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S-D Logic Service-Dominant Logic: Clarifications and Elaborations Presentation to: Frontiers in Service Conference July 1, 2006 Stephen L. Vargo, University.

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Presentation on theme: "S-D Logic Service-Dominant Logic: Clarifications and Elaborations Presentation to: Frontiers in Service Conference July 1, 2006 Stephen L. Vargo, University."— Presentation transcript:

1 S-D Logic Service-Dominant Logic: Clarifications and Elaborations Presentation to: Frontiers in Service Conference July 1, 2006 Stephen L. Vargo, University of Hawaii at Manoa

2 S-D Logic 2 Related Work Vargo, S. L. and R.F. Lusch (2004) Evolving to a New Dominant Logic of Marketing, Journal of Marketing, 68 (1), Harold H. Maynard Award for significant contribution to marketing theory and thought. Vargo, S.L. and R. F. Lusch (2004) The Four Service Myths: Remnants of a Manufacturing Model Journal of Service Research Vargo, S.L. and F.W. Morgan (2005) An Historical Reexamination of the Nature of Exchange: The Service Perspective, Journal of Macromarketing, (in Press June) Lusch, R.F. and S.L. Vargo, editors (2006), The Service-Dominant Logic of Marketing: Dialog, Debate, and Directions, Armonk, NY: M.E. Sharpe

3 S-D Logic Related Work (Continued) Lusch, R.F., S.L. Vargo(2006), The Service-Dominant Logic of Marketing: Reactions, Reflections, and Refinements, Marketing Theory, 6 (3), Lusch, R.F., S.L. Vargo, and M. OBrien (2006),Competing Through Service: Insights from Service- Dominant Logic, Journal of Retailing, (forthcoming) Lusch, R.F., S.L. Vargo, and A. Malter (2006), Marketing as Service-Exchange: Taking a Leadership Role in Global Marketing Management, Organizational Dynamics, (forthcoming) Lush, R. F. and S. L. Vargo, editors (2007) Evolving to a New Dominant Logic for Marketing: Continuing the Debate and Dialog, Special Issue of the Journal of the Academy of Marketing Science, (forthcoming)

4 S-D Logic S-D Logic: What it is A logic that views service, rather than goods, as the focus of economic and social exchange i.e., Service is exchanged for service Essential Concepts and Components Service: the application of competences for the benefit of another entity Service (singular) is a processdistinct from services, which implies intangible goods Shifts focus to operant resources from operand resources Value is always co-created Sees all economies are service economies All businesses are service businesses

5 S-D Logic Evolution of Marketing Thought To Market (Matter in Motion) Market To (Management of Customers & Markets ) Market With (Collaborate with Customers & Partners to Create & Sustain Value) Through

6 S-D Logic Foundational Premises FP1. The application of specialized skill(s) and knowledge is the fundamental unit of exchange. Service (application of skills and knowledge) is exchanged for service FP2. Indirect exchange masks the fundamental process of exchange. Micro-specialization, intermediaries, and money obscure the service-for-service nature of exchange FP3. Goods are distribution mechanisms for service provision. Activities render service; things render service (Gummesson 1995) : goods are appliances

7 S-D Logic Foundational Premises (2) FP4. Knowledge is the fundamental source of competitive advantage Operant resources, especially know-how, are the essential component of differentiation FP5. All economies are service economies. Service only now becoming more apparent with increased specialization and outsourcing FP6. The customer is always a co-creator of value. There is no value until offering is used experience and perception are essential to value determination

8 S-D Logic 8 Foundational Premises (3) FP7. The enterprise can only make value propositions. Since value is always determined by the customer (value-in- use)it can not be embedded through manufacturing (value-in-exchange) FP8. A service-centered view is inherently customer oriented and relational Operant resources being used for the benefit of the customer places the customer in the center of value creation and implies relationship. FP 9. Organizations exist to combine specialized competences into complex service that is demanded in the marketplace. The firm is an integrator of macro and micro-specializations

9 S-D Logic 9 Difficult Conceptual Transitions Goods-Dominant Concepts Goods Products Feature/attribute Value-added Profit maximization Price Equilibrium systems Supply Chain Promotion To Market Product orientation Transitional Concepts Services Offerings Benefit Co-production Financial Engineering Value delivery Dynamic systems Value-Chain Integrated Marketing Communications Market to Market Orientation Service-Dominant Concepts Service Experiences Solution Co-creation of value Financial feedback/learning Value proposition Complex adaptive systems Value-creation network/constellation Dialog Market with Service-Dominant Logic (Consumer and relational)

