Product and service oriented economy paradigms

Marketing basics, understanding service, markets, products and customers. Cooperation with customers. Win-win strategies. Management and marketing in service systems environment in opposite to traditional conception. Lessons learnt from Interim Project point of view.

= Marketing basics =

Marketing
Marketing is 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 definition, 2007)

Marketing (in general) is used to identify the customer, satisfy the customer, and keep the customer. => CUSTOMER oriented.

B2C (Business-to-Consumer)- process by which companies create value for customers and build strong customer relationships, in order to capture value from customers in return".

B2B (Business-to-Business) - creating value, solutions, and relationships, short term or long term, with a company or brand.

General TODO note to different business relationships (B2B, B2C, B2G, A2A, etc.) – anyone, please feel free to review or delete if considered unimportant.

The Marketing Process

A. Context Analysis    -Enterprise - (Product line; Image in the market; Technology and experience, Culture..)

-Partner - (Distributors; Suppliers; Alliances)

-Clients – Customers (Market size and growth; Market segments..)

-Competitors

-Physical Context (Climate – macro-enviromental factors)

B. Marketing Strategy          -Segmentation - identification of different segments of the market

-Targeting - recognizes the diversity of customers

-Positioning

- Value Proposition

C. Marketing Mix (4P)           -Product

-Price

-Place

-Promotion

D. Action and Control           -Marketing Plan

-Product introduction

Note: This is basic/traditional (G-D logic) view on marketing. (src: Luca Carrubbo, PV216, Intro to Mkt)

A proposal to service-centered view of marketing
The service-centered view of marketing perceives marketing as a continuous learning process (directed at improving operant resources). The service-centered view can be stated as follows:


 * 1) Identify or develop core competences, the fundamental knowledge and skills of an economic entity that represent potential competitive advantage.
 * 2) Identify other entities (potential customers) that could benefit from these competences.
 * 3) Cultivate relationships that involve the customers in developing customized, competitively compelling value propositions to meet specific needs.
 * 4) Gauge marketplace feedback by analyzing financial performance from exchange to learn how to improve the firm’s offering to customers and improve firm performance.

src: Vargo and Lusch, Evolving to a New Dominant Logic for Marketing, 2004

Historical Models evolution
1. Value Chain (Porter, 1985) = Relationships

2. Value Constallation (Normann, Ramirez, 1995) = Resources sharing

3. Service Value Network (Allee, 2000) = Service relevance

4. Viable Systems (Golinelli, 2000; Barile, 2008) = Service relevance

5. Service Provision Chain (Vargo, Lusch, 2004) = Actors participation 6. Service Value Chain (Alter, 2008) = Value co-creation 7- Service Ecosystem (Vargo, Lusch, 2009)

8- SMART Service System (Spohrer, Maglio 2010)

= Understanding service, markets, products and customers =

Service-Dominant (S-D) Logic
Service-Dominant (S-D) Logic is a mindset for a unified understanding of the purpose and nature of organizations, markets and society. The foundational proposition of S-D logic is that organizations, markets, and society are fundamentally concerned with exchange of service—the applications of competences (knowledge and skills) for the benefit of a party. That is, service is exchanged for service; all firms are service firms; all markets are centered on the exchange of service, and all economies and societies are service based. Consequently, marketing thought and practice should be grounded in service logic, principles and theories.

In line with S-D logic, it follows that instead of service marketing “breaking free” from goods marketing, as has been the pursuit of the services marketing sub-discipline for the last several decades, all of marketing needs to break free from the goods and manufacturing-based model—that is, goods-dominant (G-D) logic.S-D logic embraces concepts of the value-in-use and co-creation of value rather than the value-in-exchange and embedded-value concepts of G-D logic. Thus, instead of firms being informed to market to customers, they are instructed to market with customers, as well as other value-creation partners in the firm’s value network. (src: [1])

Service is the application of specialized competences (knowledge and skills) through deeds, processes, and performances for the benefit of another entity or the entity itself. (V&L, 2004) Service = complex issue:
 * Service is related to value co-creation among actors.
 * Service view improves positive interaction between entities in reticular systems.
 * Service co-creation involves many actors within a dynamic process.
 * Service exchanges need evolving expertises and competences.

Foundational premises of service-dominant logic (src: [2])


 * 1) Service is the fundamental basis of exchange
 * 2) Indirect exchange masks the fundamental basis of exchange
 * 3) Goods are a distribution mechanism for service provision
 * 4) Operant resources are the fundamental source of competitive advantage
 * 5) All economies are service economies
 * 6) The customer is always a co-creator of value
 * 7) The enterprise cannot deliver value, but only offer value propositions
 * 8) A service-centered view is inherently customer oriented and relational
 * 9) All social and economic actors are resource integrators
 * 10) Value is always uniquely and phenomenologically determined by the beneficiary

Goods-Dominant Logic vs. Service-Dominant Logic
Besides the conceptual differences mentioned below, the core idea lies in what service is. Whereas in G-D logic, service is unit of manufactured output, in S-D logic, '''service is a process. What are the goods''' then? In G-D logic they are units of manufactured output as well, which in S-D logic serve rather as the appliances for service provision. The shift in perspective therefore lies in the focus on a process rather than on unit of output.

G-D logic vs. S-D logic

Additional reading about S-D Logic: If you don't feel sure about the concept of S-D logic, you would probably be interested in “Service-Dominant Logic: What it is, What it is not, What it might be.” [3] by Lusch and Vargo which clarifies some misconceptions of S-D logic.

