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RESEARCH INSIGHT | Elevate Your Profitability by Using Customer Participation

The Research

Is allowing customers to participate in shaping an offering worth it? This research shows that, indeed, the return on customer participation (CP) is tangible and benefits the organization. In the context of the banking industry, the authors show that CP influences bank branch performance through not only customer satisfaction but also via customer empowerment.

More specifically, CP pays off from both economic and customer-related perspectives by elevating profitability, sales growth, and customer retention. However, the return on CP is more complicated than originally thought because returns can be achieved only by increasing customer empowerment and customer satisfaction. That is, without enhanced empowerment and satisfaction, CP efforts will be limited in improving performance.

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What You Need to Know

  • Having customers participate in shaping an offering can pay off for firms.
  • The total effect of CP on branch performance is maximized when the importance of social bonding, formalization of CP, and customer orientation is low and feedback is high.
  • The authors caution against formalizing CP, as customers desire discretion, control, and autonomy in how they participate.

 

Abstract

Research on customer participation (CP) has focused on its benefits for customers. However, recent research suggests that CP is beneficial to both customers and firms. The literature is also sparse on the economic (e.g., profitability) and customer (e.g., customer retention) impact of CP. This research introduces the concept of customer empowerment and develops and tests a model of customer empowerment as a parallel mediator, along with customer satisfaction, to explain the linkage between CP and bank branch performance. Furthermore, the authors draw on a broader set of moderators beyond customer characteristics to examine when CP affects empowerment and satisfaction. Using triadic matched data from a multiwave design and a three-level model in which customers are nested within employees, who are, in turn, nested within bank branches, the authors show that customer empowerment and satisfaction fully mediate the effect of CP on branch performance. The findings also show that CP results in greater customer empowerment and satisfaction when there is fit between participation and the context in which it is used. The authors discuss implications for advancing CP research and suggest actionable steps for reaping the economic and customer benefits of CP.

Constantine Katsikeas, Seigyoung Auh, Bulent Menguc, and Yeonsung Jung, “When Does Customer Participation Matter? An Empirical Investigation of the Role of Customer Empowerment in the Customer Participation–Performance Link,” Journal of Marketing Research 56 (6),