Introduction 2004; 2008), value for the customer (Woodall, 2003)

Introduction

Traditionally
marketing has been about the exchange of goods and services between people.
However, the emergence of services marketing in 1980’s saw a change in
marketing thought. Rust and Huang (2014) have
argued that services marketing will become all of marketing. The authors suggest
that services is becoming increasingly ubiquitous, resulting in an inevitable
shift of the marketing function. It is suggested that all of marketing will
inevitably embody or represent the component and characteristics of services
marketing. In today’s increasingly dynamic markets, the knowledge, skills and
competencies offered to a customer are more valuable than a product itself (Insert reference here). This is supported by a form
of marketing discourse known as service-dominant logic (Vargo
and Lusch, 2004) shifting the direction of services marketing. Within
the paper, the authors underpin the notion of value co-creation between actors.
Supporting the contention that marketing is converging from the exchange of
goods and services to an exchange of knowledge, skills and competencies (Vargo and Lusch, 2006). The growth of big data, along
with the diffusion of technology has played a crucial role in the shifting.
With themes presented by the work of Ramaswarmy (2008),
and emerging paradigm shifts (Mejtoft, 2011),
Service-Dominant logic (SD Logic) and the notion of value co-creation. This
purpose paper seeks to identify whether marketing is increasingly becoming
about the value co-creation between actors, and merely about the exchange of goods
and services. The context of this paper will be underpinned by Service-Dominant
logic (Vargo and Lush, 2004; 2008), value for
the customer (Woodall, 2003) and technological
shifts (Mejtoft, 2011). Arguments drawn by
authors O’Shaughnessy and O’Shaughnessy (2009; 2011) on
S-D logic and value co-creation will be discussed and evaluated prior to the
conclusion.

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The
Evolution and Changing Nature of Marketing

Marketing
has existed for centuries whenever and wherever there has been a market for
buyers and sellers. Holbrook and Hulbert (2002) suggests
marketing itself has biblical origins. Satan, disguised as a serpent, used a promotional
campaign to persuade Eve to eat an apple from the tree of knowledge. The
authors note that the role and nature of marketing itself has changed since the
dawn of the industrial revolution, progressing from mass production to a more
customer based focus. The introduction of services marketing shifted
information flow and power increasingly towards the consumer (See appendix 1). Holbrook and Hulbert (2002) argue that
the ‘death of marketing’ is attributed to the reduction of the gap between the
producer and the consumer. McCole (2004) counters
this by stating that the marketing disciple in not dead but presents a
challenge. Therefore the concept of marketing needed to be revised and
realigned.

The
American Marketing Association define marketing as “the activity, set of
institutions, and processes for creating, communicating, delivering, and
exchanging offerings that have value for customers, clients, partners, and
society at large” (AMA, 2017). However this
definition has sparked criticisms from marketers and scholars, questioning the
AMA’s definition-making processes (Ringold and Weitz,
2007). Through, marketing itself is defined differently by
practitioners, its principal function remains the same in making one purchase something
offered by someone else (Gummesson, 2016). Vargo and
Lusch (2004) suggest that marketing is not fragmented, but is moving
towards a comprehensive dominant logic where the integration of goods and
services forms a foundation for the provision of marketing thought and
practice. The service dominant logic is not a ‘death of marketing’, but a form
of marketing discourse in which the focal point is the process and service flow
rather than the units of output.

Offensive/Defensive Marketing

In
marketing thought, competitive strategies have been divided into offensive and
defensive, reflective of organisational aims. However, Rust,
Zahorik and Keiningham (1996) argue that as advanced economies are
becoming more service orientated, customer retention through defensive
marketing becomes more important than offensive marketing. Thus, activities linked
with defensive marketing strategies justifies itself by the value that arises
from it. Examples presented by these authors include referrals and word of
mouth. Woodall (2004) counters this by arguing
that the defensive marketing strategies do not provide a useful distinction to
the latter. Therefore both offensive and defensive marketing can be used to
win, retain or lose customers. He furthers this by redefining the conventional
archetypes of offensive and defensive marketing (See
appendix 2). Offensive marketers have a preference for value appropriation
than value co-creation, make promises and encourage purchasing through
advertising mediums (Woodall, 2012). Offensive
marketing remains a favourable tool for practitioners to market their goods and
services, rather than engaging collaborative work with the customer defensively.
Therefore, the personality and characteristics of the marketer may be
reflective of the marketing strategy chosen by the individual. This supports Prahalad and Ramaswamy, (2000) who suggest that
managers and researchers have largely ignored the consumers who shape the
industries, focusing solely on collaborations between firms.  The authors add to this, stating globalisation
and emerging technology creates challenges that will arise for managers and
employees that lack flexibility to change.

