Research Article
A REVIEW OF JOINT VALUE CO-CREATION IN HOSPITALITY SERVICE INDUSTRY
Dan Jin*
Corresponding Author: Dan Jin, University of South Carolina, School of Hotel Restaurant and Tourism Management, Close Hipp Building 603 C, 1705 College St, Columbia, SC, 29208, United States
Received: 05th May 2020; Revised: 24th May 2020; Accepted: 22nd May 2020
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Despite numerous researches on value co-creation in various forms of the hospitality sector, there is no consensus regarding its evaluation and measurement. This conceptual paper provides a brief review of value co-creation dimensions and the debates that are likely to influence the service process and its utilization of value co-creation measurement. This review focuses on joint value co-creation dimensions, the debate of value co-creation, and measurement of value co-creation that has not received much attention from hospitality scholars in addition to discussing the impacts of joint value co-creation approaches utilized by hospitality service providers and customers. This review also discusses opportunities for hospitality researchers to empirically examine value co-creation using a multifactor orientation.

 

KEYWORDS: Value Co-Creation (VCC), Service systems, Service dynamics.

INTRODUCTION

Ever since the distribution of labor started to shape our society, craftsmanship has become one of the main forces driving the modern economy. However, the high degree of manual work and customization associated with these tasks often resulted in prices too expensive for most members of society to afford. Hence, the need for customization with lower prices led to the Industrial Revolution in the nineteenth century, in which period mass producers have been introduced. However, mass customization developed historically did not integrate the customer in the manufacturing process. Later, the industry found that the feature of mass production did not get along with the major characteristics of service, such as perishability and inseparability, thus resulting in the lack of customers' willingness to be a co-producer or become a part of the production and delivery process. Under this shift, society advanced from an era of mass production to customization with a couple of game-changing movement.

First, by integrating consumer culture theory and service-dominant logic, the experiential view of value and the context of experience with a cultural ecosystem are introduced into the markets. Later, service experiences are conceptualized as dynamic and relational activities and interactions developed with the customer and potentially other actors (Vargo & Lusch, 2004). In modern society, more studies identify multiple co-creation practices, such as helping and judging, which highlight the sociological aspects of collective service experiences and also the ambivalence of the identified practices in terms of the co-creation or co-destruction of the experience. Most recently, marketing practices are empathizing with the multidimensional co-creation experience scale and employ an experiment to study the individual and environmental conditions that affect the customer experience in co-creation situations. This further highlights the co-creation experience dimensions and their relative importance for customers with different expectations, which is referred to as customer heterogeneity in terms of expected co-creation innovations. To give some examples, in contemporary markets take place not only in the provider-customer basis but also between broader networks of actors (Jaakkola & Alexander, 2014). This concerns the co-created aspect of service experience around shared interests (Cova & Dalli, 2009) and complex service delivery networks in which a variety of suppliers and providers contribute to customers’ experience formation over a series of exchanges (Hakanen & Jaakkola, 2012).

Under this evolvement, in marketing practice, the terms such as co-production, collaboration and cooperation are often used interchangeably to describe this form of industrial value creation where the customers participate in activities and processes which used to be seen as the domain of the companies and that have been studied extensively in product innovation management literature. In other words, by considering the customer as part of the value creation process, the company can obtain specific information about needs and desires, which can then be translated into concrete product specifications (Zipkin, 2001). Also, the marketing theory perspective has evolved from studying the internal, hedonic, or extraordinary experience by the individual actor toward studying experience as a collective, co-created phenomenon that is not limited to a specific actor, such as a customer, or a specific event in the service process, or a particular service encounter (Arnould & Price, 1993). These motives do not seem to stem from any cognitive dissatisfaction with the product-service (Deci, 1992), but rather from the challenge of improving what many previous experts found acceptable in the product-service, which areoriented toward self-enrichment in a manner consistent with goal-based theory.This view is consistent with the notion that consumers seek “satisfying experiences”, not product-services, which explains their motivations to seek value.

