Evolving to a New Dominant Logic for Marketing
Vargo and Lusch wrote this much cited article in 2004 in Journal of Marketing. My goal in this blog post is to summarize it and (hopefully) make it easier to understand. So keep in mind that all credit goes to the authors, Vargo and Lusch. Likewise and all mistakes, interpretive and other kinds, are to be credited to me
The article that was brought to our attention talk about the new ways of thinking in the field of marketing. Indeed, marketing was always considered as exchange of goods. During this time, the dominant logic of marketing was focused on tangible resources, embedded value and transactions. But over the past several decades, many authors begin to expose the new perspectives that emerged and show marketing in a new light. These new thoughts focused on intangible resources, the co creation of value and relationships. The current stream of thought leans towards looking at marketing as a continuous social and economic process where the value has roots in operant resources.
The authors state that “The relative role of operant resources began to shift in the late 21st century as humans began to realize that skills and knowledge were the most important types of resources”. Beginning in the 1980s, the old rules of marketing analysis was neglected. New attribute have started to appear and show a new path to achieve marketing objectives. We have: relationship marketing, quality management, market, orientation, supply and value chain management, resource management, and networks. Even though these attributes seem intangible, they were been revealed as the real lever for doing marketing. We notice here that interestingly, financial results in this new thought are not the end result, but a test of ‘market hypotheses’ about a value proposition.
The basic premises of the emerging dominant logic are:
- The fundamental units of exchange are knowledge and skills
- The fundamental unit of exchange is masked by the indirect nature of the exchange
- Goods are distribution mechanisms (or vehicles, in a sense) for services
- The fundamental source of competitive advantage is knowledge.
- All economies are service economies.
- The customer is always a co-producer.
- The enterprise can only make value propositions (which the market tests, as above).
- Service centered view is customer oriented and relational.
A fundamental analysis is needed here and the author makes it. It concerns the main difference between goods orientation and services orientation. This article shows us that it not really the good which is important but the service it provides. So marketing must not concentrate on good selling but the main purpose is to know how to achieve the services needed by customers.
A service-centered dominant logic implies that value is defined by and co-created with the consumer rather than embedded in output. A “sense and respond” strategy would make for more successful firms rather than a “make and sell” strategy. In the service oriented view, firms are in a continual process of hypotheses generation and testing. Outcomes (financial results) are primarily a learning tool to help firms understand the value of their offering.
The authors then go on to present six attributes and eight fundamental premises (FPs) which form the patchwork of the emerging dominant logic and help to distinguish the new services oriented dominant logic from the traditional Goods-oriented one. The concept of Operand and Operant Resources is used to make the distinction.
The goods-centered view make the marketers lose their objectives which is to achieve the service the client need. Even the service marketers don’t have solutions with the good-centered view. So Marketer must always think about service but not goods. The Service-Centered view of exchange points to an opposing normative direction. It implies that the goal is to customize offerings, to recognize that the consumer is always a co-producer and to maximize consumer involvement in customization. The authors end by anticipating that a paradigm shift from the Goods-Centered thinking to the Service-Centered thinking is in the works and is poised to have a substantial role in marketing thought.
Comments base on my work experience
I totally agree with the thinking of the authors of this article. I agree because it’s a situation I am currently live in my company and by applying some recommendations, the results are impressive. I work in the electricity transmission network which is a industrial company. My company has a real visibility problem with its clients and is struggling to make an image to the public. After analysis, it turned out that the problem is due to the rigidity of its core business which is electric transport. Electricity is something that our customers need everyday but they do not see the spirit of service is hidden. Today we develop a real strategy of business service. The benefits are numerous: new services have occurred, the visibility of the company is growing and a real relationship of trust with customers forges because now they know that we are there to provide services to improve their daily lives but not just provide electricity.
Discussion about my marketing thinking evolution during the program
My thinking about marketing has really grown during the master program. Coming from scientifique sector, I effectively saw the marketing like a discipline that people can avoid in a company but with this year of marketing I really notice its importance. Even it not reflected in company results, marketing is a reliable indicator about how clients accept or adhere to company business. I today work on a business creation in very competitive industry and i know that it is marketing that will allow me to quickly achieve key success factors and maintain my business in the sector. Today I agree that marketing is a very serious discipline which has its entire place in a company and I think that as any other scientific discipline marketing need to be learned before to be practice.
At the end of this program my level in marketing has really envolve. My first marketing class has quickly change my mind about it and today i really enjoy reading others marketing articles. I specially like the papers of AMA American Marketing Association.
Abdul Hady MOUYIDOU
Student 2013/2014 of the advanced master of energy marketing and management