Service Science
The Science Service, Management, Engineering and Design (SSMED) originates from an initiative of the IBM Corporation (of Almaden Research Centre in US) that has promoted a new discipline capable of satisfying an emerging research issue: the study of Service Systems.

=> multidisciplinary “open source” project, based upon many pillars.


 * SCIENCE - what SS are and how they evolve, referring to the roles of people, knowledge, shared information and technology, as well as the relevance of customers (as demand) inside production processes (as supply).
 * MANAGEMENT - how to improve efficiency evaluation, and relations sustainability.
 * ENGINEERING - develops new technologies…
 * DESIGN - deepens configurations techniques and studies to correctly structure service systems.

('Services (from G-D logic view) in the world today: 'Service sector represents more than 75% of GDP in developed countries and more than 40% of global workforce).

= Cooperation with customers =

Customers - demand => influencing actor’s behaviour.

About Value Creation

-The focus of value creation and the new interpretation on value co-creation have to be both internal (resources improvement) and external (collaborative relationships).

VALUE is perceived and determined by the CUSTOMER based on VALUE IN USE.

G-D logic vs. S-D logic on value creation

source: [1] ===

The Consumption process
Clients directly participate in production processes with a consumption experience


 * the consumer is no longer seen exclusively as a target (value destroyer);
 * companies have a right only to make its own proposal (value proposition);
 * consumers are considered real factors of production (value co-creator) within a complex system of service delivery (service system);
 * consumers are able to benefit not only from the products purchase, but also for processing, use and consumption of the same (value in use), revealing their role as active (participant) in the value generation process;

= Win-win strategies =

Win-win strategy is a conflict resolution process that aims to accommodate all disputants.

=>WIN-WIN logic – to obtain a mutual satisfaction, shared benefit…

Value creation – a potential resource is converted into an actual specific BENEFIT. -The logic of co-creation of value is a WIN-WIN, which considers the interaction between different entities represented by a number of Service Systems and the desire to gain a COLLECTIVE SATISFACTION.

= Management and marketing in service systems environment in opposite to traditional conception =

Service-Oriented Approach
- how Innovation and Quality in services differ from manufacturing archetype, due to the specific nature of services and to the related implications.

Quality and Innovation in Service Economy - All different forms of innovation and quality performances, play a key role in every organization.

Quality Management

-shift from the quality of Products to quality of Process -> Total Quality Management andCRM.

-every product may be seen as a set of resources, knowledge, and procedures, organized and coordinated by a specific structure (Quality Management)

-Service Innovation provides distinctive resources uses, as knowledge, creativity and mix of their combinations, in order to catch profitable business configurations and maximize qualitative results!!

-Quality research has to orient the detection and measurement of quality needs (customers), quality offers (by service providers), quality perceived (from customers) within service science dimensions (social, managerial, technological, relational). => different aspects related to internal and external needs.

-With appropriate Quality Management and Service Innovation actions, as real dynamic operations THROUGHPUTS, is possible to favor a positive process allowing competitive advantage

BCA (Business Competitive Advantage) depends on necessary interaction ofService Innovation andQuality Management. To understandnew value creation processes we must consider and manage their appliance development.

-> we can relate these considerations to actual processes management of entrepreneurial activities, and first of all to total quality approach to organizations, if they are committed for sustainable service provision.

- this integration for us can support the advances in business competitiveness interpretation.

Systems
Everything that exists is configured as a system, or as a part of a system (nature, society, science, computer tools, economics, human mind, organizations..) (Service Systems, SMART Systems, Complex Systems, Viable Systems)

VSA(Viable System Approach)

-The viable system is a system that survives, remains united, integral; it is balanced it has mechanisms and opportunities to grow and to learn, to develop and to adapt.

Viable, in this sense, is used to refer to the company’s need to constantly increase its survival capacity through time, representing the finality of the company as a system.

-The company as a viable system interacting with other systems gives rise to a unique system.


 * New Service Concepts -> New Value (Co-) Creation Models
 * Linear Relations -> Many-to-Many Iterative Relations
 * Product Offerings -> Customer Participation
 * Transational Competitiveness -> Viable behaviour
 * Single Static Activities -> System Dynamic Interactions

COMPLEX SERVICE SYSTEMS

-as smarter systems improve quality of life, creating more opportunities for win-win interactions: resulting in measurable resource access & value-cocreation for multiple stakeholders.

iterative, interactive, instrumented, interconnected, intelligent

S.M.A.R.T.: Specific, Measurable, Agreed, Realistic and Timely

= Lessons learnt from Interim Project point of view =

This is a Freestyle subpart – GL;)

= Bibliography =

Lusch, R.F., Vargo,S.L'''. (eds) (2006). The Service-Dominant Logic of Marketing: Dialog, Debate and Directions, ME Sharpe, Armonk.'''

Gummesson, E. (2008), Total Relationship Marketing, III ed., Butterworth-Heinemann, Burlington.

White papers on S-D logic by Vargo, Lusch et al. [1]

Demirkan, H., Spohrer, J., Krishna, V. (eds) (2011), The Science of Service Systems, Springer, New York.

AMA, Definition of Marketing, Source: [2]

Informácie čerpané z predmetu PV216 Marketing Strategy in Service Business.