With the latest update in value co-creation concerning the innovation, precursors of co-creation explain more on the actors’ will and ability to achieve new combinations that have to compete with established combinations. As a result, service innovation requires change and the willingness to learn. Specificallyin this learning process, how to deal with uncertainty becomes the main focus. This implies that the current innovation practices in value co-creation processes require the ability and willingness of the relevant actors, such as citizenship behavior to cooperate and to link and share ideas, knowledge, and experience beyond traditional organizational borders. It refers to the interactive exchanges of knowledge, information, and experiences, in which new ideas and concepts are discussed in internal and external service networks as well as society in general. This review article attempts to build on the existing body of knowledge through identifying Value Co-Creation (VCC) dimensions, clarifying the ongoing debate of VCC toward the joint value creation, and summarizing underlying themes that are likely to influence future studies in a new era of value creation.

 

VCC DIMENSIONS AND ITS IMPACT TOWARD JOINT VALUE CREATION

 

Value co-creation is a well-established concept in the marketing literature (Grönroos & Ravald, 2011). The concept of co-creation of value redefines the long-established view of the roles of providers’ and customers’ behavior. The initial understanding of value co-creation has been predominantly influenced by Vargo and Lusch’s (2004) work on Service-dominant logic. Service dominant logic, for example, provides a theoretical basis to frame customer co-creation within a much broader perspective on how companies create value. As early studies on customer co-creation have put attentions to the influence of a community of peers on the co-creation activities from individual customers (e.g. Franke, Von Hippel & Schreier, 2006), co-creation nowadays talks about the dyadic relationship between the company and its customers within a network perspective (Hienerth, Lettl & Keinz, 2014). This has been called as the resource-based view, which can provide underpinnings for research on resources. Service-dominant logic has developed in this direction, by which firms complete with customized solutions derived from the integrated resources of all those involved and performed through interactions in networks of relationships. In this resource-based network, earlier studies found that the theoretical framework described service encounters facing some difficulties in practice as the service organization has little or no control over its customers’ willingness to engage in co-creation or their effectiveness. This represents a shortcoming in service-dominant logic without successfully implementing the value co-creation approach in the service ecosystems. In this regard, some studies started looking at the customers’ perspective in the co-creation process. For example, the relation between service performance and types of relationship (Schertzer, Schertzer & Dwyer, 2013), the activities in the service process constituting value co-creation (Aarikka-Stenroos & Jaakkola, 2012), and the suppliers and customers' competencies required in value co-creation (Dong & Sivakumar, 2017). However much more research is needed, for example investigating how to effectively manage such an ecosystem to create an optimal synergy between the different entities of the network.

The second stream of work of co-creation following this demonstrates a new paradigm in management literature that is apart from the important pillars of capitalist economies, which often talks about the value is determined before a market exchange takes place (Prahalad & Ramaswamy, 2001). The marketing-related concept of the co-creation paradigm concerns the interaction between suppliers and customers. This can provide new business opportunities that can create and distribute value that is radically different from the traditional demand versus supply model. Most of the marketing-related co-creation literature has also contributed to the fields of service management, innovation management studies, and consumer research (Vargo & Lusch, 2004). However, as scholars have employed the concept of “co-creation” in these various areas to adopt the variety of approaches and theoretical perspectives in their particular areas, the definition of co-creation and its application in adopted research streams has become increasingly complex (Saarijärvi, Kannan & Kuusela, 2013).

Reviewing from the dimensions of co-creation, the first major co-creation dimensions identified is co-production, which involves customer participation and engagement (Ranjan & Read, 2016). Co-production involves customers taking an active role in assembling goods and services (Bendapudi & Leone, 2003). Subsequently, co-production is viewed as a component of co-creation as customer participation in the development provides a core offering (Vargo & Lusch, 2008). O’Hern and Rindfliesch (2017) emphasize the evolution of customers from passive audiences to active players. With this evolution, generating co-created customer value has become important as it considers the role of customer-to-customer and customer-to-enterprise interactions. Recently, studies extended the customer roles to a wider range and named customers as one of the business's stakeholders, or actors (Gummesson & Mele, 2010). These considerations increase the scope of potential value chain activities and efficiencies as Sheth and Uslay (2007) pinpointed that the co-creation options encompass activities such as co-conception, co-design, co-production, co-promotion, co-pricing, co-distribution, co-consumption, co-maintenance, co-disposal, and co-outsourcing. However, most current studies still not explained these activities further within the service ecosystem.

