Innovative Value Propositions in the Experience Economy: The Case of Chiva-som Hotel and IceHotel

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Jia Geng

Mingkhwun Wasinwasukul

Innovative Value Propositions in the Experience Economy

The Case of Chiva-som Hotel and IceHotel

Business Administration Master’s Thesis

30 ECTS

Term: Spring 2012

Supervisor: Per Skålén

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Acknowledgements

Firstly, we would like to thank Karlstad University, which has provided us such a great opportunity to study the master program and to work on this challenging project, the mater thesis. Then the deep thanks and appreciations go to our devoted advisor, Mr. Per Skålen, who has kindly helped us go through the tough situations in conducting this thesis, whether by giving guidelines and suggestions or dedicating time and effort to conduct the meetings and seminars with us. And we also appreciate the time and effort of every interviewee who inspired our studies and works about Chiva-som and IceHotel. Finally, we would like to thank our families and friends for their constantly supports and sacrifices in every way we could imagine of. It’s impossible to accomplish this thesis without their helps and supports; we send our sincere appreciations to all of them hereby.

Geng Jia

Mingkhwun Wasinwasukul

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The List of Figures

Figure 1: Value Proposition Pyramid...13 Figure 2: Methods for Resource Integration. ...34

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Abstract

Since the experience economy was introduced, many researchers and enterprises have been attempting to find new strategies for business development, thus adapting to this new economy. In this process, the innovative value proposition is discovered as a solution to deliver satisfactory service and experience to customers. As a result, people start to pay attention to how to create an innovative value proposition and use it to stage memorable experiences to customers, which is also the main task of conducting this paper.

In this paper, the authors investigate the value propositions offered by two innovative hotels, Chiva-som and IceHotel in order to answer how to create value proposition by integrating operant and operand resources. And the study about customers’ perceptions on value propositions is used to reveal how customers perceive a good value proposition and use it create a memorable experience that they desire.

At the end of this paper, the authors state a new frame of creating value propositions by presenting a model of resource integration methods (Figure 3), which includes resource-centric and co-creation centric aspects. Furthermore, the features of a good value proposition perceived by customers as well as the solutions to improve customer experiences with innovative value propositions are summarized respectively.

Key Words: experience economy, value proposition, resource integration, innovative hotel.

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1. Introduction

1.1. Background

In the recent decades, more and more researchers and companies are focusing on the customer experience since they are conscious of customers’ increasing desire of experience and its importance in influencing customers’ purchasing decision.

In 1998, Pine and Gilmore introduced the experience economy, in which experience is commoditized after commodities, goods and service. To think about experience economy, many companies are trying to find solutions in order to adapt to this new competitive battlefield, then the questions of how to improve the current products and services they are offering and use them to create desirable customer experiences, become the most important issue to every company.

When a company intend to stage better experience value, it’s necessary to think about how value is created in general. Service Dominant Logic (S-D Logic) holds that value should be co-created with customers in a dynamic, interactive system rather embedded in the products (Vargo & Lusch 2004). Thus, “the enterprise cannot deliver value, but only offer value proposition (Vargo & Lusch 2008 P8).”

Value proposition could be tangible goods, intangible service or any other input for customers’ co-creating process. Then value only emerges when customers take use of value propositions provided by companies (ibid). Essentially, innovative value propositions are important elements connecting to customers’ values and their experiences.

Moreover, S-D Logic is grounded in the changing perspective on resources originally (Vargo & Lusch 2004). Operant resources, like knowledge, technology, could produce effects themselves. So they are considered as primary by S-D logic while the Goods Dominant Logic (G-D Logic) still stays focus on the static, finite operand resources (ibid). Regarding the shifting view of resources, it’s necessary for companies to consider how to utilize the operant resources, this fundamental element, to produce better value propositions and present them to their customers.

The hospitality is an important service sector as well as a vital part of the tourism industry that is suggested as the biggest industry in the world. Waved by the intense competition and emerging experience economy, hotels are pressed for surviving in this changing world. As we mentioned above, value propositions are considered as a significant element to encourage and support companies’

transformations in the new economy, many hotels put their effort in creating unique value propositions to accomplish their new business goals. With strong

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interest in hospitality industry, we choose two innovative hotels, Chiva-Som International Healthcare Resort and IceHotel which successfully improve customer experience by present distinctive value propositions, to gain the insight into how hotels create value propositions with various resources and then stage better and indelible experiences.

1.2. Problem Statement and Research Questions

As discussed in the background, staging experience is crucial for business survival and sustainable growth in experience economy. And value proposition play an important role in customer experience creation. Surprisingly we find few researches are conducted on the relevant subject about creating innovative value propositions from resources perspective. Thus, it becomes a question for us, how companies apply their resources without a scientific guidance on resource integration methods?

Besides, successfully presenting a unique value proposition is just a half way to the destination of creating customer experience. Companies still need to keep on studying customers’ opinion on their value proposition and observing their co- creation process. So it challenges the management not only to focus on resource integration but also understand the customers’ perceptions on products or service from their perspective. Consequently, we think it’s necessary and useful to conduct this thesis, discussing innovative value propositions regarding resources perspectives and apply them into the customer experiences research afterwards. In order be a comprehensive research, we will study this topic from both customers’

and companies’ sides. Thus, we raise two researches questions:

1. How does a company integrate operant and operand resource into new value propositions?

2. What feature should a value proposition have in order to improve customer experience based on customers’ perceptions?

1.3. Content Organization

Our thesis comprises five main chapters and the content of each chapter will be illustrated as follows.

 Chapter 2: the theoretical framework provides the relative literature review on experience economy, value and value creation, service dominate logic including the operant resource and operand resource, and the role of

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customers. Besides, value proposition is also studied in two aspects, value proposition in the lens of S-D Logic and experience innovation.

 Chapter 3: the research methodology regarding qualitative approach, case study analysis and the research tools; in-depth interview we used for this thesis will be discussed in this chapter. Additionally, the process of data collection and data analysis, including the limitation, validity and creditability of our thesis is also explained through this part.

