The impacts of customer empowerment on new product and firm performance: performance effects and contextual considerations of involving customers in new product development

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School of Business | Master's thesis
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Date

2015

Department

Markkinoinnin laitos
Department of Marketing

Major/Subject

Marketing
Markkinointi

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Language

en

Pages

71

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Abstract

This study explores the relationships between customer empowerment (CE), new product performance (NPP) and firm performance (FP) as well as important contextual factors influencing these relationships. CE is defined in this study as the extent which a firm provides its customers ways to (1) actively shape the nature of its transactions and (2) connect with the firm as well as with each other. First, extant research on CE and its performance impacts is reviewed, resulting in a total of ten research hypotheses that are integrated to form the theoretical framework of the study. The main hypotheses posit that customer empowerment has a positive relationship to performance on both the product and firm level. Additionally it is argued that this relationship may be stronger when 1) the surrounding market- and technological environment of a company is highly turbulent 2) a company is focused on producing services rather than tangible products and 3) a company is primarily involved with organizational (B2B) rather than consumer (B2C) customers. The research hypotheses are empirically tested through moderated multiple regression (MMR) analysis. The research data is compiled from StratMark 2014 - a questionnaire charting marketing and strategy practices in Finnish companies - from which a research sample of 965 companies representing a wide range of industries and sizes was achieved. Before conducting the MMR, exploratory and confirmatory factor analyses were run to establish best possible reliability and validity of the constructs and entire model. Separate 7-stage hierarchical MMR analyses are then conducted for modelling new product and firm performance impacts. The discovered results support the main hypotheses: a significant and positive relationship between customer empowerment and both performance measures is found. The proposed moderating effects of market turbulence (MT) and technological turbulence (TT) are also partially supported - TT positively moderates CE's effect on NPP and MT positively moderates CE's effect on FP. This suggests that opening a company's innovation process to customers is especially appropriate in turbulent environments. In contrast, the hypotheses regarding a company's focus towards services vs. products and B2B vs. B2C customers are not supported. This would tentatively indicate that empowering customers may be an equally valid strategy regardless of a company's offering. Overall, the study provides important insights for both academics and practitioners involved with customer empowerment and new product development at large. For managers, the findings suggest that CE can be a profitable approach for new product development, and one that should be especially considered as a way to obtain information on customer needs in rapidly changing environments. For academia, the study sheds light on measurable CE performance impacts, which have scarcely been researched thus far. In addition it provides an improved understanding regarding some of the important contextual factors influencing this relationship. Further research is suggested to build on the found CE-Turbulence relationship and to verify whether a firm's offering truly does not play a role for CE applicability. Additional studies on operational-level CE practices are also called for, to further assess the practical requirements of successful CE implementation.

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Keywords

customer empowerment, co-creation, strategic orientation, new product development, firm performance, new product performance, market turbulence, technological turbulence

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https://urn.fi/URN:NBN:fi:aalto-201504032154

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[gradu] Kauppakorkeakoulu / BIZ