Customer community andco-creation: a case study

Jennifer Rowley, Beata Kupiec-Teahan and Edward LeemingBangor Business School, University of Wales, Bangor, UK

Abstract

Purpose This paper aims to provide insights into the development and management of a customercommunity, informing product innovation and engaging customers in co-creation of a consumptionexperience.

Design/methodology/approach A review of the state of current knowledge about co-production,co-creation and customer communities is followed by discussion of the case study methodology.The case history of a leading player in the UK and international sportkiting market focuses onproduct innovation and customer-community development. Discussion reflects in more detail on thelessons from the case for application of the principles in practice.

Findings The case companys innovative product development strategy provides the catalyst forco-creation of a customer experience. Its marketing actions extend beyond product development andinnovation to actively co-creating experiences with customers, fostering a sense of community amongusers, facilitating communication within that community, acting on the feedback, and continuouslydeveloping and maintaining the community relationship.

Research limitations/implications The companys marketing strategy can be summed up ascustomer community leadership. This paradigm proposes a new role for businesses in sectors wherethere is a potential to develop and engage communities. It provides a context for the effectivefacilitation of customer knowledge management, within which marketing intelligence plays asignificant role. The findings offer scope for further research into the nature of this phenomenon andits relevance to co-creation in other industry sectors, and into numerous aspects of the processesand impacts associated with customer communities.

Originality/value The case contributes to the literature of co-creation, demonstrating how it hasbeen achieved through a marketing strategy and marketing mix in a particular customer community.

Keywords Customer relations, Innovation, Relationship marketing, Leadership

Paper type Case study

IntroductionThe increased complexity, globalization and knowledge-intensity of marketplacesrequire all businesses to make better use of their technological, organizational andmarketing competences in order to survive. Contemporary organizations in highlycompetitive and highly innovative markets must be able to build market share quickly,by delivering fast, high quality, innovative solutions. The changing organisationalenvironment has driven interest in organisational learning and knowledgemanagement (Drucker, 1993; Prusak, 1997). Many studies have confirmed customerknowledge as one of the most important knowledge bases for an organisation(Bennett and Gabriel, 1999; Chase, 1997), and there is a considerable interest in thepotential of co-production and co-creation either individually or in communitycontexts, to enhance innovation and business performance (Gibbert et al., 2002).

Focus on the engagement of customers in organizational learning, innovation andknowledge processes heralds the dawn of a new paradigm of marketing intelligence in

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Received December 2005Revised November 2005,December 2006Accepted January 2007

Marketing Intelligence & PlanningVol. 25 No. 2, 2007pp. 136-146q Emerald Group Publishing Limited0263-4503DOI 10.1108/02634500710737924

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which data and information are not simply gathered into databases and distilled toinform management decision making, but rather marketing intelligence is embedded indynamic co-creation processes that involve customers as partners rather than subjects.

Through a case study analysis and critique of a leading manufacturer of kite-boarding equipment, this paper seeks to provide insights into the engagement andmanagement of a customer community, to inform product innovation and to engagecustomers in co-creation of a sporting experience. The case contributes to the literatureof co-creation and specifically to the way in which communities can be enlisted in theco-creation of experiences.

It begins with a literature review, outlining the state of current knowledge onco-production and co-creation and on customer communities, followed by a descriptionof the case study methodology. A profile of the company, with particular reference toits product development and community development follows leads to reflection indetail on the contribution from this case. Finally, conclusions and recommendationsprovide a summary of the issues. The concept of customer community leadershipis proposed, and agendas for further research identified.

Literature reviewThis section draws together current knowledge on two key themes: co-creation, orco-production, and customer communities. Research on both of these themes fitsbroadly within the paradigm or philosophy of relationship marketing. As the mainplank of a marketing strategy, relationship marketing aims to build long term,mutually satisfying relations with customers, suppliers and distributors with the keyobjective of earning and retaining their long-term preference, loyalty and business(Foss and Stone, 2001; Peck et al., 1999; Buttle, 1996; Massey et al., 2001). In discussingthe absence of a consensus on the term relationship marketing, and on theappropriateness of the term, other authors have suggested that a focus on interactionsand networks of interactions between businesses and their customers might be moremeaningful (Healy et al., 2001; Zoliewski, 2004). The concepts of co-production andcustomer communities both focus on interactions. Communities, in particular, involvenetworks of interactions.

