S-D Logic perspective on value

S-D logic as a ‘new’ emerging theory of marketing provides an interesting perspective on the concept of value, in particular two of its foundational premises, “the customer is always a co-creator of value” and “value is always uniquely and phenomenological determined by

the beneficiary” (Vargo & Lusch, 2008, p. 7). This section begins by providing an

overview of S-D logic and then focuses on S-D logic’s premises of value co-creation and value-in-use. This research wants to explore what value CAM consumers experience and how CAM consumers co-create value through their consumption experiences of CAM health services and therefore S-D logic’s foundational premises on value and value co- creation provides a worthwhile lens for this study.

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Vargo and Lusch (2004) proposed that marketing thinking needed to shift away from the economic goods based model of exchange towards a new marketing perspective where a service-dominant view needed to prevail. Service(s), they argue, should not be differentiated from goods as a sub discipline but an integral part of marketing per se, be it goods or services (Vargo & Lusch, 2004). They believe that service (as opposed to goods) is the fundamental basis of exchange (Merz, He, & Vargo, 2009) and define services (later changed to the singular service) as “the application of specialised competences (knowledge and skills) through deeds, processes, and performances for the benefit of another entity or the entity itself” (p. 329-330).

Vargo and Lusch (2004, 2006, 2008) have brought to the fore and organised 30 years of

service marketing research into one framework and put forward ‘service’ as a new logic for

marketing (Grönroos & Ravald, 2011). This is not only timely but a necessary step for the advancement of marketing theory (Lusch & Vargo, 2011). Rust, Kohli, Gummesson & Arnould (2006) claim that many marketing academics agree with the basic premise of S-D logic and the need for a shift in marketing thinking amidst the changing business and social environment. Despite leading marketing academics past efforts to call for a new paradigm shift for marketing relatively little had changed (Achrol & Kotler, 1999; Grönroos, 1994; Gummesson, 2002; Kotler, 1997; Rust, 1998). What Vargo and Lusch (2004) have done is

“generate a general theory of the marketing discipline by synthesizing the various schools

of thought in the marketing literature” (Theoharakis & Sajtos, 2007, p. 84). This has led to a plethora of reactions from the international academic community (for example Aitken, Ballantyne, Osborne, & Williams, 2006; Brodie, Glynn, & Little, 2006; Brookes, 2007; Grönroos, 2006a, 2006b, 2008, 2011a; Grönroos & Ravald, 2011; Gummesson, 2008; Merz et al., 2009; Peñaloza & Venkatesh, 2006; Rust et al., 2006; Schembri, 2006; Winklhofer, Palmer, & Brodie, 2007; Wright & Russell, 2012) many of whom have provided momentum and ideas for S-D logic’s development (Lusch & Vargo, 2006). Gummesson et al. (2010) acknowledge that “there are a host of challenges associated with the further growth, development, and implementations of S-D logic” (p. 18), but argue that time is of essence and change in marketing theory is required. Gummesson et al. (2010) call for more empirical studies using various research methods to move S-D logic towards theory development. This research on consumer value and value co-creation in CAM

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health services from a CAM consumer’s perspective hopes to contribute, at least, to S-D

logic’s foundational premises on value co-creation and the idea that value is experienced during the consumption process. An overview of these ideas is now discussed.

According to S-D logic, value does not reside in the product (goods, services or

experiences) but in the ‘service’ the product renders. In other words the product itself does not hold value until it is used and/or experienced by the consumer (Vargo & Lusch, 2004, 2006, 2008). Therefore it is only during the use of the product that value emerges (Ledden, Kalafatis, & Mathioudakis, 2011). From this perspective “the firm does not sell goods; it sells a need-satisfying offering” (Finney, Spake, & Finney, 2011, p. 3), and value is not imbedded in products but determined by the consumer during the consumption experience (Vargo et al., 2008). Lusch and Vargo (2006, p. 284) argue that “value can only be created

with and determined by the user in the ‘consumption’ process and through use or what is referred to as ‘value-in-use”. This idea is one that a number of marketing academics support (Ballantyne & Varey, 2006; Grönroos, 2008, 2011a; Gummesson, 2008; Gummesson & Grönroos, 2012; Holbrook, 2006b; Iniesta-Bonillo et al., 2012; Prahalad & Ramaswamy, 2004, 2004a; Prahalad & Venkat, 2004b; Woodruff, 1997; Woodruff & Gardial, 1996).

The premise that “the customer is always a co-creator of value” implies that the value

created in the consumption process is “interactional”and “collaborative” (Vargo & Lusch, 2008, p. 7-8). Lanier and Schau (2007) argue that co-creation implies that consumers have some input into the product or service and therefore can extend, modify or alter its form, meaning and use to benefit themselves and/or to achieve their consumption goals. Consequently this allows the consumer to experience the product or service in creative ways. Interestingly, Grönroos (2011a) argues that S-D logic’s foundational premise ‘the customer is always a co-creator of value’ is misleading because it presupposes that both parties, the firm and the customer, create value. Grönroos (2011) view is that “the

customer creates value, and the firm facilitates value creation” (Grönroos, 2011, p. 289). Value creation in not an all-encompassing process. Consequently, design, development and manufacturing of resources, and back-office processes, are not part of value creation... The total company process that leads to value-in-use for customers is needed to enable value creation, but all parts of it are not part of value creation for the customer. Logically, the

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creation of value-in-use by the user and value creation as an all- encompassing process including value-creating activities by both provider (firm) and the user (customer) cannot be included in the same analysis, as is done in the service-dominant logic literature (Grönroos, 2011, pp. 282-283).

Grönroos (2011) argues that the concept of value in marketing is still elusive and attempts

to unravel this imprecise concept from the Nordic School’s perspective as discussed in the

next section.