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International Journal of Marketing Studies; Vol. 6, No. 5; 2014 ISSN 1918-719X E-ISSN 1918-7203

Published by Canadian Center of Science and Education

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Digital Strategies of Consumer Involvement and Innovation Dynamics: A Cross-Sector Explorative Study

Eleonora Paolocci1

1 IULM University, Milan, Italy

Correspondence: Eleonora Paolocci, IULM University, Milan, Italy. E-mail: [email protected]

Received: May 24, 2014 Accepted: June 26, 2014 Online Published: September 28, 2014

doi:10.5539/ijms.v6n5p21 URL: http://dx.doi.org/10.5539/ijms.v6n5p21

Abstract

The study aims at exploring the collaborative dynamics between firms and consumers through Web tools. At present, there is limited empirical research aimed at investigating if and how the involvement of consumers in the implementation of open approaches, mediated by digital technologies, is actually implemented. The study presents a recent multifactorial investigation of the topic where literature lacks in. Through the Web-analysis of practices of a sample group of 180 companies operating in different market sectors, the author wants to explore spread and type profiles of collaborative strategies, investigating the existence of a possible correlation with the served markets and other moderator variables. Findings, identifying a ‘spectrum’ of engagement and co-creation mechanisms, suggest forms of aggregation and profiling in the approach followed by the firms and illustrate how the characteristics of virtual spaces allow them to explore new frontiers in the implementation of open approaches, with different degrees of involvement.

Keywords: co-creation, consumer insight, empirical research, open innovation (OI), virtual integration

1. Introduction

Existing academic literature suggests a significant potential of collaboration with consumers in the process of market value creation through ICTs (von Hippel, 2001; von Hippel & Katz, 2002; Sawhney, Verona, & Prandelli, 2005; Prandelli, Verona, & Raccagni, 2006; Bilgram, Brem, & Voigt, 2008; Füller & von Hippel, 2008; Prandelli, Sawhney, & Verona, 2008; Füller, Muhlbacher, Matzler, & Jawecki, 2009; Morgan & Wang, 2010). Considerable attention has been given to the benefits offered by the advent of digital technologies: low-cost interaction; increase in the speed and duration of the engagement process; easier sharing processes if compared to what can be done offline, where dynamics are limited to contexts of physical closeness (Dahan & Hauser, 2002; Afuah, 2003). The importance of collaborating with consumers in the development of innovative products and services has been recognised for many years and there has been a steady proliferation of studies on this topic (von Hippel, 1976, 1978, 1986, 1988; Grönross, 1990; Day, 1991; Bruce, Leverick, Littler, & Wilson, 1995; Gales & Mansour-Cole, 1995; Prahalad & Ramaswamy, 2004a; Vargo & Lusch, 2004). However, it is only recently that the attention given to collaborative approaches, based on the emergence of a new creative consumer (Berthon, Pitt, McCarthy, & Kates, 2007; Berthon, Campbell, Pitt, & McCarthy, 2011; Jespersen, 2011; Page & Pitt, 2011; Cova & Cova, 2012), has grown exponentially. This area of research has been given new impetus especially by the rapid growth of the Web, a powerful platform to access external and distributed knowledge. Also, this new perspective is central in open-business innovation (Chesbrough, 2003, 2006, 2011) and in network-centric innovation (NCI) (Nambisan & Sawhney, 2007) models. These approaches emphasise the need to continuously experiment around value creation and encourage companies to open up to new ideas coming from the outside, combining them with in-house ones.

However, the topic, from an empirical point of view, appears to be currently under-explored. There is still little work done to explore if and how consumer engagement processes, mediated by digital technologies, are actually implemented. In particular, while some studies are carried out within specific industries (e.g., Füller, Jawecki, & Muhlbacher, 2007, on athletic footwear; Kim, Bae & Kang, 2008, on MP3 players and mobile phone handsets in Korea; Garcia Martinez, 2013, on food products) literature lacks a cross-sector and multi-factorial investigation of the topic which relies on recent data and not limited to a specific geographic market. The topic deserves particular attention given the new opportunities that virtual environments offer: the challenge for firms is to transform new interaction opportunities into added value. Given the context illustrated and taking into due

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account the difficult application of the concept of strategic segmentation of the public to Web contexts (Hatch & Schultz, 2010), the goal of this study is to understand if specific mechanisms have been put in place to enable Web-based collaboration with consumers. Specifically, the purposes are (1) investigating ways to kick off co-creation mechanisms, (2) empirical analysis of the following hypothesis: existence of typological profiles in the implementation processes of collaborative modalities; correlation between the identified profiles and the peculiarities of the served markets, along with other specific features of the companies in the sample group. To achieve this aim, explorative research has been carried out with a cluster analysis, aimed at identifying homogeneous groups of data. The study mainly adopts the point of view of the firm and the focus is on the engagement concept in its pragmatic interpretation (Gambetti & Graffigna, 2010).

