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