Service-Dominant Marketing Logic

Reaction Paper to the article "Evolving to a New Dominant Logic for Marketing" by Vargo, Stephen L. and Lusch, Robert F. (2004a) Journal of Marketing 68 

Overview

What is the main theme of the article?

The article deals with the Service - Dominant marketing paradigm, as opposed to the Goods-Dominant paradigm.

What is important or interesting (or worth writing)? /  What is the main point or argument or the paper?/ What is the main theoretical/managerial theme the paper contributes to?

Vargo and Morgan provide a historical overview of economic and marketing thought that led to the goods-dominant logic.

• Goods-dominant (G-D) logic focuses on tangible resources and embedded value.
• G-D logic clearly separates two participants of the economic transation: seller (or producer) and the customer.
• During the last 40 years many economists started to focus on the new prospectives on the systems of exchange ( intangible resources, co-creation of value). A lot of these economist have observed the transformation of the nature of economic exchange (or transformation of the thinking about it), where services, rather than goods, are the basic units of this exchange.
• Vargo and Morgan apply these recent economic theories for marketing and come up with the theory of Service-Dominant (S-D) paradigm.

Article explains the main characteristics of the S-D paradigm where

• Service is the fundamental unit of exchange.
• All economies are service economies (authors provide their own definition of the service economy, opposed the one most commonly used these days)
• Basics of the economic exchange are hidden, because of the complexity and interconnectedness of our society (as opposed to the commodities driven exchange, where a unit of exchange can be always traced back)
• Knowledge and competence (to provide a service) is the fundament of the competitive advantage.
• Because of the relationship nature of the services, value creation is also rooted in the relationship and therefore is interactional in nature. Therefore companies can not create the value of their product independently, but only in cooperation with their consumers.

Vargo and Morgan push the S-D paradigm idea forward and speculate that: 

1

Resources are basic unit of exchange.

Now services/competences are the basic of exchange

Therefore Services/Competences =Resources

2

Services/Competences =Resources

All economic actors are involved in service/competence exchange.

Therefore all economic actors are involved in the exchange of resources.

3

Services/Competences =Resources

Services are created (by economic actors).

Therefore resources are created by economic actors.

=

Therefore all economic actors participate in the creation of resources.

What king of research methods (eg gathering and analyzing data are used in the paper?

Authors use primary 2 deductive methods in their work - modus ponens and syllogism.

Reaction

What king reaction did you have to the paper? What did you learn from reading the article?

Article provides very valuable and comprehensive overview of the marketing and related to marketing economic literature of the past decades and is very useful source of references of the books and articles to those students or scholars who wish to explore the subject further.

S-D paradigm proposed by the authors provides a valuable ground for innovative thought for marketing professionals, who often are in need of innovative proposals, but find themselves unknowingly bound to the dominant logic learned at university or proposed by their company (especially in big marketing oriented companies, such as P&G, J&J, etc). By erasing the clear boundaries between producer and the customer, it questions the 4P market mix and might be especially valuable in the industries where the interaction between the company and the clients uses a lot of social media and if open to active dialog (i.e. not very regulated industries such as entertainment, new technologies, etc.)

Despite the valuable insights that I have mentioned above, I would like also to point out that this article has, in my opinion, certain flaws.

One of these flaws, is the desire of the authors (which is typical for academicians in general) to come up with the universal theory that explains all phenomena in the field that they work with. However, in the case of marketing, it is not only impossible, but counterproductive. Marketing is not science, but a set of tools. There can never be a "universal" solution or method for success, but many different methods. In marketing, what works is good, and not what seems true.

Another flaw, in my opinion, is that the article attempts to go into the fields of social and philosophical thought that authors, due to the limited size of the article, are unable to fully cover: creation of value, exchange, financial success of firms, etc.

What kind of expectations do you have to the course/business game?

I hope to have a good understanding of the latest trends in marketing at the end of the course. As for the business game, I see it as a great occasion to practice one's leadership and other skills.