Service Dominant Logic Impacts Both Strategic Marketing Relationship Marketing Marketing Essay

Published Date: 23 Mar 2015

The Stephen Vargo and Robert Lusch paper "Evolving to a New Dominant Logic for Marketing" (2004, Journal of Marketing) redefines and redirects the age-old economic view of goods and services. Their paper states, "Over the past several decades, marketing has been evolving toward a new dominant logic... The evolving logic represents a shift away from the exchange of tangible output (goods) toward the exchange of services, which are defined as the application of specialized competences (knowledge and skills), through deeds, processes, and performances for the benefit of another entity or the entity itself."

This philosophy of marketing argues that firms are not really providing goods, but are actually rendering a service to consumers through their goods. This new service dominant logic view of marketing has already made a huge impact on both the strategic marketing and relationship marketing of firms and will continue to further impact future marketing strategy.

For nearly a century, firms have placed the marketing emphasis on their products. Companies focused on the benefits and competitive advantages that their specific product provided. Whether it was a car, a toaster or a can of soda, the marketing stemmed from what was great about that product. This goods dominant logic was based on economics and the movement of goods from producer to consumer. This philosophy was unchallenged until the early 90s. Then it was questioned as the discrepancies between goods marketing and service marketing came into view.

This philosophy of Vargo and Lusch redefines marketing so that it is primarily, a service providing activity. "Evolving to a New Dominant Logic for Marketing" states that all firms sell services to consumers and their goods are only the medium for their service to the customer. One example they provided is a razor explaining that companies do not sell the razor, but sell the service of a barber through the use of the razor.

The service dominant logic view of marketing shifts the emphasis from product to consumer service. Instead of offering the consumer a reliable car, the firm is providing the service of consistent mobility to the consumer. Instead of a multi-level toaster, the firm is offering the service of a warm breakfast; and instead of a tasty can of soda, the firm is giving the consumer a thirst-quenching service.

This shift from product to consumer means that firms will need to have more of a relationship than ever with their potential consumers. Instead of providing consumers with a physical good, they are meeting their needs through a specific service, so they will need to understand their wants, desires and lifestyles.

Firms will have to get intimate with their target market and let their feedback guide the firm's decisions on future offerings. This service dominant logic relationship will have massive impact on both their strategic marketing and relationship marketing.

THE SERVICE DOMINANT LOGIC'S IMPACT ON STRATEGIC MARKETING

Firms that currently have a strong practice of strategic marketing are already focusing the overall direction of their company with consumer targeting. They are using demographic, geographic and psychographic segmenting to pinpoint their target market. This means they are striving to know the values, attitudes and lifestyles of their target and what motivates them to purchase. It is important for these firms to look at the company from the consumer's point of view.

A strong belief in the service dominant logic will take these firms to the next level of consumer consideration. As they make their strategic plan, they will need to ask questions like: What needs or desires are we meeting with our service? What can our service do to improve our customers' lives? What trends or changes in the future will lead potential new customers to need our service?

Once they have a realistic grasp on these answers, then they can develop their strategic marketing plan again with the service-dominant state of logic.

As they look at their situational analysis and where the company currently is, they should look at it from the service dominant logic and determine how their service currently fits in the economic environment. Instead of studying a product profile - they will be looking at the service received through their product and how their consumers perceive the value of it.

As they project where they want their company to go and the firms' objectives, this service dominant logic will open up their views and direction to possibly improve their offerings. Over time, it may even lead them to look for new opportunities to provide their customers with the service they desire versus just a physical good. One example of this is an automotive company. When they adopt the service dominant logic, they may see that it is not the physical good (the car) that is what their customers value, but the service of being transported reliably. This in turn may lead them to a new offering of a car rental service or a transportation service providing customers the service of reliable transportation and not the actual car.

Another good example of this is what Apple has done with the iphone. While it is a physical good, they are really providing the service of communications to their customers. When looked at from the service angle, one can see where a customer may want the service of the applications and not necessarily the wireless. From this idea, the ipod touch developed to offer some of the services without the wireless phone aspect. Again from the service dominant viewpoint, the newly introduced ipad developed. It is geared toward what services the consumer values and not necessarily the manufactured product.

THE SERVICE DOMINANT LOGIC'S IMPACT ON RELATIONSHIP MARKETING

Firms that rely on relationship marketing are also intently focused on the consumer and strive for customer retention and satisfaction. If service dominant logic is factored in, it again takes this form of marketing to a new level. Firms will be reaching out to these consumers to form a long-term relationship based on the service provided versus a physical good. Relationship marketing recognizes the value of keeping customers coming back. The service dominant logic further emphasizes this relationship because it redirects a firm's objective from "making the sale" to maintaining a strong and consistent relationship with the customer.

