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 Lynn 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 January 2004 issue of 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 led by David Ballantyne met to discuss these issues at The Otago Forum (2005, 2008, 2011), with special issues of major marketing journals emerging, as a consequence. Other international interest emerged that broadened to include service management and service science. This broadened interest is reflected in the Naples Forum on Service (2009 and 2011) that has a special focus on service systems and networks, service science and service-dominant logic. Lusch and Vargo, in 2008 established the Forum on Markets and Marketing (FMM), which was held at the University of New South Wales and in 2010 at Cambridge University. FMM, now a biennial event was established as a service-dominant (S-D) logic-based forum to: (1) explore foundational and theoretical issues related to marketing, including the understanding of markets and marketing systems and (2) further the development of S-D logic.
Key Concepts In order to fully understand Service Dominant Logic it is important to clarify a few key concepts.
Operand and Operant Resources: Operant resources are those resources that act upon other resources to create benefit, such as a firm's competences and capabilities. Operand resources are those resources which must be acted on to be beneficial, such as natural resources, goods, and other generally static matter (Constantin and Lusch 1995; Vargo and Lusch 2004a).
Service vs. Services: S-D Logic (Vargo and Lusch 2008b) makes an important distinction between service (singular) and services (plural). In the S-D Logic literature service is indicating a process while the plural services, is indicating intangible units of output. Service as a process involves using an actor’s resources for the benefit of serving another actor. Stated alternatively service can be thought of as a verb and services as a noun.
Appliances: S-D Logic views goods as transmitters of operant resources (embedded knowledge). That is, the good is the provider of the service to the customer (another operant resource). For example, a can of soup provides the service of food storage and sustenance to the customer. The can of soup is not viewed as being a good, but instead as being the appliance to which the user of the can of soup cocreates value with the provider of the soup.
What is S-D Logic?
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 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. Vargo and Morgan (2005) provide a historical review of economic and philosophical thought that led to the dominant logic surround goods or manufactured output.
S-D Logic is built on ten foundational premises. 8 of these were put forth in the initial Vargo and Lusch 2004a article in the Journal of Marketing. Two additional premises have been added since and appear in their 2008a article in the Journal of the Academy of Marketing Science.
|Foundational Premise||Explanation & Comment|
|FP1||Service is the fundamental basis of exchange.||The application of operant resources (knowledge and skills), “service,” as defined in S-D logic, is the basis for all exchange. Service is exchanged for service.|
|FP2||Indirect exchange masks the fundamental basis of exchange.||Because service is provided through complex combinations of goods, money, and institutions, the service basis of exchange is not always apparent.|
|FP3||Goods are a distribution mechanism for service provision.||Goods (both durable and non-durable) derive their value through use – the service they provide.|
|FP4||Operant resources are the fundamental source of competitive advantage.||The comparative ability to cause desired change drives competition.|
|FP5||All economies are service economies.||Service (singular) is only now becoming more apparent with increased specialization and outsourcing.|
|FP6||The customer is always a cocreator of value.||Implies value creation is interactional.|
|FP7||The enterprise cannot deliver value, but only offer value propositions.||Enterprises can offer their applied resources for value creation and collaboratively (interactively) create value following acceptance of value propositions, but can not create and/or deliver value independently.|
|FP8||A service-centered view is inherently customer oriented and relational||Because service is defined in terms of customer-determined benefit and co-created it is inherently customer oriented and relational.|
|FP9||All social and economic actors are resource integrators.||Implies the context of value creation is networks of networks (resource integrators).|
|FP10||Value is always uniquely and phenomenologically determined by the beneficiary||Value is idiosyncratic, experiential, contextual, and meaning laden.|
Since then, Vargo and Lusch have realized that some of the original FPs could be derived from others and, thus, have identified four FPs from this expanded set of ten as particularly foundational, essentially the axioms of S-D logic. These four FPs are: FP1, FP6, FP9 and FP10.
Extending S-D Logic
The first article on S-D logic (Vargo and Lusch 2004) has already been cited almost 3000 times (Google Scholar, Summer 2012) and motived hundreds of S-D-logic-focused articles, as well as over a dozen journal special issues/sections and a similar number of focused conferences. Many scholars have therefore contributed to the evolution and development of S-D logic.
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 - creating a holistic “service logic” for marketing practice(Lusch and Vargo Marketing Theory, 2006).
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 (Lusch and Vargo Marketing Theory, 2006).
- Vargo, Stephen L.; Lusch, Robert F. : Evolving to a new service dominant logic for marketing. Journal of Marketing. Vol. 68 (January 2004), p. 1.
- Vargo & Lusch 2004a
- Aitken, R. et al. (2006) 'Special Issue on Service-Dominant Logic of Marketing: Insights from The Otago Forum', Marketing Theory 6(3): 275-392.
- Lusch, R. and S. Vargo (2006), "Service Dominant Logic: Reactions, Reflections, and Refinements", Marketing Theory 6 (3), 281-288.
- Lusch, Robert F., Stephen L. Vargo, and Matthew O’Brien (2007), “Competing Through Service: Insights from Service-Dominant Logic,” Journal of Retailing 83(1), pp. 5–18.
- Lusch, Robert F., Stephen L. Vargo, and Gunter Wessels (2008), “Toward a Conceptual Foundation for Service Science: Contributions from Service-Dominant Logic,” IBM Systems Journal 47(January–March), 5-14.
- Lusch, Robert F.; Vargo, Stephen L. & Tanniru, M. (2010) "Service, value networks and learning". Journal of the Academy of Marketing Science 38(1): 19-31.
- Lusch, Robert F. (2011), “Reframing Supply Chain Management: A Service-Dominant Logic Perspective,” Journal of Supply Chain Management, 47, 14–18.
- Shostack, G. L. (1977) ‘Breaking Free from Product Marketing’, Journal of Marketing 41 (April): 73 – 80.
- Vargo, Stephen L. and Lusch, Robert F. (2004a) ‘Evolving to a New Dominant Logic for Marketing’, Journal of Marketing 68 (January): 1 – 17.
- Vargo, Stephen L. and Lusch, Robert F. (2004b) ‘The Four Service Marketing Myths: Remnants of a Goods-based Manufacturing Model’, Journal of Service Research 6(4): 324 – 335.
- Vargo, Stephen F. and Robert F. Lusch, “It's all B2B…and beyond: Toward a systems perspective of the market,” Industrial Marketing Management 40(February 2011), 181-187.
- Stephen L. Vargo and Robert F. Lusch, “From Goods to Service(s): Divergences and Convergences of Logics,” Industrial Marketing Management 37(2008), 254-259.
- Stephen L. Vargo and Robert F. Lusch, “Why Service,” Journal of the Academy of Marketing Science 36(Spring 2008), 25-38.
- Stephen L. Vargo and Robert F. Lusch, “Service-Dominant Logic: Continuing the Evolution,” Journal of the Academy of Marketing Science 36(Spring 2008), 1-10.
- Gronroos, C. (2006), "Adopting a Service Logic for Marketing", Marketing Theory, 6 (3), 317-333.
- Gronroos, C. (2011), "Value co-creation in service logic: A critical analysis", Marketing Theory, 11(3), 279–301.