Introduction
The business environment has undergone tremendous change with the increase in the globalization and technological development that have given birth to global organizations. The customers are better informed and more powerful as they have plenty of choices at their disposal and therefore customer loyalty is lower than what it was in earlier times. The customers demand high quality products that offer innovative features and utilities. It has become a challenging task for marketers to devise innovative strategies that are aimed at satisfying the needs and the demands of the global customers and also ensure that the future products and services of the organizations are in tune with the tastes and preferences of the customers. The changes in the external political, economic, socio-cultural and technological environment have a substantial impact on the marketing and delivery of products and services.
The designing of current products and services are in collaboration with the customers who are today an important participant in the creation and delivery of services. The customers have continued to emerge as one of the most powerful actors in the marketing environment and their role in the designing of services cannot be ignored. The present paper provides a critical analysis of the emergence of the service dominant (S-D) logic in marketing that focuses on the value creation of the customers along with the other important stakeholders through services. The service dominant logic (S-D Logic) has been essentially compared with the goods dominant (G-D Logic) approach that was restricted to the production of goods for the customers.
The transition of organizations from the traditional goods dominant approach towards the services dominant approach remains a challenge. The organizations need to reorient themselves to accommodate the services nature of goods so as to evolve and grow in the current dynamic and challenging business environment. The current business environment is an open system that involves the exchange of ideas and information between the various actors.
Concept of Marketing
Marketing is defined as the process of planning and executing the conception, pricing, promotion and distribution of goods, ideas and services to create exchanges that satisfy the objectives of the organization and the individuals . This definition of marketing was revised in the year 2005. Marketing was then defined as an organizational function and a set of processes that enable creating, communicating and delivering value to customers and managing customer relationships in ways that benefit the organization and the stakeholders .
The definition of marketing was again revised in the year 2007. Marketing was then defined as the activity, institutions and processes that are involved in creating, communicating and exchanging offerings that have value for customers, clients, partners and society at large .
The revisions in the definition of marketing clearly demonstrate the shift of marketing from goods oriented approach towards a service oriented approach. The earliest definitions of marketing focused on the process of marketing to deliver value while the later definition shifts of value to “offerings or services” that have value .
The latest definitions of marketing suggest that differentiation can arise from any part of the service while the earlier definitions focused on the differentiation on the basis of the products . Additionally the earlier definitions of marketing focused on the organizations, while the later definition of marketing involves the creation of value for various stakeholders and the existence of relationships between them.
Five Marketing Eras
Philip Kotler defined the concept of marketing in the form of five key eras:
- Production Era: According to the production era in marketing, customers would favor products that were cheaper and available and therefore the focus on marketing was to increase the production efficiency so as to produce more and more products .
- Product Era: According to the product concept, the marketing focuses on the development of products that have the highest quality and deliver value to the customers .
Both the production era and product era have rise to a short sighted approach of marketing that was restricted to the delivery and manufacture of products and thus termed marketing myopia. Marketing myopia involves the product oriented approach of organizations rather than a customer oriented and service centric approach .
- Selling Era: The selling concept of marketing, concentrated on the sales and marketing of products through heavy promotions .
- Marketing Era: The marketing era concentrated on the satisfaction of the needs and the demands of the customers and to meet the needs of the organization and stakeholders .
- Societal Marketing Era: The societal marketing concept has evolved do as to create value for the various stakeholders, including customers, organizations, suppliers and the society at large .
Services in Marketing
Marketing products and services effectively in the current challenging and dynamic business environment is a difficult task. The reasons are many. The customer preferences are changing and customers demand superior quality products and services, and have a lot of options for substitute and competitive products. The task of marketers is to devise effective strategies that can match the needs of the customers and satisfy their needs and demands.
Figure 1 Services Marketing Strategy Framework
The task of strategy formulation for organizations involve a careful consideration of the organizational objectives, the offerings of the competitors the customer demands and preferences and the organizational alignment to the environment.
The services are considered to have four important characteristics that include intangibility, inseparability, perishability and variability. The intangibility of services means that the services cannot be tasted, felt or experienced prior to purchase . The inseparability of services refers to the fact that the services cannot be separated from their provider . The perishability of services means that services unlike products cannot be stored for a later use or resale . Lastly, services are highly variable in nature. Each customer may experience a difference in the satisfaction and experience from the service depending on the service provider. These views of services are largely goods centric views as services are compared to goods rather than creating value for customers and other stakeholders.
Services are primarily concerned with the evolution, interaction and reciprocal cocreation of value among the services systems that include the resources, causing benefit to the systems and the systems themselves . Services dominant logic (S-D Logic) is basically a service centered alternative to the traditional goods centered logic of economic exchange of goods and helps in a better understanding of the services sciences . Services can be considered as one of the most important basis for exchange of goods .
