1. Relationship: Toward Service-Dominant Logic Transcendence and Unification
Presentation to
Relationship Marketing Summit
December 13, 2007
Robert F. Lusch, University of Arizona
Stephen L. Vargo, University of Hawai’i at Manoa

2. What We Want to Accomplish
Evidence of Goods-Dominant Logic
Review & Update on S-D Logic
S-D logic as a unifying framework for relationship/marketing

3. Reflections of the Goods-Dominant Model
Goods-Dominant logic: Make and sell units of output
Latent evidence
Marketing is:
The “creation of utilities” (Weld)
Time, place, and possession
“production function”
Concerned with value distribution
Orientations
Production and Product
Manufacturing and distribution as value-added
Consumer Orientation
Evidence of problem vs. correction
Marketing Management and Consumer Behavior
Evidence of decoupling of thought
Alderson’s admonition:
“What is needed is not an interpretation of the utility created by marketing, but a marketing interpretation of the whole process creating utility.”
Sub-disciplinary Divergences
Relationship Marketing

4. Sub-disciplinary Divergences and Convergences
Business-to-Business Marketing
From differences
Derived demand, professional buyers, fluctuating demand, etc
To emerging new principles
Interactivity, relationship, network theory, etc
Service(s) Marketing
From differences:
Inseparability, heterogeneity, etc.
To emerging new principles:
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 themes/projects

5. A Partial Pedigree for S-D Logic
Services Marketing
e.g., Shostack (1977);
Relationship Marketing
Berry (1983); Gummesson (1994) ; Gronroos (1994); etc.
Theory of the firm
Penrose (1959)
Core Competency Theory
(Prahalad and Hamel (1990); Day 1994)
Resource-Advantage Theory and Resource-Management Strategies
Hunt (2000; 2002); Constantin and Lusch (1994)
Network Theory
(Hakansson and Snehota 1995)
Interpretive research and Consumer Culture theory
(Belk, Wallendorf, Sherry 1989; Wallendorf & Arnould 1991)
Co-creation, Customer, competence/experience
(Prahalad and Ramaswamy 2000)
Diverse research streame that seem to be saying something is missing
Services and Relationship Marketing
Research and Models
Perceived Quality (manufactured quality)
Relationship (Transaction)
Customer Equity (Brand equity)
In addition to above…
…Others
e,g., Network theory
Also, Consumer orientation—Levitt, etc

6. Evolving…Service-Dominant Logic
Service, rather than goods, as the basis 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
Service (singular) is a process—distinct from “services”— particular types of goods
Shifts primary focus to “operant resources” from “operand resources”
Value always co-created
Sees goods as appliances for service delivery
Implies all economies are service economies
All businesses are service businesses
Operates at paradigmatic, pre-theoretical level

7. S-D Radically Challenges Core Assumptions
G-D
Customer and Environments as Exogenous
Firms Create Value
Operand Resources are Paramount
Management of Marketing Mix
Relationships are Repeated Encounters
Maximize Profits
S-D
Customer and Environments as Endogenous
Value is Co-Created
Operant Resources are Paramount
Co-Creation of Marketing Mix
Relationships are Embedded
Profits are Learning Loop

8. The Evolution of Marketing
To Market
(matter in motion)
Marketing To
(management of
customers &
markets)
Marketing With
(collaborate with
customers & partners
to produce &
sustain value)
Through Future

9. Revised Foundational Premises
FP1
The application of specialized skill(s) and knowledge is the fundamental unit of exchange.
Service is the fundamental basis of exchange.
FP2
Indirect exchange masks the fundamental unit of exchange.
Indirect exchange masks the fundamental basis of exchange.
FP3
Goods are a distribution mechanism for service provision.
Goods are distribution mechanisms for service provision.
FP4
Knowledge is the fundamental source of competitive advantage
Operant resources are the fundamental source of competitive advantage
FP5
All economies are services economies.
All economies are service economies.

10. Revised Foundational Premises
FP6
The customer is always a co-producer
The customer is always a co-creator of value
FP7
The enterprise can only make value propositions
The enterprise can not deliver value, but only offer value propositions
FP8
A service-centered view is customer oriented and relational.
A service-centered view is inherently customer oriented and relational.
FP9
Organizations exist to integrate and transform microspecialized competencies into complex services that are demanded in the marketplace
All economic and social actors are resource integrators
FP10
Value is always uniquely and phenomenological determined by the beneficiary

11. S-D Marketing CUSTOMERS PARTNERS CUSTOMERS & PARTNERS
Co-Create Service Offering
Draw Upon Internal Resources
Co-Create Value Proposition
Draw Upon External Resources
Co-Create Conversation & Dialogue
Overcome External Resistances
Co-Create Value Processes & Networks
Overcome Internal Resistances
CUSTOMERS & PARTNERS
CUSTOMERS PARTNERS

12. The Nature of Coproduction and Cocreation
Integration
With Public-Facing Resources
Direct
Service Provision
Provider of Operand & Operant Resources
Service Beneficiary
Value in Context
Coproduction
Cocreation
Service Provision via Goods
Integration
With Private-Facing Resources