 Chapter 4: the empirical study regarding Chiva-som Hotel and IceHotel is provided based on primary data from customers’ interviews and some secondary data from relative literature and websites simultaneously. The primary data will be collected by customer interviews and customers’

comments on relative websites, for instance, Tripadvisor.com. The secondary data is collected through company official websites; hotel related web pages, etc.

 Chapter 5: we will make a comprehensive analysis according to the theoretical framework from chapter two and empirical study of two innovative hotels in the fourth chapter. Then we will propose a new model of process of resource integration based on our studies. And this section will answer both research questions that we proposed at the beginning of this thesis.

 Chapter 6: we will conclude the thesis and contribute the study result for the further study on the relative topics about value proposition in the last part.

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2. Theory

This chapter will illustrate the three main theoretical frameworks which are experience economy, value creation and value proposition along with S-D dominant logic. We then give description and comprehension of the theories and related terms in order to guide the understanding to our research.

2.1. The Experience Economy

In this thesis, the Experience Economy will be introduced as our general background for both research questions. According to the research questions we mentioned in the first chapter, we are in pursuit of finding a systematic method for resource integration from study hotel innovative services and products. And then the research will turn to customers’ perspective to answer what kind of value proposition is good for them to have memorable experiences, which is also conducted under the background of experience economy. Therefore, we suggest the experience economy will clearly providing studying scope for this thesis.

Although experience economy gives much inspiration for our study and it’s chosen as our study background, we are not going to investigate this new economic sector unitarily. Experience economy is clarified as one part of entire economic evolution among extracting commodities, making goods and delivering services (Pine & Gillmore 1999). Hence, you could also find some relative literature and studies on industrial economy and service economy while you read this thesis, which are used to interpret experience economy explicitly.

2.1.1. The Introduction of Experience Economy

After service economy has been realized and developed for decades, a new economy sector, experience economy is introduced, in which experiences becomes commoditized. People believe experience economy implies more financial and long-term benefit for the business. Meanwhile, more and more companies start to notice the potential value of offering experience and prepare themselves move into the new battlefield, which lies in staging customer experience (Pine & Gillmore 1999).

Despite the customers are considered as a logic thinker who make purchase decisions based on rational minds, their emotional and irrational side cannot be ignored (Gentitle et al 2007). And customers’ emotion, like experience will influence their preference as well as their purchase decisions (ibid). In this perspective, Pine and Gillmore (1999) suggest companies to upgrade their offerings and enter the emerging experience economy. As Pine and Gillmore (1999, P98) argue “An experience occurs when a company intentionally uses

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service as the stage and goods as props, to engage individual customers in a way that created a memorable event.” So we could tell that experience cannot make any effect independently, without the support of service or intangible goods. In some cases, experience could be an additional element to goods and service (Sundbo 2008). In turn, service and product offerings are used as vital factors to stage memorable experience for consumers. The success of experience business demands the mix of service and physical product.

2.1.2. Customer Experience

The experience economy development starts from the customers’ increasing desire of experiences; so customer experience is one key notion in understanding experience economy. The research on customer experience has been processed for long time and there is a diversity of definition of customer experience. Among the literature, here we choose quite a comprehensive one from Schmitt (1999, P 34) cited in Sundbo’s article about customer experience management (2008). It defines customer experience as “an experience occurs when a customer has any sensation or knowledge acquisition resulting from some level of interaction with different elements of a context created by service providers.” According to this definition, the sensation and knowledge acquisition are important reflection on companies’ value propositions. In order to have better understanding of customers’ reflection, experience study could be studied on a cognitive, affective or behavioral level (Sundbo 2008). Besides, some previous studies on experience also indicated that customers need unique, memorable, and sustainable experience over time (Pine & Gillmore 1999). In order to satisfy customers with unique, memorable and sustainable experience, companies are required to provide some innovative valuable propositions distinct from their competitors. And then getting customers engaged with those propositions emotionally and behaviorally.

Eventually, customers are able to create their own experience dynamically, with certain value proposition.

2.2. Value and Value Creation

Value and value creation is one of the important concepts throughout this thesis.

When value proposition has been innovated and promoted to the market, whether customers could perceive its benefits and use it to create the value, decides this new value proposition is successful or not. In this case, it’s necessary to study these relative theories about value or value creation. In this paper, the value in the lens of S-D logic will be highlighted because we tend to put much special attention on value co-created by customers and enterprises. We believe the main

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issue we study, value proposition, is a bridge both connecting customers and companies for the value creation.

Woodall (2003) states that value is a subtle concept while Zeithaml (1988) and Woodruff and Gardial (1996) state that the concepts of value suggests the form of determination of benefit against loss. Grönroos (2008) suggests that value creation is a process that user becomes better off in some respect or that increase the customers well-being (Vargo et al., 2008). (Grönroos 2010)

Traditionally the value for customers is believed to be embedded in the product of the companies’ manufacturing processes, in the value-in-exchange context.

However, later this concept of value has been opposed by an alternative view which is called value-in-use. Value-in-use context suggests that the value for customers arises as customers participate in “value-generating processes”

(Norman and Ramirez 1993; Holbrook 1994; Ravald & Grönroos 1996; Norman 2001; Vargo and Lusch 2004; Grönroos 2006). According to the alternative view, value-in-use, the value creation process is completed through customers’ value- generating process rather than provided by providers (Grönroos 2008).

2.2.1. Service Dominant Logic: Value Co-creation, Operant

&Operand resources and Customer Roles

S-D Logic is introduced by Vargo and Lusch (2004) to research the value creation.

It defines how actors such as customers, employees and other actors can become effective and efficient resource integrators in the value co-creation process (Vargo

& Lusch, 2004, 2008b). Value co-creation is accomplished by resource integrators’ interacting and exchanging across and through the networks, which is so-called value configuration (Vargo & Lusch 2008). S-D Logic is applicable to any networks involving companies, customers, employees, suppliers as well as other stakeholders (ibid).

