December 2009

"A deeper understanding of how consumers decide whether or not to engage in co-production, and the corresponding decision processes is imperative."

Michael Etgar, A Descriptive Model of the Consumer Co-production Process

As co-production becomes an important engagement for many consumer-supplier situations, the issue of how to encourage consumers to engage in co-production becomes an important question. Marketers need to recognize that co-production is not an automatic consumer situation, but rather a conscious decision by consumers to engage in such activities.

This article presents several factors which may enhance the ability of consumers to engage in co-production. To engage consumers, marketers have to ensure that they offer those products and services that can be individually adjusted and modified, and to present them to consumers who have a higher propensity to engage in co-production activities. In order for consumers to agree to such endeavours, marketers must find what kind of benefits targeted consumers seek in such activities. Those usually encompass economic, psychological and social needs. Then, they have to offer them packages which can fulfill such needs.

Introduction

Co-production refers to the involvement of consumers in the various value creating activities through which products and services are made. These activities include the production and distribution processes which are usually performed in the course of manufacturing a product or creating a service for a given target group of consumers.

The trend towards greater consumer involvement has been activated by the substantial changes in technology, consumer sophistication, and regulatory environments. In particular, the development of digital technologies which allow consumers to have instant access to stored information and to create and disseminate text, pictures and voice messages at minimal cost, has contributed significantly to this trend. Consumers are involved in activities such as: i) the production of their own individually designed and planned music compilations, movies and videos; ii) assembling and self delivering their own furniture bought at IKEA; iii) designing their own travel packages; iv) and planning their own unique well-being and health maintenance services. Consumers may design their own newspapers and magazines by using Really Simple Syndication (RSS) to download particular types of news items. Developments in virtual books imply a similar future in book publishing.

Co-production reflects a conscious strategic decision by consumers to become involved in production-like activities. For each co-production situation, one can also find consumers who do not engage in any co-productive activity. In order to understand how to engage consumers in co-production activities, we must understand the mechanisms which lead them to participate. Similarly to their motivation for other consumption related decisions, consumers decide to engage in co-production to satisfy their diverse economic, psychological and social needs. We need to carefully study these needs and show how their proper handling could increase consumers' propensity to engage in co-production.

Economic Needs

A major drive to engage in co-production is economic. Through co-production, consumers relieve manufacturers and retailers from performing various activities along the value creation chain which allows the latter to lower their production costs. These costs savings are then translated to price reductions to consumers. A good example is the strategy of the Swedish retail chain IKEA which offers consumers relatively low prices for furniture. In return, it expects buyers to become involved in the production process (co-produce) by demanding that they buy unassembled packages and assemble themselves the packaged components into a complete piece of furniture. Customers also self-deliver these packages from IKEA stores to their own places of residence. This format of selling unassembled packages and transferring home deliveries to the buyers significantly lowers IKEA's transportation costs along the whole supply chain from the original manufacturers up to the consumer. It also saves the retailer storage space and eliminates the need for large warehouses along its internal supply chain.

While co-production lowers costs for manufacturers and retailers, it imposes costs upon the co-producing consumers. These reflect the fact that such cost reduction is achieved by transferring to the co-producing consumers various value-creating activities required to manufacture a given product or service. To perform these activities, consumers need to use various resources and the costs of their use must be considered by consumers before they decide whether co-production is worthwhile.

The costs associated with co-production primarily include the costs of consumers' time and effort and the use of their own knowledge and skills which often requires years of investment. Self delivery of furniture, self assembly of furniture pieces, and downloading music or videos from iTunes or YouTube takes time. While some consumers may enjoy such activities and view them as experience providing, others may tire of these activities, especially if they have to repeat them over time. The use of a consumer's time for co-production must be valued as the time spent in co-production reflects its value to the consumer. Time may also represent an alternative value to the consumer who prefers activities such as spending time with family, engaging in sports, or entertaining friends.

Consumers need to employ various equipment to perform the relevant activities. To assemble IKEA furniture, consumers need to acquire diverse tools and a vehicle to haul the packages from IKEA stores. The costs of use of such resources are the actual costs of their use in the process of co-production.

Rational consumers add up all these costs of co-production activities and determine their own internal costs of co-production. They compare these internal costs with the corresponding discount in price from the manufacturers or retailers who participate in co-production activities. When the former are much lower than the latter, consumers will opt for co-production. Because a large part of the consumer's direct costs are subjective, such as the value of the time they spend on co-production activities, the ultimate decision to be involved in co-production may vary across consumer segments.

Young couples or students have more free time and the economic value of their time is low. High level executives do not have free time and the economic value of their time is high. One can easily expect that among IKEA customers, we find many young couples, students or low earning individuals and relatively few middle aged, highly paid executives or lawyers. Similarly, some consumers may maintain life styles which are more conducive to the performance of different co-producing activities. A music loving teenager may find it easier to download songs than a sports fanatic.

Another advantage of co-production is its ability to help consumers achieve greater personalization and to reduce the level of risk of inappropriateness of the products they purchase. Consumers today increasingly seek personalization. A few generations ago, consumers were satisfied with buying one type of athletic shoe. The modern consumer desires athletic shoes uniquely designed to fit the specific type of sports in which they want to be engaged, their specific type of body, and even their specific type of leg structure. Similarly, a generation or two ago, consumers were satisfied with consuming mass produced tourist packages which were marketed to all. Today, many consumers prefer to build their own unique travel packages.

