Customer Empowerment in New Product Development

Authors


  • *Both authors contributed equally. This paper was accepted in fall 2008 when the first author was affiliated with the Aarhus School of Business, Aarhus University, Denmark. We thank Guido Berens, Tom J. Brown, Nikolaus Franke, Ulrike Kaiser, Peter Keinz, Emanuela Prandelli, Bodo B. Schlegelmilch, Rajan Varadarajan, and Eric von Hippel for their valuable help with and feedback on earlier versions of this paper. We are also grateful for the suggestions made by the editor, Tony di Benedetto, and the reviewers. The project was funded by the University of Vienna (first author affiliation during PhD), the Vienna University of Economics and Business (second author affiliation during habilitation), and the Wiener Wissenschafts-, Forschungs- und Technologiefonds (WWTF).

Address correspondence to: Martin Schreier, Bocconi University, Via Sarfatti 25, 20136 Milan, Italy. Tel.: 390258363694. Fax: 390258363790. E-mail:martin.schreier@unibocconi.it.

Abstract

The traditional new product development (NPD) model, in which companies are exclusively responsible for coming up with new product ideas and for deciding which products should ultimately be marketed, is increasingly being challenged by innovation management academics and practitioners alike. In particular, many have advocated the idea of democratizing innovation by empowering customers to take a much more active stake in corporate NPD. This has become feasible because the Internet now allows companies to build strong online communities through which they can listen to and integrate thousands of customers from all over the world. Extant research has provided strong arguments that indicate that customer empowerment in NPD enables firms to develop better products and at the same time to reduce costs and risks if customers in a given domain are willing and able to deliver valuable input. Customer empowerment, however, not only affects the firm's internal NPD processes as reflected in the products that are ultimately marketed. Instead, it might also affect the way companies are perceived in the marketplace (by customers who observe that companies foster customer empowerment in NPD). This paper provides the first empirical study to explore how customers from the “periphery” (i.e., the mass that does not participate) perceive customer empowerment strategies. Customer empowerment in NPD is conceptualized along two basic dimensions: (1) customer empowerment to create (ideas for) new product designs; and (2) customer empowerment to select the product designs to be produced. Therefore, customers may be empowered to submit (ideas for) new products (empowerment to create) or (2) to “vote” on which products should ultimately be marketed (empowerment to select). In the course of two experimental studies using three different product categories (T-shirts, furniture, and bicycles) both customer empowerment dimensions (as well as its interaction) are found to lead to (1) increased levels of perceived customer orientation, (2) more favorable corporate attitudes, (3) and stronger behavioral intentions. These findings will be very useful to researchers and managers interested in understanding the enduring consequences of customer empowerment in NPD. Most importantly, the results suggest that empowerment strategies might be used to improve a firm's corporate associations as perceived by the broad mass of (potential) customers. In particular, marketers might foster customer empowerment as an effective means of enhancing perceived customer orientation. Customers will in turn provide rewards, as they will form more favorable corporate attitudes and will be more likely to choose the products of empowering as opposed to nonempowering companies, ceteris paribus. Customer empowerment thus constitutes a promising positioning strategy that managers can pursue to create a competitive advantage in the marketplace.

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