Earlier, the Goods Dominant Logic (G-D Logic) view, value is designed and added into goods and services by providers. It focuses on the tangible resources created by providers, which embedded the value throughout the producing procedure. The value is then distributed in market via value-in-exchange manner that is completed by goods and money. In G-D Logic, the roles of consumers and producers are distinct and separated; usually value is decided by producers (Edvardsson et al. 2010)

However, in the view of S-D Logic, value is always co-created. Companies or providers can only offer and communicate with customers via the value

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proposition. After the value proposition is accepted and used by customers, the value co-creation process occurs. (ibid) As Ramirez (1999) stated the nature of value co-creation is interactive and synchronic. For this reason, value depends on how organizations involve their customers and other actors in designing the service system (Prahalad and Ramaswamy 2004).

Vargo and Lusch (2008) give the eight particular shifts comparing the mindsets of G-D Logic and S-D Logic, which presents what providers should consider if value co-creation is accepted. The eight shifts are illustrated as followed:

1. From goods to service.

2. From tangible to in tangible.

3. From operand to operant resources.

4. From asymmetric to symmetric information.

5. From propaganda to conversation.

6. From value added to value proposition.

7. From transactional to relational.

8. From profit maximization to financial feedback.

(Edvardsson et al 2011)

2.2.2. Operand and Operant Resources

Constantin and Lusch (1994) have explained two types of resources: operand and operant resources to produce competitive advantages for business. Later, the shifting attention from operand resources to operant resources impels the emerging S-D logic. Specifically, operand resources are static and fixed, in which the operations and actions are needed to produce effect, such as land, animal, minerals. While the operant resources are the resources that could produce effects as they are dynamic and can be replenished, such as skills and knowledge of customers and employees, technology, etc. (Edvardsson et al. 2010). Comparing G-D Logic with S-D Logic, the G-D Logic considers the operand resources as primary, while the S-D Logic emphasizes the role of operant resources as primary as they are finite, functional and dynamic. In the late twentieth century, the role of operant resources has been emphasized as people started to realize the importance of skills and knowledge as the most important type of resources. Vargo and Lusch (2004) also state that the competitive advantage is mainly achieved through the operant resources rather than the operand resources as the operant resources like skills and knowledge act on operand resources to solve the problem, in order to gain and fulfil satisfactory customer experience and needs. (Vargo & Lusch 2004, Edvardsson et al. 2010)

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2.2.3. The Role of Customers in Service Dominant Logic

In S-D Logic, customers are always involved in the creation of value as value co- creators (Vargo & Lusch 2004). Purchasing value proposition just accomplishes the value-in-exchange via money, however the real value have not been created to customers. A continues-process perspective suggests, after customers purchase value proposition, they still need to use, maintain or adapt the value proposition to their unique needs, usage situation with their personal skills and knowledge or any other resources (ibid). The new frame of value creation, value co-creation, requires considering the changing role of customers, which has changed from isolated to connected, unaware to informed, and passive to active (Prahalad and Ramaswwamy 2004).

2.3. Value Proposition

In S-D logic, foundational premises (FP) 7 present the enterprise can only make value propositions (Vargo and Lusch 2004, P11) as they realized the value should be determined by customers who participate in the co-creation process with value proposition, rather than embedded in any tangible or intangible product. Value proposition as the key word throughout the entire thesis needs to be understood and applied into solving our research questions.

2.3.1. The Definition of Value Proposition

Value proposition is “a clear, compelling and creditable expression of experience that customers will receive from a supplier‟s measurably value-creating offering”

(Barnes et al 2009 P22). In this definition, we could understand value proposition in two different aspects of customers and enterprises. For customers, value propositions build value into customer experience or satisfy their particular needs.

In enterprise’s perspective, value propositions articulate the essence of their business and state clearly what service and products they intend to produce (ibid).

Overall, a value proposition is enterprise’s response to customers’ needs and wants. Thus, Rich (2005) claim innovative services or products are delivered based on identifying what current and potential customer value in the market.

Building a value proposition is a conversion and demand process. In this process, all the available resources are input and integrated to gather new valuable offerings for both enterprises and customers (Barnes et al 2009). Specifically, value proposition builders are illustrated by Rich (2005) as a value proposition pyramid (Figure 1.). From this pyramid, we can read that the integration of the knowledgeable workforce, customer needs and continuous improvement are the

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cornerstone, on which to build value proposition. Then the deploying technologies and fostering innovation are demanded to reach a value proposition eventually.

Via this diagram, we believe that building value proposition and making it effective requires both enterprises’ and customers’ endeavor. Moreover, enterprises need to keep a customer-oriented mindset when they are in pursuit of value propositions.

Figure 1: Value Proposition Pyramid 2.3.2. Value Proposition in the Lens of S-D Logic

Referring to the fundamental premise 7 of S-D logic proposed by Vargo and Lusch (2004), enterprises can only make value propositions to the customers. And later, to be more explicit, it has been revised as the enterprise cannot deliver value, but only offer value proposition (Vargo and Lusch 2008, P8). S-D Logic shifts the marketing focus from value distribution to value creation. Then the function of companies has been changed into facilitating resources and offering value propositions to support the customers’ value creation process (Grönroos 2006).

Therefore, it suggests the key to success for modern companies is to provide more compelling valve propositions than other competitors (Barnes et al 2009).

In the view of S-D logic, operant resource is identified as the unit of economy as well as companies’ competence advantage, which is mostly composed by fundamental knowledge and skills (Vargo & Lusch 2004). For this reason, operant resources are the fundamental source for creating value proposition. Thus recognizing new operant resources and adopting it with current resource and service, or keeping on pursuing new solution for existing resources to extent current services will lead companies to an innovative value proposition for. In a way, this concept overlaps definition of innovation under S-D logic, so a new value proposition is also suggested as the outcome of innovation activity. Since innovation is a dynamic process, a company’s dynamic capability, for instance a continuous focus on both customer and innovative orientations, will decide whether it could offer better value proposition for their customers (Ordanini &

Parasuraman 2010).

