A conceptual framework of value co-creation mechanisms: Examples from the hotel industry

Importance and Key Contribution Customers have become value co-creators through their direct interactions with firms while firms are more willing to engage with customers to facilitate value co-creation. Value co-creation... [ view full abstract ]

Importance and Key Contribution
Customers have become value co-creators through their direct interactions with firms while firms are more willing to engage with customers to facilitate value co-creation. Value co-creation activities have changed the roles of firms and customers and the unidirectional value production process. A holistic understanding of the mechanisms that facilitate value co-creation has not been fully explored (Edvardsson et al. 2011), particularly in the services arena (Morosan & DeFranco 2016). Additionally, co-creation activities do not always provide mutual benefits to firms and customers, as not every customer is willing to provide firms with any additional resources in return of price reduction or customised offerings (Saarijärvi 2012). It is essential that firms evaluate different value co-creation opportunities based on their strengths. In the context of interactive services, such as hotel services, value co-creation takes place in multi-dimensional services across multi-channels, which require a strategic integration of various mechanisms to augment value co-creation.

Research Questions
This study aims to understand the potential mechanisms and key roles of firms and customers in value co-creation in order to develop a conceptual value co-creation framework. The framework is intended to provide hotels with alternative value co-creation mechanisms and offer some new insights into various opportunities to engage with customers in increasingly dialogical interactions. To achieve this, the following research questions are identified:
1. How to integrate value co-creation mechanisms in the value co-creation process?
2. What are the potential mechanisms in the value co-creation process?

Theoretical Base
Value creation is a continuous cycle, which takes place in different spheres and results in various value formats. Grönroos & Voima (2013) categorised the value creation process into three main spheres (Fig. 1; left): provider, joint and customer. In the provider sphere, firms integrate resources in producing potential value, which is closed to customers; whereas the customer sphere is closed to service providers, customers independently create value without direct interactions with providers. In the joint sphere, firms are co-creators engaging with customers in co-creation through direct interactions (Grönroos & Voima 2013). Chathoth et al. (2013) further demonstrated four types of value co-creation approaches (Fig. 1; right): co-production, customisation, co-creation and service innovation. Each approach is defined by whether it involves firm-centric or customer-centric dialogue, and if the cooperation occurs during the production or usage/consumption processes.
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Fig. 1 The two key models used as a basis in the development of the new conceptual framework
Using the hotel industry as an example, a typical customer hotel journey can be divided into three phases: pre-arrival, hotel stay and post-departure (Berry et al. 2002). Based on the seminal works of Grönroos & Voima (2013) and Chathoth et al. (2013), the present study develops a new conceptual framework (Fig.2) by integrating the value co-creation mechanisms in the spheres. The provider sphere contains firms’ potential value creation (e.g. design) and co-production (e.g. co-design). The joint sphere involves firms and customers in co-creation activities through direct interactions and allows production and consumption happening simultaneously. In the customer sphere, customers and their social ecosystem are main actors determining real value.
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Fig. 2 An Integrated Conceptual Framework of value co-creation mechanisms in customers’ hotel journey
The main difference between co-production and co-creation is that customers play a less-active role in co-production while they are active partner in co-creation. Co-production is a more firm-initiated activity which focuses on customer participation in sporadic communications and indirect interactions by sharing their creativeness/inventiveness. For example, hotels investigate customers’ needs via surveys or social network sites (e.g., TripAdvisor) to improve existing services and stimulate innovation. Such approach provides hotels with limited insights into customers’ needs and result in offering ‘best available’ services to the majority of customers’ needs rather than fulfilling individual needs. Hence, mutual co-created value between firms and customers may not always exist.
In contrast, co-creation has relatively distinct customer-centric feature that customers actively interact with firms/firms’ facilities during their consumption process. The continuum of co-creation will depend on the degree of customer involvement, dialogue and consumption-derived value. For example, the guestrooms in Qbic Design Hotel allow customers change the colour of room lighting system depending on their preferences during the stay, which provides a unique hotel experience (Chathoth et al. 2013). Customers’ use of mobile applications to access information, purchase ancillary services and control the room condition/facilities can advance their hedonic experience (Morosan & DeFranco 2016). Therefore, customers’ active involvement in firms’ value creation activities is the key that turn potential value into real value.
The co-creation in the joint sphere is not the only opportunity that firms co-create real value with customers. Customisation and service innovation are both considered as extended mechanisms of the joint sphere. Firms can develop a platform that allows customers to actively extend the boundary and enter the provider sphere during the production process which is defined as customisation. Hence, hotels are able to provide ‘best fit’ services to individual customers (Shaw et al. 2011). Firms may also expand the joint sphere by initiating direct interactions during the consumption process which facilitate service innovations. Both co-creation and service innovation require higher user skills and customer capital (e.g., knowledge) (Shaw et al. 2011). However, service innovation has a firm-driven focus on facilitating supplier value creation along with sporadic customer involvement while customers actively continue interactions with the firm for generating consumption-oriented value in co-creation.

