The co-creative practice of forming a value proposition
Christian Kowalkowski, Oscar Persson Ridell, Jimmie G. Röndell, David Sörhammar
N.B.: When citing this work, cite the original article. Original Publication: Kowalkowski, Christian, Oscar Persson Ridell, Jimmie Röndell, and David Sörhammar (2012), “The co-creative practice of forming a value proposition”, Journal of Marketing Management, Vol. 28, Issue 13-14, pp. 1553-1570. http://dx.doi.org/10.1080/0267257X.2012.736875 Copyright: Taylor & Francis Group http://www.tandfonline.com/
The co-creative practice of forming a value proposition
Christian Kowalkowskia, Oscar Persson Ridellb, Jimmie G. Röndellb, David Sörhammarb* a
Department of Marketing, Hanken School of Economics, Arkadiankatu 22, 00101 Helsinki, Finland b
*
Department of Business Studies, Uppsala University, Box 513, 752 10, Uppsala, Sweden
Corresponding author:
[email protected]; Phone: +46 18 4711377; Fax: +46 18 4716810
Abstract: Using practice theory and an empirical illustration of reciprocal exchange of knowledge between resource-integrating actors, this paper contributes to S-D logic by deepening the understanding of the innate intricacies in a co-creative practice of forming a value proposition. A co-creative practice is conceptualised as reciprocal exchange of knowledge that is mediated by the practice-related script – understandings, procedures, and engagements – that each resource-integrating actor draws upon. The paper identifies and labels the activities of this exchange – applying, assessing, adapting, and adopting – using the literature on knowledge creation and management as a point of departure. A granular analysis is provided of how the script of each resource-integrating actor mediates the activities of reciprocal exchange of knowledge when forming a value proposition.
Summary statement of contribution: We conclude that the formation of a value proposition cannot be portrayed nor understood as a transaction of knowledge between firm and consumers; instead, it is a co-creative practice of reciprocal knowledge exchange between constellations of resource-integrating actors drawing upon different scripts. For a firm reorienting its business to integrate consumers into activities of value creation a challenge occurs when resource-integrating actors draw upon scripts that are incommensurable, as it restricts reciprocal knowledge exchange between them. Keywords: Co-creative practice, Value proposition, Practice theory, Service-dominant logic, Reciprocal knowledge exchange, Co-creative paradigm
The co-creative paradigm ‘After years of declining numbers in the under-thirty segment for our loyalty card program, we realised that the only way to increase these numbers was to modify our current offering to better fit this group of consumers … they expressed dissatisfaction with the content and communication of existing offerings … it became clear to us that we had to involve these potential consumers in the process as we apparently had no knowledge about what they perceived as valuable in the loyalty card.’ – Head of the marketing department at one of Northern Europe’s largest grocery retailers.
The above quote is an example of a firm that is reorienting its business to integrate and coordinate value creating activities with consumers, embracing what can be referred to as the co-creative paradigm (for example, see Normann & Ramirez, 1993; Prahalad & Ramaswamy, 2004; Vargo & Lusch, 2004). The reorientation towards creating value with consumers can be seen in a wide range of industries, including Lego’s Mindstorm series, Google’s Android and Starbucks’ MyStarbucksIdea. Characterising the co-creative paradigm is recognition that consumers, both existing and potential, are prerequisites for the creation of value. In relation to this paradigm, service dominant (S-D) logic (Vargo & Lusch, 2004) argues that firms cannot unilaterally develop, offer and deliver value to consumers by bundling knowledge into goods; they can only initiate value propositions. As opposed to viewing value propositions as being synonymous to offerings, which Normann (2001) defined as ‘frozen value’ in time and space, value propositions in the S-D logic perspective are formed through activities of reciprocal exchange of knowledge between resource integrating actors rather than being predefined by a single firm (Ballantyne & Varey, 2006). In relation to the opening quote, this implies that developing an offer together with a potential customer (that is, initiating and forming a value proposition according to S-D logic) entails reciprocally exchanging knowledge with the latter. However, as noted by Frow and Payne (2011), resource-integrating actors will most likely have different views about what is valuable to them, based on their idiosyncratic goals, experiential knowledge and context. Accordingly, it can be assumed that the formation of a value proposition will reflect conflicting interests amongst resource-integrating actors. Due to the lack of research that explores how value propositions are formed (Vargo & Lusch, 2008; Ballantyne, Frow, Varey, & Payne, 2011; Frow & Payne, 2011), it has been argued that: ‘A priority area for research is
