Avoiding the Mistake of Overmarketing

1. Avoiding the Mistake of Overmarketing Robert F. Lusch Stephen Vargo University of Arizona University of Maryland Academy of Marketing Science 2004 Cultural Perspectives in Marketing Conference Puebla, Mexico September 24, 2004

2. The Old Dominant Logic • The purpose of economic activity is to make and distribute things that can be sold. • To be sold, these things must be embedded with utility and value during the production and distribution processes and must offer to the consumer superior value in relation to competitors’ offerings. • The firm should set all decision variable at a level that enables it to maximize the profits from the sale of output. • For both maximum production control and efficiency, the good should be standardized and produced away from the market. • The good can then be inventoried until demanded and then delivered to the consumer at a profit.

3. Old Logic Led to Overmarketing Make & Sell Philosophy Marketing as Propaganda OVER- MARKETING Loss of Customer Contact Aggressive Price Cutting Reliance on Mass Markets

4. Technology Contributed to Failure Division of Labor in Society Micro Specialists & Professionals Growth of Marketing Technology Loss of Contact With Customer

5. The Failure of Marketing 1950’s – 1990 1990’s + 21st Century The Old Dominant Logic Informed Customer Customer Alienation Marketing Resistance Overmarketing Growth of Marketing Technology Networked Customer Societal Alienation

6. Failure of Marketing: Evidence • Customer Alienation Rising • Marketing Expenditures Less Productive • Marketing Losing Influence in the Organization

7. The Rise of Consumer Alienation What Needs More Government Regulation • Water pollution • Toxic wastes • Air pollution • Advertising • Nuclear safety Source: Yankelovich, Inc. 2004

8. The Rise of Consumer Alienation • 54% of consumers wish for a quieter and simpler life even if it means less stuff. • 61% of consumers feel the amount of marketing and advertising is out of control. • 36% believe shopping experiences less enjoyable because of all the pressures to buy. Source: Yankelovich, Inc. 2004

9. Positive Words Creative Fun, funny Attractive Negative Words Lies Deceitful, deceptive Annoying Manipulative Gimmicks Exaggeration Invasive Intrusive Brainwashing The Image of Marketing Source: Raj Sisodia; Bentley College

10. Marketing Loses Influence in Organization • “Marketing is being forced out of the equation. Sales is not guided by marketing strategy, but by the need to hit metrics for volume and margin.” • “Marketing managers are not finance-literate. Other managers are often not marketing-literate.” • “Marketing and strategic planning require investment and then promise only uncertain future results.” • “Marketing ideas are not linked to driving profits.” • “Making the financial numbers isn’t the only thing, its everything.” Source: Fred Webster (Dartmouth & U of Arizona)

11. Evolving To a New Frame of Reference To Market (matter in motion) Market To (management of customers & markets) Market With (collaborate with customers & partners to produce & sustain value) Through 1950 1950-2010 Future

12. All Exchange is Service Centered “the great economic law is this: Services are exchanged for services…. It is trivial, very commonplace; it is, nonetheless, the beginning, the middle, and the end of economic science….” - Frederic Bastiat 1860 “services are the application of specialized competences (knowledge and skills) through deeds, processes, and performances for the benefit of another entity or the entity itself.” (Vargo and Lusch 2004)

13. Institutions Growth of Marketing Institutions Institutions Goods, Money, Organizations are Intermediaries Service for Service

14. Marketing Assists Change & Evolution Change Division of Labor Exchange Increasing Degree of Change in Society

15. The Emerging Reform of Marketing Global Sustainability Service Dominant Services Intangibles Operant Resources Symmetric Conversation Value Propositions Relational Financial Feedback Goods Logic Goods Tangibles Operand Resources Asymmetric Propaganda Value Added Transactional Maximize Profits Less More Customer Alienation More Less Respect for Marketing In Firm Less More

16. Meta-Competences for Competitive Advantage • Competences for a • Highly Specialized World • Relational • Collaborative • Competences for a • Rapidly Changing World • Absorptive • Adaptive

17. Reforming the Marketing Curriculum

18. Closing Comments