Technology

The notion of value
co-creation through Service-Dominant logic (Vargo and Lusch, 2004; 2008) provides the theological foundations theory
relative to technology. It is therefore postulated that the generation of
customer value is increasingly dependent on customer participation through
sophisticated and interactive platforms (Dholakia, Zwick and Denegri-Knott, 2010). Ramaswarmy (2008) notes that tools
such as: search engines, social interaction technologies and engagement
platforms allow the ideas and opinions of consumers to be heard. Therefore,
value in use is derived from the experience of the applications through value propositions.
It has been argued that traditionally, value
has been created within a firm with minimal interaction by consumers (Pine and Gilmore, 1998). However, as shown in Ramaswamy’s work (2008), the development of the internet
and Web 2.0 makes it easier for firm to incorporate and interact with customers
within the value creation process. Though a relatively new and emerging
concept, The Internet of Things is an interconnected network of physical
devices embedded with electronics that enables seamless data exchange. Mejtoft (2011) argues that will be difficult to create
future products without a clear view of the value creation process. For the
application of service networks, a co-creation model for a network of ‘things’,
leads change in competitive situations for firms. Consequently, computers will
continually gather data from the consumer as data is derived simultaneously
without any input. This supports the transition of “customer engagement” to
“actor engagement” as actors involve ‘things’ that now offer a service, than
just firm and customer (Löbler, 2013).

 

 

 

 

 

The
shift in dominant logic (Good and Services)

Goods and services become increasingly
difficult to differentiate. Hoffman and Bateson
(2006) imply that goods
carry the attributes of service – Likewise, services contain the attributes and
elements of goods. Goods are tangible dominant as it can be weighed,
felt, measured, put under stress and tested before exchanged. Services on the
other hand are intangible dominant, lacking the physical properties of goods,
yet are produced and consumed simultaneously (Rust,
Zahorik, and Keiningham, 1996).  The
distinction between goods and services is further illustrated by Shostack (1977) on the scale of market entities (See appendix 3).

Traditionally, marketing focused
specifically on operand resources (Raw materials) as the fundamental unit of
exchange. Known as the Goods-Dominant Logic (G-D logic), firms create value for
the customer and are seen as operand resources (raw materials) by producing
benefits (Vargo and Lusch, 2006). The late
twentieth century saw a transition in use of operant resources as knowledge,
skills and competencies started becoming more important. Thus, it is argued
that operant resources are perceived as more important than operand resources (Vargo and Lusch, 2004). The value is added within the
production process of G-D logic, and is shown to be measured in price
mechanisms and value in exchange (Lusch, Vargo and
O’Brien, 2007).

Lovelock and Gummesson (2004) argue that customers do not purchase goods
or services, but now purchase offerings that generates value. Traditional goods producers and
manufacturers are thought to now turn to the service aspect of their products to
establish a differential advantage in the marketplace as well as to generate
additional sources of revenue (Hoffman and Bateson,
2006). This notion supports FP3
(See appendix 6) in which Vargo and Lusch (2004) suggest
that goods should be viewed as a distribution mechanisms for services. The 10 foundational premises (FPS) of S-D
logic (See appendix 6) therefore defeat the differences between goods and
services (Baron, Warnaby and Hunter-Jones, 2014). Goods
and services are intertwined to provide offerings that creates value for the
firm and the customer.

Engagement
Platforms

Ramaswamy (2008) transcends the traditional concept of goods and
services through what he calls engagement platforms. Nike ID has enabled
customers to determine value from an interface where customers can track data
and share information as part of a community. Within the process, the customer
is co-creating value after the service is offered to the customer. Nike has
found new sources of value through the global customer network. The value
proposition offered by Nike enables users to share interactions and
experiences, co-creating value between actors. Seen in Appendix
4, there is a fundamental shift in the basis and process of value
creation from products and services towards experience co-creation platforms. It
goes from a unilateral value creation process by the ?rm to co-creation with
individuals (Ramaswamy, 2008). Customers
unquestionably desire experiences, and therefore staging them forms a new
competitive battleground (Pine and Gilmore, 1998).