The structure of the paper is as follows: first, prior studies related to the phenomenon investigated will be reviewed; in the central section, methodology and findings will be illustrated. In the last section, results and managerial implications for marketing strategy will be discussed; the author also put forward suggestions for future research.

2. Theoretical Background

To address these overlooked issues, the present paper adopts a perspective that integrates different streams of literature related to: relationship marketing studies; new product innovation (NPI) research and collaborative marketing patterns; management and organisational studies on network-firm and Open Innovation (OI).

The concept of relationship marketing (Christopher, Payne, & Ballantyne, 1991; McKenna, 1991; Pepper & Rogers, 1993), and the research streams derived from it, apply the metaphor of personal relationship to the exchange processes between a company and consumers. A key idea, in the later development of this approach (Gummesson, 2002), is the potential that the Internet has to enhance the ability of firms to engage customers (Zineldin, 2000). NPI research has given great impetus to co-creation mechanisms (von Hippel, 1976, 1978, 1986, 1988; Grönross, 1990; Day, 1991; Webster, 1994; Gales & Mansour-Cole, 1995; Bruce et al., 1995; Slater & Narver, 1998; Verona, 1999; Krishnan & Ulrich, 2001; Thomke, 1998, 2002; Danneels, 2002; Urban & Hauser, 2002; Sawhney et al., 2005), identifying the power of collaboration, going beyond a company’s borders and demand-pull dynamics as the main factors behind this process in current times. Literature on collaborative marketing (Prahalad & Ramaswamy, 2004a; Vargo & Lusch, 2004, 2006, 2008; Payne, Storbacka & Frow, 2008) presents the concept of convergence between consumers and producers as an invitation to combine their respective skills in a partnership. The main focus is on the role of companies in identifying and supporting those consumers’ activities which lead to value creation. The contribution of management studies on OI (Chesbrough, 2003, 2006, 2011; Nambisan & Sawhney, 2007) and on the network and systemic model of organisations (Butera, 1995; Senge, Kleiner, Roberts, Ross, Roth, & Smith, 1994; Gergen, Gergen, & Barrett, 2004; Lane, Serra, Villani & Ansaloni, 2006; Golinelli, 2010) is particularly relevant in connection to the idea of a collective enterprise. This is linked to the disappearance of organisational borders, the emergence of looser relationships and the enlargement of a company’s network.

It is believed that only the combination of these separate theoretical bodies can yield the first insights to explore the complex nature of the investigated topic: each one takes on a different epistemological perspective, which highlights complementary aspects. Hence, our study is positioned at the intersection of these different research streams and, drawing on them, proposes a framework that identifies key dimensions that have to be taken into account to explore the investigated topic: relationship, engagement, value co-creation, openness.

2.1 Transactional Model of Communication: A Relationship Based Pattern

The Web changed the way consumers contact firms: the communication pattern is now based on multi-channel and multi-stakeholder communication and on a type of information transmission which can be defined as transactional (Duncan & Moriarty, 1998), bi-directional and characterised by a continuous and dynamic exchange. The use of new interactive marketing tools and techniques has the purpose of fostering ‘conversational relationships’ with consumers (Stokes, 2000). What is new is the low-cost electronic management of the dialogue (Blattberg & Deighton, 1991) and the fact that communication is not sequential (Stavrakantonakis, Gagiu, Toma, & Fensel, 2013). Web tools have become a new component of corporate communication and allow organisations to establish strong relationships with their consumers (Mangold & Faulds, 2009). Moreover, the potential of using social media as a tool to support the relationship has been highlighted by many authors (Granat, 2006; Kaplan & Haenlein, 2009, 2010; Vasalou, Joinson, Bänziger, Goldie, & Pitt, 2008). In a systemic approach to the study of economic organisations, the emergence of a new model based on the management of relationships has been observed (Golinelli, 2010). In this model, firms focus more and more on the creation of a specific function with this specific task. This should allow them to benefit from

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existing external resources, skills and innovative knowledge. Another area of organizational studies which has identified interesting concepts is that of generative dialogue: a co-created dialogue, taking new perspectives into account (Palmer, Benveniste, & Dunford, 2007) and generating ideas and alternatives. A field of research analyses innovation processes through the lens of generative dialogue and maintains that the knowledge networks stimulate innovation through “generative relationships” (Lane & Maxfield, 2005; Lane et al., 2006) between heterogeneous subjects developing constructive interactions, outside the exchanges which are traditionally linked to economic transactions. These changes can in turn lead to new products, processes or services.