This new logic redefines this relationship between the consumer and the firm. In traditional goods dominant perspective, the products and the consumers are separate. However in service dominant logic, the consumer becomes a "co-producer" of the service offered by continuously providing feedback. When a consumer purchases a good, he can only benefit from the service by using that product and adapting it to his needs. It becomes a continuous process of where the consumer is involved in developing the value of the service versus a separation of production and consumption. If the serviced dominant logic is adopted, firms will have the consumer as an active participant in the process.

As firms begin to change marketing perspectives, they are moving away from gearing messages toward consumers and instead engaging in dialog with their consumers. They are digging deep into the relationship of firm and consumer and really getting to know the later. With recent advancements in technology, they are able to gather information about their consumers easier than ever.

Internet marketing is the fastest growing medium to gather information on consumers both through feedback from the firm's own website as well as search engine research marketing. Companies are finding out what consumers are searching on a daily basis, what motivates them to click-through and what motivates them to buy. In addition, companies have greater access to consumer feedback through their web responses as well as social media networks. Facebook and Twitter give consumers a worldwide forum to talk about value of services and their likes and dislikes.

Advancements in marketing research also provide much needed information about consumers and their needs. Everything from new test market technology to focus groups contributes to knowledge of consumers. This knowledge makes it easier for a company to adopt the service dominant logic because they begin to understand what value the consumer places on their service offering and take their feedback into consideration.

Service dominant logic affects every aspect of their marketing plans from research to implementation. After firms gather information on their customers and their feedback, they will have to use this information to reach out to their customers in a way they never have before.

For example, this new philosophy is recently seen through more and more creative messages. One doesn't buy a mattress; one buys "a good night's sleep." One doesn't buy a frozen dinner; one buys "more time with her family." It's not the tennis shoes for sale; it's the service of a better game or a better workout that results when the consumer extracts the value from the new shoes. Marketing managers are offering services, not just products, through their creative message.

IN CONCLUSION

In the conclusion of their article "Evolving to a New Dominant Logic for Marketing," Vargo and Lusch state that "consumers will develop relationships with organizations that can provide them with an entire host of related services over an extended period." (2004, Journal of Marketing, p.13).

To some extent, that is already happening in today's marketplace. What they have presented in their paper is perhaps not such a new way of thinking, but more of a description of what's already taking place in today's marketplace.

The service dominant perspective has really been the evolution of marketing over the past 100 years. Marketing philosophies have evolved from the idea of taking things to market to a practice of marketing to customers and currently to a practice of marketing with customers.

Stephen Vargo and Robert Lusch have pinpointed this evolution process in this paper and have defined it as "service dominant logic of marketing." They believe the practice of marketing will shift from bringing goods to the market to marketing services to consumer. This shift will put more emphasis on the relationship of the firm and the consumer. They even called the consumer a "co-creator" of the project.

As firms and their marketing managers begin to see this evolution of marketing and shift their philosophies to the service dominant logic, it will have a tremendous impact on both strategic marketing and relationship marketing.

Firms that are strong practitioners of strategic marketing will have to look ahead to their objectives based on the service they provide. They will also have to be flexible to adjust those objectives as they receive feedback from their customers. As they proceed with their strategic marketing, they will have to further develop the relationship with their consumers and be prepared to improve upon their offerings or change them to meet the value needs of their customer.

Companies that practice relationship marketing will have to redefine the relationship between the firm and the customer. As the customer becomes a "co-producer" in the process, these firms will have to focus more than ever on retaining that customer and maintaining that relationship that keeps them coming back for their service.

As the service dominant logic of marketing creeps its way into both strategic and relationship marketing, firms realize they would benefit from placing a strong emphasis on building brand relationships with all of their consumers and creating a service-dominant firm philosophy centered around this brand value co-creation.

The revelations in "Evolving to a New Dominant Logic for Marketing," has made and continues to make an impact on the way firms view their marketing philosophy. By adopting this new perspective, firms will have a better two-way relationship with their customers. It could also improve service offerings and possible open up new service ideas.

This deeper customer knowledge and understanding becomes a huge competitive advantage for these companies. The more dialog they have with customers, the more they can improve their service offerings. The more they improve their services, the better value for the consumer. It becomes a much more efficient way to market.