How can Service Dominant Logic and its "value in use" mindset be helpful to rethink your marketing goals and approaches?
This is the first in a series of three short articles on the future of marketing. In this first article, I will explain how a Service Dominant Logic and its "value in use" thinking can be helpful to rethink your marketing goals and approaches. The second article will explain the concept of value co-creation, whereas in the third article I'll try to provide you with the implications for today's marketers, willing to explore new territories.
Time for marketing innovation
Walk into an average store today and buy a product. Chances are you will be offered a lot more than the product you came in to buy. Not only will you be offered additional warranty and premium service packages, most likely you will be offered to pay for all this in installments. You will be offered a branded credit/debit/loyalty card and before you know it, you are being spammed with offers from the service provider of the loan with or from other, affiliated, companies. Sound familiar?
I think we can all relate to the above, which is mainly how manufacturers or retail chains, selling those goods, have implemented "added value" thinking. The company's aim here is not only to sell you more additional "services", or more expensive products. The aim is also to acquire much desired transactional data tied to an individual they can profile. This is where "value added services" and "data-driven-marketing", most of the times as part of a
CRM-programme, converge. It has been the Walhalla of marketing, where "adding value" by selling "services" and obtaining "customer data" was thought to be key to a successful and growing business.
I'd like to argue against.
Not only did the decades of credit turn into the decade(s?) of debt, consumers have also become tired of being shouted at by marketeers of companies they no longer trust (and yes, the lack of trust is not only a financial services sector issue). Customers have become tired of being looked at and treated as means to a company's end. The end in most cases being a sale, preferably including a lock-in to force a customer into "loyalty". I think it is time we innovate marketing beyond increased efficiency, reach, yield and old-school value added thinking.
We need to let go of the thinking that has led us to transform marketing practice from the promise to create customers to the "art" of capturing value from the customer, all means justified. In the age of scarcity we need to find new ways of creating value that go beyond creating value for the company alone.
The above example of "service" and "data-driven" marketing finds its base in what is referred to as a Goods Dominant Logic. Goods Dominant Logic works from the assumption that value is created when the product is manufactured and sold and that service is something that product is not.
I firmly believe it is important to think differently about both assumptions, if we are ever going to master the art of creating and retaining customers, like Drucker said wisely so many years ago. I think we need to think exactly the opposite of what a Goods Dominant Logic is about.
So, what should we think about?
Six years ago, Vargo and Lusch, both well respected marketing scholars (who says the academic world is not "on top of" things?), developed a framework, referred to as "
Service Dominant Logic". This logic has two important premises I would like to touch upon here (the third I will touch in part two of the series):
First, Vargo and Lusch argue that value is created when a customer consumes or uses a product or service. Value therefore is not something you add in the process of manufacturing, nor is value something that is released when a product or service is sold. This understanding is referred to as "value in use".
Secondly, Vargo and Lusch argue that from a marketing as a value creation perspective, products and services are one and the same: both products and services are enablers of the value creation process. Both are means to an end that customers seek. (Food for thought: neither products nor services are the only enablers of the value creation process. I'll save the explanation of this for the next post).
Why is this important for marketeers?
As stated in the introduction to this article, marketing has been focusing foremost on the process of customer acquisition and optimising that process. I believe that in that process marketeers have lost their touch with customers and what they care about. Marketeers need to regain customers’ trust by focusing not only on the "dialogue or conversation" but more so on what is of real value to customers.
"[…] Customers buy products and services for a specific purpose: to get jobs done. A job is defined as the fundamental goals customers are trying to accomplish or problems they are trying to solve in a given situation. [..] From the customer’s perspective, it is the job that is the stable, long-term focal point around which value creation should be centered because the job’s perfect execution reflects the customer’s true definition of value."
I believe Vargo & Lusch in 2004
and beyond and Ulwick are very much spot on: if you really want to make the shift away from a focus on customer acquisition or a mere increase of transactions and transaction value, one needs to put the customer at the center of your thinking and thus should one focus on where customer’s value is created. Marketeers need to follow the Logic of Service and not the Logic of Goods, thus not (only) focus on the customer's experience leading towards value exchange, but focus on the customer’s experience when getting his/her job done.
This is a major shift for most marketeers, for it requires not only a change in thinking, it requires marketing to get out of their ivory tower and play a new game. A game that truly involves customers as well as partners and departments involved in delivery of the value proposition. It’s a new game, on a new playing field.
I'll leave you with these thoughts for now. Next time I'll try to explain just how (much) and why the game and playing field must change once you decide to adopt a Service Logic.
In the meantime I would like to know what you think: do you agree marketing should shift it’s focus from the process of creating value for the company to creating value for the customer? If so, are there more reasons you see? Any caveat you’d like to share?
About Wim Rampen
Wim Rampen offers fresh perspectives on your customer-related challenges, based on 13+ years experience in (leading) customer facing departments & projects. In solving the challenges you face, he applies analytical and creative methodologies for analysis/research, problem definition, ideation, testing & implementing the solution(s) created together with clients. For more information visit Wim Rampen's Blog.
