Service-Dominant Logic: Toward Reframing Business for Enhanced E-Novation

Service-Dominant Logic: Toward Reframing Business for Enhanced E-Novation

Robert F. Lusch (University of Arizona, USA), Stephen L. Vargo (University of Hawai’i at Manoa, USA) and Melissa Archpru Akaka (University of Hawai’i at Manoa, USA)
DOI: 10.4018/978-1-60566-394-4.ch006
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Abstract

Organizations and people within organizations cling to traditions, industry practices, and managerial frameworks well beyond their usefulness. Perhaps this is just another way of stating the obvious that habits die slowly. One habit or tradition that is experiencing a slow death is the traditional marketing paradigm, referred to as the goods-dominant (G-D) logic paradigm. Essentially, traditional marketing practice is focused on the creation of units of output and their distribution to customers. Applying this framework, the firm attempts to study these exogenous customers and then uses its resources to shape a market offering, conceptualized as product, price, place, and promotion (what is known as the marketing mix or four Ps) in order to effectively position the offering for a targeted segment, thus capturing the customer to create a sale (economic exchange). Although this paradigm has been under assault for decades, it continues to survive and has changed only modestly over the last fifty years. Importantly, it is a paradigm (and practice) that continues to be presented in the leading marketing and marketing management textbooks used on college campuses and in executive education throughout the world.
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S-D Logic Basics

A new lexicon is an important part of S-D logic. There are four concepts or sets of concepts that have a specialized meaning and these include: (1) service, (2) operant resources, (3) customers, suppliers and environments as endogenous, and (4) collaboration, co-production, and co-creation of value.

Service

The singular “service” has a connotation quite different from the more often used plural “services.” Service is the act of using one’s resources and competences for the benefit of another (or for oneself via self-service). The recipient of the service is the beneficiary. This service can either be provided directly to another actor through personal service or it can be provided to the beneficiary indirectly through tangible goods, which function as appliances for service delivery. Predictably, often both are used; that is, physical resources are mixed with human resources to provide service.

By contrast, the plural, services derives its meaning from a goods-dominant logic. That meaning suggests the firm is producing and delivering intangible “units of output” as, for example, in a “service-factory” conceptualization (Chase and Garvin 1989). In a service factory there is a high division of labor as workers specialize in performing standardized activities that comprise a service and then pass their work product along to other service workers in the service factory; similar to an assembly line in a production factory.

The services output provided to the customer or client may be such things as audits completed by an accounting firm, rooms booked in a hotel, meals served in a restaurant, surgical procedures completed in a hospital, or airplane seats filled on an airplane. Because of the focus on an output rather than the process of serving, the firm tries to engineer cost efficiency into the system. How to efficiently complete audits, book hotel rooms, provide meals, complete surgical procedures, or fill airline seats at the lowest cost becomes the overriding objective of the firm.

On the other hand, the concept of service (singular) has a focus more on the process benefiting another entity (e.g., customer). This focus on both the process and the beneficiary enables the firm to keep effectiveness as primary and, within this constraint, to perform the service efficiently.

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