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: david.sorhammar@fek.uu.se; 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 co-

creative 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 resource-

integrating 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 co-

creative 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, e-

mail 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 ever-

changing 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 resource-

integrating 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

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 resource-

integrating 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

Resource-­‐integrating actor

Resource-­‐integrating actor

Resource-­‐integrating actor

AssessAdaptAdopt

Apply

Procedures Engagement

Understandings

Procedures Engagement

Understandings

Procedures Engagement

Understandings

employed to understand also other constellations of resource-integrating actors and contexts

of value co-creation, such as supplier networks, private public partnerships and user

communities. Seen from practice theory, any co-creative practice, regardless of context and

constellation, is constituted by different resource-integrating actors who represent different

practices and who draw on different scripts. To handle the complexity that the study of a co-

creative practice consequently entails, our conceptualisation can be employed by researchers

as a lens to create coherency in the analysis. The complexity is also vital for managers to

consider in order to facilitate reciprocal value creation, and our conceptualisation can be

employed as a managerial tool to anticipate challenges in a co-creative practice and for

analysing occurring obstacles and progress.

References Achrol, R. (1997). Changes in the theory of interorganizational relations in marketing: Toward a network paradigm. Journal of the Academy of Marketing Science, 25(1), 56-71. Alavi, M., & Leidner, D. E. (2001). Review: Knowledge management and knowledge management systems: Conceptual foundations and research issues. Mis Quarterly, 25(1), 107-136.

Ballantyne, D., Frow, P., Varey, R. J., & Payne, A. (2011). Value propositions as communication practice: Taking a wider view. Industrial Marketing Management, 40(2), 202-210. Ballantyne, D., & Varey, R. J. (2006). Creating value-in-use through marketing interaction: the exchange logic of relating, communicating and knowing. Marketing Theory, 6(3), 335-348.

Bhattacharya, C. B., & Korschun, D. (2008). Stakeholder Marketing: Beyond the Four Ps and the Customer. Journal of Public Policy & Marketing, 27(1), 113–116.

Bourdieu, P. (1977). Outline of a theory of practice. Cambridge: Cambridge University Press. Bower, M., & Garda, R. A. (1985). The role of marketing in management. The McKinsey Quarterly, Autumn, 34-46. Brown, J., Broderick, A. J., & Lee, N. (2007). Word of mouth communication within online communities: Conceptualizing the online social network. Journal of Interactive Marketing, 21(3), 2-20.

Brown, J. S., & Duguid, P. (1991). Organizational learning and Communities-of-practice: Toward a unified view of working, learning, and innovating. [Article]. Organization Science, 2(1), 40-57. Brown, J. S., & Duguid, P. (2001). Knowledge and organization: A social-practice perspective. Organization Science, 12(2), 198-213. Churchill Jr, G. A. (1979). A Paradigm for developing better measures of marketing constructs. Journal of Marketing Research, 16(1), 64-73. Corsaro, D., Ramos, C., Henneberg, S. C., & Naudé, P. (2012). The impact of network configurations on value constellations in business markets - The case of an innovation network. Industrial Marketing Management, In press.

Davenport, T. H., & Prusak, L. (1998). Working knowledge: How organizations manage what they know. Boston, MA: Harvard Business School Press. Dyer, J. H., & Nobeoka, K. (2000). Creating and managing a high-performance knowledge-sharing network: the Toyota case. Strategic Management Journal, Special Issue 21, 345-367. Echeverri, P., & Skålén, P. (2011). Co-creation and co-destruction: A practice-theory based study of interactive value formation. Marketing Theory, 11(3), 351-373. Frow, P., & Payne, A. (2011). A stakeholder perspective of the value proposition concept. European Journal of Marketing, 45(1), 223-240. Goodman, L. A. (1961). Snowball sampling. Annals of Mathematical Statistics, 32, 148-170.

Gummesson, E. (2008). Quality, Service-Dominant Logic and Many-to-Many marketing. The TQM Journal, 20(2), 143-153.