2.2 Consumer Engagement as a Dynamic, Collaborative and Interactive Process

While the traditional perspective on consumer engagement considered value creation as a firm-centric activity, with little emphasis on interactive dialogue and where companies had a limited understanding of consumer knowledge developed within their specific contexts of experience, as previously observed by Sawhney et al. (2005), recent studies reveal the complex multidimensional and dynamic nature of consumer engagement, which comprises of a range of sub-processes reflecting consumers' interactive and value co-creation experiences (Brodie, Hollebeek, Jurlic, & Ilic, 2011). Indeed, the main dimensions associated with engagement in the marketing literature are: involvement (Sawhney et al., 2005), empowerment (Shaw, Newholm, & Dickinson, 2006), interaction (Ahuja & Medury, 2010), activation, including the interaction, participation, collaboration and co-creation components (Hoeffler & Keller, 2002; Etgar, 2008). In the literature on NPD, the concept of engagement has been analysed mainly from the perspective of empowerment and of its links with perceived customer orientation, purchase intentions, and customers’ attitudes towards the company (Fuchs & Schreier, 2011). More specifically, as for the first point, the concept has been explored through two key aspects: 1. consumer empowerment to create and generate ideas for new product designs (empowerment to create); 2. consumer empowerment to select and “vote” which product designs should be produced and sold (empowerment to select). Web tools facilitate new and extended forms of interactive consumer experiences, which may contribute to the development of engagement with companies and brands. In particular, interactive relationships in the virtual world reflect Vivek, Beatty and Morgan (2012) expanded relationship marketing domain, and Vargo's (2009) transcending view of relationships, which provide a conceptual foundation for the consumer engagement concept, defined as “the intensity of an individual's connection with an organization's offerings and/or organizational activities, which either the customer or the organization initiate” (Vivek et al., 2012, p. 4). According to this perspective, the development of any strategy focusing on consumer engagement will need to find a place for consumers to have their voice heard (Perks & Sedley, 2008).

2.3 Consumers as Market Partners and Co-Creators of the Offer

Literature indicates that companies are using customisation and collaborative processes with consumers to grasp product ideas and reduce development risk (Greer & Lei, 2012). In the mid-2000s collaborative marketing approaches emerged (Prahalad & Ramaswamy, 2004a, 2004b, 2004c; Payne et al., 2008), spurred also by the new so-called Service Dominant Logic (Vargo & Lusch, 2004, 2006, 2008), whereby marketing is not just directed at consumers, but is developed with consumers. This perspective is based on the key concept according to which value is co-created in the interaction between companies and consumers (Ramirez, 1999; Prahalad & Ramaswamy, 2004a, b) and on the figure of consumers as market partners who own resources. Collaborative marketing has its roots in the research on services marketing (Grönross, 1990), where co-production is at the basis of the service system and in the studies on product innovation and design, which look at users as potential collaborators of companies (von Hippel, 1986; Thomke & von Hippel, 2002). In the context of this last field, studies on lead users have particular relevance. This approach focuses on the creative role of a specific category of consumers, defined by von Hippel (1978, 1986, 1988, 2001) as expert users, at the forefront of a specific field, who are at the origin of new concepts and solutions. Often they are even more knowledgeable than companies’ experts, they are interested and motivated to promote a product sector’s evolution, so that it can meet their expectations in a more and more adequate way. Von Hippel’s suggestion highlights how companies have gradually moved from a technical-production approach to an approach which is linked to the active involvement of customers. This is defined Consumer Active Paradigm. Digital environments offer many opportunities to support the direct involvement and to integrate and value consumers’ contributions. The Web, using Afuah’s words (2003), makes it easier to access skills, electronic archives and communities where knowledge is already codified and digitalised, ready to be recombined. Wind and Rangaswamy (2001) have coined the term customerisation to define a new approach which companies can follow to combine high levels of technological differentiation and customisation of the end product, made possible by modular platforms, with high levels of marketing differentiation, thus offering highly analytical and targeted informative content.

