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PARADIGM
SHIFT:
SERVICE
DOMINANT
LOGIC
Dr
S enija
auevi
February
2 1
2 017
Oce
h ours:
B Y
APPOINTMENT
Introduction
Modern global culture
1.Individualist orientation
2.Strong emphasis on material achievements
doing/having not being/thinking
3.Strongly economic, commoditized time
4.Tendency to discard past in favour of future
orientation
5.Fairly high degree of utilitarianism.
Goods-dominated
Logic
Model:
Value
Production
and
Consumption
Purpose
of
economic
activity
is
to
make
and
distribute
units
of
output,
preferably
tangible
(i.e.,
goods)
Goods
are
embedded
with
utility
(value)
during
manufacturing
Goal
is
to
maximize
prot
by
decreasing
cost
and
increasing
number
of
units
of
output
sold
For
eciency,
goods
should
be
standardized,
produced
away
from
the
market,
and
inventoried
till
demanded
3
Prosumer
https://www.youtube.com/watch?v=TV4Ir-2UrN8
Goods-dominated
Logic
Model:
Value
Production
and
Consumption
Value
d
estru
ction
Valu
e
cre
ation
Consumer
supplier
Supply/value
chain
producer
Problems
with
goods
dominant
logic
Goods
are
not
why
we
buy
goods
Service
(benets)
they
make,
Intangibles
(brand,
self
image,
social
connectedness,
Meaning,
Inputs
into
experiences
Market With
Market To
(collaborate with
To Market (management of
customers & partners
(matter in motion) customers &
to produce &
markets)
sustain value)
12
A
paradigm
shift?
Goods
vs
Services
dominant
logic
in
sales
function
(Vargo
and
Lusch,
2004)
Value
creation
moves
from
production
in
isolation
from
the
customer
to
a
collaborative
process
of
co-creation
within
the
exchange
Knowledge
and
skills
are
sources
of
value
creation,
goods
produced
are
only
a
part
of
the
exchange
Convergence
in
marketing
logic
from
making
to
assisting
customers
in
their
own
value
creation
From
produced
and
sold
to
co-created
Customers
are
not
isolated,
they
belong
to
their
networks
Operand
vs.
operant
resources
Customers
as
targets
vs.
customers
as
resources
Eciency
through
eectiveness
Historical
Perspectives
on
S-D
Logic
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.
Fredric
Bastiat
1848
What
is
needed
is
not
an
interpretation
of
the
utility
created
by
marketing,
but
a
marketing
interpretation
of
the
whole
process
of
creating
utility.
Wroe
Alderson
1957
The
importance
of
physical
products
lies
not
so
much
in
owning
them
as
obtaining
the
services
they
render.
Philip
Kotler
1977
NORDIC
SCHOOL
Customers
do
not
buy
goods
or
services.
They
buy
oerings
which
render
services,
which
create
value...activities
render
services,
things
render
services.
Evert
Gummesson
1995
The
focus
is
not
on
products,
but
on
the
consumers'
value-
creating
processes,
where
value
emerges
for
consumers,
and
is
perceived
by
them...the
focus
of
marketing
is
value
creation
rather
than
value
distribution.
Christian
Gronroos
2000
Service-Dominant
logic
Perhaps
most
disturbing
and
disquieting
was
the
articial
distinction
made
in
the
lexicon
of
marketing
between
goods
marketing
and
services
marketing,
based
on
the
notion
that
services
are
intangible,
heterogeneous,
inseparable
and
perishable
(i.e.
the
IHIP
characteristics)
and,
generally,
what
goods
are
not.
As
Vargo
and
Lusch
(2004:
67)
show,
the
view
that
value
for
customers
is
embedded
in
the
product
seems
to
be
due
to
competing
logics
within
economic
theory
and
misunderstandings
arising
when
the
dominating
value
concept
from
economics
was
transferred
to
management
and
marketing.
Service
is
a
perspective
on
value
creation
rather
than
a
category
of
market
oerings.
Edvardsson,
Gustafsson
and
Roos
(2005:
118)
Value
is
not
in
product,
but
in
the
service
what
the
product
does
to
the
customers
(Vargo
and
Lusch,
2004)
Service-Dominant
logic:
Foundational
Premises
FP1.
