Introduction
Value refers to the utility, the worth or the desirability of a good or service. For a business, value refers to the primary sources of revenue. Value is located in the object (inherent value), in the experience (value in use), and in perception (value as a social construct).
Inherent value resides in an object. This value can be observed from the market price of the object. The forces of demand and supply determine the market price of an object.
Values in use arise when a customer enjoys an intangible service such as a hotel room and they are prepared to pay for the enjoyment of such service.
Value as a social construct argues that consumers subjectively evaluate value depending on their social circumstances. For instance, a business dinner is different from a family dinner in terms of food, beverages, and location because the social context of the two events is different. According to this analysis, customer perception of value is not static, rather, value emerges, and changes overtime as customer engages in social interactions (Edvardsson, Tronvoll, & Grubber, 2011). The value of a product is dependent upon the degree of social consensus about such value (Edvardsson, Tronvoll, & Grubber, 2011)
Co-creation of value consists of three main components:
Customer value-creating processes in a business-to-consumer relationship refer to the resources, processes, and practices that consumers use to manage their activities (Payne, Storbacka, & Frow, 2008). In business-to-business the customer value-creating processes refers to the processes the customer organization uses to manage its suppliers (Payne, Storbacka, & Frow, 2008).
Supplier value-creating processes refer to the processes, resources, and practices that a business uses to manage its relationship with its customers and other stakeholders (Payne, Storbacka, & Frow, 2008).
Encounter value-creating processes refer to the processes of interaction and exchange that occurs in customer and supplier relationships that have to be managed in order to create successful co-creation opportunities (Payne, Storbacka, & Frow, 2008).
Figure 1. Illustrates the conceptual framework for value co-creation
Figure 1: Conceptual framework for value co-creation
Source: Payne, Storbacka, & Frow, 2008
The three processes, customer process, encounter processes, and supplier processes form the basis of value co-creation.
Customer processes should provide customers with opportunities for them to play an active role in the interaction with the firm (Payne, Storbacka, & Frow, 2008). In value co-creation, a customer can play various roles such as a payer, a co-marketer, or a quality controller. One key element that influences the ability of the customer to create value is the amount of knowledge, skills and information the customer posses. Therefore, for a business to be competitive, it must aim at increasing the knowledge, skills, and the information of the customer so that the customer is able to use the resources efficiently and effectively (Payne, Storbacka, & Frow, 2008).
Relationship experience can be considered from two perspectives, information-processing approach, and experiential approach. The information-processing approach views the customer as knowledgeable and willing to evaluate the merits and demerits of a product, and the past, present, or imagined future experiences (Payne, Storbacka, & Frow, 2008). The information processing approach views the customer to be engaged in goal-oriented activities such as searching for information, weighing between alternatives, and deciding whether to buy a particular product or not (Payne, Storbacka, & Frow, 2008).
The experiential approach focuses on the emotions and contextual, symbolic, and non-utilitarian aspects of consumption. The experiential approach considers the value in use (Payne, Storbacka, & Frow, 2008). The relationship experience comprises of three elements, cognition, emotion, and behavior. The experiential approach regards customers as doers, feelers, and thinkers (Payne, Storbacka, & Frow, 2008). Cognition focuses on memory-based activities and the sub-conscious activities.
Customer learning there are three levels of learning remembering, internalization, and proportioning (Payne, Storbacka, & Frow, 2008). Remembering is the basic level of learning, at this level the customer merely recalls the information. Therefore, businesses have to compete for the customer attention and not the ability of the customer to process information. Internalization involves the customer interpreting and assimilating information. Internalization is common in brand-building activities that aim at building a lasting customer association with a brand. Proportioning involves the customer reflecting upon the experience. Such a reflection will lead the customer into sustaining the relationship or disengaging from certain practices (Payne, Storbacka, & Frow, 2008).