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2.4 A Paradigm Shift toward External Innovation Processes

There is increasing consensus among academics and practitioners on the paradigm shift from internal innovation to open innovation processes (Keinz, Hienerth & Lettl, 2012). Focus is placed on the limitations of traditional production-based innovation processes in order to overcome the commodity trap. This is linked to the fact that products quickly lose their attractiveness for end consumers and that, over time, a company’s product becomes indistinguishable from others available on the market (Chesbrough, 2003, 2006, 2011). Open Innovation is defined as the antithesis of a vertical integration model, as it integrates internal and external flows of knowledge with the aim of accelerating a company’s innovation process and expand markets through third-party channels. This generates a positive cross-pollination between heterogeneous knowledge. The direct involvement of consumers in innovation processes, which promotes the sharing of tacit knowledge (Nonaka, 1991; Nonaka & Takeuchi, 1997) with companies, helps solving difficulties arising from knowledge which cannot be transferred with technical-scientific language, but which is based on the sharing of practices and interaction. In an open model it is more difficult for competitors replicate concepts, solutions and the value proposition as they are based mainly on the sharing of non-codified knowledge between partners. Also, consumers are less inclined to leave the company. The joint work by Nambisan and Sawhney (2007) which introduces the concept of network-centric innovation (NCI) and the need to continuously experiment around value creation, follows the same approach. NCI is defined as an externally focused approach to innovation that relies on harnessing the resources of external networks and communities to amplify innovation reach / speed and the quality of outcomes. With the creation of virtual environments to manage relationships with consumers, firms can foster their systematic engagement (Swink, 2006; Nambisan 2003).

3. Propositions and Research Questions

Based on the insights from the reviewed literature, the following proposition has been formulated:

P1. Different approaches related to the OI paradigm can be adopted by firms: a ‘spectrum’ of potential forms of collaboration, at different product life-cycle stages, market levels, with heterogeneous objectives and degrees of consumer involvement.

Although there is considerable literature demonstrating the benefits and potential of digital consumer involvement, empirical support about the implementation approaches followed by firms appears to be scarce. Hence, the following set of research questions have been considered as critical to define the relevance of the investigated topic and will drive the study:

RQ1. Which specific mechanisms have been put in place to enable Web-based engagement and collaborative processes with existing or potential consumers and how widespread is their use?

RQ2. Is it possible to identify different typological profiles in their implementation? If so, does a correlation exist between the identified profiles and the peculiarities of the served markets, the specific industries and with other features of the companies?

4. Study design

4.1 Scope of the Investigation

The universe of reference is the company. The scope of the investigation is circumscribed to the analysis of the dynamics related to Web-based collaborative processes of physical consumption goods. It focuses on business to consumer markets (B2C), given some prerogatives which make their exploration particularly stimulating. First, Web-based co-creation processes are the most advanced developments in terms of sharing customer knowledge with a company. Second, the extension of the principles of open source movements to non-immaterial goods, is supported by the idea that every product is also a concept and an information product, especially at development stage. Third, studies on collaborative processes were originally carried out mainly on B2B markets, where they can boast a longer tradition (e.g., concept of customer-supplier interaction, largely explored since the 80s by the researchers of the IMP – Industrial Marketing and Purchasing; social media utilization in B2B relationships: Kärkkäinen, Jussila & Väisänen, 2013). Fourth, B2C markets are characterised by more elements of risk, due to the size of the scope of reference and the wider language gap linked to the difficulty of directly understanding needs. Coherently, the methodological choice for the analyzed industries excludes companies which exclusively operate in B2B markets, offer immaterial goods as their core business and that only deal in distribution activities. However, in constructing the theoretical background, the author also referred to concepts taken from models which originate in the B2B and service markets, as they are useful to have an holistic understanding of the studied phenomenon.

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4.2 Sample

This explorative study was carried out following a quantitative methodology and a sample of companies belonging to nine different sectors of physical consumption goods. To select the product industries, the following reports (Note 1) were jointly analyzed and considered. Different factors were taken into account, such as fastest growers, most profitable, most bang for buck, brand reputation and other critical features: Fortune World’s Most Admired Company; Brand Finance Best Global Brands; Fortune Global 500 – Annual ranking of the world’s top industries. In order to select the units, the method of judgmental or purposive sampling (Lavrakas, 2008, p. 646) was chosen. The method is generally used to study phenomena which can theoretically exist in a wide population, but in practice are expected to be concentrated in some specific areas. For example, the choice was made to exclude micro and small manufacturing companies as, based on a first explorative analysis, their absence from virtual environments was observed, or at least a scattered digital presence which could not enable an effective analysis of codified typologies. The final sample, from the Bureau Van Dijk Electronic Publishing Directory (Note 2), consists of 180 companies (see Appendix 1 for the complete list), 20 for each of the following sectors: Apparel, sportswear, shoes and accessories; Automotive; Consumer packaged goods (CPG): household, family and personal care, beauty; Consumer electronics and appliances; Consumer packaged goods (CPG): food industry; Furniture and accessories; Pharmaceutical and healthcare; Toys, videogames, hobby modelling; Stationery, adhesives, hobby paint products.