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2.3.3. Value Proposition for Staging Experience

Value proposition intends to build in value to customer experience (Barnes et al, 2009) so experience innovation proposed by Prahalad and Ramaswwamy (2004) to introduce the development of value proposition regarding customer experience perspective. Experience innovation is developed to create or improve experience environments with experience enables, such as technology capabilities, employee’s knowledge etc. (Prahalad & Ramaswwamy 2004). Experience environment refer to the capacity to accommodate a wide range of context- specific experience of heterogeneous individuals (ibid, p54). So experience environment is the key to facilitate overall customer experience, which is built on products, service as well as interaction between customers and enterprises (Prahalad & Ramaswwamy 2004). Lastly, we need to notice, experience innovation encourage co-creating experience with customers as they emphasis the interaction between customers and enterprises in experience environment.

Moreover, regarding the characteristic of experience economy, Pine and Gillmore (1999) also present five key principles for designing memorable experience, which could be useful when enterprises create value proposition for staging customer experience. It includes theme the experience, harmonize impressions with positive cues, eliminate negative cues, mix in memorabilia and engage all five senses (Pine & Gillmore 1999).

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3. Research Methodology

In this part, the detail of research will be described including research design, data collection, data analysis and Limitation, creditability and trustworthiness. The principle of designing our thesis is attempting to solve the research questions in a concise, complete and creditable method.

3.1. Research Design

3.1.1. Qualitative Method

Sachdeva (2009) states that the qualitative method is the set of techniques pursued to decode, describe and translate terms and meaning of certain phenomena, rather than frequency or numerical results. And this method usually is used to gain insight and understanding of the human behavior, and its implicit behavior (Denzin & Lincoln 2005). Besides, via qualitative method, researchers can have deeper information connected to the subject’s motivation, attitude and belief (Kinnear & Taylor 1996). In this paper, our research aim to find a new method to create value proposition regarding resources integration perspective and discover what kind of value proposition will be useful to improve experience through their perception. In order to accomplish our research aim, we demand abundant data from our cases, two innovative hotels, and acquire the implicit information. Thus, the qualitative method is chose to be our main research method as it is appropriate to study human behavior and its implications.

Additionally, Bryman and Bell (2007) illustrated five main research methods associated with qualitative research as ethnography/participant observations, qualitative interviewing, focus groups, language-based approaches to the collection of qualitative data and qualitative analysis of texts and documents. In our thesis, we tend to study customer perception and experience on value proposition, which demands amounts of customers’ feedback about those two cases, Chiva-som healthcare resort and IceHotel. As we know, qualitative interview would emphasize on the interviewee’s point of view, where it could reflect the researcher’s concern (Bryman and Bell 2007). Thus, we decided to use qualitative interview as main research method for this paper. Furthermore, the interview is designed as a semi-structured interview. As Bryman and Bell suggested (2007), the semi-structure interview gives flexibility in interviewing and allows the researchers easily to reach the interviewee’s world. The interviewee has the freedom to answer, and the researcher can modify questions according to the interesting issue that comes up during the interview. In this type

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the interview. For instance, we design questions like “What made IceHotel to be interesting to you?” “If you have a chance to go back IceHotel, do you want to go back, if so, will you want to just visit or stay overnight in the hotel? ” etc. for interviewing the customer of IceHotel to discover their traveling or accommodation experience towards the hotel. During the interview of Chiva- som’s customers, we raise the questions like, “How do you think about healthy consulting before you start you retreats and do you satisfied their suggestion about your therapy?” “Is it hard for you to join your retreats especially some skillful activities, like yoga and how do you think about the interaction between you and your coach?” which emphasis more on customer co-creations. Beside the questions we design before the interview, there are more questions rising during the interview according to the real situation. Therefore, we decided to apply the semi-structure interview for this paper, which will be completed by interviewing customers from Chiva-som healthcare resort and Ice hotel.

3.1.2. Case Study

Case study is a qualitative manner used for analyzing the data from one case or a small number of cases in their real life context (Dul & Hak 2008). Case study research is a common research strategy in business research, especially when the topic is quite broad, but the available theory is limited or the “real life context” is very important (ibid). In this paper, we choose case study because we need the help of “real life context” referring to the value propositions in the innovative hotels to solve our research questions. For instance, the two case studies that we selected, Chiva-som and IceHotel, will illustrate some practical data about resource integration and customers’ perceptions and experiences on innovative value proposition, which we demand for conducting this paper.

Because of the differences between research objectives, case study strategy can be classified into single case study and multiple case studies (Bryman & Bell, 2007).

In this paper, we are using multiple case studies which could emphasize on the distinct context of each individual case (ibid). Both cases are innovative hotels that offer new and distinct value propositions for customers. Chiva-som is a luxury health care resort in Thailand which combines the traditional, ancient Asian therapies with Western therapies for wellness and a healthy life. We choose this hotel due to its emphasis on involving customers’ knowledge, one of operant resource, in the value co-creation process, which could inspire us to answer the research on how to create innovative value proposition in a customer-focusing way. Moreover, since customers are involved more in hotel retreats, their perceptions on value proposition will be meaningful for this research. In another

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case, IceHotel offers customers with a totally different experience with unique ice and snow construction. We attempt to answer how customer experiences are improved by innovative value proposition, with the date obtained from this case.

Besides, it also provides data to reveal the methods of resource integration and create new value propositions.

3.2. Data Collection 3.2.1. Primary Data

“The research design and the collection of data are guided by specific researches that derive from theoretical concern” (Bryman & Bell 2007, P405). Regarding the research question in this thesis “What feature should a value propositions have in order improve customer experience based on customers’ perceptions?” we need customers’ opinions on specific value propositions and their experiences towards both innovative hotels of our cases. Thus, we conduct semi-structure interviews with customers from Chiva-som healthcare resort and Ice hotel, which is categorized as our primary data. Most of our interviewees in our case are contacted through tripadvisor.com, which is a travel website, composed by travel information or customers’ comments on hotels, restaurants, attractions, etc. In order to gather comprehensive, interviewees are chosen on the basis of various nationalities, traveling time, and age, etc. Besides the data from customer interview, we also take some customers comments about Chiva-som healthcare resort and Ice hotel from tripadvisor.com, which are provided by customers directly, without being edited or processed in any way.