 

THE DEBATE OF VCC TOWARD THE JOINT VALUE CREATION

 

Both material and symbolical values are concerned under the co-creation with an ongoing debate in the literature about what indeed is the co-creation. Prahalad and Ramaswamy (2001) introduced co-creation by acknowledging the changing roles, such as upward and downward relationships between customers and suppliers beyond the price system that traditionally mediates service-in-exchange relationships. From the service science perspective, Vargo and Lusch (2004) suggest that companies should not focus on products, but should consider their offerings in terms of the services that they can offer to their customers. Co-creation is generated from this collaborative perspective and introduced to the market offering. Later, various directions in co-creation have been introduced by considering stimulating product and service innovations (Bitner, Ostrom & Morgan, 2008) and usage experiences (Payne, Storbacka & Frow, 2008). Along with this change in the perspective of co-creation, there are three varied perspectives mentioned in the literature: (1) value of customer-to-customer support; (2) value of co-creating for the customer rather than the firm; and (3) value of involved costs in co-creation.

First, Jeppesen (2005) first showed the value of customer-to-customer support in community-based innovation, which concerned with supporting customer innovation activity rather than joint innovation activities involving both the firm and customers. This perspective of value co-creation later strengthened by the term customer‐dominant logicto truly reflect a customer‐centric focus, which emphasizes a more holistic understanding of customers' lives, practices, and experiences (Heinonen et al., 2010) rather than treating their customers as partial workers or partners in co‐creation. This view enforces what customers do with the service to accomplish their own goals, thus studying customers' social sphere that could be converted into specific ways for organizations to support and facilitate customers' co‐creation (Grönroos & Voima, 2013). In this regard, customers are capable of co‐creating value by integrating their various ‘operand’, which refers to physical resources that can be acted upon, and ‘operant’ resources, which refers to intangible resources such as skills and knowledge (Vargo, 2011).

Second, other studies focus on the value of co-creating for the customer rather than the firm (Fuchs & Schreier, 2011), which articulate that customer value is related to a sense of belonging to a community and a strong feeling of accomplishment. This perspective emphasizes the hedonic and affective benefits that can bring customers pleasure and enjoyment during the co-creation process (Franke, Schreier & Kaiser, 2010). This opens up a user-led innovation and customer-active paradigm, which shifted the focus of innovation from a single organization to distributed processes and arrangements that co-opt multiple stakeholders in value networks (Bogers & West, 2012). Customer value co-creation here requires a learning strategy that enables both organizations and customers in coping with the increasing market (Di Tollo, Tanev & Ma, 2012). Knowledge and information acquired during the learning process can drive the innovation process for new service development (Edvardsson, Kristensson, Magnusson & Sundström, 2012). However, such co-creation from customers has been criticized as an avenue for exploiting customers to generate value that is not required.

Third, studies also suggest that while there are benefits of customer co-creation regarding producing novelty or quality, there are indeed risks and costs involved in establishing the co-creation mechanism (Mahr, Lievens & Blazevic, 2014). Related costs are associated with the identification and recruitment of appropriate customers, sufficient interactions of the management, and the actual value of knowledge proposed by customers. According to the economic theory, knowledge value is measured as the relative balance between costs and considered usefulness (Bailey & Pearson, 1983). This means, customer knowledge generated from the co-creation should provide new insights, unique inspirations, and a broad range of opinions and ideas, that is termed as the knowledge novelty (Im & Workman Jr, 2004). However, the knowledge is difficult to detect and the relevance of the produced knowledge is hard to be measured nor implemented. Although co-creation enables customers to contribute unique knowledge about their usage through continuous participation in the firm's innovation process (Nambisan & Baron, 2009), whether their participation transforms a firm's resources to further improve performance innovation is rarely known. Meanwhile, knowledge costs are associated with temporal and monetary efforts, which hinders customers or firms to participate in co-creation. Especially, when using face-to-face communication channels, it is always the case that firms eventually abandon their co-creation activities due to the concern of costs might outweigh the benefits (Olson & Bakke, 2001). Nevertheless, in the new digital age, customers can instantly collect thousands of reviews by clicking the review sites with low costs (Poetz & Schreier, 2012). Therefore, more variations have been added to co-creation perspectives.

