Presentation on theme: "The Service-Dominant Logic of Marketing"— Presentation transcript:
1 The Service-Dominant Logic of Marketing Presented By: Presented To:Robert F. Lusch MMA Annual ConferenceProfessor of Marketing Chicago, IllinoisUniversity of ArizonaMarch 16, 2006
2 Advancing Theory: The Role of the Funeral Scientific theories, however, are fundamentally different. They are constructed to be blown apart if proved wrong, and if so destined, the sooner the better. “Make your mistakes quickly” is a rule in the practice of science. I grant that scientists often fall in love with their own constructions. I know; I have. They may spend a lifetime vainly trying to shore them up. A few squander their prestige and academic capital in the effort. In that case – as economist Paul Samuelson once quipped – “funeral by funeral, theory advances.”(Edward O. Wilson. Consilience: the Unity of Knowledge. 1998; p. 52).
3 Contrasting G-D Logic and S-D Logic Goods-dominant logic is similar to Theory X management where the worker is treated as someone that has to be controlled and managed. Goods- dominant logic viewed the consumer as someone to control and manage. S-D logic views the customer as a collaborative partner and co-creator of value. In a way it is similar to Theory Y management.
4 The Traditional Logic: Operand Resource EmployeeNeed to PersuadeNeed to Extract WorkNeed to Tightly Manage & ControlNeed to Extract Maximum ProductivityConsumerNeed to PersuadeNeed to Extract MoneyNeed to Capture & ControlNeed to Extract Maximum Profit
5 All Exchange is Service Centered “the great economic law is this: Services are exchanged for services…. It is trivial, very commonplace; it is, nonetheless, the beginning, the middle, and the end of economic science….” Frederic Bastiat 1860“services are the application of specialized competences (knowledge and skills) through deeds, processes, and performances for the benefit of another entity or the entity itself.” - (Vargo and Lusch 2004)
6 Growth of Markets & Marketing InstitutionsInstitutionsInstitutionsAs markets grow we develop and impact institutions in society. Relationships are at the core of these institutions. (next exhibit)Goods, money, organizations as intermediaries (two exhibits forward).Service for ServiceGoods, Money, Organizations are Intermediaries
7 Evolving To a New Frame of Reference To Market(matter in motion)Market To(management ofcustomers &markets)Market With(collaborate withcustomers & partnersto produce &sustain value)Through Future
8 Conceptual Transitions in Marketing G-D Logic Transitional S-D LogicGoods Services ServiceProducts Offerings ExperiencesFeature/attribute Benefit SolutionValue-added Co-production Co-creation of valueProfit maximization Financial Engineering Financial feedbackPrice Value delivery Value propositionEquilibrium system Dynamic system Complex adaptive systemSupply Chain Value-Chain Value-creation networkPromotion IMC DialogTo Market Market to Market withProduct orientation Market Orientation S-D Orientation
9 Resources (internal & external) Draw UponResources (internal & external)CollaborateWithCustomers &PartnersCo-CreateValuePropositionCo-CreateServiceOfferingCollaborate:Customers &PartnersCo-CreateValue Processes &NetworkCo-CreateConversation& DialogueOvercomeResistancesS-D Logic as aTheory of Marketing
10 The Nature of Marketing? ChangeDivision ofLaborExchangeIncreasing Degree of Change in Society
11 Where Do We Go From Here? Nature & Scope of Marketing Commercial SocietyWorld of WorkWorld of ConsumptionConditionDivision of LaborSpecialized CompetencesMeansExchangeLaborMarketConsumer & Business MarketEndChangeValue
12 Where Do We Go From Here? Frontiers in Research Co-Production & CollaborationDialog & ConversationValue Propositions & NetworksFeedback & AdaptationBusiness Processes & Service FlowsKnowledge & Competitive AdvantageMeaning of Consumption & WorkMarkets, Marketing & Class ConflictMarketing & Macroeconomic Policy
13 Marketing Curriculum Reform Fundamental of Marketing (service dominant)Competency Building and Competitive AdvantageManaging Cross Functional Business ProcessesDesigning Value Propositions & Pricing StrategyIntegrated Marketing CommunicationManaging ValueNetworks & ConstellationsConsumer Buying, Usage & Co-CreationDesigning and Delivering Service FlowsThe Role of Marketing in Society
14 Postscript“The fundamental purpose of the corporation is not wealth creation. It is job creation and collaborating with all stakeholders (including the customer) to co-create value.”Robert F. Lusch“The extent of the market may be a function of the division of labor; however if society does not benefit from the division of labor and the fruits it bears then markets and marketing will be replaced by other institutions.”