Supplier value-creating processes begin with the supplier understanding the customer value processes. This involves the review of co-creation opportunities; planning, testing, and prototyping value co-creation opportunities with customers; developing appropriate metrics to measure the success of the organization value propositions (Payne, Storbacka, & Frow, 2008). The co-creation opportunities available to the supplier are largely dependent on the industry they operate. However, Payne, Storbacka, and Frow (2008) argue that there are three main source value creation-opportunities:
Opportunities provided by technological advancements such as the advent of the internet
Opportunities provided by transformations in the industry such as the development of new channels of reaching customers.
Opportunities provided by changes in customer’s tastes and preferences for instance, there is a trend towards greater individuality, providing organizations with the opportunity for mass-customization
Organization learning involves organizations developing knowledge about the customers. Organizations can design management of knowledge around particular value co-creation processes (Payne, Storbacka, & Frow, 2008).
Encounter process involves a two-way interaction and transactions between the supplier and the customer. Encounters are also referred to as contacts or touch points and can occur at the initiative of the company (e.g. through direct mail, advertising, and invoicing), the customer (e.g. through inquiries, orders and feedback), or both (e.g. meeting at a trade-fair) (Payne, Storbacka, & Frow, 2008). The encounters that facilitate value co-creation can be classified into three: communication encounters, usage encounters, and service encounters. Communication encounters are aimed at creating a connection with the customer. Usage encounters refer to customer practices in using the product such as a bank customer using online banking. Service encounters refer to the customer interaction with the customer service personnel or service application.
Not all encounters have the same importance, some are fundamental to creating value to the customer while others may enhance the customer experience. The former are called critical encounters and may be either positive or negative. For instance, a case of a bank customer who finds a faulty ATM may get frustrated but may not change the banks. However, a customer whose mortgage application is declined may switch banks.
Customer engagement platforms
Customer engagement refers to a psychological state of the customers that drives their loyalty. Customer engagement is based on the foundations of co-creative experience that moves beyond commitment, involvement, and commitment.
A business can use various customer engagement platforms that include:
Customer Relationship Management (CRM) refers to the practices, strategies, and applications organizations use to manage, analyze the interaction of the customer with the organization throughout the customer lifecycle. The objective of CRM is improving the relationship a business has with its customers and improves customer retention and profitability. The CRM is designed to collect customer information at the various points of contact with the customer that may include the telephone, website, and direct marketing.
Customer Lifecycle Management involves an organization creating and constantly nurturing beneficial relationships with its customers. Customer Life Cycle management entails five key stages that include reach, acquire, develop, retain, and advocacy. To reach the customer the organization must develop appropriate content and make the customer aware of the business value proposition. Acquire customers by providing a product that meets their needs. Develop the relationship by ensuring that the customer is satisfied with the product. Retain the customer by nurturing a relationship that will make them to make repeat purchases. The business should ask for feedback from the customers and incorporate the feedback in improving the product. Satisfied customers will create a buzz about the products of the business and help generate more sales through referrals and testimonials.
Loyalty reward Schemes are marketing strategies and practices that encourage customers to continue shopping for a particular business by awarding the customer points each time they make a purchase from the business. The customer can then convert the points into some reward such as a discount, a freebie, or a privilege.
Customer Discussion Forums and Social Media. Social media such as Facebook, Instagram, Twitter, YouTube, and a host of online communities are giving customers a platform where they can express their opinion or feedback about a company and its products. With the advent of social media, “Ants have megaphones.” Therefore, it is important that companies develop social media engagement strategies that will optimize customer engagement on social media. The company can classify the customer engagement in the social media into two categories:
Developing own social platform such as customer community forums on the company’s website
Relying on the external social media websites such as Facebook, Whatsapp, Instagram, YouTube etc.
A company can decide to develop strategies to engage customers in both of the social media categories in marketing, customer service, customer acquisitions, and public relations.
References
Edvardsson, B., Tronvoll, B., & Grubber, T. (2011). 2 Expanding understanding of service
exchange and value co-creation: a social construction approach. Journal Of The Academy Of Marketing Science, 39(2), 327-339.
Payne, A., Storbacka, K., & Frow, P. (2008). Managing the co-creation of value. Journal Of The Academy Marketing Science, 36(1), 83-96.