exploring and assessing alternative processes for developing them [value propositions], including the context of multiple stakeholders’ (Frow & Payne, 2011, p. 236). Following the call for further elaboration of the value proposition concept (Vargo & Lusch, 2008; Frow & Payne, 2011; Kowalkowski, 2011), the present paper conceptualises a cocreative practice of forming a value proposition using practice theory and an empirical illustration of the activities of reciprocal exchange of knowledge between resource-integrating actors. The aim of our study is to provide a deepened understanding of the intricacies that are innate in a co-creative practice of forming a value proposition. The paper begins with a theoretical section that accounts for the value proposition concept, followed by an account of practice theory. Practice theory is used to initiate the conceptualisation of a co-creative practice in order to deepen the understanding of the nature of the reciprocal exchange of knowledge through which value propositions are formed. The methodological section explains how the formation of a value proposition has been investigated longitudinally, and further conceptualises the co-creative practice by labelling and identifying the activities of reciprocal knowledge exchange. This is followed by an empirical illustration of how resourceintegrating actors apply, assess, adapt and adopt knowledge during the co-creation of a customer loyalty card. The paper analyses how a co-creative practice of forming a value proposition is affected by the individual practices of resource-integrating actors and concludes with a discussion on the nature of the resource-integrating actor, avenues for future research, and managerial implications. The value proposition concept The origins of the value proposition concept date back to the 1980s. The concept was briefly mentioned by Bower and Garda (1985) and was later introduced by Lanning and Michaels (1988) to accentuate the critical importance of communicating value in offerings. Emanating from a supplier’s perspective, and in compliance with a goods-dominant logic, the development of a value proposition consists of three main steps: choose the value, provide the value, and communicate the value (see for example, Kotler & Armstrong, 2010; Peter & Olson, 2010; Schiffman, Lazar Kanuk, & Hansen, 2012). From this perspective, the value proposition concept is still analogous to the use of the traditional marketing offer, as discussed from a supplier-centric perspective. The concept of value proposition has also recently been emphasised in the S-D logic discourse (for example, Ballantyne & Varey, 2006; Frow & Payne, 2011; Kowalkowski, 2011). Given that the implications of the value proposition concept change considerably if
and when the notion of value is described as being ‘idiosyncratic, experiential and contextual’, the concept has been proposed as a central issue that is ‘ripe for further elaboration’ (Vargo & Lusch, 2008, p. 9). The value proposition has been conceptualised as a systems- and stakeholder-unifying process (Frow & Payne, 2011; Lusch & Webster, 2011) and is covered in the literature on service systems (Maglio & Spohrer, 2008; Vargo, Maglio, & Akaka, 2008), service ecosystems (Vargo, 2009), stakeholder networks (Bhattacharya & Korschun, 2008), and marketing networks (Gummesson, 2008). Normann and Ramirez (1993) offered a similar reasoning in their illustration of value constellations that consist of firms and individuals who are linked through a coordinated set of activities with the purpose of creating value (Achrol, 1997; Lorenzoni & Lipparini, 1999; Dyer & Nobeoka, 2000; Corsaro, Ramos, Henneberg, & Naudé, 2012). The body of work that anchors the value proposition concept in S-D logic has helped outline the structural aspects of the reciprocal exchange of knowledge that forms a value proposition. However, as Frow and Payne (2011) argued recently, there is a growing need for studies that address the activities through which value propositions are formed, and how the idiosyncratic goals, experiential knowledge and context of resource-integrating actors influence this formation. To advance the understanding of the characteristics of resource-integrating actors, Vargo and Lusch (2011) recently suggested describing them as ‘practices’. Practice theory has been employed within the co-creative paradigm to study value creation (Korkman, 2006; Jensen Schau, Muñiz Jr., & Arnould, 2009), and S-D logic scholars have found it a fruitful avenue for understanding interactive formation of value (Echeverri & Skålén, 2011). Therefore, in order to attain a more profound understanding of how value propositions are formed, the present paper draws inspiration from practice theory (Bourdieu, 1977; Lave & Wenger, 1991; Reckwitz, 2002; Rouse, 2006) to initiate a conceptualisation of a co-creative practice of forming a value proposition. Value propositions are formed through reciprocal exchange of knowledge between resource-integrating actors, and practice theory lends itself to gaining insights into the nature of this exchange. Practice theory Practice theory draws on a view that social reality consists of nexuses of practices (Schatzki, 1996) that make action and order possible (Bourdieu, 1977), and practice has been a central notion in studies of various phenomena. Theorists of education and organisational learning (Brown & Duguid, 1991; Lave, 1996; Brown & Duguid, 2001) have described knowledge of individuals as being intimately related to their engagement in practice. Knowledge of