The higher level of personalization which modern consumers seek also increases their level of risk of not receiving the exact type of product they desire. Consumers may decide to become involved in the production or design of the products and services they buy to reduce the level of risk that they will get products and services that are not suitable for their needs. Through co-production, consumers can better supervise both personally and directly any critical stages of manufacturing and ensure a better fit for the fulfillment of their specific needs.

We could summarize that consumers tend to be more engaged in co-production in situations where there is an opportunity to receive substantial price reductions from manufacturers and retailers while they themselves need to bear only minor costs. These cost advantages will be higher for consumers belonging to specific demographic and life style segments. Co-production will also be encouraged in situations where consumers want highly personalized items and the current mass manufacturing processes cannot ensure items with the specifications they desire.

Satisfaction of Psychological Needs

The co-production decision is not purely economic. A major motivation is psychological, covering a host of diverse drives and motivations. A major motivation is the desire to be involved in meaningful activities. Modern life styles separate many people from creative and emotionally and physically rewarding activities. Many are engaged in mundane and highly repetitive work which has no direct relationship to daily consumer routines, creating alienation of many workers from their daily activities. Co-production allows consumers to become re-involved in production-like activities which have a direct link to their daily life and desires. Some consumers love to tinker around the house and be involved in do-it-yourself (DIY) activities.

Many co-productive activities are basically extended hobbies which allow consumers to exhibit their creative drives and their desire to play. Modern life and employment directs many individuals to engage in non-physical activities, to sit all day and to utilize mainly their non-physical capacities. Through co-production, many individuals can engage in more physical DIY activities.

Another important factor is the desire of many consumers for self expression, distinction and uniqueness. Co-producing consumers become involved in the design of their own jeans, shoes or houses in order to achieve distinction from other consumers. Such differentiation can not be achieved through mass production of identical items. Co-production changes mass produced products into more handcrafted items with a personal touch. Co-production also raises the psychological self evaluation, or the internal value, of many individuals who feel important when they are consulted by business personalities, converse with research engineers, and interact with vice presidents of marketing. Related is the ability of co-producing consumers to feel self fulfillment, from being able to show to themselves and their family and friends that they can complete specific tasks.

Co-production allows consumers to increase their benefits from consuming and buying various items by introducing them to experiential shopping and use. Consumers can become involved in the creation of ice cream flavours by informing the ice cream vendor which items to mix. Shoppers at Build-A-Bear toy stores construct their own, unique toy bears determining everything from the color of its skin, its clothing, its greeting on a special chip, up to his furniture and friends. Similarly, shoppers at chocolate factories can cook and prepare their own unique blend of chocolates. It can be concluded that consumers tend to engage in co-production activities that offer meaning, include elements of play, are similar to hobbies and free time activities, allow self expression, allow expressions of creativity and self fulfillment, and contain elements of physical activity.

Co-production may also allow consumers to satisfy diverse social needs. Modern times increase the feeling of personal alienation and loneliness. People try to overcome this by creating social networks based around various topics and socially connecting factors. Those may include age, social status, interests and life styles. Consumption of particular items and shared interests and experiences offer attractive bases for social networks. Co-production creates social networks of consumers, users and employees who share common experiences and give consumers a sense of belonging. Social networks of consumers who share similar experiences from using a given product or receiving a similar service, both good and bad, are highly valued. In many cases, such social networks carry high social status because they indicate privileged life styles such as those related to gourmet cooking, wine making, music preparation or specific sports. Participation in such social networks also raises consumers' self esteem.

Operational Implications

Modern consumption culture is often tied to life styles, implying that it is the actual type of use of the product which gives it its meaning. When consumers use the product in a given use context and in conjunction with other products and services, they create the actual benefits the product can provide. Co-production takes place when such benefits are created; therefore, co-production will be enhanced in products and services which are primarily tied to life styles.

Another important attribute of modern consumption culture is its increasing reliance on service components. Many tangible goods such as foods, baby products, clothing, and computing devices include a service component in their basic package of benefits. Toys are no longer just toys, but vehicles to improve a child's cognitive, physical, social or emotional skills. Therefore, they come with educational content regarding its use, benchmark monitoring of a child's progress, and contact information for interactive communications. Trips abroad are educational, relaxing, sports related or entertainment oriented. Food is associated with health maintenance and socializing with friends or family. Within this framework, co-production is easier because all these services demand direct inputs from the user or consumer.

Consumers tend to engage in co-production when the products they purchase include a higher component of services, are related to specific life styles, and allow them to connect with distinct social networks.

Product and Consumer Characteristics

Co-production is more suitable for some products and consumers than for others. Co-production leads to personalization which implies changes in product design and attributes. Co-production is more easily realized in product categories where items can have diverse specifications rather than in commodity like products. Unique brands with well defined product positioning are probably also less suited for individual adjustments via co-production. Those products are desired exactly for their well defined and advertised specific characteristics and personal adjustments will only reduce their attractiveness. Thus, when Coca Cola changed the traditional taste of its drinks, consumers rebelled and forced the company to revert to the classic Cola taste.

In summary, marketers need to recognize that co-production is not an automatic consumer's situation. To engage consumers in co-production, marketers have to ensure that they offer suitable products and services to consumers with a higher propensity to engage in co-production activities. In order for consumers to agree to such endeavours, marketers must find what benefits targeted consumers seek in such activities and offer them packages which can fulfill such needs.

 

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