By Ashoke Agarrwal
Traditionally, marketing as a discipline inherited a model of exchange from economics – the exchange of goods that is an exchange of tangible resources, embedded values and transactions. The core value marketing brought to the business table facilitated this transfer, as encapsulated in Philip Kotler’s 4P model.
Businesses and marketers thought of service as an adjunct to physical goods as a residual that enhanced the value of the goods.
As economies and societies developed, services like health care, education and public transport became competitive categories. And marketers needed to evolve marketing and sales strategies for products that were pure services, with tangible goods playing a secondary role.
There are crucial differences in the exchange between selling physical goods and offering “pure” services. First, the sale of physical goods was a one-time make-and-sell operation. On the other hand, providing a service like health care and education requires a sense-and-respond process overlayed on a make-and-sell one.
In the last few decades of the 20th century, marketing considered services like health care and education as a niche within the overall 4P model.
However, as the computer, internet and mobile age matured and services of various kinds bloomed, marketing evolved a new approach.
This approach went to the core of societies’ economic life regarding economic resources.
Operand resources as resources on which an operation or act is performed to produce an effect. Operant resources are employed to act on operand resources (or other operant resources). For example, societies’ operand resources are land, animal, plant, mineral, and other natural resources.
In the last decade of the 20th century and the first decade of the 21st century, marketing’s dominant logic shifted from exchanging goods to what is now known as Service-Dominant Logic (SDL). SDL applies to the marketing of all products, including goods and services.
This shift is primarily in the outlook towards operand and operant resources:
:: While traditionally, the primary unit of exchange is operand resources, in the SDL world, the exchange is to acquire the benefit of specialised competencies (knowledge and skills) or services, that is, operant resources.
:: Even when the exchange involves operand resources, the marketing focus in the SLD paradigm is treating these operand resources as transmitters of operant resources (embedded technologies)
:: In the SDL world, marketers view customers as operant resources as users in the value-creation process. In the SDL world, customers aren’t just value consumers but also value-creators. SDL marketing is a process of doing things with the customer.
:: In traditional marketing, world value is determined by the producer. In the SDL world, value is determined and perceived by the consumer in terms of “value-in-use.” Firms can only make value propositions.
:: Traditional marketing acts upon the customer as an operand resource. In SDL marketing, the customer is an operant resource in actively participating in relational exchange and co-production.
:: Traditionally wealth is obtained from surplus tangible resources and goods. Wealth consists of owning, controlling, and producing operand resources. In SDL, wealth is acquired through applying and exchanging specialized knowledge and skills. It represents the right to the future use of operant resources.
A realisation of the SDL world, even in traditional categories consisting chiefly of physical goods, is through the Brand-As-A-Service (BaaS) model. I wrote about this in my MxM India column dated March 17, 2022, titled “Like Saas, Is Baas the Future”.
The SDL world also calls for a re-orientation of consumer research and CRM. Traditionally much attention in consumer research is paid to segmentation and further market penetration. In essence, an approach that treats the consumer as an operand resource that is acted upon by marketing. Instead, SDL calls for a research orientation that synergizes with CRM to facilitate the customer to be a co-creator.
The coming of 5G and IoT will lead to a further explosion of Big Data. However, the traditional marketing paradigm would further distance the customer as an operand resource that is mined and exploited. In an SDL world, however, IoT-sourced Big Data combined with always-on digital communication can bring the customer closer as a co-creator of value.
The other great advantage of the SDL perspective is that it is a world of abundant operant resources instead of the traditional Malthusian world of limited and depleting operand resources.
For a detailed overview of the SDL approach, I suggest you read the white paper “Evolving to a New Dominant Logic for Marketing” by Stephen L. Cargo and Robert F. Lusch in the Journal of Marketing, Vol 58 (Jan 2004) 1-17.
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