From goods to service(s): Divergences and convergences of logics

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Abstract

There are two logics or mindsets from which to consider and motivate a transition from goods to service(s). The first, “goods-dominant (G-D) logic”, views services in terms of a type of (e.g., intangible) good and implies that goods production and distribution practices should be modified to deal with the differences between tangible goods and services. The second logic, “service-dominant (S-D) logic”, considers service – a process of using ones resources for the benefit of and in conjunction with another party – as the fundamental purpose of economic exchange and implies the need for a revised, service-driven framework for all of marketing. This transition to a service-centered logic is consistent with and partially derived from a similar transition found in the business-marketing literature — for example, its shift to understanding exchange in terms value rather than products and networks rather than dyads. It also parallels transitions in other sub-disciplines, such as service marketing. These parallels and the implications for marketing theory and practice of a full transition to a service-logic are explored.

Section snippets

Alternative logics

Broadly speaking, there are two perspectives for the consideration of service(s). One views goods (tangible output embedded with value) as the primary focus of economic exchange and “services” (usually plural) as either (1) a restricted type of (intangible) good (i.e., as units of output) or (2) an add-on that enhances the value of a good. We (Vargo and Lusch, 2004a, Lusch and Vargo, 2006a) call this logic goods-dominant (G-D) logic. Others have referred to it as the “neoclassical economics

Goods-dominant logic

As the label implies, G-D logic is centered on the good – or more recently, the “product”, to include both tangible (goods) and intangible (services) units of output – as archetypical units of exchange. The essence of G-D logic is that economic exchange is fundamentally concerned with units of output (products) that are embedded with value during the manufacturing (or farming, or extraction) process. For efficiency, this production ideally takes place in isolation from the customer and results

Subdividing and breaking free from G-D logic

Arguably, the establishment of many of the sub-disciplines of marketing, such as business-to-business marketing, services marketing, and international marketing, is a response to the limitations and lack of robustness of G-D logic as a foundation for understanding value creation and exchange. That is, while G-D logic might have been reasonably adequate as a foundation when marketing was primarily concerned with the distribution of commodities, the foundation was severely restricted as marketing

Service-dominant logic

The most critical distinction between G-D logic and S-D logic is found in the conceptualization of service. In S-D logic, service is defined as the application of competences (knowledge and skills) for the benefit of another party. The use of the singular “service” as opposed to the plural “services”, as traditionally employed in G-D logic, is intentional and non-trivial. It represents a shift from thinking about value in terms of operand resources — usually tangible, static resources that

Developing the intersections for better marketing theory

One major step in building this foundational theory for marketing requires shifting the unit of analysis from products to value creation and understanding that the essential drivers for all value creation are operant resources — resources that are capable of “purposefully” acting on other resources. It is this application of resources for the benefit of another entity – that is, service – with the anticipation of reciprocity – service for service – that motivates exchange. But service is not

S-D logic directions for marketing practitioners

Even without a reoriented theory of the market and marketing, S-D logic suggests the following transitional shifts to move from a product focus to a service focus (see Table 1).

  • 1.

    From thinking about the purpose of firm activity as making something (goods or services) to a process of assisting customers in their own value-creation processes.

  • 2.

    From thinking about value as something produced and sold to thinking about value as something co-created with the customer and other value-creation partners.

  • 3.

Conclusion

There are two logics for transitioning from goods to service(s). One based on G-D logic, in which services are a special type of good. The other is S-D logic, which considers service as a process, rather than a unit of output (good). We argue that this S-D logic represents the intersection of service marketing and business marketing, the creation of both of which was more driven by the inadequacies of G-D-logic-driven traditional marketing. Additionally, it is informed by a number of other

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