The
application
of
specialized
skill(s)
and
knowledge
is
the
fundamental
focus
of
exchange.
Service
(application
of
skills
and
knowledge)
is
exchanged
for
service
FP2.
Indirect
exchange
masks
the
fundamental
process
of
exchange.
Goods,
organizations,
intermediaries,
and
money
obscure
the
service-for-service
nature
of
exchange
FP3.
Goods
are
distribution
mechanisms
for
service
provision.
Activities
render
service;
things
render
service
(Gummesson
1995)
:
goods
are
appliances
17
Service-Dominant
logic:
Foundational
Premises
(2)
FP4.
Knowledge
is
the
fundamental
source
of
competitive
advantage
know-how, -
essential
component
of
dierentiation
19
Clarications:
Service
vs.
Services
Services
=
intangible
products
Service
=The
process
of
using
ones
competences
for
the
benet
of
some
party,
the
application
of
knowledge
and
skills
n Service
transcends
and
rise
above
goods
and
services
There
are
No
Services
in
Service-Dominant
Logic
S-D
logic
is
built
on
a
transcending
denition
of
service,
one
that
better
reects
its
nature
and
purpose.
It
views
service
as
the
application
of
resources
by
one
actor
for
the
benet
of
another.
Goods
then
become
service
provisioning
appliances,
goods
are
tools
or
instruments
in
order
to
provide
service.
G-D
Logic
S-D
Logic
services
products
goods
Making
something
(goods
or
Assisting
customers
in
their
services)
own
value-creation
processes
Value
as
produced
Value
as
co-created
Customers
as
isolated
entities
Customers
in
context
of
their
own
networks
Firm
resources
primarily
Firm
resources
primarily
as
operant
as
operand
Customers
as
targets
Primacy
Customers
as
resources
Eciency
of
eciency
through
eectiveness
Vargo,
S.L.
and
Lusch,
R.F.
(2008),
From
goods
to
service(s):
Divergences
and
convergences
of
logics.
Industrial
Journal
of
Marketing,
37
p.
258
Goods
vs.
Service-Dominant:
Where
do
the
logics
point
us?
Goods-Dominant
Service-Dominant
Make
stu
Serve
and
satisfy
Sell
to
Mass
market
Respond
to
markets
of
one--
customization
Produce
product
Find
solutions,
co-create
value
Promote
product
Conversation
&
dialog
Charge
for
product
(price)
Oer
value
proposition
Distribute
product
(value)
Integrate
value
network
&
processes
Create
transaction
Build
relationships
Money
as
goal
Prot
as
feedback
(learning)
Asymmetric Symmetric
More Customer Less Conversation
Propaganda Alienation
Value Added Value Propositions
Transactional Relational
https://www.youtube.com/watch?v=RUQm7cTudqw
4
types
of
co-creation
Co-creation
https://en.eyeka.com/contests/8691-royco-oce-break
https://en.eyeka.com/contests/8586-maggi
3D
printers
production
consumption-
prosumption
Among
many
other
things,
the
3-D
printer
promises
to
transform
the
home
more
than
ever
into
both
a
consumption
site
and
a
factory.
In
the
process
of
producing
these
things,
prosumer
as
producer
will
need
to
consume
many
other
things,
including
their
own
labor
time,
electricity,
as
well
as
raw
materials.
Prosumer
as
Producer
(PaP)
vs
Prosumer
as
Consumer
(PaC)
The
prosumption
that
takes
place
on
social
media
(Facebook,
Twitter,
Foursquare)
is
more
or
less
in
the
middle
of
the
prosumption
continuum
P-a-p
is
more
the
norm
in
factories
and
oces
P-a-c
is
more
likely
to
predominate
in
malls
and
fast-food
restaurants.
At
one
time,
those
who
studied
the
media
tended
to
see
audiences
as
passive
consumers
of
the
content
being
produced
and
promulgated
by
the
media.
However,
that
view
has
long
been
rejected
and
replaced
by
a
view
of
the
audience
as,
in
the
terms
of
this
analysis,
actively
producing
(dening,
interpreting,
etc.)
content
as
they
consume
it
(Ritzer,
2015,
p.417).
https://www.youtube.com/watch?v=FiK7s_0tGsg
Reading
material
is
added
on
the
moodle
site