13. Service Exchange through Resource Integration and Value Co-creation
Market-facing and public and private resources
Service
Market-facing and public and private resources
Resource Integrator/Beneficiary
(“Firm”)
Resource Integrator/Beneficiary
(“Customer”)
Value Co-creation
$ (Service Rights)

14. Common Misconceptions
A Theory
S-D logic is a logic, an approach, a lens, but not a theory
Could be foundation for a general theory of the market and marketing
A Reflection of the transition to a services era
In S-D logic, all economies are service economies and all businesses are service businesses
Restatement Of The Consumer Orientation
Consumer orientation is evidence of G-D logic, not a fix to it
Consumer orientation is implied by S-D logic
Alternative To The “Exchange Paradigm”
Problem with exchange paradigm is notion of exchange of output, not the notion of exchange
At issue is the “transaction,” not exchange
Exchange is a relational concept -- reciprocity
S-D logic says service (a process) is exchanged with service

15. Relationship Orientations
G-D Logic
Positive: repeated transactions (encounters)
Normative: Hug your customer and channel partners
S-D Logic
Positive
Relationship inherent (FP8)
Service as benefit – provided by one party, determined by the other
Service as reciprocal
Value as co-created
Network-with-network
Value as phenomenological: “value-in-use” and “value-in-context”
Economic (and social) actors as resource integrators
Normative: collaborate and co-create for mutual benefit

16. The New Geometry of Marketing?
External Resources
Needs
Resources
Resistances RI
Value Co-creation
Value Co-creation
Resource Integration
Resistance Reduction
Exchange
Change
Customers
Needs
Resources
Resistances RI
Stakeholders
Needs
Resources
Resistances RI
Value Co-Creation

17. For More Information on S-D Logic visit:
Thank You!
For More Information on S-D Logic visit:
sdlogic.net
We encourage your comments and input. Will also post:
Working papers
Teaching material
Related Links
Steve Vargo: Bob Lusch:

18. Service Exchange through Resource Integration and Value Co-creation
Density
Value Configuration
Resource Integrator/Beneficiary
(“Firm”)
Resource Integrator/Beneficiary
(“Customer”)
Value Co-creation

19. Organizations Evolving to be Service-Dominant
Bureaucracy
Slow Thinking
Quick Thinking & Slow Responding
Analyze, Plan & Control
Sense, Reflect, Realize, & Learn
Slow Thinking & Quick Responding
Fast Acting
Slow Acting
Service-Ecosystem
Source: Lusch & Webster
Fast Thinking

20. Difficult Conceptual Transitions
Goods-Dominant Concepts
Goods
Products
Feature/attribute
Value-added
Profit maximization
Price
Equilibrium systems
Supply Chain
Promotion
To Market
Product orientation
Transitional Concepts
Services
Offerings
Benefit
Co-production
Financial Engineering
Value delivery
Dynamic systems
Value-Chain
Integrated Marketing Communications
Marketing to
Market Orientation
Service-Dominant Concepts
Service
Experiences
Solution
Co-creation of value
Financial feedback/learning
Value proposition
Complex adaptive systems
Value-creation network/constellation
Dialog
Marketing with
Service-Dominant Logic
(Consumer and relational)

21. Marketing as Resource Integration
Market Facing Resources
Non-Market Facing Private Resources
Integration
Resource
Non-Market Facing Public Resources

22. Breadth of Knowledge Integration
Category Time Cited/Mentioned
Social Science Citation Index 65
Business Source Premier
105
Google Scholar
264
Google.com
550
Conferences* (call for papers and presentations) 22
Marketing Courses* (subjects and reading lists) 13
Website Posts* (e.g., blogs)
172
*as of December 2006 22

23. Integration in Marketing Literature
Journal of Marketing (7)
Journal of Service Research (7)
International Journal of Service Industry Management (7)
European Journal of Marketing (5)
Industrial Marketing Management (5)
Journal of Business Research (4)
Journal of Retailing (3)
Marketing Science (3)
International Marketing Review (2)
Journal of Business-to-Business Marketing (2)
Journal of Public Policy & Marketing (2)
Citations
Numbers based on Social Science Citation Index. 23

24. Main Sub-themes of Integration
Three main sub-themes underlying the knowledge integration focus on core concepts of S-D logic:
The categorization is adapted from marketing schools of thought presented by Shaw and Jones (2005). The numbers represent selected citations relating to or elaborating upon S-D logic (Vargo and Lusch 2004). 24

25. Service-Dominant Logic: Toward the Unification of Marketing
Presented by: Robert F. Lusch, University of Arizona
Stephen L. Vargo, University of Hawaii
Presented to: Relationship Marketing Summit
Buenos Aires, Argentina
December 13, 2007

26. For more information on S-D logic visit: sdlogic.net
THANK YOU
For more information on S-D logic visit: sdlogic.net
For permission to use any information in these slides please or