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"Customers have become tired of being looked at and treated as means to a company's end. The end in most cases being a sale, preferably including a lock-in to force a customer into "loyalty"."
I think that succinctly sums up the stinking-thinking that has cursed customer relationship management.
I hope that we are beginning to see a change in this.
Thanks (0)Spot on, Wim. We really have to change logic.
I am just still trying tofigure out the real value of the customer's job. Following a strict service logic still leads to a "push" attitude, whether from marketers (we can help you, just let me show you) or from customers (I want that, please give it to me). The famous sentence "customers don' want a drill, they want a hole" is a hoax. What customers REALLY need is a nicely hanging frame. If the only way to get it is a hole, then a plug, then a hammer, the drill might help him for sure. But we have to think about other ways around, and in some cases the customer's job is the wrong one. This is one the reasons why co-creation initiatives turn short.
Some times ago, I wrote about brands dematerialization, and I am pretty sure that future lies, not in asymetric relationships (the service logic still is), but in truly symetric, multi-directional, relationships, where brands might have the biggest role to play. More on that in my next post.
Cheers.
Thierry
Thanks (0)Vargo and Lusch's argument that "value is created when a customer consumes or uses a product or service" is an intriguing viewpoint and I can see how it makes sense. If that's the case, though, then I'm looking forward to your upcoming articles to explain what the marketer can do to ensure that value is, in fact, created. My immediate thought is that greater responsibility rests with the product designer(s) to imbue a product (or service) with a "potential" value that becomes unleashed during the customer's experience (using the p/s to "get the job done", in Ulwick's terminology). Since the marketing interaction with the customer usually does not temporally coincide with when the customer uses the product or service to help "get the job done", it's unclear to me how the marketer can make an impact on value. But perhaps I've missed something in your thesis.
Thanks (0)Hello Skellerman,
I truly like your comment, because it shows me that, through my post, you started to think about the most important question: how can a marketeer have an effect on the value creation process of a Customer..
I won't answer that question from my perspective just yet. Please continue to think about the question and try to come up with some ideas or potential solutions yourself. Maybe one follow-up question can help you kick-start the process: what would need to be true for a marketer to be able to have an effect on the value creation process of a Customer..?
And please let me know what comes out of your thinking/ideation process..
I hope you can wait for another (short) week before part 2 is there.
Thx again,
Wim
@wimrampen
http://wimrampen.com
Thanks (0)Hi Thierry,
I can see your caveat. In my humble opinion there is a "limited" view on customer Jobs, which is basically flawed and looks at the jobs customer try to do with the product. The true value of Customer Jobs lies in an understanding of the desired outcome. In your example that would be the hanging frame, not the hole in the wall..
Furthermore I think the service logic is not limited to customer-jobs. It's framework extends well beyond the product experience into the lifetime experience, relationships in networks etc.. More on that in parts 2 and 3.
Thx for your contribution & we probably need to talk a little more on the thinking behind your post, for me to fully grasp the intention of the concept.
Wim
Thanks (0)Dear Wim,
Allowing the use of "Comments" as space for thinking out loud, I wonder whether buyer personas are relevant to the discussion. Marketers can create narratives which describe these (hypothetical, but intensely relatable) customers' experiences of using the product/service to help get the job done.
Publicizing such narratives and particularly, the attendant satisfaction that comes with the value created in getting the job done, would be a powerful marketing message.
Thanks (0)Creating value for customers is unlikely to come from marketers. By their nature, most marketers are focused on implementation - carrying out the delivery of brand messages in the hope that 'some'of them will get through. Value is created for customers by really understanding their needs and motivations and responding accordingly. In simple terms, most marketers are too busy carrying out tasks to stop and listen.
The marketng services industry is a very crowded space, particularly at the implementation end, where a self sustaining network of agencies and clients 'spend' budgets rather than 'invest' in innovation. While the music plays the party will will continue - there is a disincentive for either client or service provider to change the status quo. Eventually though, business leaders will begin to question the return they get from established marketing services practitioners and look at more disruptive, user centred ways of creating value. In my opinion, service innovation, experience design and social technologies sit at the heart of the territory where they should be looking for the next era of value creation, or more importantly, co-creation.
I mean no disrespect when I say that most of the marketers I know have little idea what service design, user centred design or user experience are. It is not really their fault when they are under continuous pressure to 'out-market' the competition rather than 'out-smart' them with user led innovation. By and large, the industries they work in and the firms they work for, were created for a pre-digital era so the systems and processes that sustain them are now out of step with the social changes happening around them.
So, as you rightly intone, the game has now competely changed and it will take a huge structural re-think for business to first, learn the new rules (there are none) and second, get really good good at playing (learn by doing).
Sean O'Halloran
www.thisishoop.com
http://twitter.com/seanohalloran
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