individuals is seen as situated in practice, as illustrated in studies of professions such as service technicians (Orr, 1996), tailors (Lave, 1996), naval navigators (Hutchins, 1993), and insurance claims processors (Wenger, 1998). The situated view of knowledge derives from a perspective of learning as being dependent on the activity, context and culture in which it occurs (Lave, 1988); meaning that knowledge is anchored in the very fabric and contours of human practice. Practice has recently also become a central notion for understanding value creation (see Korkman, 2006; Jensen Schau, et al., 2009; Echeverri & Skålén, 2011). Conceptualising a co-creative practice In light of practice theory, a co-creative practice of forming a value proposition involves knowledge exchange between resource-integrating actors whose knowledge is situated in their respective practice. Recognising the idiosyncrasies of each actor’s practice, this exchange can reasonably be expected to be less than straightforward. As practice is defined as ‘shared historical and social resources, frameworks, and perspectives that can sustain mutual engagement in action’ (Wenger, 1998, p. 5), it can be understood as a sort of idiosyncratic script that each resource-integrating actor draws upon when they engage in forming a value proposition. In support of this reasoning, Echeverri and Skålén (2011) recently argued that practice both limits and enables interactions between actors of diverse practices, such as providers and customers. Inspired by previous practice research (for example, Lave & Wenger, 1991; Schatzki, 1996; Reckwitz, 2002; Warde, 2005), Jensen Schau et al. (2009) have provided a general outline of the characteristics of practices as constituted by understandings, procedures and engagements. In relation to the present paper’s interest in understanding resource-integrating actors, these characteristics are defined as follows: •
Understandings are the practice-related knowledge (know-how), skills and experiences of each resource-integrating actor.
•
Procedures are the practice-related rules, principles and cultural norms of each resource-integrating actor.
•
Engagements are the practice-related wants and needs, goals and purposes to which each resource-integrating actor is committed.
Taken together, these characteristics constitute the script that each resource-integrating actor draws upon when engaging in a practice of forming a value proposition. Thus, in a co-creative
practice of forming a value proposition, the script that each resource-integrating actor draws upon mediates (enables and delimits) the reciprocal exchange of knowledge between actors. By using practice theory, we have initiated a conceptualisation of a co-creative practice of forming a value proposition that encompasses the characteristics of resource-integrating actors that mediate reciprocal knowledge exchange. With the aim of providing a deepened understanding of the intricacies that are innate in a co-creative practice of forming a value proposition, the methodological section of this paper furthers the conceptualisation of a cocreative practice by addressing the activities of reciprocal exchange of knowledge. In this section, knowledge exchange is subdivided into activities, which are then illustrated in the empirical section, in order to enable a more granular analysis of how the script of each resource-integrating actor mediates reciprocal knowledge exchange. Methodological considerations On 17 August 2011, one of Northern Europe’s leading grocery retailers presented a service offering in the form of a new customer loyalty card specifically designed for students. Similar to service offerings provided by UK retailers such as Sainsbury and Tesco and US retailers such as Walmart and K-mart, the customer loyalty card combined grocery services and financial services (such as credit cards, insurance, various loans). What made this offering unique was that it had been co-created together with students. By the end of September 2011, the card had already gained the retailer an approximate 16 percent share of the student segment and had generated 26,000 ‘likes’ on Facebook. The idea of developing a customer loyalty card specifically designed for this segment had been raised in February 2010 after the retailer had experienced difficulty attracting the student segment to use its general customer loyalty card. The lack of success in reaching the segment with traditional marketing tools, and the realisation that no research reports or analysis existed about the segment, led the retailer to involve students in the development of the customer loyalty card from the outset. This paper reports on the study of the entire extension of the development of the customer loyalty card – a 20-month investigation that began in early February 2010 and ended in early September 2011. Normann (2001) has previously described the customer loyalty card as a bundle of several applications and configurations that together compose the service of the card. Therefore, the development of a customer loyalty card is regarded an appropriate object for empirically capturing the formation of a value proposition, and it can therefore offer insights into the reciprocal exchange of knowledge upon which all value creation is based.
