Relationship: Toward Service-Dominant Logic Transcendence and Unification

1. Relationship:Toward Service-Dominant Logic Transcendence and Unification Presentation to Relationship Marketing Summit December 13, 2007 Robert F. Lusch, University of Arizona Stephen L. Vargo, University of Hawai’i at Manoa

2. What We Want to Accomplish • Evidence of Goods-Dominant Logic • Review & Update on S-D Logic • S-D logic as a unifying framework for relationship/marketing

3. Reflections of theGoods-Dominant Model • Goods-Dominant logic: Make and sell units of output • Latent evidence • Marketing is: • The “creation of utilities” (Weld) • Time, place, and possession • “production function” • Concerned with value distribution • Orientations • Production and Product • Manufacturing and distribution as value-added • Consumer Orientation • Evidence of problem vs. correction • Marketing Management and Consumer Behavior • Evidence of decoupling of thought • Alderson’s admonition: • “What is needed is not an interpretation of the utility created by marketing, but a marketing interpretation of the whole process creating utility.” • Sub-disciplinary Divergences • Relationship Marketing

4. Sub-disciplinary Divergences and Convergences • Business-to-Business Marketing • From differences • Derived demand, professional buyers, fluctuating demand, etc • To emerging new principles • Interactivity, relationship, network theory, etc • Service(s) Marketing • From differences: • Inseparability, heterogeneity, etc. • To emerging new principles: • Relationship, perceived quality, customer equity, etc. • Other Sub-disciplines • Other Intra-marketing initiatives • e.g., interpretive research, Consumer culture theory, etc. • From deterministic models to emergent properties • From products to experiences • From embedded value to individual meanings and life themes/projects

5. A Partial Pedigree for S-D Logic • Services Marketing • e.g., Shostack (1977); • Relationship Marketing • Berry (1983); Gummesson (1994) ; Gronroos (1994); etc. • Theory of the firm • Penrose (1959) • Core Competency Theory • (Prahalad and Hamel (1990); Day 1994) • Resource-Advantage Theory and Resource-Management Strategies • Hunt (2000; 2002); Constantin and Lusch (1994) • Network Theory • (Hakansson and Snehota 1995) • Interpretive research and Consumer Culture theory • (Belk, Wallendorf, Sherry 1989; Wallendorf & Arnould 1991) • Co-creation, Customer, competence/experience • (Prahalad and Ramaswamy 2000)

6. Evolving…Service-Dominant Logic • Service, rather than goods, as the basis of economic and social exchange • i.e., Service is exchanged for service • Essential Concepts and Components • Service: the application of competences for the benefit of another entity • Service (singular) is a process—distinct from “services”— particular types of goods • Shifts primary focus to “operant resources” from “operand resources” • Value always co-created • Sees goods as appliances for service delivery • Implies all economies are service economies • All businesses are service businesses • Operates at paradigmatic, pre-theoretical level

7. S-D Radically Challenges Core Assumptions

8. The Evolution of Marketing To Market (matter in motion) Marketing To (management of customers & markets) Marketing With (collaborate with customers & partners to produce & sustain value) Through 1950 1950-2010 Future

9. Revised Foundational Premises

10. Revised Foundational Premises

11. S-D Marketing CUSTOMERS PARTNERS CUSTOMERS & PARTNERS

12. The Nature of Coproduction and Cocreation Integration With Public-Facing Resources Direct Service Provision Provider of Operand & Operant Resources Service Beneficiary Value in Context Cocreation Coproduction Service Provision via Goods Integration With Private-Facing Resources

13. Service Exchange through Resource Integration and Value Co-creation Market-facing and public and private resources Market-facing and public and private resources Resource Integrator/Beneficiary Resource Integrator/Beneficiary (“Firm”) (“Customer”) Service Value Co-creation $ (Service Rights)

14. Common Misconceptions • A Theory • S-D logic is a logic, an approach, a lens, but not a theory • Could be foundation for a general theory of the market and marketing • A Reflection of the transition to a services era • In S-D logic, all economies are service economies and all businesses are service businesses • Restatement Of The Consumer Orientation • Consumer orientation is evidence of G-D logic, not a fix to it • Consumer orientation is implied by S-D logic • Alternative To The “Exchange Paradigm” • Problem with exchange paradigm is notion of exchange of output, not the notion of exchange • At issue is the “transaction,” not exchange • Exchange is a relational concept -- reciprocity • S-D logic says service (a process) is exchanged with service

15. Relationship Orientations G-D Logic Positive: repeated transactions (encounters) Normative: Hug your customer and channel partners S-D Logic Positive Relationship inherent (FP8) Service as benefit – provided by one party, determined by the other Service as reciprocal Value as co-created Network-with-network Value as phenomenological: “value-in-use” and “value-in-context” Economic (and social) actors as resource integrators Normative: collaborate and co-create for mutual benefit

16. External Resources RI Resistance Reduction Resource Integration Needs Needs Resources Resources Needs Resources Exchange Change Resistances Resistances Resistances RI RI Customers Stakeholders The New Geometry of Marketing? Value Co-creation Value Co-creation Value Co-Creation

17. Thank You! • For More Information on S-D Logic visit: • sdlogic.net • We encourage your comments and input. Will also post: • Working papers • Teaching material • Related Links • Steve Vargo: svargo@sdlogic.net Bob Lusch: rlusch@sdlogic.net

18. Density Resource Integrator/Beneficiary Resource Integrator/Beneficiary (“Firm”) (“Customer”) Value Co-creation Service Exchange through Resource Integration and Value Co-creation Value Configuration

19. Organizations Evolving to be Service-Dominant Bureaucracy Slow Thinking Slow Acting Fast Acting Service-Ecosystem Source: Lusch & Webster Fast Thinking

20. Difficult Conceptual Transitions

21. Marketing as Resource Integration

22. Breadth of Knowledge Integration Category Time Cited/Mentioned *as of December 2006

23. Integration in Marketing Literature Journal of Marketing (7) Journal of Service Research (7) International Journal of Service Industry Management (7) European Journal of Marketing (5) Industrial Marketing Management (5) Journal of Business Research (4) Journal of Retailing (3) Marketing Science (3) International Marketing Review (2) Journal of Business-to-Business Marketing (2) Journal of Public Policy & Marketing (2) Citations Numbers based on Social Science Citation Index.

24. Main Sub-themes of Integration Three main sub-themes underlying the knowledge integration focus on core concepts of S-D logic: The categorization is adapted from marketing schools of thought presented by Shaw and Jones (2005). The numbers represent selected citations relating to or elaborating upon S-D logic (Vargo and Lusch 2004).

25. Service-Dominant Logic:Toward the Unification of Marketing Presented by: Robert F. Lusch, University of Arizona Stephen L. Vargo, University of Hawaii Presented to: Relationship Marketing Summit Buenos Aires, Argentina December 13, 2007

26. THANK YOU For more information on S-D logic visit: sdlogic.net For permission to use any information in these slides please e-mail: rlusch@eller.arizona.edu or svargo@hawaii.edu