4.3 Methodology and Data Collection

The method used envisages the Web-analysis of practices of the firms belonging to the sample-group. Adopting the technology-in-practice approach suggested by Orlikowski (2000) and moving from the theories by Korkman, Storbacka and Harald (2010), the goal is the description of the ways in which collaborative dynamics can develop starting from practical engagement. This involves a mapping activity in the virtual environment, aimed at exploring if and how companies consider the adoption of Web tools to connect to consumers and cooperate with them with different degrees of involvement, until the highest level of collaborative innovation, following the integrated marketing and innovation management perspective suggested by Stephen and Toubia (2010). The survey unit is represented by the open virtual spaces, which may be observed by any external subject. A similar method was used by Prandelli et al. (2006); Alexy, Criscuolo & Salter (2012); Russo-Spena & Mele (2012). The data collection occurred in Winter 2013-2014. In order to operationalise the variable “Type of mechanisms put in place by the firm to enable collaborative processes”, an explorative analysis was carried out to identify its possible ways – Coding of practices –. To this purpose, the method of content analysis (Krippendorff, 1980) was used, following the steps recommended by Kassarjian (1977). The process of analysis let to the identification of the following categories, characterised by different degrees of consumer involvement:

 Technology-driven channels to collect ideas (Note 3)

Primary target: scientific and business community – B2B partnering, inventors, researchers –. Accepted contribution types: mainly breakthrough or radical innovation oriented – new products, ingredients, technologies, materials, packaging and process innovations, in some cases already patented –. Communication modality: one-to-one – forms; e-mails – and one-to-many. Types of channels: collaborative platforms, portals or dedicated pages within the corporate website.

Potentially, this first category may involve, as secondary targets, expert consumers / lead-users as theorised by Hippel and creative consumers, as identified by Berthon et al. (2007), given that «users may possess knowledge in the application domain and knowledge in the technology domain of the product» (Jespersen, 2011, p. 1145; see also: Magnusson, 2009; Fuchs & Schreier, 2011).

 Market oriented channels to collect ideas, understand the user experience and catch consumer insights

Target: mass open approach – cross-target – (Note 4). Type of accepted contributions: any, not limited to breakthrough innovation – also incremental innovation oriented –, but aimed to the activation of market competencies and skills and to facilitate a ‘consumer self-revelation’ and ‘customer self-disclosure’ process (Andrade, Kaltcheva, Weitz, 2002; Zwass, 2010), such as: «a new concept», «ideas for advertising/promotions», «new suggestions for brands», «sustainability ideas», «product enhancements», «marketing plans or new product names». Communication modality: one-to-one – forms; e-mails – and one-to-many. Types of channels: collaborative platforms, platforms or dedicated pages within the corporate website.

 Idea Communities (Note 5)

Communication modality: one-to-many and many-to-many. Target: mass open approach – cross-target –. Type of accepted contributions: any, not limited to breakthrough innovation, but aimed to the activation of market

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competences and skills – also incremental innovation oriented –. Types of channels: open collaborative platforms.

Danneels’s contribution (2002) on the implications of strategic alternatives to innovation further explores the first three typologies, highlighting the role of consumers among the possible actors which may be involved by crossing the options related to the knowledge needed to develop innovation – with more technological or market significance – and the subjects to be involved in each case – technology oriented partners in the first case, customers with innovation relevant knowledge in the other –.

 On-line contests:

‐ aimed to trigger competitive mechanisms on ideas: design competitions, collaborative advertising initiatives, also in partnership with external platforms, creative communities and social networks;

‐ aimed to collect consumer insights (Note 6) and better understand the user experience.

 Web business games / online idea competitions (Note 7) which involve international students: they have communication and strategic purposes of employer branding, but also of input collection and innovation management. The target is usually represented by university/design school students and, more generally, “young talents”.

Literature has addressed motivation for consumers, and several incentives and stimulators to encourage participation have been identified (Etgar, 2008; Kaiser & Muller-Seitz, 2008; Ojanen & Hallikas, 2009; Füller, 2010; Nambisan & Baron, 2007, 2009). Consistent with the theoretical background, for both these two last types of modalities, the data collection has identified the presence of any Economic rewards and/or Social value incentives to collaborate – fun, exposure, psychological reasons, career perspectives and so on –.

 Online product customisation (Note 8): possibility to customise and personalise the aesthetic and functional attributes through configuration tools.

 Online consumer surveys with open and spontaneous participation, publicised on the corporate sites / brand sites / official pages of social networks.

 Activation of a general “Suggestions” channel, usually through tools such as a suggestions box, or a specific item …