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S-D Logic The Service-Dominant Logic of Marketing Presented By:Presented To: Robert F. LuschMMA Annual Conference Professor of MarketingChicago, Illinois.

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Presentation on theme: "S-D Logic The Service-Dominant Logic of Marketing Presented By:Presented To: Robert F. LuschMMA Annual Conference Professor of MarketingChicago, Illinois."— Presentation transcript:

1 S-D Logic The Service-Dominant Logic of Marketing Presented By:Presented To: Robert F. LuschMMA Annual Conference Professor of MarketingChicago, Illinois University of Arizona March 16, 2006

2 S-D Logic 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 S-D Logic 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 S-D Logic The Traditional Logic: Operand Resource Employee Need to Persuade Need to Extract Work Need to Tightly Manage & Control Need to Extract Maximum Productivity Consumer Need to Persuade Need to Extract Money Need to Capture & Control Need to Extract Maximum Profit

5 S-D Logic 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 S-D Logic Growth of Markets & Marketing Institutions Service for Service Goods, Money, Organizations are Intermediaries

7 S-D Logic Evolving To a New Frame of Reference To Market (matter in motion) Market To (management of customers & markets) Market With (collaborate with customers & partners to produce & sustain value) Through Future

8 S-D Logic Conceptual Transitions in Marketing G-D LogicTransitionalS-D Logic GoodsServices Service ProductsOfferings Experiences Feature/attributeBenefit Solution Value-addedCo-production Co-creation of value Profit maximizationFinancial Engineering Financial feedback PriceValue delivery Value proposition Equilibrium systemDynamic system Complex adaptive system Supply ChainValue-Chain Value-creation network PromotionIMC Dialog To MarketMarket to Market with Product orientationMarket Orientation S-D Orientation

9 S-D Logic Collaborate With Customers & Partners Collaborate: Customers & Partners Overcome Resistances Co-Create Service Offering Co-Create Value Proposition Co-Create Conversation & Dialogue Co-Create Value Processes & Network Draw Upon Resources (internal & external) S-D Logic as a Theory of Marketing

10 S-D Logic The Nature of Marketing? Division of Labor Exchange Change Increasing Degree of Change in Society

11 S-D Logic Where Do We Go From Here? Nature & Scope of Marketing Commercial Society World of Work World of Consumption ConditionDivision of Labor Specialized Competences MeansExchangeLabor Market Consumer & Business Market EndChangeValue

12 S-D Logic Where Do We Go From Here? Frontiers in Research Co-Production & Collaboration Dialog & Conversation Value Propositions & Networks Feedback & Adaptation Business Processes & Service Flows Knowledge & Competitive Advantage Meaning of Consumption & Work Markets, Marketing & Class Conflict Marketing & Macroeconomic Policy

13 S-D Logic Marketing Curriculum Reform Fundamental of Marketing (service dominant) Competency Building and Competitive Advantage Managing Cross Functional Business Processes Designing Value Propositions & Pricing Strategy Integrated Marketing Communication Managing Value Networks & Constellations Consumer Buying, Usage & Co-Creation Designing and Delivering Service Flows The Role of Marketing in Society

14 S-D Logic 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. Robert F. Lusch

15 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:

16 S-D Logic Timeline of SD-Logic Initial Draft 1995 Refinement Summer 1999 Submission Summer 2000 Submission Summer 2001 Submission Summer 2002 Submission Winter 2003 Submission Spring 2003 Paper Accepted Published January 2004 Four major revisions Two editors Six reviewers One strong reviewer advocated from beginning Sixth reviewer became advocate for publishing with commentaries Editor Ruth Bolton coached and guided along the way

17 S-D Logic 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 ofalthough 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 S-D Logic 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 S-D Logic 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. Lusch Resubmission Letter to Editor Stewart

20 S-D Logic 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 S-D Logic 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 S-D Logic 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 S-D Logic 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 others Lusch & Vargo contribute integrative essays dealing with economic and marketing history, public policy, marketing management, and toward a general theory of marketing.

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