Center for Services Leadership - "Customer Co-Production - A New Frontier for Service Excellence"

"Customer Co-Production - A New Frontier for Service Excellence"

Many companies have joined the customer co-production bandwagon over the past several years, but is it the best strategy for the services your company offers? A new piece of recent research put out by affiliated CSL Faculty member Dr. Neeli Bendapudi and Dr. Robert P. Leone ("Psychological Implication of Customer Participation in Co-Production," Journal of Marketing, January 2003), shed some light on the important do's and do not's of making the most of co-production strategies.

In the past, the merits of jointly producing a product or service in collaboration with the customer have been viewed purely from the perspective of monetary benefits. It is assumed that the company - and often the customer - saves money by off-loading some of the production costs onto the customer.

Little consideration has been given to the psychological benefits of customer co-production. Does co-production increase the level of satisfaction the customer derives from the process and outcome of the service they receive? Does the collaboration process engender greater degrees of loyalty to the company or does it put the company at greater risk of having a dissatisfied customer?

The research's key findings revolve around the psychological phenomenon known as a "self-serving bias": when working in collaboration with someone else, people tend to claim more responsibility than their partner for success and less responsibility than their partner for failure. If this mindset isn't carefully managed, a co-production strategy might hurt your business more than it helps.

  • After analyzing the results of creating multiple simulated co-production scenarios, Bendapudi and Leone make the following recommendations for carefully managing the self-serving bias in your customer co-production efforts: Develop a strong bond with the customer first. The research indicates the customer is less likely to engage in a self-serving bias if they feel they have an actual friendship with the company rather than just a business relationship.
  • Make sure customers are willing, not just able. Just because your customers have the knowledge and skills to assist you in co-production, that doesn't mean they want to engage with you in that manner. If they become co-producers against their will, they will be more likely to judge you harshly when things go wrong.
  • Create exit ramps. A customer may be interested in co-production at the beginning, but might not want the same level of involvement throughout the process. Look for ways to create multiple places in which the customer can hand off the project to the company entirely.
  • Focus on non-monetary as well as monetary benefits: Customers are more likely to give the company much of the credit for the success of the co-production when the benefits are more than just cost-savings. If the customer can also derive psychological benefit in the form of enjoyment, accomplishment, self confidence, control and a greater degree of customization, they will be much more likely to come away with a great deal of loyalty to the company.

Co-production is a two-edged sword. Managed poorly, customer co-production can actually invite your customers to find fault in you that they wouldn't have found otherwise. Managed carefully and strategically, however, customer co-production can be a whole new frontier to be explored for competitive advantage.