We conducted two interviews with customers from Chiva-som hotel. For instance, Paul Knox is 52 years old from United Kingdom, who has been to Chiva-som hotel five times during the recent ten years. We interviewed Paul Knox through video call on Skype, which lasted approximately half an hour, until the interviewee had answered all the, to the topic relevant questions posed to him, upon which, Mr. Knox described his different experiences during different visits at Chiva-Som, was concluded. Anchalee (Angela) Chiarapurk, 35 years old, comes from Thailand. Because of time and geography limitation, the interview between us was conducted by the e-mail. For instance, we send her all the questions we concern about Chiva-som in one e-mail and she replied us with all her answers. And we discussed the detail of her answer through more e-mail contact. Since the study of Chiva-som aims to research customers’ knowledge, as a kind of important operant resourcing, involved in creating innovative value proposition. We attempted to obtain more information about customers’

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participation to the service in Chiva-som by some relevant question, such as healthy consulting, customized retreatments etc.

Moreover, we also picked 4 customers of IceHotel as our interviewees. Karla Valenzuela is 22 years old from Mexico, who has been to Ice Hotel in 2011. We conducted the interview with her on Skype. Paulina Jesionek, a 22 years old student, and Marlena, Grlechowiak, 23 years old went to Ice Hotel together. Both of them come from Poland and we had face-to-face interview with them at the same time. The forth interviewee is Sarut Wanamkang, 25 years, from Thailand.

He visited IceHotel in 2010 and we interviewed him in person. IceHotel, as a unique hotel providing distinct experience with beautiful ice sculpture, we conducted the interview with their customers emphasizing on the traveling experience, ranging from their opinion on the ice sculpture, an originality of IceHotel, etc. The data from the interview is used for us to work on resource integration for creating value proposition as well as customer experience improvement.

Besides, in case study, part of empirical data is gained from the companies’

publications, related online websites and articles. For instance, the information on the official website of Chiva-som healthcare resort and IceHotel, provides the rich data on innovative service in both hotels. In addition, some articles about these hotels are collected through various traveling blogs and websites to contribute information.

3.3. Data Analysis

Although it is accepted that researchers can generate a large and rich amount of data with qualitative research, it is still difficult to find analytic paths through all that data richness to reach the research aim (Bryman & Bell 2007). So we need to be prudent to choose the method for data analysis. Inductive study is process of induction involves drawing generalizable inferences out of the observation (ibid).

We intend to build the theory about resources integration method for creating value proposition from study the empirical data. In other words, we try to build a theory rather than test any pervious explanation. Therefore, the inductive research strategy matches our research.

The first research question is processed by the data from both innovative hotels, Chiva-som and IceHotel. We study the distinct services and experiences offered by both hotels to understand how a new value proposition comes to the customers.

After studying the innovative services offered by both and gaining the insight on

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how they achieve it, we will build a new framework of resource integration methods for creating value propositions.

Data from customer interview is mostly used to answer the second research questions. With the data from customers’ side, the customers’ perceptions and experiences will be examined. Then we try to list the prerequisites of a successful value proposition and its contribution to improve customer experience.

Regarding the integral structure of this thesis, the narrative approach is used in this thesis to illustrate the data findings and analysis for better comprehension.

The analysis is structured based on two research questions which are answered by analyzing the theories and empirical data.

3.4. Limitation, Creditability and Trustworthiness

In conducting a thesis or any research the creditability is an important thing that researchers should be concerned with, as it judges the quality of the research. The creditability also improves the trustworthiness of the research. (Patton, 1999, Bryman & Bell, 2007) Besides, the validity and reliability are essential in assuring the quality of the research. As Kylén (2004) states, validity and reliability factor is vital for the quality of research. Reliability ensures the trustworthiness and accuracy of the data collected as free from error, while validity means the usefulness and relevance of data collected to intended study (Zikmund, 1997, Kylén, 2004).

This thesis is based on the case studies of Chiva-som and Ice Hotel as the illustration of innovative service providers offer the innovative value propositions regarding resources perspectives and the customer experiences in co-creating value with providers. Due to the limitation of time, we have faced the obstacles in communicating with the companies directly, to learn how they research and design new services and present innovative value propositions. However, in assuring the validity and reliability of this thesis, we are able to gain reliable official information through the companies’ official websites and related websites such as social networking sites in tourism industries and etc. Moreover, we were able to reach a number of customers to make the interviews which give us the information from the customers’ perspectives. The information gained from both companies’ perspectives and the customers’ perspectives in both cases make our thesis gain better creditability of the data. We also retrieve theoretical framework data from various reliable sources in a certain topic to increase the creditability.

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4. Empirical Study

The empirical study will be divided into two main parts according to our two case study hotels: Chiva-som and IceHotel. Both hotels‟ empirical data are retrieved from the official website, related websites and the information from customers‟

perspective through the in-depth interviews and customers‟ comments on tripadvisor.com. We tend to use the data collected from hotels‟ perspective to solve our first research question, how does a company integrate operant and operand resources into innovative value propositions. And the data from customers‟ perspectives will be mainly used for the second research question about customers‟ perceptions on qualified value proposition and customer experience enhancement.

4.1. Chiva-som International Healthcare Resort

4.1.1. The Overview of Chiva-som International Healthcare Resort

The name, Chiva-som means “the heaven of life”, with the tri-parts hotel logo representing body, mind and spirit. Chiva-som is a luxury health resort in Prachuabkirikhan Province (Hua Hin), Thailand (Chiva-som 2012). Chiva-som is internationally famous and well-known because of its business concept for customers’ wellness. For instance, according to Earthcheck (2012), Chiva-som is a pioneer in integrating traditional ancient Asian therapies with Western approaches to deliver health and wellness therapies, diagnostic along with luxurious accommodation on international standards.

