Goods Dominated Logic in Marketing

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MK0388 Marketing Management and Strategies
Assignment

Part 1
Goods-Dominated (GD) logic has been instilled in contemporary thinking since the industrial era, stemming from the fact that economic growth was achieved through a country’s ability to produce excess quantities of goods and export the excess for wealth. Although when this logic is extended into services it results in reducing service offerings into man hours, information and other ‘exchangeable’ units.

Whereas recently, literature has proposed the concept of a Service Dominated (SD) logic where the customer and the firm are involved in co-creating value-in-use, rather than value-in-exchange, within a service system (Vargo et al 2008). In this SD logic Vargo & Lausch (2004) suggest that a business’ offering of a value is merely a proposition for the customer to realise at point of use, and until this point what is being offered is only potentially valuable described in FP7 of the 10 “Foundational Premises” offered by Vargo and Lausch (2008). They do this by reaching into a pre-industrial past to find a more holistic marketing logic suited to the more open, dynamic and global markets than the control-orientated resource allocation model most commonly represented as the 4P’s (Ballantyne & Varey 2008). And it has been suggested that, through this SD logic, marketing literature has seen a paradigm shift as more attention is being paid to the intangible resources of a firm due to the impact they have on the co-creation of value between suppliers and customers, rather than simply exchanging their good or service for a pre-determined price as even Kotler (1977) notes that the “importance of physical products lies not so much in owning them as in obtaining the services they render”. Instead it is now believed the strategic role of the supplier is to support the customer’s value creating purposes with both service activities and goods that render service (Gummesson 1993).

One of the main differences between GD and SD logic is their retrospective way of handling resources, especially that of Human Resources. In light of this it is evident that SD logic places much greater importance on different areas of the business strategy, such as relational marketing where GD focuses on transactional. And through effective managing of models such as “The Six Markets” model (Christopher et al 2002), firms can effectively use Relationship Marketing to emphasise the relationships between the organisation and all of its stakeholders in each of the six “markets”. And therefore can more effectively assist in instilling the SD logic of co-creation in the organisation as a “holistic approach to the value-creating space without the boundary constraints of ‘product’ and ‘service’” (Ng and Briscoe 2011).

And linked closely with this is an intangible resource that is also seen to have a high level of importance with the SD logic, that of Internal Marketing, due to the importance of human interaction within aspects such as value creation. Internal Marketing is a concept first proposed by Berry, Hansel and Burke (1976) and was originally developed within Service Marketing as more of a philosophy that, since employees play a large part in how a company is perceived, due to their interaction with customers, the employees’ needs should also be satisfied, viewing them as “internal customers” (Berry 1981). Then in turn, as employees are more positive in their work, they are in a better position to satisfy the “external customers” as demonstrated by the Service Marketing Triangle (King and Grace 2006).

An example of this in practice can be seen through the Swedish firm, The Ericsson Group, who in 1983 installed their Internal Marketing ‘Ericsson Quality’ program with the main justifications behind it being that “quality was to become the most important weapon in marketing warfare” (Gummesson 1987). And this could be argued in line with the general SD logic in which quality takes...
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