Accordingly, a logical assumption of value co-creation depends on how a customer perceives the individualized experience under the service context that working toward customization (Dong, 2015). As the Service-dominant logic indicates, co-creation is not referring to a unit of output resulting from a (co‐) production process. Rather, service under co-creation is defined as the application of specialized operant resources through deeds, processes, and performances for the mutual benefit of actors involved (Vargo & Lusch, 2008). Co-creation logic follows the assumption that value‐in‐use is generated by parties that tend to result in optimal interactions in generating service outcomes. This confirmed that goods-dominant logic, which concerns the value that is sorely created by the firm during the production process and destroyed by the consumer at the moment of consumption, is not co-creation. Meanwhile, the premise of “interaction” in value co-creation also refers to the success of trade-off between the two parties, namely customers and service providers. As Jaworski and Kohli (2014) mention that, when firms are not willing to engage in the co‐creation of value with a customer owing to the conflict from the nature of a service system, customers and service providers are not indeed interact at all under such circumstances, where the devaluation processes can occur, and thus diminish value co-creation.

Meanwhile, Payne et al. (2008) emphasize that the set of processes and resources in value co-creation should be contrasted against the value propositions that the company seeks to create. In this process, the value can be co-created through procedures, tasks, mechanisms, activities, and interactions. This process pinpoints the relationship between the provider and the customer as a longitudinal, dynamic, interactive set of experiences and activities performed by the provider and the customer. The first is the customer value-creating processes in a business-to-consumer relationship. Here, the interaction concerns processes, resources, and practices of customers-employee activities. The second is the relationships with suppliers. Here the interaction process concerns the resources and practices of stakeholders, which the supplier uses to manage its business. The last one is the interaction concerns the service encounter processes that take place within customer and supplier relationships. All these interactional phases should be taken into account when developing successful co-creation opportunities. Further, it is also important to note that customer learning can take place at differing levels of the interactional process. According to Bai (2018), three types of customer learning are involved in value co-creation: remembering (customer attention), internalization (interpret and assimilate messages and experiences), and proportioning (engage in practices). Such reflections from customers in terms of their service-learning influence them to change their behavior by performing new activities or disengaging from existing practices, and to use resources in new ways. Hence, it is critical to see whether customers fully understanding the supplier's value proposition and being attracted to it via their service-learning process. This can be seen as another type of necessary interaction to achieve value co-creation. The customer seeks a trade‐off between various costs before engaging in activities that would minimize the costs of performing value co‐creation activities (Cochoy, 2015). This means, value co-creation can only be successful when the costs associated with co‐production or co-creation is reasonable, if not value co‐destruction will occur. Value co‐destruction indicates that an interactional process between service systems that results in a decline in at least one of the systems' well‐being. Therefore, co-creation can only happen when service systems “successfully interact” either directly via person‐to‐person or indirectly via platforms through the application integration of resources and reasonable costs. Otherwise, the value will be co-destructed through the interactions between service systems.

