LIST OF ABBREVIATIONS
CHAPTER 1: INTRODUCTION
2.3. Service Dominant Logic Conceptualization
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product or service combines value into its actual use, or use-value, rather than through its sales price or exchange-value. Yet, while researchers are united on the importance of a more active role of customers, there is no consensus on defining terms and potential mechanisms to do so. On this basis, understanding the value acquisition strategy requires comprehension of the meaning of value, the different types of value and the different conditions that guide the process of value acquisition. Participation, customer buying behavior, management behavior and other organizational factors form part of the value acquisition process.
2.2.4. Summary and Synthesis of Research Gaps
The discussion in this section of the literature review chapter evidences that the concepts of value, value creation and co-creation, as well as VoE are considerably covered in diverse research. With respect to the focus of the present research on a service sector - the hospitality industry, the VoE concept takes a critical role. Experience takes a central role in the services and in the tourism industry specifically (Ritchie, Tung, & Ritchie 2011). Nevertheless, the evidence related to the creation of value and the VoE in the geographical and industry context selected for the present research is limited. This emphasizes the need for bridging the identified gap through the present study.
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perspective of SDL and competing views related to the SDL. The section concludes with a summary of identified research gaps.
2.3.1. Theoretical Background of Service Dominant Logic:
To begin with, SDL is defined as the “process of one actor using its resources for the benefit of another” (Vargo & Lusch 2008). In order to provide detailed understanding of the service dominant (SD) logic, the historical review, published by Vargo and Lusch (2004a), is summarized in Table 2.4.:
Table 2 4. SDL Historical Review
Author Conceptualization
Bastiat (1848) in Arksey and Knight (1999) The great economic law is that service is exchanged for service. It is trivial, it is normal.
Nevertheless, it is the starting point, the middle and the end of economic science.
Alderson (1957) What is needed is not an explanation of the utility of marketing creation, but a marketing explanation of the whole process of creating utility.
Kotler (1977) The importance of physical products lies not
only in owning them, but also in accessing the services they provide.
Gummesson (1995) Customers do not purchase goods or services.
They buy products that provide services and
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create value. Activities can provide services;
things can provide services.
Grönroos (2000) Focus shifted from the product to the
customer’s creation of value. The customer creates value for the customer, and they are aware of it. Marketing focuses on value creation rather than value distribution.
(Based on: Vargo and Lusch (2004a))
According to Vargo and Lusch (2017, p.48), S-D Logic strategy is an understanding of the intention of the organizations, society and markets - “The main premise of the SDL is that organizations, society and markets are all essentially anxious with the exchange of service.” Lusch and Nambisan (2015) went on to say that: services are exchanged; all organizations are service companies; all markets are service-based; and all economies and societies are service-based.
Therefore, marketing thoughts and practices should be based on SDL principles. As a result, service marketing, like the sub-disciplines that have pursued service marketing for decades, is not about “breaking free” from tangible goods marketing, but that all marketing needs to move away from commodities and manufacturing-based models or the SDL, because of the inherent value to all parties with SDL. This is because SDL and VCC include the concept of using value and creating value together, not the concept of embedded value in the exchange of GDL. Therefore, instead of organizations marketing “to” the customers, they alternatively market “with” the customers, as do with the other value-creation allies in the organization’s value network, moving from Product- Centricity to Customer Focus (Brodie et al. 2011). The shift from product centrality to customer
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Figure 2. 2: From Product-Centricity to Customer Focus. (Adopted from Vargo & Lusch 2008).
SDL contains the concepts of "value in use" and "co-creation of value", as opposed to the typical
"value in exchange" and "embedded value" in GDL. As Vargo and Lusch (2008) point out, instead of telling the organization about the customer, it is better to instruct the market of the customers and other value co-creation partners within the organization value network towards the organization beneficiary.
The discussion presents the importance of SDL for the VCC process. Considering that the tourism industry selected as the setting of the present research belongs to the services sector, additional insights into the service marketing grounded on SDL is presented in the following section.