The theme of interaction between customers and organizations in product andservice innovation is developed in the literature on co-production. Prahalad andRamaswamy (2000) suggest that companies have to recognise that the customer isbecoming a partner in creating value, and need to learn how to harness customercompetences. One aspect of this will be the engagement of customers in co-creatingpersonal experiences. The body of work on co-creation and co-production has grown inrecent years. Kristensson et al. (2004) have examined the benefits of involving usersin suggesting new product ideas, finding that ordinary users created significantly moreoriginal and valuable ideas than professional developers, whilst professionaldevelopers and advanced users created more easily reliable ideas. At a more modestlevel of customer engagement, Salomo et al. (2003) found that customer orientationin innovation projects (not necessarily, in this case, customer engagement) had apositive influence on NPD success and that the impact increased with the degree ofproduct innovativeness. Similarly, Hsieh and Chen (2005) showed that new productdevelopment performance can be enhanced by interacting with users, and capitalisingon user-knowledge management competences. Matthing et al. (2004) suggest that the

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value of customer involvement in new service development resides in the opportunityto facilitate proactive learning about the customer, and to understand and anticipatelatent customer needs. Lilien et al. (2002) suggest that user contribution to the ideageneration process is optimised through the careful selection of lead users toparticipate in the process.

Dahlsten (2004) discusses customer involvement in the case of a productdevelopment project at Volvo Cars, which allowed the project management teamto acquire an understanding of the customer through customer presence. A studycomparing the sources of product and process innovation in large and smalltechnology-based firms found that product developers in SMEs valued customers,co-workers, marketing and journals more highly, whilst suppliers were particularlyvalued by large firms (Bommer and Jalajas, 2004).

Co-creation might be viewed as an aspect of customer-knowledge competence,the processes that generate knowledge about specific customers (Campbell, 2003).Gibbert et al. (2002, p. 460) describe customer knowledge management as a process inwhich organisations seek to know what their customers know and define it as:

. . . the strategic process by which cutting-edge companies emancipate their customers frompassive recipients of products and services, to empowerment as knowledge partners. CKM isabout gaining, sharing, and expanding the knowledge residing in customers, to bothcustomer and corporate benefit.

It is thus concerned with an understanding of how to elicit and leverage knowledgefrom customers. Their emphasis on interacting with customers and co-production,extending to co-learning, lifts the focus from collecting data and information in order tolearn about customers to learn with customers. They discuss five different styles ofcustomer knowledge management, including prosumerism where the customer actsas co-producer, and communities of creation in which groups of people worktogether, have shared interests, and want to jointly create and share knowledge.

The focus of co-production research is often on product innovation and newproduct development, with some contributions relating to service development(Matthing et al., 2004). However, Prahalad and Ramaswamy (2003), suggest a future inwhich the locus of innovation and co-production will shift from products and servicesto experience environments. This suggestion aligns with other proposals that theexperience marketing era is on the horizon, and that it is becoming increasinglyimportant for businesses to respond to the needs of the experience consumer (Li andWei, 2004).

Co-creation may take place in the context of customer communities. There is aconsiderable literature on customer clubs (Butscher, 2002; Gustafsson et al., 2004;Stauss et al., 2001) and loyalty schemes (Bolton et al., 2000; Mauri, 2003; Passingham,1998; Worthington, 2000). Only a small sub-group of such clubs and schemes canproperly be described as customer communities, however, which should at the veryleast exhibit C2C interaction. To convincingly justify the use of community theyshould furthermore share a culture with norms, values and identity, and mutualinterests and objectives. Fan clubs, interest clubs, and software user groups mayconstitute customer communities. Butscher (2002) identifies the Kawasaki Riders Club,The Volkswagen Club, and Swatch The Club as examples which might be described ascustomer communities. On the other hand, loyalty schemes such as Tesco Clubcard,American Express, Airmiles, and Marriot Rewards are focussed on the B2C dimension

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of relationship marketing, and do little to cultivate or influence C2C interactions.Therefore, whilst they may be able to identify a relatively stable group of users, theyhave not created a community.

One context in which there has been more discussion of customer communitiesis the virtual environment (Armstrong and Hagel, 1996). Some loyalty schemes usethis channel to support C2C interaction. Virtual customer communities enableorganizations to establish distributed innovation models that involve varied customerroles in new product development (Nambisan, 2002; Pitta and Fowler, 2005). Nambisan(2002) suggests that the design of virtual customer environments needs to considerinteraction patterns, knowledge creation, customer motivation, and integration of thevirtual customer community with the new product development team. Dholakia et al.(2004) explore the impact of group norms and social identity on participation inconsumer communities. The wider literature on virtual communities and their rolein learning and knowledge creation is also substantial, and may have perspectives tooffer on the role of virtual communities in innovation (Hall and Graham, 2004;Davenport and Hall, 2002; Wenger, 2000).