Due to its extraordinary service and fresh business idea, Chiva-som has been awarded and recommended by many magazines, social networks and institutions globally. For instance, it has been regarded as “The Best Overseas Health and Wellness Property” by Luxury Travel & Style Magazine from 2007 to 2012,

“Best Destination Spa” by The Crystal Awards in 2010, "Best River Cruise Line"

by Travel + Leisure Magazine in 2011, and etc. (Traveltheworld 2012)

According to Chiva-som (2012), they has been offering all guests the total lifestyle transformation to achieve lifetime wellness through its full range of holistic health therapies, physiotherapy, spa and fitness, and diagnostic, the integration of the naturopathic and conventional medicines, along with the detox and healthy cuisine. The aim of treatments is to balance and rejuvenate body, mind and spirit. All treatments are offered to guests along with the luxurious accommodation, with a minimum stay of 3 nights to ensure the beneficial and

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realistic outcomes. Thus, Chiva-som is an ideal place for the customers to find peace, rest, and heal their body, mind and spirits in one-stop service and experience (Chiva-som 2012). Because of the holistic services and the health- retreat aspect offered by Chiva-som, we cannot treat it as an ordinary Spa hotel.

And what they offer differently from other Spa hotels draws our interest on this luxury health resort. Therefore, we plan to conduct an in-depth study on its distinctive and desired service and hotel experience in the next section.

4.1.2. The Service and Experience Offered by Chiva-som

Nowadays, it’s useful and necessary to engage customers in the service process and co-create value together, to stage unforgettable memory. And Chiva-som provides us with a practical example on this concept. In order to reach different customers’ health aim, Chiva-som offers the customized programs and retreats for each customer ranging from the diet, activity, relaxation, exercise, physical alignments, inner self and emotional issues and relaxation. The designed retreats and programs are based on the health status, goals, and ability of each customer and professional advice from healthy experts in Chiva-som. To fulfill the individual’s aim, customers are examined through the health and wellness consultation on their arrival. The consultation and therapies service experience will be carried out by professional and expert staff in various sciences, including fitness instructors, spa therapists, consulting doctors, nutritionists, naturopaths and alternative health practitioners who are scheduled variously over certain time periods. Customers can see the available practitioners from the schedule on Chiva-som website to decide their visiting period (Chiva-som 2012). The health consultation by expert staff will lead customers to get their optimal retreatment, with their professional knowledge and rich experience with therapies.

Additionally, they will offer suggestions on daily health care, which could be used after leaving Chiva-som.

In designing the customized retreats and program for each customer, the consultation is the most important step. The ancient Eastern therapies and the Western diagnosis approaches and techniques are incorporated to encompass health and wellness of body, mind and spirit, which are the main focus of Chiva- som. The current health status, short and long term goals of customers is also collected from customers’ statements to design the appropriate program and retreats. Beside the diagnosed health status, the customer can also inquire health and emotional problems they are concerned for a more applicable and beneficial outcome. Within this interaction between customers and expert staff, the retreats will be customized with professional suggestions along with the customers’ goals

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and the results they expect. There is a range over 150 types of retreats provided at Chiva-som with the support of specialized professionals, recent technology and complementary medical services (ibid).

Another attractive point of Chiva-som experience is the spa cuisine which is acclaimed by many international awards, as we have stated earlier. Most health food is perceived as awful tasting but Chiva-som has made a lot innovative changes, improving health food very much. It states that the customer would not notice that they are eating healthy dishes as they are tasteful. Obviously Chiva- som cuisine has healthy and detoxified properties from herbs, spices and vegetables, which are organically produced at the resort (Chiva-som 2012). The practice leads to the memorable flavor scent of customer experience. In order to provide such healthy and delicious food, Chiva-som put much effort into working their special recipes. As we learned, the collaboration between chefs and nutritionists is the key point to ensure the food there has the qualification of detoxification and also good taste. For instance, nutritionist will work on the stresses and absorb nutrition with a scientific concept. Meanwhile, the chefs will make the nourishing material into tasty course with their culinary skills. All in all Chiva-som tends to take care of customers dishes in healthy and delightful ways, which requires much dedication of specialized staff and distinctive recipes.

Moreover, to ensure the total lifestyle transformation in a long-term basis, the cookbook is also offered by Chiva-som, with which customers are able to cook at home after their stay at Chiva-som and enjoy the healthy cooking in their daily life. The book comprises healthy menus with easy-to-find ingredients and nutrition knowledge (ibid), which could help customers make their own healthy and delicious food in an easy way.

4.1.3. Chiva-som in Customers’ Eyes: Customer Experience towards Chiva-som

To evaluate whether a new service is successful, it’s necessary and important to collect customers’ opinions on it. Especially, in this thesis, one of our aims is to study the customer experience on innovative value proposition. Thus, we have interviewed two customers of Chiva-som and retrieved more data of customers’

reviews on tripadvisor.com as well as the information from articles written by customers on related websites. In general, we found that although the price is high, most of customers were still quite satisfied with the service and experience offered by Chiva-som ranging from the health consultations, retreatment and

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program, healthy and tasteful cuisine, hospitality, staff, quality and integration of innovative service experience, holistic health approach and etc.

 Customer experience towards Chiva-som

In experience economy, customers experience is the main commodity which will be traded for profits. So we need to learn customer experiences initially and then to find a way to improve it. Chiva-som tends to offer integrated holistic health approaches, relaxing and healing with accommodation to customers in various delightful ways. In fact, most of the customers enjoyed service and experience provided by Chiva-som. For instance, in the progress of health consultations, they can participate in designing their own program so that they can receive the retreats fitting their needs and requirements. As one of interviewee Anchalee told us “I had the herbal stem, aromatherapy massage and facial skincare on my first day.

