Service Dominant Logic — Transcript

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1. 0:03Hi everyone. In this video I want to
2. 0:05talk about the concept of service
3. 0:07dominant logic. Um, this is something I
4. 0:10like to refer to this as like a an
5. 0:11orientation or an approach to marketing
6. 0:14that has really become sort of the
7. 0:17uh the most common used uh strategy or
8. 0:20approach in in the 21st century. It's
9. 0:23not used by all firms. It's not It's
10. 0:25certainly not universal, but certainly
11. 0:27from the academic side of things, uh
12. 0:30service dominant logic is is sort of the
13. 0:32prevailing wisdom in marketing.
14. 0:35So, before we get into maybe specifics
15. 0:37about service dominant logic, it's
16. 0:39probably worthwhile to uh take an
17. 0:42uh sort of high-level look at the
18. 0:43evolution of of marketing strategy, sort
19. 0:45of going back in time and how things
20. 0:48have sort of changed and evolved. So, if
21. 0:50we go back to the Industrial Revolution,
22. 0:53uh from a marketing perspective, we call
23. 0:54this kind of the production era.
24. 0:57And really there wasn't a lot of
25. 0:58marketing going on because uh goods and
26. 1:01services were scarce. What was produced
27. 1:03was sold and there wasn't
28. 1:06uh very high competition in in many
29. 1:08sectors and there actually wasn't enough
30. 1:10goods and services to go around. So,
31. 1:13uh the the need for marketing was per-
32. 1:14perhaps lessened in this era.
33. 1:17As we progressed into the mid-1900s and
34. 1:20we we approached the the sales era. This
35. 1:22is kind of categorized by the the Mad
36. 1:25Men uh era of marketing. We see
37. 1:28advertising becoming more prominent uh
38. 1:31in in terms of a strategy to
39. 1:32differentiate from from competitors and
40. 1:35to communicate sort of a compelling
41. 1:36story. And there's also a focus on
42. 1:39salespersons and and hiring sales people
43. 1:41to uh connect with with buyers.
44. 1:45This evolved then to the marketing
45. 1:47concept era in approximately the 1980s
46. 1:49where marketers realized we have to
47. 1:52really start looking at at customers and
48. 1:54and sort of not just producing goods and
49. 1:56services and then selling them, but
50. 1:58starting with the customer and and sort
51. 2:00of understanding their needs and wants
52. 2:02and then creating offerings that that
53. 2:04are appealing to them.
54. 2:06And this kind of leads into this sort of
55. 2:08more modern approach, which we refer to
56. 2:11again as service dominant logic, which
57. 2:13is really taken prominence in in the
58. 2:1521st century. So, um this is a view of
59. 2:18marketing which customers are seen not
60. 2:21just as exchange partners, but as
61. 2:23resources uh in which uh firms can
62. 2:27co-create value. Um and in this sense uh
63. 2:30we kind of think of exchanges can be
64. 2:33viewed in terms of service for service
65. 2:35exchange. Even even products, uh we
66. 2:38might purchase a physical product, but
67. 2:40what it's actually doing is performing a
68. 2:42service for us. And the marketer
69. 2:44understanding sort of that that uh that
70. 2:47concept needs to really uh focus on what
71. 2:50what that service will be for for
72. 2:52customers.
73. 2:53And again, as I say this is the dominant
74. 2:55paradigm in in marketing scholarship
75. 2:57today, certainly from the academic
76. 2:59perspective, focusing in on the customer
77. 3:02and seeing them as a co-creator of
78. 3:04value.
79. 3:05Uh but in practice, many companies again
80. 3:08are not uh are not really taking this
81. 3:10approach and they they still maintain a
82. 3:13a product-centric approach.
83. 3:16So, perhaps one way to understand this
84. 3:18is to sort of look at some of the
85. 3:20differences from product-centric to
86. 3:22customer-centric.
87. 3:23Um if you think of just the overall
88. 3:25philosophy, from a product perspective,
89. 3:27we are going to manufacture and then
90. 3:29sell products to whoever will buy them.
91. 3:31That that's kind of the overall
92. 3:32philosophy. Whereas uh the SDL or
93. 3:35customer-centric approach, our job is
94. 3:38serving customers. Uh and that might not
95. 3:41seem like a big difference, but when the
96. 3:43focus again is is on that customers, it
97. 3:45it definitely uh pays dividends down the
98. 3:47line.
99. 3:48Uh from an orientation perspective, uh
100. 3:51we are transaction-oriented
101. 3:53in the product uh centric approach.
102. 3:56We're just kind of focused on that buyer
103. 3:58seller exchange, whereas from a customer
104. 4:01centric, we're perhaps a little bit more
105. 4:03long-term focused and we are looking at
106. 4:05a mutually beneficial relationship with
107. 4:08customers over an extended period of
108. 4:09time. That sort of loyalty or repeat
109. 4:12purchase is is important.
110. 4:15Product positioning in a product centric
111. 4:17view, we are going to obviously
112. 4:19highlight all the product features.
113. 4:21We've developed something and we're
114. 4:22going to say, this is what this product
115. 4:24is and describe all of those those great
116. 4:27features, but from a customer centric
117. 4:30view, we we have to switch that a little
118. 4:32bit and say, forget about the features,
119. 4:34we need to highlight the benefits. What
120. 4:37are those features doing for customers?
121. 4:39What is it that is meeting these
122. 4:41customer needs? And again, that small
123. 4:44change really highlights
124. 4:46in the consumer's mind why they may want
125. 4:48to engage in with this offering.