In conclusion, the themes of co-creation and customer communities have beenidentified as important in the literature, but there remains a scope for considerablefurther work, specifically relating to:

. co-creation of experiences;

. customer communities that exist in both physical and virtual space; and

. the mechanisms and processes through which organizations can engagecustomer communities, as opposed to individual members of those communities,in co-creation.

MethodologyCase studies are a valuable way of looking at the world around us, and asking howor why questions (Yin, 1994). The case study design adopted in this paper may bedescribed as a holistic single case design. Typically, single case designs areappropriate when the exercise has something special to reveal that might act as a pointof departure for challenging received wisdom, prior theoretical perspectives anduntested assumptions.

A specialist in sporting kite technology was chosen as the basis for the case analysisin this paper for four reasons in particular, as follows:

(1) The stated mission of Flexifoil International is to: provide our customers withthe ultimate Kitesports experience (www.flexifoil.com/company).

(2) Flexifoil has been consistently committed to product innovation.

(3) Flexifoil works with customers and proactively builds customer communities tosupport customer engagement in co-creation of the kiting experience.

(4) The active and extensive participation of one of the authors in the kitingcommunity formed the basis for an in-depth understanding of the communitybuilding and co-creation processes observed.

Company profile: Flexifoil InternationalThrough product innovation, the company seeks to design and develop the highestperformance products, with new designs and products that support new kite-based

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sporting experiences and events. Flexifoil build both their own customer communityand the kite boarding community in general through customer service, distributionnetworks, sponsorship and promotion of the sports for which their products are used.They provide opportunities for the kite sporting community to interact, online and inother ways. Their community is thus built through B2B, C2B and C2C relationshipsand channels.

Product developmentUntil the early 1970s, a kite had for hundreds of years been a piece of fabric controlledwith one or two lines, designed to be hand-flown in windy conditions.

What is now Flexifoil International started when two English university studentseffectively invented the two-line power kite by producing the first to be soldcommercially. Two larger kites with the evocative names Pro Team 8 and Super 10established Flexifoils market position, and enabled the company to enter upon a periodof innovation and experimentation that explored a range of different potentialapplications for power kites. Some of their innovations were successful, others less so,such as three-wheeled buggies designed to be pulled by a power kite or traction kite.

The successful developments in materials and design technology by Flexifoil andits followers allowed this basic product to support today such diverse activities as kiteboarding (water-based), snow kiting, kite land boarding, buggying, recreational powerkiting, and sportkiting (traditional kiting). The companys own product range nowcomprises: power kites, recreational kites, traction kites, and water re-launchable kites;buggies and boards; lines and control gear; and miscellaneous accessories such asclothing.

Following the launch of a web site, with associated forums in which enthusiastscould meet and exchange ideas, Flexifoils sales increased by around 25 per cent eachyear between 1999 and 2004. Innovation continued, with the development ofwater-based kiting or kitesurfing, and later kites for land boarding and snow kiting.Over the last thirty years, the company had thus effectively created a market, andmaintained leadership in its particular niche, by means not only of product innovationbut also engagement with and cultivation of a power-boarding community.

Community developmentDistribution. The community development process begins with the companysdistribution network of authorised retail outlets. Initially, those were mainlywindsurfing and surfing shops, but more recently specialised kiting shops haveentered the market. Significantly for Flexifoil, some of those have developed intokitesports centres where customers can fly before they buy. At three Premier KiteSports Centres, the most comprehensive Flexifoil range is available for trial in anenvironment characterised by knowledgeable staff and extensive facilities in a goodlocation; activity training is also on offer. A smaller range of Flexifoil kites is soldthrough high street shops. The company also moves the product to market throughtraining schools, academies and university kite clubs, to whom equipment is availableat discounted rates or even free of charge if the outlet becomes an official Flexifoiltraining centre.

In addition to these bricks-and-mortar outlets, the company transacts a significantproportion of its retail sales through internet distributors. It also sells spare parts,

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branded clothing and a selection of promotional merchandise via Flexifoildirect.com,but restricts distribution of core products to distributors who can offer a full after-salesservice.

The objective of the companys distribution strategy is to build, support andmaintain an effective customer community.

Promotion and marketing communication. The main platform of Flexifoilspromotional programme is to communicate their commitment to after-sales support,and their ambition to maintain good relationships with both customers and dealeroutlets. This strategy, in turn, generates positive word-of-mouth communication, andoften act as a channel for customer feedback that can inform future product innovationand development.

