CHAPTER 3 94
3.5 Contemporary issues on service quality management 110
3.5.2 Changes in conceptions of service quality management 114
In a seminal article, Vargo and Lusch (2004:2) present a service-dominant (S-D) logic which considers service as a process of doing something for another party. The S-D logic has been characterized as a lens or mindset through which phenomena such as value creation, market exchange, and competition can be viewed in the light of service provision (Lusch, Vargo and Malter, 2006:267). The underlying premise of the S-D logic is that the core of exchange is not manifested by goods but rather by the rendering of service which is provided directly or indirectly through employees, goods, websites, etc. (Vargo & Lusch, 2004). In addition, S-D logic proposes that value is not what goes into a product but is what customers get out of a product and, as a consequence, value subjectively arises within individual customer experiences (Grönroos, 2008; Prahalad and Ramaswamy, 2004:80).
The S-D logic implies a relationship between the service organisation and its potential clients, and mutual work with them which results in the co-creation of value. The value co-creation in the service-dominant logic is illustrated in Figure 3.2. Research suggests that customers as external factors have to contribute in varying degrees in order to be able to produce and consume the service (Kelly, Donnelly and Skinner, 1990:315) either by personally getting involved or providing some objects or information to the co- creation process, effectively co-creating value (Berry and Lampo, 2000:266; Grönroos, 2008:299; Payne, Storbacka & Frow, 2007:85). Alter (2008c:8) mentions that the extent of co-creation of value can be viewed as a continuum:
The customer does nothing.
The customer provides a request for service but does little else. There exists a minimum level of co-creation.
Customers participate in some aspects of service fulfillment processes.
The service occurs largely through multiple service interactions including direct participation by customers, and
Page 115
A self-service approach is utilized, whereby the service provider creates and provides the means by which the customer performs self-service processes and activities.
Vargo et al. (2008:148) assert that in service-dominant logic, knowledge and skills are fundamental resources required for competitive advantage derived from collaborative competence which enables organisations to adapt to dynamic and complex environments (Lusch et al., 2007:7). It is the knowledge and skills of the providers that represent the essential source of value creation, not the goods, which are only sometimes used to convey them. Therefore, in S-D logic, goods are still essential; however, service is superordinate.
Figure 3.2 Value creation and service-dominant logic
Source: Vargo and Lusch, 2008:257 According to Lusch et al. (2007:6) S-D logic superordinates service (the process of providing benefit) to products (units of output that are sometimes used in the process).
Service-dominant logic is grounded in nine foundational premises, viz. The application
Page 116
exchange masks the fundamental unit of exchange; goods are distribution mechanisms for service provision; knowledge is the fundamental source of competitive advantage;
all economies are service economies; the customer is always a co-creator of value; the enterprise can only make value propositions; a service-centered view is customer oriented and relational; organisations exist to integrate and transform micro-specialised competencies into complex services that are demanded in the market place. These foundational premises as well as the S-D logic have been challenged.
The literature provides four notable criticisms of S-D logic. Firstly, Venkatesh, Penaloza and Firat (2006:260) argue that the disciplinary focus of marketing should be on markets and that skills and knowledge are subordinate to meanings and value. They further argue that more important than skills and knowledge or goods and services emphasized in S-D logic are the meanings and values underlying these two sets of market symbols which together constitute micro elements of the world.
Secondly, Wilkie and Moore (2006:270) argue that the increased balance between firm and customer implied in co-creation may not be as salient as suggested by Vargo and Lusch (2004:11). They imply that there is an excessive focus on the firm in S-D logic, or at least an imbalance in relation to the other two parties and rather the focus should be on an aggregate marketing system which consists of consumers, marketers and government. Furthermore, Wilkie and Moore (2006:271) suggest that, contrary to what is implied by the concept of co-creation, a significant information asymmetry remains between consumers and companies. This is because marketers specialize in specific categories, possess expertise and experience about what is sold, however the process frequently offers partial information to buyers.
Thirdly, Lehmann (2006:297) criticizes S-D logic, suggesting that servicing the society is secondary to financial performance that is driven by growth imperatives of the firms.
Lehmann (2006:297) argues that S-D logic suggests that firms exist because they provide services for society and that a firm’s financial performance is primarily a learning mechanism. The argument is that a firm’s performance is not a reward for
Page 117
pleasing customers is often necessary but not a sufficient condition.
Fourthly, Archrol and Kotler (2006:147) criticize the validity of S-D logic as a paradigm, arguing that substitution of goods for services does not bring about inconsistencies or problems in meaning. They also suggest that the supposed distinction between service-centered and goods-centered view is not based on a fundamental logic shift. Archrol and Kotler (2006:148) argue further that four premises do not account for pure services and services provided via goods and in addition they are more provider- oriented than customer-oriented. The authors suggest that S-D logic is a step backward from the current exchange paradigm because the “application of specialized competencies and knowledge to one’s own benefit” does not address the mutuality of interest between two parties in “end-to-end exchange-consumption relationships”.
In addition, Grönroos (2008:306) notes that although from a consumption perspective,
“every business can be considered a service business” there are still some customers that might “see and purchase goods as goods and not as services”. Grönroos (2008:307) proposes that in such situations, value propositions should be developed and communicated accordingly. Following is a discussion of service as a system. The reasoning is based on the work of Shostack (1985:35) who asserts that in order to make changes to an existing service operation, one should view a service operation as a system and not as a set of disconnected pieces and parts.