10 S-D Logic What S-D Logic is Not A Theory S-D logic is a logic, an approach, a lens, but not a theory Could be used as the foundation for a theory Reflection of the transition to a services era In S-D logic, all economies are service economies Justified by the Superior Customer Responsiveness of Services Companies Services companies just as likely to operate from G-D logic Restatement Of The Consumer Orientation Consumer orientation is evidence of G-D logic, not a fix to it Consumer orientation is implied by S-D logic

11 S-D Logic What S-D Logic is Not (2) Alternative To The Exchange Paradigm Problem with exchange paradigm is assumption of exchange of output, not the notion of exchange S-D logic says service (a process) is exchanged with service Equating Service with Provision of Functional Benefits Co-creation of value implies service best understood in expressive and experiential terms Applicable only to marketing management More generally, could serve as foundation for theory of markets and marketing

12 S-D Logic 12 Why Service? Accuracy: It is precisely service that we are talking about What is exchanged is the application of specialized knowledge and skills (competences) for the benefit of another partyi.e., Service Thought-leadership: Service marketing concepts and insights transforming marketing thought Transaction Relationship (Manufactured) Quality Perceived (Service) Quality Brand Equity Customer Equity Consumer Prosumer (co-producer of value)

13 S-D Logic Why Service? Continuity: Does not require rejecting the exchange paradigm Just change in focus from units of outputs to processes Normatively Compelling: The purpose of economic exchange is mutual service Implies managerial, macro, and ethical standards Purpose of the firm is to serve…

14 S-D Logic What S-D Logic Might be Foundation of a paradigm shift in marketing Perspective for understanding role of markets in societyTheory of Markets Basis for general theory markets and marketing Basis for service science Foundation for theory of the firm Reorientation for economic theory

15 S-D Logic Thank You! For More Information on S-D Logic visit: We encourage your comments and input. Will also post: Working papers Teaching material Related Links Steve Vargo: Lusch:

16 S-D Logic S-D Logic Can Direct Macro/Public Policy From goods to service(s). Tax policy to encourage firms to retain tangible goods and sell service flows? From tangible to knowledge resources. Tax policy to encourage investments in education and skill development vs. housing. From operand to operant resources. Public policy to encourage collaboration vs. competition. From value in exchange to value in use. Public data collection on value in use and home production.

17 S-D Logic The Inversion Products (units of output) Goods Services (Intangible goods) Service (processesapplied competences) Direct Indirect (Goods--Appliances) Goods Logic Service Logic

18 S-D Logic 18 Implications of a Service- Exchanged-For-Service Paradigm Academic Unifyingorganized around the common denominator (mutual service provision) Unique Marketing Origininternally generated, rather than inherited Resource-Centeredbuilds on relative resource-expanding nature of operand vs. resource-depleting nature of operant resources Value-definingshifts focus to value-in use Logically Divisible--Allows sub-discipline of direct service provision Promotes researchprovides clear links among firm, customer, society, value, etc Micro implicationsMakes service-based concepts central/applicable to marketing IHIP as it applies to value creation/all of marketing Macro implicationsSocial role of Marketing Value–creating Resource-expanding

19 S-D Logic An S-D Logic Definition of Marketing Marketing is the process in society and organizations that facilitates voluntary exchange through collaborative relationships that create reciprocal value through the application of complementary resources. Therefore marketing can be viewed as the means by which societies are able to create value through the voluntary exchange of knowledge and skills.

20 S-D Logic Implications of a Service- Exchanged-For-Service Paradigm Practice Managerially compellingfocuses on mission (service) Demands customer orientation/value-in-use Implies relationship marketing Role of operant resources Implies better customer experiences/fairer treatment Promotes social responsibility Marketing has social purpose Education Easily understandablerequires fewer adjustments Normative prescripts (e.g., customer orientation/relationship) implied by framework Invitingincreased attractiveness off discipline Society Promotes social responsibilitypurpose is to: Serve individuals/society/organizations Facilitate value enhancement/resource expansion through exchange

21 S-D Logic Evolving Toward a Service-Dominant Lexicon Operand Resources Tangible Value Added Goods Products Transactional Units of Output Promotion Brand Equity Profit Maximization Operant Resources Intangible Co-creation of value Service Experiences Relational Processes Conversation/Dialog Customer Equity Financial Feedback G-D Focus S-D Focus

22 S-D Logic Thank You! For More Information on S-D Logic visit: We encourage your comments and input. If you would like your working papers or teaching material and/or links to your research displayed on the website, please us Steve Vargo: Lusch:

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