 

 

 

VCC MEASUREMENT AND ITS IMPACT TOWARD HOSPITALITY SERVICE RESEARCH

 

In terms of elements that affect the individual and organizational level of value co-creation, the knowledge intensity is repeatedly identified as a differentiating factor that affects the value co-creation process (Aarikka-Stenroos & Jaakkola, 2012). More specifically such differentiator has been given a name called a knowledge-intensive business with three features that will influence value co-creation: (1) knowledge intensity, (2) problem-solving function, and (3) interactive nature. This allows service firms to mitigate the interest conflict between the actors and help service firms to co-create customized solutions with their customers by integrating their knowledge with the service providers’ specialized professional skills. However, due to the lack of knowledge (imbalanced knowledge level), even if the service providers try to communicate the value proposition in advance to best manage the situation, customers may have difficulties in steering the newly proposed value proposition (customized service) to an ideal customization outcome. Consequently, it is important to highlight that the imbalance of specifications and skills from the actors may cause difficulties in collaborative co-creation. Besides, if the collaboration happens in online settings, the format of the interaction regarding developing knowledge intensities might in need of considerable investment in learning to smoothly co-create value (Komulainen, 2014). This requires relationship embedment such as groupthink that can lead to creativity in developing long-term relationships between service providers and customers in terms of value co-creation (Vafeas & Hughes, 2016).

Furthermore, at the individual level, customers can take up a variety of specific roles that can contribute to the different stages of the collaborative value co-creation process (Dong et al., 2015). Depending on the degree of participation, customers can become a co-producer, co-designer, co-innovator, or a follower (Martinsuo & Hoverfält, 2018). Customer work as a co-producer means they provide physical effort that is related to core service, such as customers' use of self-checkout counters (Dong, 2015). When customers work as a co-designer, they share critical information related to core service (Son, Sadachar, Manchiraju, Fiore & Niehm, 2012). Meanwhile, the customer as co-innovator means they are involved in new service design beyond core service transactions, where customers post ideas in online review settings and so forth (Edvardsson, Gustafsson, Kristensson & Witell, 2011). As follows, the highest level of customer participation in service requires customers to become followers, who engage their behaviors beyond core service transaction, and become positive referrals (Van Doorn et al., 2010). However, in any of these cases, customers are somewhat forced to invest additional resources from their side, which could potentially lead to value conflicts and frustration (Gatzweiler, Blazevic, & Piller, 2017). Therefore, the complexity of how service providers should take all of these situations into account and wisely invite customers to the value co-creation.

 

THEMES IN CURRENT VCC AND FUTURE RESEARCH DIRECTIONS

 

Previous studies in VCC follows three themes that describe the underlying evolution of elements in co-creation. The first theme under the evolution of co-creation is to define the relevant concepts of co-creation that are used in value-focused research (Green & Sergeeva, 2019). Originating from the marketing, Prahalad and Ramaswamy (2001) introduced the concept of co-creation by acknowledging the changing roles between customers and suppliers (i.e. service providers) and looked into the interactions in the business markets. Following this direction, later studies investigated constitutive elements of co-creation and specified that co-creation can be achieved by collaborating customers in designing market offerings (quantity, quality, attributes) and designing activities and services that are requested by customers (Grönroos, 2008; Sawhney, Verona & Prandelli, 2005). Recent service science as an emerging interdisciplinary filed follows this debate and focuses on models, theories, and applications that can drive service innovation, competition, and wellbeing through value co-creation (Grönroos & Voima, 2013). Moreover, all these studies in the service sciences have clarified that co-creation is inherent in the service business is created in the service encounter, which describes the environment where the interaction between service providers and customers takes shape. This literature is strongly related to the service-dominant logic that articulates the relationship among actors in the co-creation process (Grönroos, 2008; Grönroos & Voima, 2013). Ramaswamy and Gouillart (2010) suggested that the core principle of co-creation is engaging people in creating valuable experiences together, which contributes to the service system perspective and discussions of co-creation as a dynamic process contributing to the well-being of a service ecosystem.