Implications
The extension of the joint sphere provides firms with alternative opportunities to co-create value with customers. Firms not only can facilitate value co-creation but also actively influence customers’ value determination through direct/dialogical interactions (Grönroos & Voima 2013). This emphasises the importance of continuous dialogues with customers rather than just listening to customers to obtain creative resources in the production process. Studies also have demonstrated that involving customers in co-creation and the sharing of consumption experience lead to innovative ideas (Kristensson et al. 2008). Therefore, it is crucial that a firm establishes an interactive platform (e.g., mobile applications) which facilitates continuous dialogues with customers (Neuhofer et al. 2015; Glushko & Nomorosa 2013) .
The development of information technology provides emerging opportunities for firms to engage and communicate with customers in various formats (MSI 2013). Morosan and DeFranco (2016) indicated that the utilization of mobile devices can enhance customers’ perceived efficiency in value co-creation and advance their hedonic experience. The high level of access to information and technology enhances firms’ capabilities to connect with customers in real time and also provides customers with more autonomy in co-creating and personalising their service experiences (Ostrom et al. 2015). Therefore, technology and mobile devices would be potential tools for hotels to extend the joint sphere in value creation (Shaw et al. 2011; Morosan & DeFranco 2016).
The study maps the various mechanisms in value creation spheres in order to achieve a comprehensive understanding of the value co-creation process and available strategies for hotels. Also, the conceptual framework demonstrates that not every value creation process is linear. Value can be formed from various mechanisms in different spheres. It is important that hotels identify the important value co-creation opportunities and leverage technology capabilities in influencing customer value creation in order to augment value co-creation and continue customer-firm interactions.
*Note: Two figures are sent via email.

Key References
Berry, L.L., Carbone, L.P. & Haeckel, S.H., 2002. Managing the total customer experience. MIT Sloan Management Review, 43(3), pp.26–32.
Chathoth, P. et al., 2013. Co-production versus co-creation: A process based continuum in the hotel service context. International Journal of Hospitality Management, 32(1), pp.11–20.
Edvardsson, B., Tronvoll, B. & Gruber, T., 2011. Expanding understanding of service exchange and value co-creation: a social construction approach. Journal of the Academy of Marketing Science, 39(2), pp.327–339.
Glushko, R.J. & Nomorosa, K.J., 2013. Substituting Information for Interaction: A Framework for Personalization in Service Encounters and Service Systems. Journal of Service Research, 16(1), pp.21–38.
Grönroos, C. & Voima, P., 2013. Critical service logic: making sense of value creation and co-creation. Journal of the Academy of Marketing Science, 41(2), pp.133–150.
Kristensson, P., Matthing, J. & Johansson, N., 2008. Key strategies for the successful involvement of customers in the co-creation of new technology-based services. International Journal of Service Industry Management, 19(4), pp.474–491.
Morosan, C. & DeFranco, A., 2016. Co-creating value in hotels using mobile devices: A conceptual model with empirical validation. International Journal of Hospitality Management, 52, pp.131–142.
MSI, 2013. 2014-2016 Research Priorities. Marketing Science Institute. Available at: http://www.msi.org/uploads/files/MSI_RP14-16.pdf.
Neuhofer, B., Buhalis, D. & Ladkin, A., 2015. Smart technologies for personalized experiences: a case study in the hospitality domain. Electronic Markets, 25(3), pp.243–254.
Ostrom, A.L. et al., 2015. Service research priorities in a rapidly changing context. Journal of Service Research, 18(2), pp.127–159.
Saarijärvi, H., 2012. The mechanisms of value co-creation. Journal of Strategic Marketing, 20(5), pp.381–391.
Shaw, G., Bailey, A. & Williams, A., 2011. Aspects of service-dominant logic and its implications for tourism management: Examples from the hotel industry. Tourism Management, 32(2), pp.207–214.

Value co-creation, Value creation sphere, Service marketing, Hotel [ view full abstract ]

Value co-creation, Value creation sphere, Service marketing, Hotel