2.3.2. Introduction to Service Marketing and Service Dominant Logic:
The evolution of SDL came as a result of intense focus on service marketing that emerged as a separate field of study in the early 1980s (Vargo & Lusch 2016). Its premise is that unique
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characteristics of services require different strategies compared to the marketing of physical goods.
Service marketing can apply to either business-to-consumer (B2C) or business-to-business (B2B) products and services, and historically focused on, simply enough, the marketing of services (Lusch & Nambisan 2015).
SDL literally changes marketers’ and marketing researchers’ approach and understanding of value- creation and the customer's role in the value delivery processes, focusing on relationship value- based marketing. Vargo and Lusch (2004a) further suggest that SDL strategy is the intrinsic
“perspective for all of marketing”. Marketing scholarship has consistently embraced the importance of SDL, with Ramaswamy and Ozcan (2016) going so far as to state that “increasingly, all marketing will be largely similar to previous service marketing areas of expertise.” Maglio and Spohrer (2008) suggest “SDL strategy is the philosophical underpinning for service marketing.” While the application put forth by Vargo and Lusch (2004a) was new, the idea that services are exchanged for services was first posited by Bastiat in 1848, over a 170 years ago (Arksey & Knight 1999). Similarly, research indicates Prahalad and Ramaswamy (2004) had been promoting VCC many years before Vargo and Lusch (2004a) work on SDL strategy. Hence, the concept of SDL is studied and contemplated over many years.
For instance, Vargo and Lusch (2004a) have published a popular article in Marketing Magazine that provided thoughtful impact on marketing theory, and has not been well echoed in marketing textbooks. They point out that:
“Marketing inherits an exchange model from economics that has a dominant logic based on the exchange of goods, usually manufactured goods. The dominant logic focuses on physical resources, embedded value and transactions. Over the past few decades, new ideas have emerged, and the revised logic of these views has focused on intangible resources, the co-creation of values
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and relationships. New ideas are converging to the new marketing- led logic in which services, rather than goods, are the basis of economic exchange” (Vargo & Lusch 2004a, p. 328).
At this point, the transition from a GDL to a SDL was fully developed in conjunction with Vargo and Akaka (2009) who continue to further summarize SDL pointing out that there is no “service”
but service is the act of performing a task for another party, either directly or through good deeds.
Additionally, there is not a notion of the “new” service economy because since the beginning of time services have been the basis of communication. The authors also emphasize the deep interconnection between the concepts of “value” and “co-creation”. Vargo and Akaka (2009) believe that if goods are used as service tools, they may be co-produced, but creating value together is not optional.
Service in SDL means the use of specialized abilities; knowledge and skills based upon unique behaviors, processes and performances to benefit the participant. While it has traditionally been associated predominantly with service models in information technology (such as software-as-a- service), data analysis and broader service computing it also applies to businesses, governments, and non-profit organizations, as well as social entities such as families or workgroups (Lusch &
Vargo 2011).
These studies present an overview of the primary research directions currently being explored, but the dissemination of the SDL and theoretical application construction accelerates as the strategic narrative evolves into a systematic view focusing on the service ecosystem (McColl-Kennedy et al. 2012). Of major importance here is the establishment of a “service science” concept, refining GDL’s definition of value into that of an intangible concept of service, validating increased demand for intangible assets, completing the circle of SDL and expanding the application of VCC throughout the organization ecosystem – Figure 2.3 (Vargo & Lusch 2016).
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Figure 2. 3: Narrative aspects of S-DL(Adopted from Vargo & Lusch 2016)
Vargo and Lusch (2004a) were the first, however, to organize the concept of SDL, establishing axioms of the strategy which came to be known as Foundational Premises (FPs), all the while stating that SDL is not owned by them and encouraging further research, stating it was open sourced. Originally, there were only eight FPs, with FP 9 and 10 added at a later date.
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Figure 2. 4: Foundational Premise (FP)(Vargo & Lusch 2016).