Second, under this paradigm of the shift from product-based business mindset to the service-based, later, scholars began to study co-creation with the consumer culture theory and tried to understand co-creation in the consumption filed. The focus has been on the supplier’s process of providing resources for customer use as well as the customer consuming process of turning service into value. This activity has been termed as a social construction under value co-creation by Edvardsson, Tronvoll and Gruber (2011). This further indicated that service providers’ and customers’ position in the social structure and their degree of participation during the consumption process can attribute to the value co-creation outcomes (Vargo, Wieland & Akaka, 2015). During this process, service providers can view customers’ co-producers (i.e. partial employees who are not adequately compensated) or as co-creators through customer use and experience. However, the insights from prior studies analyzing value co-creation from the social structure perspective are limited in two ways. One is that these studies remain primarily conceptual, thus creating a lack of explanations in terms of how value is co-created. The other one is these studies have not clearly explained how value is perceived by service providers and customers, and how the underlying value creation process forms. Thus, very little is known about how initial stakeholders' perspectives of value co-creation will affect their inputs and further lead to various value outcomes. Therefore, the second theme of value co-creation perspective requires new business models, which can identify actors’ interactions that lead to an increase in resource density (Storbacka, Frow, Nenonen & Payne, 2012).

Knowing these limitations from the second theme, the co-creation studies reevaluated the literature of the value creation process in service lifecycles (Pargar, Kujala, Aaltonen, & Ruutu, 2019). More dynamics have been introduced in the third theme of value co-creation regarding the collaborative relationship between service providers and customers with the focus on the value formation (Siltaloppi, Koskela-Huotari & Vargo, 2016). Under this theme, extant studies articulate that a harmonious value-formation process requires mutual benefits to be created between service providers and customers. This is hard to achieve, as sometimes the self-interest of the service business and the customer might different. Such conflict of interest will inevitably occur between the actors, thus leads to the negative dynamics of business interactions. The controversy of collaborative relationships has been classified into two elements: (1) misalignment vs. realignment; (2) opportunism vs. trust.

 

By evaluating these two elements, service providers and customers can identify the cause of the social disagreement, and misalignments in the process of service value-making within actors that might hinder value co-creation (Gambetti & Graffigna, 2015). When using a multifactor orientation, it is necessary to acknowledge that service encounters rarely involve single interactions but are more likely to include several interactions with multiple, actors, often at different points in time and possibly in different locations. This leads to the complexity of joint value co-creation, but studies have yet focused on such holistic aspects due to two main reasons. One is that service research typically focuses on single-actor engagement, while a multi-actor orientation is crucial in addressing the inherent complexities of service recovery encounters (Edvardsson, Tronvoll, & Gruber, 2011).The other one is that it is also necessary to recognize invisible interactions the sifts service provider's attention away from instances where they can control activities that might influence customers' lives. Future studies should examine such two research inquires because while the value co-creation processes are commonly described in terms of single-service encounters (Bolton, 2019), service does not occur in isolation but at a dynamic and emergent environment. This is described as a synergetic and multi-sided platform in service systems. Synergetic refers to the influence of the conceptualization of people, objectives, and technology under the service system (Meynhardt, Chandler, & Strathoff, 2016). This view encompasses the study of service systems as value co-creation configurations of actors, platforms (either face-to-face or technology-based), and value propositions (Maglio & Spohrer, 2008). Interdisciplinary research from service, information systems, marketing has focused on systems as in a singular moment, where the objective did not intent to emphasize the interconnectedness of the service systems overtime. Thus, one huge drawback of joint value co-creation is on the incomplete articulations on how service systems move into the future by only studying the temporal interactions among actors. Future studies should also examine the service situations that area seemed to be well-handled and managed butmight need to further interpret how the service is offered and accepted in customers’ activities and experiences. It requires a unique position in the theoretical field to study customers’ framing effects of the service experiences. Put it simply, the interactive service contexts that mainly concern the service provider's activities involved in the collection of information about customers is no more legitimate. Instead, customer’s core activities and experiences related to a specific service and customers’ goals and tasks that can satisfy their most interests seems to be compatible. Therefore, to interpret customers' logic and apply that into appropriate service actions in designing service value co-creation, more studies are needed to figure out the challenges and tensions that might arise internally from the customers.

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