Source: Adapted from Prahalad & Ramaswamy (2005). ing of new capabilities is critical, it is less difficult than changing one’s dominant logic. Unless we make communities, and networks of firms can take place. a shift from a firm-centric to a co-creation perspective The transformation of the relationship between firms on value creation, co-extraction of economic value by and consumers is shown in Table 2. informed, connected, empowered, and active commu- nities of consumers on the one hand and cost pres- THE MARKET AS A FORUM FOR sures wrought by increased competition, competitive CO-CREATION EXPERIENCES discontinuities, and commoditization on the other will only make it harder for companies to develop a sus- Co-creation of value fundamentally challenges the tainable competitive advantage. The future belongs to traditional distinction between supply and demand. those that can successfully co-create unique experi- When the experience, along with the value inherent ences with customers. in it, is co-created, the firm may still produce a phys- ical product. But the focus shifts to the characteristics of the total experience environment. Now demand is IMPLICATIONS FOR INTERACTIVE contextual. Given that customers cannot predict their experiences, co-creation of value may well imply the MARKETING death of traditional forecasting. Instead, the focus As we move rapidly to a co-creation experience as the shifts to capacity planning, the ability of the experi- basis of value, the fundamental interaction between ence network to scale up and down rapidly, and for the firm and the consumer changes in character and the system to reconfigure resources in real time to importance. As we have discussed, the interaction accommodate shifting consumer desires and person- becomes the locus of value creation; the interaction alization of co-creation experiences. Such a system can be anywhere in the system, not just at the con- may be highly demanding, yet it promises incredible ventional point of sale or customer service. In the tra- efficiency gains as well. We must view the market as ditional view of marketing, interaction is where the a space of potential co-creation experiences in which firm markets its offerings to extract economic value individual constraints and choices define their will- from the consumer (based on the value the firm has ingness to pay for experiences. In short, the market already created through its value chain). This firm- resembles a forum for co-creation experiences. centric and product-centric view is deep-rooted and manifests itself at all the interfaces and touchpoints The market as a forum challenges the basic tenet of between firms and customers. Firms manage cus- traditional economic theory: that the firm and the tomer relationships leaving little room for customers 12 JOURNAL OF INTERACTIVE MARKETING
  • 9. TABLE 3 The Market as a Target for the Firm’s Offerings Versus a Forum for Co-Creation Experiences THE MARKET AS A TARGET THE MARKET AS A FORUM The firm and the consumer are separate, with distinct The firm and the consumer converge; the relative “roles of the moment” predetermined roles. cannot be predicted. Supply and demand are matched; price is the clearing mechanism. Demand and supply are emergent and contextual. Supply is associated Demand is forecast for products and services that the firm can supply. with facilitating a unique consumer experience on demand. Value is created by the firm in its value chain. Products and services are Value is co-created at multiple points of interaction. Basis of value is exchanged with consumers. co-creation experience. Firm disseminates information to consumers. Consumers and consumer communities can also initiate a dialogue among themselves. Firm chooses which consumer segments to serve, and the distribution Consumer chooses the nodal firm and the experience environment to channels to use for its offerings. interact with and co-create value. The nodal firm, its products and services, employees, multiple channels, and consumer communities come together seamlessly to constitute the experience environment for individuals to co-construct their own experiences. Firms extract consumer surplus. Consumers are “prey,” whether as Consumers can extract the firm's surplus. Value is co-extracted. Consumers “groups” or “one-to-one.” Firms want a 360-degree view of the customer, expect a 360-degree view of the experience that is transparent in the but remain opaque to customers. Firms want to “own” the customer consumer's language. Trust and stickiness emerge from compelling relationship and lifetime value. experience outcomes. Consumers are competitors in extracting value. Companies determine, define, and sustain the brand. The experience