That is totally what I wanted.” Besides, every healthy and wellness therapy is delivered in a relaxing environment. As one of our interviewees stated, he has visited Chiva-som for five times already, starting from 2001 and the latest was last year, 2011. He was impressed by the relaxed atmosphere, service-minded, warming and pampering hospitality and the healing outcome of Chiva-som since mostly he went there to relax from his stressful workload. He also stated that the treatments were different from each time according to his needs and current health and mental status. He said he used to visit many other spa resorts around the world including two others in Thailand but none of them could give him such impressive results as Chiva-som, as he stated “The other two in Thailand or another one in Bali are nice but not quite the same as Chiva-som. It gives me such experience, I can really feel relaxed and balance at Chiva-som.” Chiva-som can be thought as the optimal choice for his needs (Paul). Many other customers also talked about the price which was high, but on the other hand, it does worth the money. “I arrived at Chiva Som stressed, frazzled, uptight, feeling „go, go, go‟, and with a stress-based rash. I left so happy, calm, serene, at peace, clear-skinned,

„life changed‟, and determined not to forget it all” (Richardson O. 2010). Another example of customers’ opinion is from the comment on tripadvisor.com (2011) by JensenKiev: “After the seven days I really got a great kick-start to a better lifestyle, not least because of the advice I was given from the Australian nutrition specialist and other staff members, who advice how to get rid of some bad habits.”

Most of the customers are also impressed by the surprisingly tasty and healthy recipes offered during their stay. Most of the customers, according to the interviews and the reviews, are aware that the ingredients and materials are

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organically produced by the resort so they are appreciated for those benefits. And the desirable recipe has become an important part of the holistic healthy approach at Chiva-som. As Chelsearodgers (2008) wrote in tripadvisor.com, “The food was consistently super - I've never eaten so well and it really does contribute to the overall feeling of 'wellness' that you experience at the Spa”. Arabella (2008) posted on tripadvisor.com, “The food was excellent - fresh, natural and delicious.”

Beside the above aspects, another aspect that most customers were impressed is the quality of staff and excellent service at Chiva-som. As concluded from the data, most of the customers stated that staff is friendly and is willing to help with their knowledgeable and skillful expertise. They can give advice, consultation, and assist customers in various ways with a cooperative working style. For instance, during the consulting process, every expert staff provides customized health advice along with their professional knowledge and the information gathered from customers. Every consultant is willing to listen to their customers and help customers get out of their unhealthy way. And other staff in the hotel also demonstrates their willingness to help customers. “The quality of the service, friendliness of the staff and sheer attention to detail was faultless” claimed by chelsearodgers (2008). Paul Knox also told us about his impressive experience with the staff. He said that upon arrival, Chiva-som took photos of the customers.

Then during the stay the staff can call him by name and since he was a frequent guest, the staff remembered him very well. He said that from his previous visits, he felt familiar with them, and they made him relax and comfortable during his stay at Chiva-som.

 The role of customers in Chiva-som

Value is co-created by customers with companies when they utilize value propositions. Since the role of customers has been redefined, we need to understand customers’ perceptions on value proposition and their value co- creation activities. At Chiva-som, achieving customers’ needs and training goals are their main focus, thus the role of customers and their participations is what is emphasized in various aspects. Customers are welcome to express their needs and wants upon their arrival and as well as throughout their stay. “A gracious staff attentive to all our needs, the superior spa therapists and excellent spa cuisine made for a relaxing mind/body experience” stated by Zenluxe (2008). Another interviewee Paul Knox also stated the similar opinion of his stay at Chiva-som. He said Designing programs does not only depend on the health status but also

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consider the goals and needs of customers. He said “It is your holiday, you are the customer, you say and you choose what you want to do.”

Upon the arrival, customers receive the consultation in which the customers’

health status is examined through various approaches. During that initial consultation, the customers/guests have the opportunity to state any health problem they may have, and express what their goals and aims are in improving their overall health situation, which they hope can be accomplished by Chiva-som treatment program. The staff team will evaluate the customer’s aim, current health and mental status, and the ability of customers to decide the program. Apart from the designed program and retreats, customers can also make additional requests.

Most customers are satisfied with the service as they always get what they want on the customized level. We can say that, at this point, the customer and Chiva- som are sharing their knowledge and benefit each other by the shared information.

Besides, another obvious role is that the Chiva-som’ customers are not only receiving general services passively like other hotels such as treatments, accommodation and diets, but they also learn and share the experience to live with the new healthy lifestyle that Chiva-som endeavor to advise them. As some comments stated on tripadvisor.com, Richardson (2010) said “I arrived at Chiva Som stressed, frazzled, uptight, feeling „go, go, go‟, and with a stress-based rash.

I left so happy, calm, serene, at peace, clear-skinned, „life changed‟, and determined not to forget it all.” “After the seven days I really got a great kick- start to a better lifestyle, not least because of the advice I was given from the Australian nutrition specialist and other staff members, who advice how to get rid of some bad habits” stated by JensenKiev (2011).

4.2. IceHotel in Jukkasjärvi

4.2.1. The Overview of IceHotel

IceHotel, the first and largest hotel in the world build of ice, deliver brand new experience to customers with its fantastic ice art and design. Regarding the location of IceHotel, Jukkasjärvi, a village 200 kilometers above the Arctic Circle (IceHotel 2011), we may conceive that IceHotel shouldn’t just offer the normal accommodation as a common hotel. In fact, all the rooms and suites in IceHotel with artistic ice sculpture and novel experience of living a minus temperature environment have attracted thousands of guests to visit Lapland area in Sweden, which has become one of most important landscape architectures there, in the winter time. Since ice architectures are difficult to be retained when summer

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comes. IceHotel is rebuilt every year offering yearly new vision to the guests, which gives a good reason for customers to visit IceHotel more than once.

Via the history of IceHotel, we learned that summer was the only fortunate season for Lapland throughout the 1980’s and at the beginning of 1990’s. Tourists fly to Jukkasjärvi in the summer to see the midnight sun. But winter is more quite there.

However, Yngve Bergqvist, the founder of IceHotel never ceased his effort to seek new attractions for customers in the winter, concerning the distinct natural environment in Jukkasjärvi. In 1989, he was inspired by the ice and snow festival in a town in Japan and then established the fact that the ice full of Torne River could be the precious resource to be exploited. The prototype for IceHotel, a snow building was created with the help of two Japanese ice artists in 1990. It was a 60 square meter arched building where they hosted an art exhibition. And the first guest to stay overnight in an ice building happened in 1992. With the joyful feedback from the first guest, IceHotel we know now, came out and offered accommodation to all visitors to Lapland (IceHotel 2012). Now IceHotel aims to offer life-enriching experience with its ice art and closeness to nature, which could last in guests’ memory or shared with others (ibid). Hence, keeping on working the distinctive feature of IceHotel and building the impressive ice sculpture will be an important path in fulfilling its aim.