Data collection Given the lack of prior empirical research addressing the activities through which value propositions are formed (Frow & Payne, 2011), the study adopted an exploratory approach. In order to capture the development as holistically as possible, data were gathered through formal interviews and informal meetings, participant observations and project documentation. The five employees who constituted the project group at the retailer were key informants (Marshall, 1996) who were formally interviewed, and informally met with, throughout the study of the development. As recommended (for example, Malhotra, 2010), the formal interviews lasted between one and two hours. The informal meetings occurred in relation to participant observations. All interviews were recorded and transcribed. The reason for conducting interviews through the entire development of the customer loyalty card was to ‘tap the knowledge and experience’ (Churchill Jr, 1979, p. 105) that the employees progressively gained. A semi-structured interview guide was used, with the purpose of uncovering rich insights and unexpected examples. In accordance with Brown et al. (2007), the same authors conducted all interviews in order to enhance comparability. The purpose of conducting formal interviews and informal meetings was to provide the study with extensive data about the development. The interviews included such open-ended questions as ‘how would you describe your input to the development?’ and ‘what is your view on contributions made by other participants to the development?’ Participants who were referred to during these interviews were then contacted in what became a purposive sample gained through a snowball procedure (Goodman, 1961; Salganik & Heckathorn, 2004). Additionally, the authors met the project group informally, both before and after the participant observations. Representatives from the IT, marketing, and sales departments were also present on these occasions. Participant observations were conducted by attending meetings between the project group and the students, between the project group and intra-organisational departments, and between the project group, intra-organisational departments and the students. All observations were made unobtrusively in order to limit the effects of researcher presence. Participant observations were made during three presentations in which students presented their concepts, ideas and inputs to the project group. All presentations lasted approximately one hour. Further participant observations were conducted during four meetings held by the project group and the IT, marketing and sales departments. These meetings lasted an average of two hours each. Participant observations were also made during a 24-hour case competition, at the end of which students presented their conceptual solutions to a case that the project group created.
The project group and representatives from the IT, marketing, and sales departments were present at this time. To complement the first-hand data, second-hand data were gathered in the form of students’ reports from the case competition, PowerPoint presentations used during the above-mentioned meetings and presentations, creative briefs showing the progression of the development, email correspondence with the project group, and policy and legal documentations. Data analysis and interpretation As noted above, a co-creative practice of forming a value proposition is herein conceptualised as being constituted by two principle elements: the script (understandings, procedures and engagements) that each resource-integrating actor draws upon when engaging in the practice, and the reciprocal exchange of knowledge between these actors. Against the purpose of this paper – to provide a deepened understanding of the intricacies innate in a co-creative practice – this exchange is subdivided into activities in order to enable a more granular illustration of how the script of each resource-integrating actor mediates the reciprocal exchange of knowledge. A peer-evaluation-style process (Miles & Huberman, 1994) was used to identify and label four mutually-exclusive activities (applying, assessing, adapting and adopting), which were subsequently tested and found valid as a .83 inter-judge reliability index was achieved (Perreault Jr & Leigh, 1989). The process had an a priori thematic focus – reciprocal knowledge exchange – and an approach that was ‘between either wholly inductive or completely confirmatory’ (Brown, et al., 2007, p. 9). Theoretically, the process was founded on literature regarding knowledge creation and sharing (Nonaka & Takeuchi, 1995) and knowledge management (for example, Davenport & Prusak, 1998; Alavi & Leidner, 2001), which generally describes the exchange of knowledge as a sequential process of accessing, gathering, interpreting and utilising knowledge. This description was employed as an initial guide that coders used to identify and label the activities, and the peer-evaluation-style process entailed iterative discussions between coders who had gathered the data and those who had not. A successive progression of identifying and labelling of the activities was allowed. Because the data described continuous interactions between resource-integrating actors, discussions were carried out between coders regarding how the activities could be labelled in order to more fully capture the reciprocal nature of the exchange of knowledge between actors. Rather
than describing an occurrence of how knowledge is accessed and gathered by a single actor, the data showed that all resource-integrating actors provided inputs and evaluated each other’s inputs during the exchange. Coders were also hesitant about whether the labels of interpreting and utilising fully captured the resource-integrating actors’ critical evaluation of inputs, and about how actors altered and further developed each other’s inputs in the data. Therefore, the data did not describe the activities as carried out sequentially by the same actor, but rather portrayed the exchange as interchangeable, multifaceted and constituted by actors who reciprocally provided, evaluated, altered, accepted or refuted each other’s inputs. Therefore, the labels of applying, assessing, adapting and adopting were considered more suitable for describing the activities of reciprocal knowledge exchange between resource-integrating actors. The discussion between coders rendered a consensual description of them as follows: •
Applying refers to the providing of inputs.
•
Assessing refers to the evaluation of inputs.
•
Adapting refers to the altering of inputs.
•
Adopting refers to the acceptance of inputs.
The forming of a value proposition Two insight-stimulating examples (Selltiz, Wrightsman, Cook, & Balch, 1976) are provided with the aim of illustrating how the activities – applying, assessing, adapting and adopting – constitute the reciprocal exchange of knowledge in a co-creative practice of forming a value proposition. Two examples of co-creation between the retailer and the students are presented, with different outcomes. The first example illustrates an attempt to co-create elements of the customer loyalty card, while the second example shows how the strategy for communicating the card to the market was successfully co-created. Co-creating elements and layout of a customer loyalty card In January 2011, the project group, along with students and representatives from the IT, marketing and sales departments, initiated co-creation of the elements and layout of the customer loyalty card. Conferring about what the card would entail and how it was to be presented, the development was guided by the retailer’s initial input that the card entail both grocery and financial services, as well as being creative but technically and economically feasible.
