Performance Effects of Involving Lead Users and Close Customers in New Service Development

Customer involvement has been recognized as a key factor for successful service development. One important aspect affecting the outcome of new service development (NSD) projects in whose development customers are involved is the choice of the appropriate participating customer. This study examines the effect of two customer’s characteristics (relational closeness and lead-userness) on four indicators of new service performance. The paper uses data from 102 NSD projects. Covariance-based path analysis is used to test the model. Results reveal that involving close customers in the NSD process has a positive direct effect on service advantage and speed to market and a positive indirect effect on market performance. The involvement of lead users, on the other hand, has a positive effect on service newness and service advantage, and a negative effect on market performance. Findings from this study suggest that firms need to make conscious choices about the types of customers to involve in service innovation as different types of customers affect new service performance differently