In an increasingly competitive global economy, companies are motivated to continuously search for innovative products and services. Innovation has been long regarded as the source of profitable growth for companies. Customers can play a pivotal role in innovation through co-creation. Co-creation is defined as the joint creation of value by the company and the customer (Prahalad & Ramaswamy, 2004). Co-creation is a new approach for interacting with customers in various value creation activities undertaken by a company. Co-creation may also have indirect benefits such as increasing customer engagement, loyalty and interaction with the company, which may have positive long term consequences beyond the immediate co-created outcomes. Co-design is a special instance of co-creation (Sanders, 2008). Co-design happens when customers actively participate in the design and development process of new products. Co-design is different than conventional approaches to design. In conventional design customer participation is usually limited to product specification development through market surveys. Customers rarely participate in the initial phases of the design activity where ideas and concepts are generated by company designers.

Kaulio (1998) identified three product development approaches: design for the customer, design with the customer, and design by the customer. The first approach relies on traditional market research methods, the second approach maintains a dialogue with the customer during the design process by letting them respond to various designs, whereas the third approach allows the user to become the designer and this final approach is where co-design is realized. Pals et al. (2008) has used the terms no direct user involvement, reactive user involvement, and active user involvement to represent Kaulio’s three approaches to product design. Most current products are designed using the first two approaches. Usually customers play a passive role in design through surveys and focus groups. That is, they typically respond to the designs already developed by companies. However through co-design customers are able to propose designs and become active participants in the product design process. Such a co-design process has several advantages over the conventional process. The customer provides the design and the customer makes a commitment for purchasing the product. In this way no forecasting is required for the product volume. Recent research has shown that co-designed products can outperform conventionally designed products. Nishikawa et al. (2013) has compared the market performance of co-designed products against the products that were not co-designed. They used the Japanese firm Muji for their case study. Their data showed that products that were co-designed outperformed products that were not co-designed. Specifically they found that in first year of introduction sales revenue of co-designed products were three times higher than other products. Not only co-designed products were highly successful in the first year of introduction, their sales revenues were five times higher than other products over a three year time period. Another case study (Poetz & Schreier, 2012) compared the design ideas generated by professionals working for a company to the ideas generated by customers of that company. They found that the company executives rated user generated ideas significantly higher for novelty and customer benefit.

Customers’ participation in designing products can be much deeper during co-design than conventional design. Therefore conventional design processes should be adapted to account for various factors that can affect customers’ participation in co-design. Co-design raises several questions. Will customers be equally interested in participating in co-design for all the products they own (or do not own) or will they be more interested in some products than others? For example, given a chance to co-design, will a customer prefer to co-design a house or a digital camera? How will customers want to participate in co-design? What is the right medium to contact customers for co-design? Online, offline or a hybrid of the two? Similarly, what mode will customers prefer to submit their design ideas to the design team? Verbal, visual, or a combination of both? In order to find answers to these questions surveys were conducted using a pool of customers in the US.