The students provided input by mentioning their distaste of the pink colour of the retailer’s existing card. Students felt that the card should be black, and one student colourfully expressed the motivation for this change: ‘A pink card is not really something you would want to wave around in a bar…’ Although all of the retailer’s representatives assessed the students’ input regarding the layout of the card, a change in the colour of the general card would have required significant internal administration. Moreover, a representative of the marketing department said that such a change would go against ‘the tradition of how we [the retailer] do things’, to which the other representatives concurred. Students also provided input in the form of an idea they called ‘Nickels and dimes’. The idea was to let card-holders choose to have the amount of their purchases rounded up, for example being charged $10 for a grocery item that only costs $9, with the difference being transferred into their savings account (an account connected to the card). To support the idea, the students suggested developing a smartphone application (app) that would provide consumers with a range of information, including the status of their savings account, maps of discounts in each of the retailer’s stores (via GPS), and bonus points that have been accrued through prior purchases. The students also felt it was crucial that the app should have a user-friendly interface, which they believed could be easily achieved within the retailer’s wishes of technical and economical feasibility. The project group, and the IT, marketing, and sales departments assessed ‘Nickels and dimes’, and the idea was considered by them all to be highly creative and interesting. However, a representative of the IT department mentioned that it needed to be significantly adapted if it was to work within the retailer’s IT structure, which consisted of different IT systems for customer relationship management, for financial services, and for grocery services. A representative from the IT department said, ‘For the moment, a number of IT-related obstacles make the implementation of the idea, in its present state, questionable’. Having assessed the students’ idea of developing an ‘all-inclusive’ app, the project group argued that the idea could be adopted if the three IT systems were instead adapted to fit ‘Nickels and dimes’. The IT department then noted that the IT systems were operated by different departments at the retailer and could not be integrated without considerable investments in the overall IT structure. The sales department evaluated ‘Nickels and dimes’, and, based on previous experiences, made the assessment that accommodating the transaction of data between the three IT systems that was necessary in order to adopt ‘Nickels and dimes’ could be problematic. The Personal Data Act, the Debt Recovery Act and the Credit Information Act made it impossible to interlink personal and credit data between the IT
systems in their current state. Although the IT department stated that the restrictions could be complied with if investments were made in the IT structure, a representative of the marketing department commented that the interlinking of the data required for ‘Nickels and dimes’ could be contrary to the current opposition to a ‘Big Brother’ society. ‘Privacy is becoming more and more important for consumers, and this [interlinking of personal data] might send mixed signals to them’, said a representative from the marketing department. After the project group and the IT, marketing, and sales departments had assessed and suggested adaptations to the students’ idea of ‘Nickels and dimes’, the idea was still considered technically and economically unfeasible. Accordingly, it was not adopted for the time being. However, the students also applied another idea: ‘Eat up your loans’. Like ‘Nickels and dimes’, the idea was to enhance the shopping experience by enabling students to amortise their loans through purchases. The change from grocery purchases could be used to amortise loans that consumers had taken as part of the retailer’s financial services. The resemblance of this idea to ‘Nickels and dimes’ meant that it was given similar consideration as the former with regard to technical and economical feasibility. The reason why it was not considered possible to adopt, even with adaptations, was because all representatives from the retailer felt that consumers’ experience of the retailer’s grocery services should only be connected with feelings of enjoyment and fun. One of the project group members said, ‘As inspiration is one of our five core values, we don’t want the fun of shopping for groceries to be associated with the “necessary evil” of amortising’. Even though the students did not agree with such a sentiment, all of the retailer representatives felt that combining something that should be experienced as enjoyable with something that could be experienced as unenjoyable would contradict the retailer’s principles. Co-creating a communication strategy for a customer loyalty card In March 2011, the project group, along with students and representatives from the IT, marketing and sales departments, initiated the co-creation of the communication strategy for the customer loyalty card. Discussions about how to communicate with the student segment to raise awareness about the card were guided by the retailer’s wish that the card entail both grocery and financial services, as well as that it be creative but technically and economically feasible. The co-creation revolved around considering overall strategies for communicating the loyalty card to the segment. The project group provided input in the form of a ‘creative brief’ that contained information about the retailer, its customary market communication strategy and