126. 4:52From an organizational structure and
127. 4:53organizational focus perspective,
128. 4:56again, this this is common even in
129. 4:58today's world, we see firms that are
130. 5:01organized based by based on product
131. 5:03profit centers and they might have
132. 5:05product portfolios and managers of
133. 5:08different products, right? And in terms
134. 5:11of
135. 5:12you know,
136. 5:13strategy, they might focus on product
137. 5:15development, right? What's coming next?
138. 5:17What what products can we develop to
139. 5:19meet meet needs of
140. 5:21customers.
141. 5:22Switching that to the customer centric
142. 5:23view,
143. 5:25we we realize that
144. 5:27organizations might be better served if
145. 5:29they were organized by customer
146. 5:31segments.
147. 5:32And instead, you have customer
148. 5:34relationship managers and customer
149. 5:36portfolios that are that are managed by
150. 5:38different people within an organization.
151. 5:41And again, the focus then becomes on
152. 5:43customer relationship development.
153. 5:46Performance metrics might focus on
154. 5:49product sold or profit margins in a
155. 5:52product-centric view. Whereas in a
156. 5:54customer-centric view, we are much more
157. 5:56concerned with
158. 5:58let's say the share of the consumer
159. 5:59wallet. How much
160. 6:01of their wallet are they using to to to
161. 6:04buy our products and services? Again,
162. 6:06customer lifetime value, brand equity
163. 6:09becomes much more important in this
164. 6:10view.
165. 6:12Um
166. 6:13in the in the selling approach, our
167. 6:15focus
168. 6:16product perspective is how many
169. 6:17customers can we sell to? Whereas from a
170. 6:19customer-centric view, it's not how many
171. 6:21customers we can sell to, it's how many
172. 6:23products can we sell to this customer?
173. 6:25How do we co-create value with this
174. 6:28customer or this customer group?
175. 6:31And then lastly, with regards to
176. 6:33customer data and our perspective on
177. 6:35customers, in a product-centric world
178. 6:37that the customer data is a is a control
179. 6:38mechanism, it might be useful for us to
180. 6:40collect and perhaps utilize
181. 6:43to engage in our marketing strategies,
182. 6:45but from customer-centric view, customer
183. 6:47knowledge we turn that customer data
184. 6:49into customer knowledge and it becomes
185. 6:51an asset and the foundation on how we
186. 6:55co-create value with with customers.
187. 7:00So,
188. 7:01the trend towards customer-centric
189. 7:03marketing has has again really been
190. 7:05predominant in in in the 21st century
191. 7:07and there are many reasons and sort of
192. 7:09outside forces that are pushing firms
193. 7:12and marketers in this direction.
194. 7:15So, this comes from a paper a few years
195. 7:18ago that talked about sort of the the
196. 7:20the need for companies to transform from
197. 7:24those those product-centric approaches
198. 7:26to more customer-centric
199. 7:29approaches.
200. 7:30First off, there we we see intensifying
201. 7:32pressure to improve productivity in
202. 7:35marketing. This obviously continues
203. 7:38today with costs going up and firms
204. 7:40trying to lower costs and increase
205. 7:43productivity. Well, if you're focused
206. 7:45again on that customer, you're going to
207. 7:46be much more successful in in pursuing
208. 7:49those
209. 7:50productivity improvements.
210. 7:52Many industries have intensifying
211. 7:55competition and we see lots of different
212. 7:58brands coming in, lots of sectors where
213. 8:01maybe there wasn't competition in the
214. 8:03past, now there's multiple choices for
215. 8:05customers. Again, if you're the company
216. 8:07who has not been focused on the customer
217. 8:09and then all of a sudden comes along a
218. 8:11brand that is has this customer-centric
219. 8:13focus, they're going to see
220. 8:16you know, you're going to be challenged
221. 8:18by it by that competition for sure.
222. 8:21We know that customers have much more
223. 8:24power these days and much more
224. 8:25information and knowledge. They share
225. 8:27knowledge amongst each other and we can
226. 8:30gather knowledge as customers way better
227. 8:32than we could in in the past.
228. 8:35It was often often times was the case
229. 8:37that marketers didn't really have to
230. 8:38care about
231. 8:40the customer
232. 8:41sort of
233. 8:43you know, the feelings and opinions that
234. 8:45that customers had about the brand. We
235. 8:47know that that's not the case today.
236. 8:49Word of mouth is an important and so
237. 8:51having that customer-centric view is is
238. 8:54is is very important.
239. 8:56And then finally, advances in
240. 8:58technology. This is accelerating
241. 9:00rapidly.
242. 9:01We know that technology is going to be a
243. 9:03huge part of of the future and and
244. 9:07again, going back to the idea of are we
245. 9:09creating
246. 9:10technological devices that we can just
247. 9:12kind of talk about the
248. 9:15you know, some of the features of that
249. 9:16or we're actually paying attention to
250. 9:18what these devices and what these tools,
251. 9:21things like AI,
252. 9:23do for the consumer. What is the service
253. 9:25that they are providing for that
254. 9:27consumer?
255. 9:28That's really
256. 9:30sort of the the focus that should we
257. 9:32should be paying attention to.
258. 9:35Okay, so when when you think of
259. 9:36service-dominant I'd really just want
260. 9:38you to think of this idea of um the
261. 9:40customer being at the center
262. 9:43of all of our marketing activities and
263. 9:45our approaches. And again, businesses
264. 9:47who have that consumer-centric approach
265. 9:51are going to fare better than than those
266. 9:53that are much more focused on on
267. 9:55products.