When co-creation pays: stimulating engagement to increase revenues

Abstract

Purpose

Customer willingness to pay (WTP) was initially set out to estimate the perceived value from a purchasing experience. However, purchasing decisions have changed as value co-creation has been increasingly applied in the hospitality industry. In adopting a service-dominant (S-D) logic lens, this paper aims to empirically test how co-creation affects WTP through customer engagement (CE).

Design/methodology/approach

The context for the empirical analysis is the Chinese market, one of the largest online purchasing markets that has been significantly transformed since the proliferation of co-creation. The study is a within-design online experiment with 488 Chinese participants. The analysis makes use of mediation models to evaluate the proposed mechanisms behind co-creation, CE and the moderated role of frequency of stay, and their impacts on WTP.

Findings

The data confirm the hypothesised positive impact of value co-creation on customer WTP. This impact is fully mediated by CE, i.e. CE is the mechanism behind a higher WTP propensity for co-created hotel rooms. Notably, the frequency of stay at a hotel, thus positively influencing WTP, does not have a moderated mediation effect on this relationship.

Originality/value

Limited research to date has investigated the price effectiveness of value co-creation in the hospitality context. This study contributes to the S-D logic and value co-creation discourses by testing the effectiveness of these concepts in relation to customer pricing decisions. This study empirically confirms the hypothesised model and provides recommendations for hospitality research and practice.

Citation

Tu, Y., Neuhofer, B. and Viglia, G. (2018), "When co-creation pays: stimulating engagement to increase revenues", International Journal of Contemporary Hospitality Management, Vol. 30 No. 4, pp. 2093-2111. https://doi.org/10.1108/IJCHM-09-2016-0494