the project group’s current knowledge of the student segment. The students suggested ‘keeping it cheap’, a concept that included ideas about how to communicate the customer loyalty card to the student segment using online advertising, social media and guerrilla marketing. It was assessed by the project group, the IT, marketing and sales departments, and was found to require certain adaptations in order to become adoptable. As a representative of the project group said, ‘Even though these are some fantastically creative ideas, we need to keep in mind that some of them might not be doable as we have a number of formal and informal rules, regulations and limitations to consider’. Following the input from the project group, the students provided further input about how the customer loyalty card could be communicated through social media and guerrilla marketing. The students considered that all online ads should be designed in the spirit of ‘keeping it cheap’. They gave two suggestions for ads. One read ‘Spending less money on this ad enables us to give you a better discount on breakfast cereals’, and the other read ‘Spending less money on this spot gives you a better deal on your insurance’. These ads were designed using a handwritten-style font, as the students felt that it captured the ‘keeping it cheap’ spirit and embraced the straightforward communication to which students are accustomed. When assessing these ideas, the project group and the marketing department argued that a ‘simple’ tonality should be adopted instead of a ‘cheap’ tonality. A member of the project group stated that such adaptation meant that the ‘cheap’ tonality was ‘transformed into something we can feel comfortable with over time’. Moreover, the ‘cheap’ tonality was considered unadoptable in that the retailer’s suppliers and other partners might not be able or willing to comply with the ‘cheap’ concept. Also, it was considered necessary to adapt the ‘less money spent…’ ads as they were at odds with the retailer’s reputation as the biggest media buyer in Northern Europe. Similarly, the marketing department assessed that the handwritten-style font could not be adopted as it was not a part of the retailer’s long-established font portfolio. Instead, a crayon-like font, which the project group and the students felt equally captured the student culture, was adopted. Furthermore, the students applied the idea that Facebook should be used as the communication hub, replacing the retailer’s traditional channels of market communication. The students made it clear that the segment is sceptical about ‘push’ marketing and is not easily attracted by conventional ads. As one student said, ‘We want to choose when to be communicated to, and rather prefer to listen to our peers’. Also, the loyalty card needed its own Facebook page, separate from the retailer’s general Facebook page. Following this idea,
a representative of the project group argued that ‘It is important that we allow the Facebook page to evolve on its own with its own unique dialogue … we don’t want to risk specific information to cardholders becoming lost in the general site’s flow of information’. However, as such a change would require additional website editors a request was brought to the management of the IT department who decided to take on an additional editor. Thus, the project group and the IT, marketing and sales departments adopted the idea of providing the customer loyalty card with its own Facebook page. The concept also contained ideas about how to guerrilla market the customer loyalty card. One such idea was that the retailer sponsor tent camps in university cities where the lack of student housing was evident at the beginning of the semester, and another was to hand out ice cream around campuses in return for students filling out the application form for the loyalty card. However, all of the retailer’s representatives assessed the guerrilla marketing suggestions as unadoptable. With regard to sponsoring tent camps, a project group member stated: ‘My experience tells me that it [the idea] would be too much of a hassle due to the procurements and legal processes that it will bring with it’. In turn, the marketing department considered the idea of handing out ice cream around campuses to be unadoptable because the campaign would occur during the peak of the ice cream season. Based on previous experiences, such a campaign had been found to be unachievable due to the scarcity of ice cream freezers during the summer months. Following the inadaptability of the guerrilla marketing ideas, the students suggested another novel idea about how to communicate the loyalty card: ‘Battle of the corridors’. Emerging from the idea of using Facebook as the communication hub, ‘Battle of the corridors’ involved a competition in which student participants could win $10,000 to spend on improving their housing. To participate, students would use photo collages or entertaining short films to offer suggestions about how to improve their housing. The contributions would then be posted on the card’s Facebook page and the contribution with the most ‘likes’ would win the competition (an event that also would be posted on the Facebook page). The marketing department wanted to adapt ‘Battle of the corridors’ so that the prize sum would not be concentrated on a single winner or event. A representative of the marketing department stated: ‘By spreading it out over time, we prolong the possible time that we can interact with consumers’. The project group and the students found this adaptation valuable because they felt it would encourage more students to participate and possibly also generate a more continuous ‘buzz’ about the loyalty card. Apart from dividing the prize into smaller prizes, the