Furthermore, Vargo and Lusch (2015) feel the urgency to provide additional information which is necessary to some of the original FPs. Figure 2.4 represents the updated Foundational Premise (FP) development by Vargo and Lusch (2015). Selected important FP changes are explained below:
FP4: Operational resources are the basic source of competitive advantage - Vargo and Lusch (2008), used the word competitive advantage to mean the beneficial impact of operational resources. And strategic interests highlight the important implications of the conceptualization of
“on-demand” services in SDL strategy, such as the role of service providers as beneficiaries in the case of mutual exchange of services. This shift does not mean that competition is irrelevant. We believe that understanding the source of alternative services for beneficiaries is important for the
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FP6: Customers are always value creators - perhaps no other FP would cause as many misunderstandings as FP6 and, in some cases, be as controversial. The first misconception is that Lusch and Vargo (2006) theoretically link value creation with active participation in the organization’s design, definition, creation, or value proposition. As Vargo and Lusch (2008) acknowledge, since they used the term “co-production” in the original FP6, they likely caused this confusion (Vargo & Lusch 2004a). However, the basic intention of the original FP6 was to acknowledge that the benefactor was always an actor-party to its own value creation, but in doing so it might inadvertently convey that value co-creation was binary. On the contrary, it is neither singular nor binary, but rather a multi-role phenomenon, with ten large-scale emergences. The FP10 shows, that the beneficiaries are centered and play key roles in all cases of integration (and evaluation) roles. Since this is essential for any important conceptualization of service- value creation logic.
This thinking was reinforced in Rindfleisch and Morman (2003), who define customer orientation as the interaction of actions and beliefs that put the interests of the customer first and continuously create superior customer value where value creation is transferred to the customer. In addition to that, Grönroos and Voima (2013, p. 138) state that:
“Interaction is the situation in which the interaction parties participate in each other’s practices.
At the heart of the interaction is physical, virtual, or spiritual contact, which enables providers to create opportunities to interact with customer experiences and practices that affect their processes and outcomes. The opportunity for interaction is a natural phenomenon in service contact, but can also be created in a commodity marketing environment, such as through pick-up, logistics, problem diagnosis and call centers.”
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As such, the opportunity for electronic interaction is deemed a possibility, with the term interaction not implying full face-to-face or repeated contact. It only represents mutual or influential interaction. That is, value is often created and anticipated by multiple participants, including not only participants in the binary exchange, but also tangential participants (Lusch & Webster 2011).
The present discussion uncovers the fundamental role of SDL in the marketing of services. Yet, specifics with regard to the interactive platforms necessary to support such collaborative interaction remain undefined and we believe that further clarification is needed to examine how the concept of SDL can create value through co-creation and capture value using specific social media platforms that enable the development of a co-creation strategy framework.
2.3.3. Summary and Synthesis of Research Gaps – SDL
Regardless of the importance of the SDL in the marketing theory and practice, presented in the above section, there is no universal definition of SDL. The concept is characterized by a wide diversity of views presented from authors like Brodie et al. (2011), Lusch and Webster (2011).
In the beginning, while there was growing recognition that brands play an important role in the value of the organization, SDL rarely mentioned brands with marketing scholars citing traditional models of service brands as either theoretical or empirical (Brodie et al. 2011). The traditional service model holds that a brand is a “good will” asset, with the brand itself having value (Brodie et al. 2013). The authors agree that SDL based on the idea of value co-creation in which organizations are driven by service providers that in turn drive value creation, using an analytical approach that significantly reshapes marketing by creating value across the customer process, with value creation being customer driven (Brodie et al. 2013; (Lusch & Webster 2011). The table in Appendix 5 delineates the various contributions by scholars as defined by their theoretical or
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With respect to the aim of the present research, the reason why SDL is significant to the development of a value capture framework is because the notion of co-creation is closely related with the customer’s role as a value creator. In addition to that, a research gap related to the specific platforms needed to support the collaborative interactions between customers and business organizations was identified in the above discussion. Therefore, the present research attempts to bridge this gap by a study of the interconnections between SDL, VCC and value capture through specific social media, with a focus on the development of a strategic framework for VCC through social media.