In pursuit of that objective, Flexifoil make extensive use of specialised advertisingmedia, including every kite magazine in circulation, often running double-pagespreads. A branded display stand for Flexifoil product catalogues is distributed toevery dealer. To keep the brand at the centre of the kitesporting world, the companysponsors a team of kite boarders who compete around the world. The promotional mixthus embraces advertising, publicity, sales promotion and point-of-sale.

Flexifoil furthermore use their web site and its forums proactively to develop theUK kiting community, especially pre-launch. Previews of new kites provoke discussionin the forums, and a level of interest that builds up over months of anticipation andtypically generates high sales volumes immediately on the release of the product.This online communication channel brings customers together to exchangeexperiences, and sell equipment to each other. The company lays claim to thelargest online kiting community, of nearly 7,000 members. The variety of forumsavailable to its members specialise in the full range of sportkiting activities.

The clear aim of the marketing communications strategy is, like the distributionstrategy, to create a community of interest rather than one based simply ontransaction.

DiscussionThis discussion will draw out two themes from the case study analysis: co-creation,and customer communities.

The study contributes a perspective on the co-creation of experiences, which is acentral element in the emerging paradigm of experience marketing. By continuingengagement with their customer community, the subject company has been able notonly to gather feedback on the experiences associated with the use of its products, butalso to add to them by offering opportunities, in both the real and virtual environmentsfor customer to enjoy interactions with others who share their interests. It monitors andenhances the experience through the same channels. Whilst product innovation isstepwise, the dialogue and interaction with customers on which that innovationis based is continuous. This is not co-production in the sense that the term is usedin new product development contexts, but rather in the service context, where the termrefers to the fact that customers have a hand in the development of their own serviceexperience. Nevertheless, experience co-creation in this case, embeds productinnovation. The impact of this approach to co-creation is difficult to disentangle fromthe impact of other business and marketing actions. The significant increase in salesin the years since the launch of the web site could be taken as one indicator, but it

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is important to acknowledge the spiral nature of the community creation process.This increase in sales will have expanded the community, and probably also haveintensified customers engagement with the experiences that community membersco-create with the company.

The case also contributes some insights on the nature of customer communities.Though the company does ask customers to register their product and thereby collectspersonal contact details, it does not operate a customer community, club or loyaltyscheme. Rather, the innovative and interesting products act as a catalyst forcommunity creation through the medium of the experiences they deliver. Thecustomer community comprises those who have participated in those experiences,enjoyed them, and wish to develop the interaction. Customers work in partnership withthe company to build excitement and develop skill, and by sharing the experienceswith others, add to the totality of the customer community. The company has taken anumber of actions to facilitate this process, including working with distributors,sponsorship, engagement in events, training courses, and an interactive web site.Specifically, their approach to communication with their customers is sophisticated.The common view of marketing communications as a one-way transmission isreplaced by a marketing communications strategy designed to build and reinforce thecompanys position as a leader of a community. Traditional channels such asadvertising, sponsorship, and even brand building are only elements in a complex webor network of marketing communications activities, involving C2C and B2B as well asB2C relationships. The company communicates directly with its customers, but alsoprovides contexts which encourage them to talk among themselves. In addition, themarketing communications effort is pushed through distributors, not just in terms ofthe traditional advertising and branding, but also through the selection of distributorsthat can offer appropriate support and advice. These actors in the system have a role inwelcoming new members into the community. They are supported in doing so by theexisting on-line community, and various company-sponsored events at whichmembers are encouraged to gather.

The customer community has built gradually as the business has grown.As new products have been added to the product range to support new sports,new sub-communities have formed around them. The process of communitydevelopment goes hand in hand with product development.

Conclusions and recommendationsThe entrepreneurs behind Flexifoil International have simultaneously created a sport,and an associated sporting community. The company is clear that its mission as notsimply to develop and distribute the best products but rather to deliver the mostexciting kiting experience. This case study has demonstrates that the entire marketingmix is focussed not on transactions, or even relationship building, but rather oncommunity creation. That community includes both consumers and dealers. Productinnovation, distribution and promotion are tightly coupled with community creation.Community building is not just about increasing membership, or even about theengagement of members with the community, but focuses on the creation of a level ofmutuality in which there is ongoing dialogue between community members and thecompany. Flexifoil has neither annexed an existing community, nor do they own one,although they do manage a virtual space through which the community can interact.

