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On Theories of Markets and Marketing: From Positively Normative to Normatively Positive S-D Logic Presentation to BIGMAC 3: EMAC/ANZMAC Research Symposium October 7, 2006 Stephen L. Vargo, Shidler College of Business, University of Hawai’i at Manoa Marketing’s Missions (something Like) S-D Logic Applied/Managerial: Enhance organizational wealth and wellbeing through the facilitation of exchange Academic/Educational: Disseminate scientific knowledge that informs applied marketing i.e., apply normative marketing theory i.e., teach normative marketing theory Academic/Scholarly: Develop theory and knowledge that can inform marketing practice i.e., develop positive marketing theory The Problem: Shaky Foundations S-D Logic Normative marketing theory Positive marketing theory is (should be) built on positive market/marketing theory built on positive economic theory Positive economic theory built on a normative theory wealth creation Background S-D Logic Smith’s Bifurcation Positive foundation of exchange: specialized knowledge, labor (service), Value-in-use Normative model of (national) wealth creation: Value-in-exchange and “production” Say’s Utility: Creation of surplus, exportable tangible goods Usefulness (value-in-use) Morphed into a property of products (value-in-exchange) Development of Economic Science Built on Newtonian Mechanics Matter, with properties Deterministic relationships The science of exchange of things (products), embedded with properties (“utiles”) Reflections of the Product Model S-D Logic Marketing is: The “creation of utilities” (Weld) Concerned with value distribution Orientations Production and Product Evidence of problem vs. correction Marketing management and Consumer Behavior Alderson’s admonition: distribution vs. value-added Consumer Orientation Time, place, and possession “production function” “What is needed is not an interpretation of the utility created by marketing, but a marketing interpretation of the whole process creating utility.” Disconnect between marketing theory and marketing practice Sub-disciplinary division Sub-disciplinary Divergences and Convergences S-D Logic Business-to-Business Marketing From differences To emerging new principles From differences: Inseparability, heterogeneity, etc. To emerging new principles: Interactivity, relationship, network theory, etc Service(s) Marketing Derived demand, professional buyers, flocculating demand, etc Relationship, perceived quality, customer equity, etc. Other Sub-disciplines Other Intra-marketing initiatives e.g., interpretive research, Consumer culture theory, etc. From deterministic models to emergent properties From products to experiences From embedded value to individual meanings and life theme Evolving…Service-Dominant Logic S-D Logic A logic that views service, rather than goods, as the focus of economic and social exchange i.e., Service is exchanged for service Essential Concepts and Components Service: the application of competences for the benefit of another entity Shifts primary focus to “operant resources” from “operand resources” Sees goods as appliances for service deliver Implies all economies are service economies Service (singular) is a process—distinct from “services”— particular types of goods All businesses are service businesses An orientation (mindset) rather than a theory What is needed S-D Logic Positive Theory “Market are everywhere and nowhere...” (Venkatesh, Penalosa, and Firat 2006) Foundations for Positive theory Reorientation to marketing and marketing Shift from products as unit of analysis to collaborative value creation and determination B2B marketing/network theory Inframarginal analysis Models of emergent structure and processes Resource-based theories of the firm; resource advantage theory Elimination of producer/consumer distinction B2B, service, and relationship Refocus on operant resources as source of value S-D Logic Complexity theory Interpretive research Theory of resource integration and exchange Theory of markets to inform normative marketing theory Resourse Integration S-D Logic Foundation: Modified FP9: All economic actors are resource integrators (and resource exchangers) RI (Firm) RI RI (Firm) Beneficial RI-1 Beneficiary RI (Producer) (Consumer) RI RI RI RI (Firm) RI Value Creation The New Geometry of Marketing? S-D Logic External Resources RI Resistances Resistance Reduction Resource Integration RI Resistances Customers Exchange RI Resistances Value Co-Creation Stakeholders Concluding Observations S-D Logic Pluralism and Duality? Approaches Acceptance (Pluralism) Confrontation Goods and services (what marketing has been doing) Goods vs services (what some are hearing) Transcendence Service as generalizable Goods as a service-provision vehicle (what we are saying—”service dominant”) S-D Logic Thank You! For More Information on S-D Logic visit: sdlogic.org We encourage your comments and input. Will also post: • Working papers • Teaching material • Related Links Steve Vargo: [email protected] Bob Lusch: [email protected] Evolution of Marketing Thought S-D Logic To Market (Matter in Motion) Market To (Management of Customers & Markets ) Through 1950 1950-2005 Market With (Collaborate with Customers & Partners to Create & Sustain Value) 2005+ Difficult Conceptual Transitions S-D Logic Goods-Dominant Concepts Transitional Concepts Service-Dominant Concepts Goods Services Service Products Offerings Experiences Feature/attribute Benefit Solution Value-added Co-production Co-creation of value Profit maximization Financial Engineering Financial feedback/learning Price Value delivery Value proposition Equilibrium systems Dynamic systems Complex adaptive systems Supply Chain Value-Chain Value-creation network/constellation Promotion Integrated Marketing Communications Dialog To Market Market to Market with Product orientation Market Orientation Service-Dominant Logic (Consumer and relational) 14 What’s Next S-D Logic End of “producer”/”consumer” distinction Theory of the market All economic actors as resource integrators, service providers and service beneficiaries network integration Superordination of logic of discovery to logic of justification Adoption of dynamic, non-linear, and longitundinal research methods