Hutchins, E. (1993). Learning to navigate. In Chaiklin, S. & Lave, J. (Eds.), Understanding Practice, Perspectives on Activity and Context. (pp. 35-63). Cambridge: Cambridge University Press. Jensen Schau, H., Muñiz Jr., A. M., & Arnould, E. J. (2009). How Brand Community Practices Create Value. Journal of Marketing, 73(September), 30-51. Korkman, O. (2006). Customer value formation in practice: A practice–theoretical approach. Ph.D., Swedish School of Economics and Business Administration, Helsinki. Kotler, P., & Armstrong, G. (2010). Principles of Marketing. Upper Sadle River, N.J.: Prentice Hall. Kowalkowski, C. (2011). Dynamics of value propositions: Insights from Service Dominant Logic. European Journal of Marketing, 45(1), 277-294. Lanning, M., & Michaels, E. (1988). A Business is a Value Delivery System. McKinsey Staff Paper, 41(July). Lave, J. (1988). Cognition in Practice: Mind, Mathematics, and Culture in Everyday Life. Cambridge, U.K.: Cambridge University Press. Lave, J. (1996). Teaching, as Learning, in Practice. Mind, Culture, and Activity, 3(3), 149-164.

Lave, J., & Wenger, E. (1991). Situated learning: Legitimate peripheral participation. Cambridge ; New York: Cambridge University Press.

Lorenzoni, G., & Lipparini, A. (1999). The leveraging of interfirm relationships as a distinctive organizational capability: a longitudinal study. Strategic Management Journal, 20, 317-338. Lusch, R. F., & Webster, F. E. (2011). A Stakeholder-Unifying, Cocreation Philosophy for Marketing. Journal of Macromarketing, 31(2), 129-134. Maglio, P., & Spohrer, J. (2008). Fundamentals of service science. Journal of the Academy of Marketing Science, 36(1), 18-20. Malhotra, N. K. (2010). Marketing Research: An applied orientation (European ed.). London: Pearson Education. Marshall, M. N. (1996). Sampling for qualitative research. Fam Pract, 13(6), 522-525.

Miles, M. B., & Huberman, A. M. (1994). Qualitative data anlysis: An expanded sourcebook. Thousand Oaks, CA: Sage.

Nonaka, I., & Takeuchi, H. (1995). The knowledge-creating company: How Japanese companies create the dynamics of innovation. New York: Oxford University Press. Normann, R. (2001). Reframing Business: When the Map Changes the Landscape. Chichester, UK: John Wiley & Sons. Normann, R., & Ramirez, R. (1993). From value chain to value constellation: designing interactive strategy. Harv Bus Rev, 71(4), 65-77. Orr, J. E. (1996). Talking about machines: An ethnography of a modern job. Ithaca, N.Y.: ILR Press. Perreault Jr, W. D., & Leigh, L. E. (1989). Reliability of nominal data based on qualitative judgements. Journal of Marketing Research, 26(2), 135-148. Peter, J. P., & Olson, J. C. (2010). Consumer Behavior & Marketing Strategy. Boston, MA: McGraw-Hill Higher Education. Prahalad, C. K., & Ramaswamy, V. (2004). Future of Competition: Co-Creating Unique Value with Customers. Boston, MA: Harvard Business School Press Books. Reckwitz, A. (2002). Toward a Theory of Social Practices: A Development in Culturalist Theorizing. European Journal of Social Theory, 5(2), 243-263. Rouse, J. (2006). Practice Theory. In Turner, S. & Risjord, M. (Eds.), Handbook of the Philosophy of Science: Elsevier. Salganik, M. J., & Heckathorn, D. D. (2004). Sampling and Estimation in hidden populations using Respondent-Driven Sampling. Sociological methodology, 34(1), 193-240. Schatzki, T. R. (1996). Social practices: a Wittgensteinian approach to human activity and the social. New York: Cambridge University Press. Schiffman, L. G., Lazar Kanuk, L., & Hansen, H. (2012). Consumer Behaviour: A european outlook (Vol. 2). Harlow: Pearson Education Limited. Selltiz, C., Wrightsman, L. S., Cook, S. W., & Balch, G. I. (1976). Reserach methods in social relations. New York, NY: Holt Rinehart and WInston. Vargo, S. L. (2009). Toward a transcending conceptualization of relationship: a service-dominant logic perspective. Journal of Business & Industrial Marketing, 24(5), 373 - 379. Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68(1), 1-17. Vargo, S. L., & Lusch, R. F. (2008). Service-dominant logic: continuing the evolution. Journal of the Academy of Marketing Science, 36(1), 1-10. Vargo, S. L., & Lusch, R. F. (2011). It's all B2B…and beyond: Toward a systems perspective of the market. Industrial Marketing Management, 40(2), 181-187. Vargo, S. L., Maglio, P. P., & Akaka, M. A. (2008). On value and value co-creation: A service systems and service logic perspective. European Management Journal, 26(3), 145-152.

Warde, A. (2005). Consumption and theories of practice. Journal of Consumer Culture, 5(2), 131-153.

Wenger, E. (1998). Communities of practice: Learning, meaning, and identity. Cambridge, NY: Cambridge University Press.