Service dominant logic (Marketing)

="'Service-Dominant Logic of Marketing=

Radical reformulation of marketing thought is not new and arguably is part of the dynamic tension just under the surface calm of any discipline. But not since Lyn Shostack’s call to marketers to “break free” from goods marketing in 1977 has a new reconfiguration of general marketing logic attracted so much interest so quickly. The catalyst for this interest was the publication of an award-winning article by Stephen Vargo and Robert Lusch in a 2004 edition of [http://www.marketingpower.com/AboutAMA/Pages/AMA%20Publications/AMA%20Journals/Journal%20of%20Marketing/JournalofMarketing.aspx|"Journal of Marketing"] entitled “Evolving to a New Dominant Logic for Marketing”. This was followed in the same year by an article from the same authors in the "Journal of Service Research", directly challenging the efficacy of the characteristic differentiators between services and goods (intangibility, heterogeneity, inseparability and perishability). In 2005, an International group of academics met to discuss these issues at [http://www.commerce.otago.ac.nz/Marketing/Events/OtagoForum/ The Otago Forum] , with special issues of major marketing journals emerging, as a consequence.

How does it work?

The service-dominant (S-D) logic says that customers create value through service experiences and relationships, especially in the co-creation and sharing of resources with suppliers, including skills and knowledge. What a supplier firm does essentially is offer value propositions (promises) and marshal resources together for customers. The difference in the logic is subtle but has profound practical implications. Rather than firms marketing to customers, emphasis is placed on marketing with customers (an interaction process). In this the customer is the arbiter of value co-created in direct service interaction, and most importantly, the arbiter of value-in-use of any goods sold. Put another way, goods are service appliances which offer the customer value-in-use. Ultimately service is exchanged for service

The S-D logic could be seen as just another restatement of ideas from earlier phases in the development of marketing thought, such as services marketing, relationship marketing, market orientation, network perspectives, integrated marketing communications (IMC) and the resource based view of the firm. However, Vargo and Lusch’s special contribution to marketing debate is in bringing these ideas together in a new way, in a new pattern - a “service logic” for marketing practice as a whole.

Lusch and Vargo ( [http://mtq.sagepub.com/|"Marketing Theory"] , 2006) explain that:

"It is important to recognize that there are two components of value co-creation. The most encompassing of these is the "co-creation of value". This concept represents a rather drastic departure from good logic... The second component of co-creation is what might more correctly be called "co-production"."

Furthermore, Gronroos ("Marketing Theory", 2006) elaborates:

"Traditionally production is related to the process where an object is produced... On the other hand, consumption is the process where customers consume goods, whatever the purpose." "To make the marketing consequences of this visible, consumption must no longer be viewed as a black box."

The future of marketing

A good dominant marketing logic arguably limits the mind-set for seeing the opportunities for co-creation of value with customers and other stakeholders of the firm. In a similar way, a transactional exchange view ignores customer loyalty and puts constraints on developing the lifetime value of the customer to the firm. The S-D logic proposes broadening the logic of exchange, both social and economic, and that will excite academic and practitioner thinking about the role of marketing in the business world of tomorrow.

= Sources =
* Aitken, R. et al (2006) 'Special Issue on Service-Dominant Logic of Marketing: Insights from The Otago Forum', [http://mtq.sagepub.com/cgi/reprint/6/3/275.pdf "Marketing Theory"] 6(3): 275-392.
* Gronroos, C. (2006), "Adopting a Service Logic for Marketing," "Marketing Theory", 6 (3), 317-333.
* Lusch, R. and S. Vargo (2006), "Service Dominant Logic: Reactions, Reflections, and Refinements," "Marketing Theory", 6 (3), 281-288.
* Shostack, G. L. (1977) ‘Breaking Free from Product Marketing’, "Journal of Marketing" 41 (April): 73 – 80.
* Vargo, Stephen L. and Lusch, Robert F. (2004a) [http://dret.net/lectures/ssme-spring07/VargoReading-Recommended.pdf ‘Evolving to a New Dominant Logic for Marketing’] , "Journal of Marketing" 68 (January): 1 – 17.
* Vargo, Stephen L. and Lusch, Robert F. (2004b) [http://www.business.otago.ac.nz/Marketing/Events/OtagoForum/Papers/FourMyths.pdf ‘The Four Service Marketing Myths: Remnants of a Goods-based Manufacturing Model’] , "Journal of Service Research" 6(4): 324 – 335.