Vargo and Lusch examined the supplier/customer relations from a new perspective. The new vision of these relations opens a new opportunities for better satisfaction by the products, no matter they are physical goods, or services. The improvement in satisfaction is achieved by co-creation of value, while interaction between people and consuming the products. Lusch R. (2009) has mentioned very interesting point that: “We are here to serve one another”, Vargo S.(2011) adds further: “cocreation is in the heart and soul of the human species, … and all businesses are service businesses”. In this paper I will discuss different situations concerned with co-creation and co-production of value, also will mention several strategies to increase the effect of co-creation.
Experience of Co-Creation value We are engaged in different businesses, and one of them is importing and selling the calcium carbonate compound, it is used in production of ordinary polyethylene shopping bags. As Vargo S. (2011) mentioned that all businesses are service businesses, the same with ours, we sell product, but mostly it is about delivering service, we not just sell it, we offer solution for decreasing the cost of the finished product, and each customer is unique. Firstly we make an appointment in the potential customers production place, and our specialist take free samples with them to elaborate the unique formula directly in the manufacture. Each customer’s recipe is different; it depends on the machinery, type of raw materials, who is his customer, etc. After showing in practice the cost and quality advantages of our product we negotiate about the price. Our product is more expensive than competitor’s but through interaction it becomes a better solution than the cheaper alternatives. Some customers do not allow anyone from outside to enter the production, and they offer us just to send the samples and they try without our interference, after we get a feedback from them: “We examined and haven’t observed the advantages”. According to Schulz and Gnoth (2008, p. 6) “Value is cocreated only when interaction takes place, not after and certainly not before”. Our second department is producing the edge protectors for packaging pallets with different types of goods. While getting acquainted with SDL I understood that for now this business is based on traditional view, i.e. goods-centered view. We make good marketing campaigns and
sell our products, not knowing our customers, and which products do they pack. Grönroos (1994, p.8) presents the marketing strategy continuum where on the left is transaction marketing and on the right there is relationship marketing. Everything is different, for example concerning the time perspective, relationship marketing has long-term focus, or instead of marketing mix there is Interactive marketing supported by marketing mix activities. So we’ll move right along the Strategy continuum, and create a strategy based on service. From just selling goods, our managers will switch to consulting and providing the packaging solutions. The protectors have different sizes, with the help of metrical laboratories we will find the breaking point and communicate with the customers about the type and the weight of goods, to offer the solution they need, so the customer will pay exactly for the product that he needs and will nor overpay. This approach is supported by Vargo and Lusch (2004, p.12): “A service-centered view of exchanging points implies that the goal is to customize offerings, to recognize that the customer is always co-producer of value, and to strive to maximize customer involvement in the customization to better fit his or her needs”. This will increase his satisfaction and loyalty to our company. I also would like to mention the experience of our competitor in the market of flexographic inks (for industrial printing on any type of paper, polyethylene) etc. This is a global company originally from Finland called Flint Group. Their prices are 30% higher than mine, but they succeeded in mixing their goods with service they provide, so for the customer to switch the supplier seems to be very risky and expensive. They installed dispensing units with a software including formulas for thousands of different colors. Each producer’s inks are different, so these formulas are suitable only for their inks. So it is almost impossible for me to enter this type of companies, nevertheless my offer is 30% better. Along with that Flint Group technically supports his customers; organize seminars for technicians, etc. As Barney (1995, p. 53) explains that if a firm possesses the valuable, rare and very costly to imitate resources, it obtains sustained competitive advantage. Though we have different businesses we won’t concentrate on inks, but may be use the experience of our competitor in different area and obtain sustained competitive advantage. Strategies I believe there are a great number of strategies for moving from goods-dominant logic to service-dominant logic, but I will mention some of them.
