S-D Logic Relationship: Toward Service-Dominant Logic Transcendence and Unification Presentation to Relationship Marketing Summit December 13, 2007 Robert.

S-D Logic

Relationship: Toward Service-Dominant Logic Transcendence and Unification

Presentation toRelationship Marketing Summit December 13, 2007

Robert F. Lusch, University of ArizonaStephen L. Vargo, University of Hawai’i at Manoa

S-D Logic

What We Want to Accomplish

Evidence of Goods-Dominant Logic

Review & Update on S-D Logic

S-D logic as a unifying framework for relationship/marketing

S-D Logic

Reflections of theGoods-Dominant Model Goods-Dominant logic: Make and sell units of output Latent evidence

Marketing is: The “creation of utilities” (Weld)

Time, place, and possession “production function”

Concerned with value distribution Orientations

Production and Product Manufacturing and distribution as value-added

Consumer Orientation Evidence of problem vs. correction

Marketing Management and Consumer Behavior Evidence of decoupling of thought

Alderson’s admonition: “What is needed is not an interpretation of the utility created by

marketing, but a marketing interpretation of the whole process creating utility.”

Sub-disciplinary Divergences Relationship Marketing

S-D Logic

Sub-disciplinary Divergences and Convergences Business-to-Business Marketing

From differences Derived demand, professional buyers, fluctuating demand, etc

To emerging new principles Interactivity, relationship, network theory, etc

Service(s) Marketing From differences:

Inseparability, heterogeneity, etc. To emerging new principles:

Relationship, perceived quality, customer equity, etc. Other Sub-disciplines Other Intra-marketing initiatives

e.g., interpretive research, Consumer culture theory, etc. From deterministic models to emergent properties From products to experiences From embedded value to individual meanings and life

themes/projects

S-D Logic

A Partial Pedigree for S-D Logic

Services Marketing e.g., Shostack (1977);

Relationship Marketing Berry (1983); Gummesson (1994) ; Gronroos (1994);

etc. Theory of the firm

Penrose (1959) Core Competency Theory

(Prahalad and Hamel (1990); Day 1994) Resource-Advantage Theory and Resource-Management

Strategies Hunt (2000; 2002); Constantin and Lusch (1994)

Network Theory (Hakansson and Snehota 1995)

Interpretive research and Consumer Culture theory (Belk, Wallendorf, Sherry 1989; Wallendorf & Arnould

1991) Co-creation, Customer, competence/experience

(Prahalad and Ramaswamy 2000)

S-D Logic

Evolving…Service-Dominant Logic

Service, rather than goods, as the basis 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 process—distinct from “services”—

particular types of goods Shifts primary focus to “operant resources” from “operand

resources” Value always co-created Sees goods as appliances for service delivery Implies all economies are service economies

All businesses are service businesses

Operates at paradigmatic, pre-theoretical level

S-D Logic

S-D Radically Challenges Core Assumptions

S-D Logic

The Evolution of Marketing

To Market(matter in motion)

Marketing To(management of

customers &markets)

Marketing With(collaborate with

customers & partnersto produce & sustain value)

Through 1950 1950-2010 Future

S-D Logic

Revised Foundational PremisesFP1 The application of

specialized skill(s) and knowledge is the fundamental unit of exchange.

Service is the fundamental basis of exchange.

FP2 Indirect exchange masks the fundamental unit of exchange.

Indirect exchange masks the fundamental basis of exchange.

FP3 Goods are a distribution mechanism for service provision.

Goods are distribution mechanisms for service provision.

FP4 Knowledge is the fundamental source of competitive advantage

Operant resources are the fundamental source of competitive advantage

FP5 All economies are services economies.

All economies are service economies.

S-D Logic

Revised Foundational PremisesFP6 The customer is always a

co-producer The customer is always a co-creator of value

FP7 The enterprise can only make value propositions

The enterprise can not deliver value, but only offer value propositions

FP8 A service-centered view is customer oriented and relational.

A service-centered view is inherently customer oriented and relational.