is the brand. The brand is co-created and evolves with experiences. Source: Prahalad & Ramaswamy (2004). to have a voice, inject their view of how they want to and changing managerial practices. How does a firm (individually and collectively) interact with firms and engage in a dialog? How do you understand the consumer communities, and co-create value that cus- underlying expectations of millions of consumers and tomers are, by design, “willing to pay for.” their utility functions? The infrastructures and the governance processes that are emerging in a wide But co-creation demands that both managers and range of industries is an indication of implicit negoti- consumers make the necessary adjustments. For ations (e.g., Expedia, eBay, Amazon, and others). The example, both must recognize that the interaction system allows for the consumers to inject or state between the two—the locus of value creation—must their expectations and their willingness to monetize be built on critical building blocks. It must start from their own experiences and makes it explicit. The firm access and transparency. Firms have traditionally also has a way of accepting or rejecting that specific opposed transparency. The fight against product transaction at that time. What is emerging is that labeling is well known. Releasing information regard- dialog requires us to invest time and effort to under- ing the likely risks is often mandated. It must become stand the economics of experience and develop sys- voluntary. Further, transparency and access are of lit- tems to come to agreements rapidly. Finally, firms tle value if the firms do not create the infrastructure must recognize that the more educated the consumer, for dialog. This requires investment in technology but the more likely it is that she will make an intelligent more important, investments in socializing managers choice and make tradeoffs that are appropriate to her CO-CREATION EXPERIENCES 13
  • 10. context. This does not take away the responsibility of Normann, R., & Ramirez, R. (1994). Designing Interactive the company to deny some choices. As everyone Strategy: From Value Chain to Value Constellation. Chichester, UK: Wiley. knows, the barman has the obligation to know when to stop serving drinks. Peppers, D., & Rogers, M. (1993). The One to One Future: Building Relationships One Customer at a Time. New York: Doubleday. Consumers have to also learn that co-creation is a Pine, B.J., II, & Gilmore, J.H. (1999). The Experience two-way street. The risks cannot be one sided. They Economy: Work Is Theater and Every Business a Stage. must take some responsibility for the risks they con- Boston: Harvard Business School Press. sciously accept. The tobacco company has the obliga- Porter, M.E. (1980). Competitive Strategy: Techniques for tion to educate consumers on the risks of smoking and Analyzing Industries and Competitors. The Free Press. develop cessation programs. But if a consumer per- Prahalad, C.K., & Ramaswamy, V. (2003). The New Frontier sists in smoking, he must take responsibility for his of Experience Innovation. Sloan Management Review, own actions. In cases where the consumer is unlikely Summer, 12–18. to have the expertise to make that choice, they must Prahalad, C.K., & Ramaswamy, V. (2004). The Future of accept the choice made for them by a neutral party Competition: Co-Creating Unique Value with such as the Federal Drug Administration. The gover- Customers. Boston: Harvard Business School Press. nance issues that will mediate the interactions and Prahalad, C.K., & Ramaswamy, V. (2005). Building New create mutually beneficial results for the consumer Strategic Capital for Co-Creation. Strategy + Business, and the firm is the goal. This we believe is the next forthcoming. practice of value creation. Schmitt, B.H. (1999). Experiential Marketing: How to Get Customers to Sense, Feel, Think, Act, and Relate to Your Company and Brands. New York: Free Press. REFERENCES Seybold, P.B. (1998). Customers.com: How to Create a Kotler, P. (2002). Marketing Management. Englewood Profitable Business Strategy for the Internet and Cliffs, NJ: Prentice Hall. Beyond. New York: Times Books. LaSalle, D., & Britton, T.A. (2002). Priceless: Turning Thomke, S., & Von Hippel, E. (2002). Customers as Ordinary Products into Extraordinary Experiences. Innovators: A New Way to Create Value. Harvard Boston: Harvard Business School Press. Business Review, April, 74–81. Levine, R., Locke, C., Searls, D., & Weinberger, D. (2001). Wikstrom, S. (1996). Value Creation by Company- The Cluetrain Manifesto: The End of Business as Usual. Consumer Interaction. Journal of Marketing Cambridge, MA: Perseus Publishing. Management, 12, 359–374. 14 JOURNAL OF INTERACTIVE MARKETING