When co-creation pays: stimulating engagement to increase revenues

Abstract

PurposeCustomer 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/approachThe 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.FindingsThe 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/valueLimited 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.