 

 

 

 

 

 

Value
Co-Creation (Between actors) 600 words

Conceptualised
by Prahalad and Ramaswamy (2000) co-creation was
introduced by recognising changes in the market. Later, Prahalad and Ramaswamy (2004) considered and articulated the
possible directions and ways co-creation could offer benefits for customers. From
the perspective of S-D logic, Vargo and Lusch (2004) suggests
companies should not focus on products, but consider its service offerings that
can be provided for customers. Value itself is prominent in within FP6, FP7 and
FP10 (see appendix 5). To understand value
co-creation and its influence between actors, value needs to be analysed and
critiqued.

Value for the customer/businesss

Zeithaml (1988: 14) defines
value as “the consumer’s overall assessment of the utility of a product based
on perceptions of what is received and what is given”. However, according
to Sanchez-Fernandez and Iniesta Bonillo (2008), there
are many forms of value that exists, so condensing it becomes more difficult narrowing
down what value becomes increasingly difficult .Woodall
(2003) argues that Zeithaml’s (1988) definition of value does not take into
account the ideas and notions presented by marketing practitioners and scholars
alike. He furthers this by attempting to piece together different
conceptualisations of customer value, consolidating it within a framework of
five constituent variables. (See appendix 5). These
are: Net VC, Marketing VC, Derived VC, Rational and Sale VC. Marketing and
Derived VC will be utilised to understand both the value for the customer and
business through S-D logic.

The marketing VC viewpoint represents perceived product
attributes. Previously mentioned, Ramaswarmy (2008) value
propositions were offered by organisations that enable customer to derive value
from the use of NIKE ID. In today’s society, the advancement of technology
enables ideas to be shared within communities. Marketing VC is therefore linked
to Vargo and Lusch’s (2008) FP7 statement in
value propositions are offered by the firm. Derived VC emphasises that value is
derived for the customer through the outcomes of experiences. Thus value is
co-created in the use of something, not transferred by the ownership of it.
Consequently, derived VC reinvigorates the FP6 and FP10 of S-D logic.

Co-Creating
Value between Actors

O’Shaughnessy and O’Shaughnessy (2009) criticise the
Service Dominant logic by arguing that the thought sets to become an
all-encompassing marketing paradigm, dismissing marketing theory in its own
right. However, Vargo and Lusch (2011) respond
to the claims, stating that S-D logic is not regressive. Rather, service
provision and value co-creation make more sense to focus on than on measures of
output.  Achrol
and Kotler (2006) support this by stating that S-D logic challenges traditional
marketing thought rather than regress it. On the contrary, O’Shaughnessy and O’Shaughnessy
(2011) make claims that S-D logic is primarily based in the US, rather than
globally as suggested by Vargo and Lusch (2004; 2008). More
importantly, the authors argue S-D Logic is limited by very few articles,
lacking input from scholars. Countering this, is the fact that S-D logic
remains widely studied by scholars and practitioners. Over two thousand papers
by scholars about S-D logic has been reviewed and approved by Vargo and Lusch (2011). The authors also emphasise that S-D logic studied
in different subdivisions of the marketing discipline along, as well as different
sectors. Alike, service dominant remains open-sourced with contributions
continually being made.

 

 

 

 

 

Conclusion – 500 words

To
conclude, the prior literature makes the suggestion that customers want to experience
value through the use of goods and services. The growth of actor engagement
prompts firms to offer value propositions so the consumer can derive their
value from use. Therefore, the assertion that marketing is based on value
co-creation between actors is agreed with.

Marketing
managers have control over the offensive and defensive marketing strategies.
That being said, the industry firms compete is dictated by the consumer. Firms
that aren’t adapting to change will not stand the test of time within increasingly
dynamic markets (Prahalad and Ramaswarmy, 2000).
Previously mentioned in the literature, goods and services are intertwined.
Moving into an era of IoT (Internet of Things), physical
objects will be embedded with technologies that provide more dynamic service
offerings for the consumer to customise. The diffusion of big data shows
promise for the co-creation of value as information technology enables firm to
offer novel value propositions for customers. Service is therefore expanding
through technology, influencing all of marketing as opposed to just services
marketing. Highlighted by Rust and Huang (2014), one of the leading economic
trends have been in the growth of employment within the service sector. The
transition to service and value in-use is largely driven by technology. Thus, actors
have now become ‘things’ that enable the communication and transfer of data through
networks (Löbler, 2013). As shown by Ramaswamy (2008), actors derive value through the
information exchanged by both parties. This has suggested that advancements in
big data further firms to build and tailor operant resources to suit the needs
of the customer. Suggested by Mejtoft (2011), the
Internet of Things is slowing becoming incorporated in the everyday lives of
the consumer. Consequently, incorporating co-creation with service as value
propositions prompts a sustained competitive advantages for organisations the
firms willing to do so.