Service logic

Based on the Nordic School research tradition, but with a separate identity, service logic (e.g. Grönroos 2008a; 2008b; 2007b, 181–189; 2006a; 2006b) has provided the marketing field with a slightly different perspective on service and value

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creation compared to the S-D logic. The aspects emphasized by the S-D logic are to a large extent similar with – and even based on – the contributions from the Nordic School research tradition. Thus, for the most part, the differences between S-D logic and service logic are semantic in nature. However, some differences do occur: for example, the way value co-creation is approached is notably different. This specific difference is discussed in more detail later in this chapter.

Most importantly, service logic makes a clear distinction between customer service logic and provider service logic (Grönroos, 2008a; Grönroos, 2011). The former relates to customers combining the resources provided by the firm with other resources in their everyday practices. The latter, in turn, takes a firm perspective by arguing that through interactions with customers firms can develop opportunities for value co-creation. During these interactions both the customer and the firm have an effect upon each other and are subjects (Grönroos & Ravald, 2011); i.e. active participants in the customer’s value creation. As Grönroos (2011, 289) argues, in interactions the customer and the firm are in some contact: “Interactions are situations where the interacting parties are involved in each other’s practices, and have opportunities to influence each other.” Through engaging in the process of customers using goods or services, the firm can co-create value with them and for them (Grönroos, 2008a). The firm’s strategy is not solely based on goods provision. Thus, what is essential in service logic is how the actual creation of value is viewed and understood. It is the customers who create value for themselves as a result of their resource integration process (Grönroos, 2008a, 303):

As firms provide customers with resources for their use, they can be viewed as creators of a value foundation through a value facilitation process. When customers use these resources (goods or services) and add other resources (goods, services, and information) and skills held by them, the value potential of the resources is developed into value-in-use. Hence, the customers also bring a value foundation to the table.

In terms of value creation, service logic makes a clear distinction between goods and services. Goods are perceived as value-supporting resources, whereas services are value-supporting processes. Service logic is about the firm facilitating processes that support customers’ value creation. Goods logic, in turn, is about the firm

proving customers with goods as resources available for their own value creation (Grönroos, 2006a).

Another important aspect of service logic is the argument against S-D logic’s seventh foundational premise: the enterprise cannot deliver value, but only offer value propositions (Vargo & Lusch, 2008a). Grönroos (e.g. 2008a; 2008b) argues that by engaging itself with the customer’s own value creation process the firm is able to co-create value with the customer and thus, is not restricted to making value propositions only. Hence, the concept of interaction – activities that occur between the firm and its customer during the customer’s consumption process – becomes critically important. Interaction is the key through which firms can influence the value actualization process. Therefore, according to service logic, the focal construct in marketing should be interaction, rather than exchange, or service (Grönroos, 2007b, 200)11. For example, the customer can interact with a physical good, ATM, a vending machine or a complaints handling process and with people, technologies, systems or information involved in such interactions (Grönroos, 2006b). These interactions are there to make sure that customers get the value that was originally expected from goods and services. Normatively, firms need to find new and innovative ways to enter the consumption process and create interactions during that process (Grönroos, 2007b, 198). Firms should strive to add more resources to the goods themselves in order to support and facilitate the use of goods. Alternatively, they could provide customers with a variety of different resources – goods, information, other service activities and access to advice – in a value-supporting process (ibid, 197–198)12.

The differences between S-D logic and service logic are summarized in Table 513.

11 _{For exchange as a central construct in marketing, see e.g. Hunt (1976), and for service as a central}

construct in marketing, see e.g. Vargo & Lusch (2004).

12 _{More recently, Heinonen et al. (2010) have introduced a customer-dominant logic, which can be}

seen as sharing similarities with S-D logic and service logic. Customer-dominant logic emphasizes the importance of placing focus on what customers are eventually doing with services and service in order to accomplish their goals. Hence, what is central is not the offering, but the customer’s life and the tasks it is related to (see Strandvik, Holmlund, & Edvardsson, 2008).

13 _{Service Science was not included in the Table 5 due to the fact that it is to a large extent in line}

with the S-D logic. Thus, only differences between S-D logic and service logic are explored in more detail.

Table 5. Differences between the S-D logic and the service logic

S-D logic Service logic Difference

Goods Goods are transmitters of service and intermediate “products” that are used in the value creation process. Goods act as a vehicle for operant resources enabling access to benefit of firm competences (Vargo & Lusch, 2004; Vargo, Maglio, & Akaka, 2008).

Goods are resources, but they cannot transmit services alone, other resources are needed as well (Grönroos, 2006a; 2006c, 354–355).