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Rather, their product innovation and the experiences that their product range provideshave the potential to act as the catalyst for the community, whilst sponsorship,engagement in events, and the virtual space all facilitate the enhancement of theexperience for community members.

Other companies compete with Flexifoil for leadership of the power kitingcommunity, both rival manufacturers and others keen to enhance the sportkitingexperience. Many of these have web sites through which they seek to capture an onlinecommunity. For example, one casts itself as the kite flyers portal to the internetoffering links to kite manufacturers and kite stores in the USA and Canada, to otherpower kiting web sites, to other kite flyer sites, kite teams and clubs, and to magazinesand newsgroups. Another claims to be the online community that brings flyerstogether and a third promotes itself as the internet magazine for kiters. All offerdifferent services and benefits to their customers, but for some, their engagement withthe sport kiting community will be restricted to virtual space. Though Flexifoil has astrong brand presence as a manufacturer, it needs to encourage members to participatewith it in co-creation if it is to deliver on its mission of providing customers with theultimate kite sports experience.

The approach to marketing strategy described in this case study can aptly bedescribed as customer community leadership. By leading the sport kiting community,but not owning it, Flexifoil has created a community that will buy their products,co-create kiting experiences, provide insights that can inform innovation in theproduct, the experience and the community innovation, look forward to the nextproduct release, and mutually enhance community members experiences of thecompanys products and services. Embedded in this approach to communityleadership are a number of more traditional marketing actions, such as new productdevelopment, advertising, and commitment to after-sales support. The distributionchannels are designed to offer the support and training that is likely to enhance sportkiting experiences, but also to build relationships with dealers, and to bring sportskiters together. This is supplemented by opportunities for interaction in virtual space.Community development is achieved through a network of relationship-buildingactions, at the heart of which are enjoyable and shareable sports kiting experiences.Through community leadership, the company has created a context in whichcustomers are thus from being passive recipients of products and services, andempowered as knowledge partners (Gibbert et al., 2002). In other words, it has therebycreated a context that facilitates the processes of customer knowledge management.This is an approach to marketing intelligence and decision making embedded indynamic co-creation processes that involve customers as partners.

It is worth noting that the term customer community leadership can have twodifferent meanings in practice. First, it may mean leadership of a community, in thesense of making it work, setting its direction, and participating in the shaping ofexperiences of community members. In this context, the focus is on factors such asmember engagement, culture, norms, identity and community viability, in terms of thevalue delivered to all parties. Second, it can describe an avenue to market leadership, inwhich the business performance of an organisation over the longer term is defined anddetermined by the extent to which its leadership of a community of potentialcustomers, or its power and capacity to lead, is greater than that of its competitors.

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In taking the development of the concept of customer community leadershipforward, it will be important to explore the different styles and approaches that are andcan be adopted by different firms and organizations. Given that another essential ofsuccessful leadership is followers, an important phenomenon for further study is thenature of followership in this context.

This case study has focussed on the actions and strategies adopted by one businessto build and benefit from a customer community and to engage customers in theco-creation of an experience. In addition, it has demonstrated how both online andreal-world communities can be enlisted to contribute to building the experience. Thereis a scope for considerable further study of the processes associated with theco-creation of the experience, and the details of how communities operate. Suchresearch needs both to cover a wider range of organizations and business sectors, andto examine in more detail aspects of communities, co-creation and customer knowledgemanagement. Some potential areas of investigation are:

. Perceptions and views of different stakeholders as to the impact of thecommunity and the contributions of different parties in the co-creation ofthe experience.

. The profile of such customer communities in terms of loyalty, retention andcustomer lifetime value, including comparisons between online and real-worldcommunities.

. Community processes, including models of key processes of influence,knowledge and learning, identification and role of node members, and therole of celebrity voices and endorsement.

. The marketing actions that contribute to the cultivation of effective co-creationcommunities.

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Further reading

Gilmore, A., Carson, D. and Grant, K. (2001), SME marketing in practice, Marketing Intelligence& Planning, Vol. 19 No. 1, pp. 88-102.

Hagel, J. and Armstrong, A.G. (1997), Net Gain: Expanding Markets Through VirtualCommunities, Harvard Business School Press, Cambridge, MA.

Shaw, R. (1999), Measuring and Valuing Customer Relationships, Business Intelligence, London.

Zontanos, G. and Anderson, A.R. (2004), Relationships, marketing and small business:an exploration of links in theory and practice, Qualitative Market Research:An International Journal, Vol. 7 No. 3, pp. 228-36.

Corresponding authorJennifer Rowley can be contacted at: j.e.rowley@bangor.ac.uk

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