The Impact of Value Co-Creation on Service Quality Essay

Introduction

Older business research considered manufactured goods to be the most valuable element on which the company could focus. As a result, the ecosystem of marketing was centred on products. However, with the increasing competition and technological development, the role of the consumer evolved (Grönroos 2012). Service-dominant logic (SDL) became the new standard for product promotion, and value creation influenced purchasing attitudes of consumers. Currently, businesses explore the idea of value co-creation – a collaborative process that engages both the company and its customers (Grönroos & Voima 2013).

The connection between the co-creation of value and the perceived quality of service is a research topic in many industries. This essay argues that the SDL and value co-creation have a substantial effect on consumer opinions about service quality while improving businesses’ performance by integrating client demands into the operations of the firm.

Service-Dominant Logic (SDL)

Before the development of the service-dominant logic (SDL), product centricity was the main idea considered by businesses. The quality of goods and their presentation were crucial to organisational success, having a significant role in brand recognition and popularity (Vargo & Lusch 2004). Therefore, consumers were viewed as passive receivers of goods who offered money as the only type of sacrifice to obtain an item that they might need or want (Kuppelwieser & Finsterwalder 2016).

The issue of innovation was viewed from a similar perspective, with manufacturers believing that new developments were only required to make products and services better in characteristics (Vargo & Lusch 2004). As an outcome of this philosophy, the relationship between companies and consumers did not include any collaboration or sharing of knowledge and skills.

Later, an alternative theoretical approach emerged, increasing the role of customers in business and introducing a new concept of value creation based on exchange. SDL, developed by Vargo and Lusch, was founded on the idea that people could benefit others by applying their skills, and society’s reciprocal exchange increased the positive outcome through continuous collaboration and service-for-service transactions (Vargo & Lusch 2004).

As one can see, the role of the customer in this framework is greatly increased, with people acting as contributors to the final product manufactured by a business. Furthermore, clients’ money is not the only type of possible sacrifice, as they can also offer their knowledge, experience and competencies to the company to make the goods better suited for their demands (Pinho et al. 2014). Thus, the principles of business operations were altered drastically, moving away from selling commodities to producing value.

This fundamental change was guided by a number of notions. First, the role of goods in business shifted from the centre of all transactions to a distribution mechanism that allowed the firm to provide service (Ranjan & Read 2016). Second, as the number of competitors significantly increased in all industries, the characteristics of a product, including its size, appearance, quality and others, lowered in value (Wu 2017).

Companies searched for a new way of attracting clients, finding that service can be appealing to people (Storbacka et al. 2016). Currently, one’s knowledge and abilities are considered to be crucial for the business, and they are viewed as a unit that can be exchanged (Vargo & Lusch 2004). Through the creation of value, firms use this unit implicitly, gaining competitive advantage as a result (Vargo & Lusch 2004). As an outcome of the shifting business principles, the customer’s role as a co-producer was ingrained in all types of businesses. A service-centred view replaced the goods-centred approach, and customer orientation was elevated as the key to success.

Value Co-Creation

One of the major concepts that lie at the basis of the SDL is value co-creation. The concept of value in business is widely disputed, with the idea of value gaining different meanings depending on the framework that is used by researchers. Overall, the holistic perspective on this concept describes value as a combination of positive customer experiences (Verleye 2015). Other definitions see the value of a product in the monetary gains from its sales (Grönroos 2012). Viewing the notion of value through a traditional approach, one can determine that companies create value by making goods that make clients’ lives easier, solve customers’ problems, improve their performance or relieve them of responsibilities (Grönroos 2012). Here, the firm is the main controlling force that determines the value of goods.

Another point of view is value-in-use, the concept that highlights the ongoing process of value creation. In this framework, the inherent qualities of goods are not the main factors influencing value. In contrast, customer experiences and their ability to extract value from a product are at the centre (Xu, Liu & Lyu 2018). Therefore, apart from economical and functional benefits that one may consider when choosing an item or service, such dimensions as social, ethical, emotional and environmental spheres have to be addressed (Cheung & To 2016; Zhang et al. 2015). The consumer’s use of the product, therefore, becomes the primary source of value. This particular framework makes the idea of co-creation inseparable from the nature of value since the latter cannot be measured without customer participation.