4.2.2. The Experience and Services Offered by IceHotel

In the experience economy, the innovative services and products are used to stage memorable experiences. And IceHotel is one of the cases that explain to us how hotels enhance customer experience with their innovative value propositions. Here, we initially learn the distinctive feature of IceHotel and some services and experiences they offered and then use this data for our further research.

One of most innovative and distinctive offering of IceHotel comes from the ice art and design. Every year, artists from all over the world come to Jukkasjärvi and create an exclusive exhibition, IceHotel. Although all the ice architecture will melt in the spring, rebuilding IceHotel in a different style each year becomes another fresh selling point to attract visitors, who are curious to see the new version of IceHotel. For instance, in year 2011/2012, there were 47 rooms in total including 1 Deluxe Suite, 16 Art Suites, 20 Ice Rooms, 8 Snow Rooms and 2 Group Rooms.

And artists came from 15 countries all over the world to create these ice rooms with various themes, such as Frozen Love, And Yet She Move, Penguin’s Era, Coffee Mudra, etc. (IceHotel 2012). It’s impossible to find two exactly identical

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rooms in IceHotel where each piece of ice art work contains the artists’

distinguished imagination and artistry.

Spending one night in IceHotel where it keeps between -5 and -8 degrees regardless what the temperature is outside (IceHotel 2012), offers a totally fresh experience for clients. The cold accommodation of IceHotel could let customers experience sleeping in a subzero environment and test whether they could survive in an extreme environment. Due to the special accommodation, IceHotel prepares leather-covered ice beds, cozy sleep bags, and hot lingonberry juice for guests in the morning, as well as specific guided Check-in tour for their customers to explain the instructions for sleeping in minus degrees. Additionally, when you check out of IceHotel, all the customers will receive the certification to prove that guests have succeed in spending a night in zero degree temperature environment (IceHotel 2012). Comparing to the ordinary hotels, the facilities in IceHotel might be thought quite limited; however the experience created by IceHotel is irreplaceable and priceless to every customer.

As the first and largest hotel build out of ice and snow, the IceHotel doesn’t only offer to the accommodation need, but also opens up to site visiting in the daytime.

Travellers could go to IceHotel and pay for the admission fee to stroll around the hotel. Meanwhile, a tour guide service introducing the theme of each art suite and special rooms and proper instructions of staying in zero degrees is included in the admission fee (IceHotel 2012). In this case, more people could have the opportunity to observe and experience the amazing ice sculpture in IceHotel since the accommodation offer is limited and the cost of staying there is quite expensive.

4.2.3. IceHotel in Customers’ Eyes: Customers Experience towards IceHotel

As we mentioned above, in order to research customer experience towards innovative hotel service, we need the data from the customer’s perspective. So in the case of IceHotel, we conducted interviews with four customers of IceHotel and obtained more data through customer comments on tripadvisor.com. The customers of IceHotel could be sorted into two groups as visitors who just pay the admission fee to travel around IceHotel and hotel guests who spend the night in IceHotel. Visitors and hotel guests capture different experiences towards IceHotel, since different services are provided accordingly.

Generally speaking, all the customers, either visitors or hotel guests, are amazed by the structure of IceHotel and ice sculpture inside the hotel, which lead to the

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special customer experience towards its distinctive theme. From the customers’

data, we found the attraction of IceHotel mostly comes from the uniqueness of the hotel, including the special construction of the hotel, the special location at the Arctic Circle and unique accommodation experience in minus temperature etc.

However, IceHotel, despite being such an innovative enterprise trend to stage marvelous traveling or lodging experiences for their customers, there are still some problems along with the implement of new service. Especially, the feedback from those guests who spend night in the hotel indicates the high price and overall service was the main concern when they stayed there.

From the customers’ interviews, especially visitors group, we notice that the premise of IceHotel’s success is due to its special location: Jukkasjärvi, a village that is 200 kilometers above the Arctic Circle (IceHotel 2011), where customers could view the northern light sin winter or midnight sun in summer. Many customers tend to travel above the Arctic Circle for some special landscape or to try some outdoor activities, such as ice driving, dog sled etc. After the northern trip is planned, IceHotel caters to their vision, which perfectly matches the adventure at the Arctic Circle. As Karla Valenzuela who travelled to Kiruna in 2011, said, “An Austrian guy, he told me about Kiruna first and asked me weather to go with him. I was wondering what is special in Kiruna and He told me there is an IceHotel.” Now IceHotel has already become one of the most essential sites in Kiruna for those visitors. In turns, after traveling around IceHotel, customers admit that it’s worth to visit IceHotel if you travel around the northern part of Sweden. Marlena, told us “Although, the main reason was to visit Lapland and IceHotel is just part of those attractions, it‟s my favorite and the most important site view of the entire trip.”

According to the interviews and reviews of customers’ comments on tripadvisor.com, we notice the biggest attraction of IceHotel comes from experiencing the ice and snow architecture and sculpture there, in a totally snowy and icy world. And this is exactly what the theme of IceHotel is, which make it different from other hotels. IceHotel offers a unique and unusual traveling experience to everyone who has ever been there. Although it’s very common to see ice and snow elsewhere, it becomes totally different when they are used as the basic materials to build a hotel or add some artistic idea on ice and snow making it into a piece of art work. As Marlena told us during the interview, “before I went there, I was so curious what the hotel looks like and whether it‟s only made of ice and snow”. Therefore, we could tell only the idea of IceHotel makes potential customers curious and want to explore it. After customers arrive at IceHotel, the

Innovative Value Propositions in the Experience Economy: The Case of Chiva-som Hotel and IceHotel

Jia Geng

Mingkhwun Wasinwasukul