sales department also suggested adapting ‘Battle of the corridors’ so that it was more closely associated with the retailer’s assortment of groceries. Instead of a sum of money, the sales department suggested that prizes be in the form of gift certificates that students could use only to buy groceries from the retailer. The project group then pointed out that such an adaptation would generate continuous information about students’ want and needs, which would be beneficial if the customer loyalty card was ever to be ‘tweaked’. The students agreed and pointed out that students would also benefit from this adaptation as it would satisfy their everchanging needs. The adaptations that the project group, the students and the IT, marketing, and sales departments made to ‘Battle of the corridors’ rendered the idea technically and economically feasible, and it was finally adopted. The intricacies innate in a co-creative practice This paper has elaborated on the characteristics of resource-integrating actors that mediate reciprocal exchange of knowledge, and it has also identified, labelled and empirically illustrated the activities of this exchange. To enable a consideration of the intricacies innate a co-creative practice of forming a value proposition, this section provides an analysis of how the activities – applying, assessing, adapting, and adopting – are mediated by the scripts that resource-integrating actors draw upon; i.e., understandings, procedures, and engagements. The way in which understandings of resource-integrating actors mediate the exchange of knowledge becomes particularly evident in relation to the retailer’s IT structure, especially regarding the students’ application of the ‘Nickels and dimes’ idea. With an unproblematic understanding of IT, the students were adamant that ‘Nickels and dimes’ had to be supported by an all-inclusive app with a user-friendly interface and easy access to a broad variety of grocery and financial services. The IT department’s assessment of this idea reveals a more complex understanding of IT and what would have to be adapted in order for the students’ idea to be adopted. The IT department suggested that ‘Nickels and dimes’ be significantly adapted to work within the retailer’s current IT structure, which demonstrated an understanding of IT as a structure to which the students’ applied ideas are attuned. Conversely, the project group suggested that the IT structure be adapted to fit ‘Nickels and dimes’, thus revealing an understanding of IT as a structure that can be attuned to the students’ applied ideas.
The way in which understandings mediate exchange of knowledge can also be seen in relation to the assessment of how to handle the issue of interlinking personal data entailed in ‘Nickels and dimes’. The IT department understood this issue as an IT-related matter, suggesting an adaptation that meant solving the issue through investments in the current IT structure. However, the marketing department understood the issue as a matter of public reputation and avoiding becoming part of the ‘Big Brother’ society. As one department representative explained: ‘Privacy is becoming more and more important for consumers, and this [interlinking of personal data] might send mixed signals to them.’ Also, the students’ ideas about guerrilla marketing through tent camps and handing out ice cream around campuses revealed how understandings of resource-integrating actors mediate the exchange of knowledge. The idea of sponsoring tent camps in university cities was assessed as being unadoptable. One project group member explained: ‘My experience tells me that it [the idea] would be too much of a hassle due to the procurements and legal processes that it will bring with it.’ Also, the marketing department assessed the idea of handing out ice cream around campuses as unadoptable based on experience of scarcity of freezers during previous campaigns in the summer months. The fact that procedures mediate exchange of knowledge between resource-integrating actors is expressed, for instance, in relation to the students’ input about how to communicate the customer loyalty card to the student segment using online advertising, social media and guerrilla marketing. Although the concept of ‘keeping it cheap’ was assessed and considered to contain ‘some fantastically creative ideas’, a representative of the project group stated that ‘…some of them might not be doable as we have a number of formal and informal rules, regulations, and limitations to consider’. One such idea was the way in which the students wanted to communicate the customer loyalty card through online advertising. The ads, which were to communicate the ‘keeping it cheap’ spirit using a handwritten-style font, reading ‘less money spent on this ad …’, aimed to capture the straightforward attitude in today’s student culture. Having assessed the idea, the project group and the marketing department felt it was necessary to adapt ‘keeping it cheap’ and instead embrace a ‘simple’ tonality in order to fit the concept to the retailer’s advertising principles, as well as those of its suppliers and partners. For instance, the handwritten-style font that the students suggested did not comply with the retailer’s long-established font portfolio, so a crayon-like font was adopted; the students and the project group felt that this font equally captured contemporary student culture.