According to the SDL viewpoint, the co-creation of value is a process to which consumers contribute during all steps of production, including design and manufacturing (Grönroos & Voima 2013). As mentioned above, this idea is now being integrated into all spheres of business, and all economies are valuing services at the same level as or more important than goods (Chen & Wang 2016). The introduction of the SDL incentivises businesses to loosen the control over their presentation since its clients gain power over choosing which product is the best on the market. The value of services also becomes more critical with the increased number of options and technological advancements in interpersonal communication (Breidbach & Maglio 2016). Thus, the financial performance of a brand is now reliant on the public’s attitudes and actions.

Market researchers identify several types of co-creation, each of them having a specific level of customer participation. For instance, the company may choose to ask for ideas in the form of submissions, providing the clients with fixed rules and deadlines (Yu et al. 2018).

In this case, clients need to follow the guidelines given by the company, and the firm is responsible for selecting the most appropriate idea for implementation. This type of co-creation is restrictive, but it increases engagement and may lead to a balance between the business’ abilities and customers’ wishes. In another scenario, if a company has a finished product that it wants to improve or change, it can offer the customers to “tinker” with the model (Yu et al. 2018). Here, standards or rules for ideas do not exist, but the firm chooses which feedback to implement in the end. While the company remains as the sole deciding party, consumers offer their expertise, potentially gaining a product that corresponds to their demands.

Other types of co-creation are led by customers – a business may have a co-designing opportunity, where contributors are the judges for the best idea. This type of co-creation still has many restrictions, even though the decision-making part of the process is guided by consumers (Pyatt et al. 2017). As the firm is responsible for manufacturing and distribution, it has to include some limitations.

Finally, some companies have an open-source foundation to which clients can add without strict rules. Some examples of such collaboration efforts are internet browsers’ open-code platforms where the public can fix the code, remove bugs, revise the structure, and add new modifications (Hajli et al. 2017). Overall, all branches of value co-creation are based on the idea that clients working together with the company can make a product that appeals to them the most.

The Impact of Value Co-Creation on Service Quality

The significant changes that the SDL has brought to the company-client relations have to be considered to discuss how the new framework may impact the concept of service quality. First, the definition of this idea is challenging since quality is not an objective qualification when measured by clients. Although the quality of products may be easy to determine as it usually adheres to a particular set of characteristics, customer experiences are not as transparent (Zeithaml, Berry & Parasuraman 1996). High service quality rating may differ from one customer to another, thus making academic research difficult.

One of the qualitative approaches to measuring service quality is the SERVQUAL Model. It integrates a variety of opinions, expectations and experiences to identify gaps in service and determine the overall quality of service. According to this model, five main dimensions of service quality exist – “reliability, assurance, tangibles, empathy and responsiveness” (Buttle 1996, p. 9). Reliability refers to the company’s ability to deliver the services that it is expected to provide.

Assurance describes workers’ knowledge and confident and trustworthy attitude. The physical characteristics of the goods, personnel and equipment are measured in tangibles. Empathy includes the attention given to the customer – one has to experience an individualised and caring approach. Finally, the responsiveness of the company is measured by looking at its willingness to help quickly and positively (Buttle 1996). As a result, problems in service quality appear in gaps between customers’ expectations and companies’ performance in the five dimensions.

This view of service quality measurement allows one to see which of the activities and characteristics are the most important to consumers. It should be pointed out that all dimensions mentioned above consider the relationship between a client and a firm as vital to the perception of quality. Employees, services and products are judged according to not only their ability to solve a client problem but also their convenience, care, innovativeness and positive attitude (Cossío-Silva et al. 2016). Thus, a question arises of whether value co-creation has a substantial effect on customers’ judgments.

Several studies consider this link and find that participation in value co-creation changes people’s quality perceptions. According to Cheung and To (2016), co-production and information sharing change consumers’ view of justice in the process of service recovery. Becoming co-creators, clients feel a certain degree of responsibility for the changes that happen in a firm and view any improvements as a part of personal achievement. As an outcome, customer satisfaction in this environment increases with the level of participation (Navarro, Llinares & Garzon 2016). Companies can use service failure as an opportunity to increase engagement and create a structure that raises the engagement in value co-creation, while also impacting customer satisfaction with service quality.