Services Dominant Logic Versus Goods Dominant Logic
The goods dominant logic in marketing was borrowed from economics that involved exchange of goods based on production concept. The earlier concept of marketing focused mainly on the production of goods and cared a little if the consumers would require products that were being produced. The concept of consumer satisfaction and demands were virtually ignored in the concept. The service dominant logic evolved later focused primarily on the service orientation of marketing to serve the customers in the best possible manner.
According to the services dominant approach to marketing, the goods are not the end products of organizations, but, the services associated with the goods are the end products . In the goods dominant approach, the customers are the recipient of goods and in the service dominant approach to marketing, the customers are involved in the co-creation of the services .
Figure 2 Goods Dominant Logic and Service Dominant Logic
Service Dominant Logic
The concept of marketing has evolved a great deal to incorporate the concept of value creation through services rather than the initial product centric approach. Today, services are considered an important aspect of each and every product and products are today mere means of providing value and offerings to the customers. The customers continue to be an important stakeholder in the entire marketing value chain process and the aim of marketing continues to meet the needs and the demands of the customers and their interaction with the organizations in the co-creation of value through the concept of customer integration.
The article is based on Customer Integration–Facilities, Transformation (CI-FTU) logic and the central idea of the article is that in cIntegrator a firm is the main integrator of the resources, and understanding of the role of the firm can be improved through developing the concept of customer integration . Customer integration is defined as the incorporation of resources from the customers into the company processes . The author identifies the idea of customer integration somewhere between the idea of co-production and co-creation of value.
The transition from marketing concept from traditional goods dominant concept (G-D Concept) to services dominant concept (S-D Concept) has its own unique challenges.
The article provides an over-view of the service dominant logic and the challenges that organizations may face in the development of such logic.
Premises in Service Dominant Logic
Figure 3 Service Dominant Logic
The service dominant logic has the following premises:
- Service is the fundamental basis for exchange in business . The knowledge and skills are resources in services form the basis for services . A service may be exchanged for another service.
- The indirect exchange masks the fundamental basis for exchange . The goods, money and institutions usually mask the service nature of exchange .
- Goods may be considered as the distribution mechanisms for service provisions . Both types of goods, durable and non-durable get their value through the use that primarily involves the services provided by them .
- The operating resources such as knowledge and skills may be considered as the source of competitive advantage . The comparative ability of services to make change drives the competition .
- All economies may be essentially considered as the service economies . The role of services in the economy is becoming more and more important and services are also being outsourced in organizations.
- The customer may be considered as the co-creator of values . This implies that the value creation is interactional.
- An enterprise does not have the capability to deliver value, it can only make value propositions . An organization can create strategies to deliver value to the customers and its stakeholders, but cannot deliver the value on its own. The value can only be delivered through interaction between the organization and its stakeholders.
- A service centered view is customer oriented and relational . The service oriented view of marketing is purely oriented towards the customer and is involved in delivering value and strengthening relationships with the customers at large.
- All economic and social actors may be considered as resource integrators . The creation of value through services involves the interaction between the various networks.
- The value is always uniquely and logically determined by the beneficiary . The value may differ for each customer or stakeholder and it may vary with the situation and the context.
Initially, the logic of Services Development was grounded in marketing, but now it has a profound impact on other areas such as human resources, leadership, information technology (IT) and operations management, thus providing a market reorientation to the organization . The concept of services development is an evolution of the tangible goods oriented logic to the intangible services oriented logic in marketing . A close relationship exists between services sciences and services logic . In SD logic, a service is considered as a transcending concept that may be defined in terms of the utilization of competencies for the benefit of the other party .
Figure 4 Services Concept (SD Logic)
Conclusion
The concept of marketing initially started with the production concept that concentrated largely on selling the goods and services to the customers. The customers would demand goods and services that would be provided to them by the organizations and they would buy those products and services. However, the scenario changed substantially with time, as the earlier concept was largely profit centered towards the producers of goods and services rather than being customer centric. The later concept of marketing have importance to the customers and aimed to provide the customers with the best and high quality products and services that would satisfy their needs and make them happy. The concept was later revised so as to consider the interests of the various stakeholders such as the customers, suppliers, investors and the society at large and the aim of marketing was then to create value for each of the stakeholders.
Services that were initially considered and comparable to the products in the context of inseparability, intangibility, perishability and variability today form the part and parcel of every product that is produced in the different parts of the world. It has been considered that the main aim of marketing is to produce value for customers in the form of services that are offered along with the products. The creation of value for customers through the offerings along with the products cannot be done by the organizations in isolation. The organizations need to constantly interact with the customers and the other stakeholders discover what features or additions to the products and offerings would create value for them and then incorporate the changes so as to improve the products and services to satisfy the needs of the customers and the other stakeholders in the long run.
Customers remain an important stakeholder for all organizations and all efforts are directed towards the satisfaction of customers. The role of customers through have evolved from the earlier product centric approach to being the recipient of products and services to being a co-creator in the production process.
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