The way in which procedures mediate exchange of knowledge between resource-integrating actors is also seen in relation to ‘Eat up your loans’, which was the students’ idea about enhancing the students’ shopping experience by letting them amortise loans through grocery purchases. The idea was assessed by all representatives and was considered to be in direct contradiction with the basic business principles of the retailer; as one representative said, ‘We [the retailer] don’t want the fun of shopping for groceries to be associated with the “necessary evil” of amortising’. Even though the students did not agree with the reason for not adopting ‘Eat up your loans’, all representatives from the retailer considered that consumers’ experience of the retailer’s grocery services should only be connected with feelings of enjoyment and fun. The students’ input about changing the colour of the customer loyalty card from pink to black also reveals how procedures mediate the exchange of knowledge. The reason why this input could not be adopted was, as expressed by a representative of the marketing department, because it went against ‘the tradition of how we [the retailer] do things’. Also, the way in which engagements of resource-integrating actors mediate exchange of knowledge can be seen in relation to the colour of the customer loyalty card. The students suggested a change of the current layout of the card because it was not in line with their assessment of the student segment’s preference for the design of the customer loyalty card. The comment of one student that ‘a pink card is not really something you would want to wave around in a bar’ revealed that the need to change the card was founded on a view of the card as being more than solely something for monetary transactions. The fact that engagements mediate exchange of knowledge between resource-integrating actors is also seen in relation to the students’ suggestion of using Facebook as the communication hub, thus replacing the retailer’s traditional communication channels. One student expressed the student segment’s need to be communicated with, rather than communicated to, stating that ‘We want to choose when to be communicated to, and prefer to listen to our peers’. Engagements of resource-integrating actors can also be seen with regard to the adaptation of ‘Battle of the corridors’. The idea involved an interactive competition on Facebook in which students could win money to spend on improving their housing. Revealing the need to perpetuate the communication with the segment, the marketing department wanted to adapt the idea with regard to how the prize sum would be allocated: ‘By spreading it out over time, we prolong the possible time that we can interact with consumers’. In line with its wants and needs, the project group found the suggested adaptation to be valuable because it
would generate a more continuous ‘buzz’ about the loyalty card. The sales department then suggested adapting ‘Battle of the corridors’ so that prizes would be in the form of gift certificates to the retailer, as this would ensure that students would spend their winnings on buying only the retailer’s groceries. This adaptation would also enable the project group to achieve its goal of upholding the relevance of loyalty card, as it would generate continuous information about students’ buying habits and the card could be ‘tweaked’ accordingly. As the students noted, the adaptation would also mean that the retailer would meet the segment’s changing wants and needs. Contributions and implications Frow and Payne (2011) recently argued that although value propositions are a central concept in S-D logic (Vargo & Lusch, 2008; Ballantyne, et al., 2011), they have been under-theorized and under-researched. The present paper concurs and contributes to S-D logic by providing a conceptualisation of a co-creative practice of forming a value proposition. Practice theory (Bourdieu, 1977; Wenger, 1998; Jensen Schau, et al., 2009) has been employed to help understand the characteristics – the script – that mediate resource-integrating actors’ exchange of knowledge, and the activities of this exchange have been identified and labelled using literature on knowledge creation and management (Nonaka & Takeuchi, 1995; Davenport & Prusak, 1998; Alavi & Leidner, 2001) as a point of departure. Having empirically illustrated these activities, we have provided a granular analysis of how the script – understandings, procedures and engagements – of each resource-integrating actor mediates the activities – the application, assessment, adaptation, and adoption – of reciprocal exchange of knowledge when forming a value proposition. Against the purpose of providing a deepened understanding for the intricacies that are innate in a co-creative practice of forming a value proposition, this paper shows that a firm should not to be portrayed or understood as a single resource-integrating actor. Firms consist of several departments, groups and representatives, all of which represent different resourceintegrating actors in a co-creative practice. Also consumers should be portrayed and understood as resource-integrating actors with many faces. In relation to a co-creative practice, consumers are both ‘knowledge carriers’ who participate in reciprocal exchange of knowledge and ‘troublemakers’ who highlight issues of incommensurabilities between the scripts that resource-integrating actors draw upon. Consequently, as Figure 1 shows, the formation of a value proposition cannot be portrayed nor understood as a transaction of knowledge between firm and consumers; instead, it is a co-creative practice of reciprocal
knowledge exchange between constellations of resource-integrating actors drawing on different understandings, procedures and engagements. Figure 1 – A co-creative practice of forming a value proposition Procedures
Engagement
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Procedures
Engagement
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Procedures Apply Assess Adapt Adopt
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Firms reorienting their business towards the co-creative paradigm are thus faced with a challenge. In this paradigm, value is always determined by the beneficiary, and a firm can only facilitate value creation by initiating or participating in reciprocal exchange of knowledge. The challenge occurs when resource-integrating actors draw upon scripts that are incommensurable, leading to restrictions in the exchange of knowledge between them. A firm that aims to reorient its business to integrate consumers into activities of value creation must acknowledge that this challenge can emanate from interactions between either of the resourceintegrating actors that are involved in a co-creative practice of forming a value proposition. Recommendations for researchers and managers This paper reports on a particular occurrence in a specific context, thus naturally limiting the generalisability of the findings presented. The retailer involved students, as this was the targeted segment for the co-creation. Students were during the co-creation found a particularly favourable segment to collaborate with as they were well-informed and very outspoken. Compared to other segments students could thus be construed as more inclined to collaborate, which raises questions of the applicability of the herein presented analysis. However, from a practice theory perspective, students, as well as any other traditional market segment, are also representatives of a practice. We are therefore compelled to argue that our conceptualisation of a co-creative practice – combining practice theory and S-D logic – can be
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