FP9 Organizations exist to integrate and transform microspecialized competencies into complex services that are demanded in the marketplace

All economic and social actors are resource integrators

FP10

Value is always uniquely and phenomenological determined by the beneficiary

S-D Logic

S-D Marketing

CUSTOMERS & PARTNERS

CU

STO

MER

S

PA

RTN

ER

S

S-D Logic

Provider of Operand &

Operant Resources

Direct Service

Provision

Service Beneficiary

Service Provision via Goods

Value in Context

Cocreation

Integration With Public-

Facing Resources

Integration With Public-

Facing Resources

Integration With Private-

Facing Resources

Integration With Private-

Facing Resources

Coproduction

The Nature of Coproduction and Cocreation

S-D Logic

Service Exchange through Resource Integration and Value Co-creation

Resource Integrator/Beneficiary(“Firm”)

Resource Integrator/Beneficiary(“Customer”)

Value

Co-

crea

tion

Market-facing and

public and private

resources

Serv

ice

Market-f

acing and

public and p

rivate

reso

urces

$ (Service Rights)

S-D Logic

Common Misconceptions A Theory

S-D logic is a logic, an approach, a lens, but not a theory Could be foundation for a general theory of the market

and marketing A Reflection of the transition to a services era

In S-D logic, all economies are service economies and all businesses are service businesses

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

Alternative To The “Exchange Paradigm” Problem with exchange paradigm is notion of exchange

of output, not the notion of exchange At issue is the “transaction,” not exchange

Exchange is a relational concept -- reciprocity S-D logic says service (a process) is exchanged with

service

S-D Logic

Relationship Orientations G-D Logic

Positive: repeated transactions (encounters) Normative: Hug your customer and channel partners

S-D Logic Positive

Relationship inherent (FP8) Service as benefit – provided by one party, determined

by the other Service as reciprocal Value as co-created

Network-with-network Value as phenomenological: “value-in-use” and “value-

in-context” Economic (and social) actors as resource integrators

Normative: collaborate and co-create for mutual benefit

S-D Logic

The New Geometry of Marketing?

Valu

e C

o-cr

eatio

nValue C

o-creation

Value Co-Creation

Resource Integration

Resistance Reduction

Exchange

Change

Customers

Nee

ds

Resources

Resistances

RI

Stakeholders

Nee

ds

Resources

Resistances

RI

S-D Logic

For More Information on S-D Logic visit:

sdlogic.net

We encourage your comments and input. Will also post:• Working papers

• Teaching material• Related Links

Steve Vargo: [email protected] Bob Lusch: [email protected]

Thank You!

S-D Logic

Service Exchange through Resource Integration and Value Co-creation

Resource Integrator/Beneficiary(“Firm”)

Resource Integrator/Beneficiary(“Customer”)

Value

Co-

crea

tion

Value Configuration

Den

sity

S-D Logic

Organizations Evolving to be Service-Dominant

Slow Acting

Fast Acting

Slow Thinking

Fast Thinking

Bureaucracy

Service-Ecosystem Source:

Lusch & Webster

S-D Logic

20

Difficult Conceptual Transitions

Goods-Dominant ConceptsGoods

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

Marketing to

Market Orientation

Service-Dominant ConceptsService

Experiences

Solution

Co-creation of value

Financial feedback/learning

Value proposition

Complex adaptive systems

Value-creation network/constellation

Dialog

Marketing with

Service-Dominant Logic(Consumer and relational)

S-D Logic

Marketing as Resource Integration

S-D Logic

Breadth of Knowledge Integration

Category Time Cited/Mentioned

*as of December 2006

Social Science Citation Index 65

Business Source Premier 105

Google Scholar 264

Google.com 550Conferences* (call for papers and presentations) 22

Marketing Courses* (subjects and reading lists) 13

Website Posts* (e.g., blogs)

172

S-D Logic

Integration in Marketing Literature

Journal of Marketing (7)

Journal of Service Research (7)International Journal of Service

Industry Management (7)European Journal of Marketing (5)Industrial Marketing Management

(5)Journal of Business Research (4)Journal of Retailing (3)Marketing Science (3)International Marketing Review

(2)Journal of Business-to-Business

Marketing (2)Journal of Public Policy &

Marketing (2)

Numbers based on Social Science Citation Index.

Citations

S-D Logic

Main Sub-themes of Integration

Three main sub-themes underlying the knowledge integration focus on core concepts of S-D logic:

The categorization is adapted from marketing schools of thought presented by Shaw and Jones (2005). The numbers represent selected citations relating to or elaborating upon S-D logic

(Vargo and Lusch 2004).

S-D Logic

Service-Dominant Logic:Toward the Unification of Marketing

Presented by: Robert F. Lusch, University of ArizonaStephen L. Vargo, University of Hawaii

Presented to: Relationship Marketing Summit Buenos Aires, Argentina

December 13, 2007

S-D Logic

THANK YOU

For more information on S-D logic visit: sdlogic.net

For permission to use any information in these slides please e-

mail: [email protected] or [email protected]