To kick off this month’s topic The changing nature of services, we seek to challenge readers’ thinking on what differentiates goods from services. Is there really a difference? Many would say the differences are obvious, one is tangible the other is performed and consumed simultaneously. But some marketing scholars and a new wave of business leaders believe the differences are merely semantic.
Service Dominant Logic (SDL) is a line of thinking about commerce and value exchange such that all business are service-oriented businesses. It’s not just about the obvious ones like dry-cleaners, landscapers, or mechanics. Those are obviously services. Instead, everything from global auto manufacturers to corner bakeries are considered service-oriented businesses as well. While these businesses do produce a tangible output (cars and croissants respectively) they are also providing a service. They assemble, combine, or in some way process materials into a finished or semi-finished good. It’s the application of knowledge and skills during the processing that is the service element and that’s of significant value to the consumer. After all, I don’t trust the structural integrity of my corner welds and I don’t want to be up at 3am Saturday morning mastering French pastry!
SDL challenges conventional thinking by embracing concepts of the usage value and value co-creation rather than the exchange value or embedded value in goods dominant logic that we typically think of with product-oriented companies.
We’re all in the service industry!
Instead of thinking of about the marketplace as targets to acquire and then retain through a series of “push” marketing tactics leading to transactions, SDL helps reframe a firms’ approach to value creation. Adopting SDL principles means marketing with current and prospective customers, as well as other value-creation partners in the firm’s supply and value chain network. It’s a much more collaborative approach and rather than needing to constantly laude your business’ accomplishments and competitive strengths you can focus on understanding customer’s needs and create an ecosystem that services those needs in a less transactional way.
In other words:
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.
SDl can help foster demand creation in the market and facilitates a pull marketing approach.
What does this mean for customers?
Consumers purchase based on perceived value and expect to realise a return.
Imagine, instead of being bombarded with advertising impression after impression, you are invited to contribute to the design of the offering you wish to receive from the marketplace. Gosh, that would feel like a breath of fresh air! Customers love this approach because it means they have the opportunity to improve perceived value through value co-creation. It results in much stronger alignment between expectations and reality, and it's a built-in satisfaction mechanism.
Now, we're not saying this is an easy practice. Adopting the tenets of SDL requires a significant philosophical change in how business thinks about innovation, commercialisation, and customers. So, what types of businesses are best suited to SDL? The answer is not so clear, but digital first or digitally enabled companies certainly have better access to the type of information and communication networks that help to facilitate the practice.
Thus, we'll explore the digitisation of services next week!