15 For More Information on S-D Logic visit: Thank You!For More Information on S-D Logic visit:sdlogic.orgWe 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 usSteve Vargo: Bob Lusch:
16 Timeline of SD-Logic Four major revisions Two editors Six reviewers Initial Draft 1995RefinementSummer 1999 SubmissionSummer 2000 SubmissionSummer 2001 SubmissionSummer 2002 SubmissionWinter 2003 SubmissionSpring 2003 Paper AcceptedPublished January 2004Four major revisionsTwo editorsSix reviewersOne strong reviewer advocated from beginningSixth reviewer became advocate for publishing with commentariesEditor Ruth Bolton coached and guided along the way
17 Is It All About Services: A Paradigm Inversion (1999) “While your manuscript has interesting ideas, the current positioning of the paper leaves one feeling that there is not much new in the paper.” - JM Editor David Stewart (November 1999)“The author(s) are to be applauded for taking on such an extremely ambitious essay. To propose a true Khunian paradigm shift in marketing and to succeed is to try to do something that no theoretical paper has achieved that I am aware of—although historians of science will ultimately be the judges of such matters.” JM Reviewer (November 1999)"Every once in a while a paper comes along that is truly exciting--that has the ability to change the way people think. This is one of those papers. If this paper is published in JM, then it has the opportunity to be a classic in our field. I wish that I had written it.” JM Reviewer (November 1999)
18 Is It All About Services: A Paradigm Inversion (2000) “The primary concern of the reviewers remains focused on the incremental contribution of the paper.”“…it is probably too strong to conclude that all goods represent services in disguise.”“…identify the boundary conditions of your premises.”-Editor David Stewart
19 Is It All About Service (2001) Revision of this manuscript has taken longer than intended. However, we should mention that one of the reasons it has taken ten months to complete this revision is that we kept trying to revise based on the individual comments of the reviewers and finally decided to start anew. Importantly the suggestion of reviewer #5 to organize the manuscript around a set of propositions (and your mentioning of this suggestion in your letter of September 19, 2000) while simultaneously encouraging us to significantly reduce the length of the manuscript led us in this direction. For your information the manuscript has been reduced by approximately 30%. Consequently, this manuscript is almost a total rewrite and is now organized around eight key propositions from which we derive thirteen managerial and societal implications.Steven L. Vargo & Robert F. LuschResubmission Letter to Editor Stewart
20 Transition & Convergence: From an Output to a Process Centered View of Marketing (2002) “All three reviewers praise you for undertaking the challenging task of writing a paper that synthesizes a diverse marketing literature (over a substantial period of time)—and attempts to crystallize the debate about the meaning and direction of marketing.”“As you may recall, I invited a new reviewer (Reviewer 6)…He/she found the paper “interesting and provocative” and rightly observes that it is unlikely (and perhaps undesirable) for the reviewers to converge in their opinions.”“I ask you to create a shorter and more focused paper (that retains your key arguments). Then, if your paper is accepted for publication, it can provide the basis for invited commentaries by distinguished scholars.”- Editor, Ruth Bolton
21 Evolving to a New Dominant Logic for Marketing (2004) Marketing inherited a model of exchange from economics, which had a dominant logic based on the exchange of “goods,” which usually are manufactured output. The dominant logic focused on tangible resources, embedded value, and transactions. Over the past several decades, new perspectives have emerged that have a revised logic focused on intangible resources, the co-creation of value, and relationships. The authors believe that the new perspectives are converging to form a new dominant logic for marketing, one in which service provision rather than goods is fundamental to economic exchange.Abstract, Journal of Marketing (January 2004), p.1
22 Invited Commentaries: Day, Deighton, Narayadas, Gummesson, Hunt, Prahalad, Rust, Shugan Vargo & Lusch (2004) observe that an evolution is underway toward a new dominant logic for marketing. The new dominant logic has important implications for marketing theory, practice, and pedagogy, as well as for general management and public policy. … The ideas expressed in the article and the commentaries will undoubtedly provoke a variety of reactions from readers of the Journal of Marketing.- Ruth Bolton, Editor, Journal of Marketing (2004)
23 The Service-Dominant Logic: Dialog, Debate and Directions M.E. Sharpe (2006)Distinguished Group of Scholars Identify areas of Consensus, Dissent, and Future Directions.Essays contributed by Achrol, Arnould, Brodie, Day, Gronroos, Gummesson, Holbrook, Hunt, Jaworski, Kohli, Kotler, Levy, Penzola, Price, Oliver, Rust, Sawhney, Wilkie, Woodruff, and othersLusch & Vargo contribute integrative essays dealing with economic and marketing history, public policy, marketing management, and toward a general theory of marketing.