The various roles of clients in value co-creation have an impact on all activities of the company. Agrawal and Rahman (2015) find that co-creation can improve product quality, reduce costs, lower business risks and encourage repeat purchases. Using the SERVIQUAL Model’s dimensions, one may analyse these conclusions and see that the quality of service increases with customer participation in improving tangibles and responsiveness. Co-production and co-designing, for example, influence the perception of tangibles by helping the company make the product that is suited to clients’ needs. The open platform that engages customers is viewed as a sign of the business having increased responsiveness and empathy (Agrawal and Rahman 2015). The connection between service quality and co-creation is evident in these scenarios.

The effect of value co-creation exists in both physical and psychological participation. Prebensen and Xie (2017) demonstrate that clients’ sharing of experiences and emotions is a sphere of tourism is a part of co-creation. Although consumers do not directly affect the product, they generate value for the services, thus providing other clients with the knowledge and specific expectations. The authors find that such creation of value increases the satisfaction with service quality by augmenting the experiences and acknowledging people’s role in the company’s growth (Prebensen and Xie 2017). The idea of value in use is represented in this example, since the products of a firm are not tangible, and clients find value after using the services. The perceived value is improving with co-creation as a result.

Nonetheless, the definite link between co-creation and high service quality does not always mean that customers are fully prepared to make products or fix mistakes. In some cases, the initially poor quality of service can disengage customers from co-creation and even encourage them to choose co-destruction – the process of making the company less successful through negative comments and boycotting (Prior & Marcos-Cuevas 2016).

Jiménez-Barreto and Campo-Martínez (2018) find that the quality of the initial product plays a role in engaging consumers in co-creation. Therefore, service quality can influence value co-creation experiences. Similarly, Zhang et al. (2018) highlight that co-creation is connected to positive emotions, while co-destruction is empowered by negativity. This finding suggests that the SERVQUAL Model’s dimensions of reciprocity and empathy are among the main factors that increase the success of integrating value co-creation. After co-creation is present in the company’s processes, clients improve the dimensions of tangibles and reliability.

The process of value co-creation affects the quality of services directly since it helps to redefine the attitudes and behaviours of employees, causing them to develop the qualities such as empathy and responsibility when it comes to the issue of meeting customers’ needs, communicating with buyers, and managing customer-related issues. Overall, the opportunity to help buyers in customizing their experience with the selected organization is what makes the process of value creation such an important step in improving the quality of services. Thus, the creation of value will affect the company on an organizational level by making it gain a clear view of how its value system needs to be reorganized in regard to its human resources management (HRM) (Prior & Marcos-Cuevas 2016).

The applied change will send ripples across the entire organizational structure of the firm, causing its staff members to gain the sense of greater loyalty to the firm as the key corporate values are reinforced within the company’s setting. As a result, the staff members are likely to approach their workplace tasks with a greater sense of responsibility and with the focus on the firm’s needs in mind. Thus, the organizational framework according to which the company functions will be challenged to adders some of the inconsistencies within its ethics, value system, and people management framework.

Overall, the effects that value co-creation has on service quality is quite ample due to the changes that it incites within the organization. By convincing employees to accept the values, ethics, and quality standards set by the company, managers will create the environment where defying corporate standards for quality will be impossible (Prebensen & Xie 2017). As a result, while being indirect, value co-creation leads to a gradual improvement in product and service quality.

This intricate connection between service quality and co-creation shows that companies’ actions and initial client perceptions matter in the evolution of company-customer relations. A business cannot integrate co-creation if its current customer base considers the service quality to be low. Therefore, organisations need to foster the culture of reliability and reciprocity before giving clients increased rights to change the structure due to the risk of co-destruction (Zhang et al. 2018). Nevertheless, if a firm has a foundation built on positive interactions and mutual trust, the inclusion of value co-creation may greatly improve customer perceptions and lead to higher satisfaction rates.

Conclusion

To sum up, the idea of value co-creation is becoming increasingly important for businesses due to the growing competition and abundance of choices in markets. Customers’ participation, as shown by research in a variety of business spheres, changes their perception of organisations, increasing service quality and satisfaction. However, consumer attitudes are strongly reliant on the initial relations between clients and businesses. Negative experiences put the company at risk of co-destruction, while positive emotions make value co-creation successful. Thus, service quality plays a role in making co-creation meaningful, while increased co-creation further improves clients’ perception of service quality.

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