New Dominant Logic of Marketing

Stephen Vargo and Robert Lusch have made some exciting assertions in their article “Evolving to a New Dominant Logic for Marketing” (2004, Journal of Marketing). They claim transformation in the field of marketing from goods to services, putting more emphasis than ever on the relationship with the customer, even calling the customer a “co-creator” of the project (p. 10). Vargo and Lusch predict a shift in the dominant logic of marketing by identifying and pulling together the many threads of academic thought that have been evolving in the field.
The articles in this week’s assignment were variations on the themes of new ways of understanding the customer relationship and the importance of whole-company mindset of service, or marketing. The article I most related with Vargo and Lusch is “From Sales Obsession to Marketing Effectiveness” by Philip Kotler (1991, Dolan, ed., Strategic Marketing Management). Since Kotler’s article was written thirteen years before “Evolving to a New Dominant Logic for Marketing,” one could see it as a foreshadowing of what was to emerge in the new dominant logic. For example, Kotler, Vargo and Lusch all put an extremely high responsibility on the role of the executive of a company to manage the complete company wide marketing system in what Kotler calls “systems management” (p. 474). Vargo and Lusch describe a management role that must “be performing the role of a network integrator that develops skills in research, forecasting, pricing, distribution, advertising and promotion” (2004, Journal of Marketing, p. 13). This marks a change in the role of the executive, demanding a more complete understanding and direct involvement with the details of organizational operations.
In “From Sales Obsession to Marketing Effectiveness” Kotler was predicting a shift in the role of customers. What he called “customer philosophy” (1991, Dolan, ed. Strategic Marketing Management , p. 474) put the customer first, not just to satisfy or please him or her, but to actually let the customer shape what the company produces and develops. Vargo and Lusch’s service-dominant logic demands that the knowledge of the consumer is essential in a partnership model of co-creating the future production of the company (2004, Journal of Marketing, p.10). This similarity is striking, despite the difference in the writers’ motivation, with Kotler’s goal being to maximize profits rather than sales (p. 471) and Vargo and Lusch insisting that the end product should be long term value rather than immediate profit (p. 2).
The role of knowledge as the key competitive edge is common to both articles. Kotler lists “adequate information” for executives as one of his audit measurements for effective management (1991, Dolan, ed., Strategic Marketing Management , p.476). He also sees knowledge and training as the solution for poor economic performance (p. 477). Vargo and Lusch insist that knowledge and skills are the fundamental unit of exchange in their new paradigm (2004, Journal of Marketing, p.6). These views differ from past assumptions that actions (work) and products (results of work) were the basic units of economic power. In the age of technology and quantum physics, our mindset has changed into an abstract system in which the realm of knowledge is more valuable than the physical world.
In their conclusion, Vargo and Lusch predict that “consumers will develop relationships with organizations that can provide them with an entire host of related services over an extended period” and they give examples in which that is already happening in the marketplace (2004, Journal of Marketing, p.13). Kotler did not have this vision, but he did forecast that companies need to think long term as they plant the seeds for future crops (1991, Dolan, ed., Strategic Marketing Management, p. 479). The managers who followed Kotler’s instructions to be customer led, knowledge based and long term oriented might well have been the leaders who inspired the Vargo and Lusch new dominant logic.


References
Dolan, Robert, ed., Strategic Marketing Management, 1991, McGraw-Hill Book Company: United States.

Vargo, Stephen, and Lusch, Robert, “Evolving to a New Dominant Logic for Marketing,” Journal of Marketing, 2004, Vol. 68)