Service logic disagrees with the S-D logic perspective that goods are transmitters of service and emphasizes that other resources than merely goods are needed as well.

Service Service is the application of specialized competences (knowledge and skills) through deeds, processes, and performances for the benefit of another entity or the entity itself (Vargo & Lusch, 2004).

Service is a process that consists of a set of activities which take place in interactions between a customer and people, goods and other physical resources, systems and/or infrastructures representing the service provider and possibly involving other customers, which aims at assisting the customers’ everyday practices (Grönroos, 2008a).

S-D logic emphasizes the role of specialized competences, especially operant resources, in service provision. Service logic views service as a set of activities which take place in interactions. In addition, it highlights service’s role as facilitating customers’ everyday practices.

Value Value is always uniquely and phenomenologically determined by the beneficiary (Vargo & Lusch, 2008a, 9). Value is always intangible, heterogeneously experienced, co-created, and potentially perishable (Vargo & Lusch, 2008b).

Value for customers means that after they have been assisted by a self-service process or a full- service process they are or feel better off than before (Grönroos, 2008a).

Both approaches acknowledge the subjective nature of value. Service logic emphasizes customer’s own value-generating activities as a starting point for understanding value for customers.

Value proposi- tion

Firm can only offer value propositions that can be understood as a promise that value-in- exchange will be linked to value-in-use (Lusch, Vargo, & O’Brien, 2007).

Firms can influence both the development of value propositions and the process of value fulfillment (Grönroos, 2008a).

On the basis of different implications drawn from the concept of value-in-use, S-D logic and service logic differ in terms of whether the firm can do more than just offer value propositions.

Value- in-use

Value is co-created with the customer and determined by the customer’s assessment of value-in-use (Lusch, Vargo, & Malter, 2006).

Value is created in customers’ everyday activities and value-creating processes (Grönroos, 2007b, 196).

Both approaches carry similar perceptions of value-in-use.

Inter- action

Views interaction as being implicitly part of S-D logic. For example, interaction is central when viewing marketing as social and economic processes from the S-D logic’s perspective (Lusch & Vargo, 2006a).

Through interactions firms create opportunities to make sure customers get the value that was originally wanted from goods and services (Grönroos, 2008a). Interaction is about the actors having an effect upon each other (Grönroos & Ravald, 2011; Grönroos, 2011).

S-D logic considers interaction as a vehicle to better manage networks. Service logic views interaction as more fundamental construct, allowing firms to influence the value actualization, i.e. value-in-use.

Value co- creation

Value is always co-created with the customer (Vargo & Lusch, 2008a).

Value is created solely by the customer and in some cases, through interactions, co-created with the firm (Grönroos, 2008a).

S-D logic argues that value is co-created, but according to service logic, value is created by the customer and only through interactions, a firm can act as a co-creator of value.

Firm Firms exist in order to integrate and transform different kinds of micro-specialized competences into services (Vargo & Lusch, 2006). Firms should propose and co-create value, provide service and think in terms of service flows, rather than in terms of purchasing goods (Lusch, Vargo, & Malter, 2006).

Firms provide customers with a value foundation and they should focus on understanding customers’ everyday practices and value- generating processes and facilitate these processes (Grönroos, 2008a).

S-D logic focuses on the firm’s role as integrator and transformer of resources and emphasizes the importance of extending the firm’s perspective from products to service. Service logic emphasizes the importance of firms understanding of customers’ everyday practices and their role as facilitating these processes.

Custo- mer

Customer is a co-creator of value, operant resource and collaborative partner (Vargo & Lusch, 2004; Lusch, Vargo, & O’Brien, 2007).

Customer’s value foundation, i.e. customer’s own resources, and other resources such as information, together, create the value potential for customer value (Grönroos, 2008a).

Service logic views the customer in terms of value foundation and acknowledges the importance of additional resources that are needed in order for value to realize. Similarly, what comes to customer as an additional resource in value actualization, S- D logic sees customers as co-creators and as an operant resource.

Marke- ting focus

Service exchange is the fundamental construct in marketing (Vargo & Lusch, 2008b, 32). Marketing should identify and develop the core competences and position them as value propositions that offer potential competitive advantage (Vargo & Lusch, 2004). Marketing ought to focus on providing service to all stakeholders (Vargo & Lusch, 2008b).

Interaction is the fundamental construct in marketing. Marketing should focus on developing and communicating value propositions to customers and facilitate customers’ own value creation through resources and interactions (Grönroos, 2008a; Grönroos, 2007b, 210).

S-D logic and service logic provide contradictory viewpoints to the question of the focus of marketing. S-D logic argues for service exchange whereas Service logic views interaction as a foundational construct in marketing.