First of all it is Customer relations Marketing (CRM). According to Mitussis and Patterson (2006, p. 4): “The ability to develop successful customer relationships lies in an organization’s ability to understand its customers, their individual preferences, expectations and changing needs”. The individual approach will provide with the long-term and trust relationships with the customer. The creation and support of ISFs. Doan et al (2013, p. 1) notes that: “When firms and customers can understand each other, and then collaborate with trust, firms can provide better services that depend on agreement with customers”. Examples of such platforms are: specialized forums where can specialists can meet and discuss new some products, share with their experience also they can discuss new tendencies or developments, etc. These platforms can be organized also by producers to find out which problems do the consumers face, to better meet their needs and expectations. The environment in the company is also very important. It is very difficult to underestimate the role of employees. According to Baines et al (2011, p. 502): “Employees are required to deliver both the functional aspects of an organization’s offerings and the emotional dimensions, particularly in service businesses”. For example in our company it doesn’t matter what kind a customer is it, big or small. We always try to consulate and satisfy all the needs of the potential customer. Conclusion The increasing competition and globalization require moving from product-dominant logic to service-dominant logic. Baines et al. (2011, p. 495) posit that the products alone are insufficient to meet customer needs today. The company must use different strategies to improve the customer satisfaction, which will be achieved by meeting the hidden and obvious needs. The more strategies the company will implement and realize the more sustained competitive advantage it will receive. References: Barney J.B. (1995) ‘Looking inside for competitive advantage’ Academy Of Management Executive, November 1995; 9(4):49-61. Available from: http://sfxhosted.exlibrisgroup.com.ezproxy.liv.ac.uk/lpu? title=academy+of+management+executive&volume=9&issue=4&spage= 49&date=1995 . Doan M., Shirahada K., Kosaka M., (2013) “Service Mediator Model for Value Co-Creation Based on Service Dominant Logic”, available at:
http://scholar.google.com.tr/scholar? q=Service+Mediator+Model+for+Value+CoCreation+Based+on+Service+Dominant+Logic&hl=tr&as_sdt=0&as_vis =1&oi=scholart&sa=X&ei=fTykUtm0OoW1tAbTwoBA&ved=0CC0Qg QMwAA
Grönroos, C. (1994) ‘From marketing mix to relationship marketing: Towards a paradigm shift in marketing’, Management Decision, 32(2), pp.4-20 [Online]. Available from: http://sfxhosted.exlibrisgroup.com.ezproxy.liv.ac.uk/lpu? title=Management+Decision&volume=32&issue=2&spage=4&date=199 4 [Accessed on 4 December 2013] Mitussis, D., O’Malley, L. & Patterson, M. (2006) ‘Mapping the reengagement of CRM with relationship marketing’, European Journal of Marketing, 40(5/6), pp.572-589 [Online]. http://sfxhosted.exlibrisgroup.com.ezproxy.liv.ac.uk/lpu? title=European+Journal+of+Marketing&volume=40&issue=5%2F6&spa ge=572&date=2006 [Accessed on 4 December 2013] Schulz M., Gnoth J., (2008) “Understanding the service-dominant (S-D) logic from within the firm ” available at: http://www.business.otago.ac.nz/marketing/events/OtagoForum/Final %20forum%20papers/Otago%20Forum%20Paper%209_Schulz.pdf Vargo, S.L. and Lusch, R.F. (2004) 'Evolving to a new dominant logic of marketing', Journal of Marketing, 68(1), pp.1–17, [online]. Available from: http://ehis.ebscohost.com.ezproxy.liv.ac.uk/eds/pdfviewer/pdfviewer? sid=5576290b-0162-4dc0-bc62575ea9a68b91%40sessionmgr111&vid=1&hid=109 (Accessed: 7 December 2013). Schulz M., Gnoth J., (2008) “Understanding the service-dominant (S-D) logic from within the firm ” available at: http://www.business.otago.ac.nz/marketing/events/OtagoForum/Final %20forum%20papers/Otago%20Forum%20Paper%209_Schulz.pdf Lusch R. on Service-Dominant Logic (2009), video, available at: http://www.youtube.com/watch?v=gWN9VPu7Xi8 Vargo S. (2011) “Beyond Service Dominant Logic” video, available at