The Service-Dominant Approach to Marketing
I recently asked Avantika, a management trainee in a pharma company: “Avantika, can you tell me who determines which products are better?”
Avantika gave a mischievous smile (and probably said to herself – “What a stupid question Vivek Sir”) and instantly replied
“Of course the customers do, Vivek Sir.”
“Yes Avantika,” I said “ this is the traditional way of thinking and nothing wrong in this. However, what happens when you start taking a product-oriented approach?”
Without waiting for her to reply, applying my learnings from Philip Kotler and the book “H2H Marketing” I said, “But think Avantika, can this not result in marketers focusing too much on the product itself and not enough on the customer or service-related factors that customers want?”
“Never thought of this Sir. Can you tell me more on this service dominant approach?”
“That would be my pleasure Avantika. I recently learned this from Philip Kotler. Now let us apply this in pharma”
“Who are our customers? Patients via the doctors, right? They will compare the products in conjunction with the services that come with it.”
“Do you remember the Boston Consulting Group article I had shared with you a couple of months back? ‘What Do Patients Want, and Is Pharma Delivering?’ It said [“Doctors were more likely to prescribe medication from a pharma company they considered more patient centric.”] So if a doctor compares two products both from equally strong and reputed companies, he will prefer that company which gives something extra to his patients – the patient-centric services. That’s what the service dominant approach is – the Service-Dominant Logic.”
“In other words, the complete offering is the basis of comparison between two products. And by the ‘offering’ I mean the product, its price, and the service. The advantage of the Service-Dominant Logic is that it integrates the product, price, and service dimensions of the offering.”
“Can you tell me one advantage of this, Avantika?”
Avantika thought over it carefully before replying, but didn’t look too confident of her response: “Will Service-Dominant Logic make budding marketers like me think more like the patients, and can help me add value to my company’s products?”
“Wow, Avantika. You are absolutely on the right path!”
“For instance, PharmaState Academy educators offer not just an ordinary workshop or a course. The add-on service is a one-on-one interaction of the participants with the educator to discuss individual issues and problems. That is the Service-Dominant Logic of PharmaState Academy. Now PharmaState Academy has offered not just an ordinary product (a course or a workshop) but a service which adds value, along with it. And do you know Avantika, who created this innovation? It was created by the participants themselves. It is just that PharmaState Academy listened to the learners”.
“And there are many more such examples in the business world. And here Avantika, let me tell you the story of Post-it Notes.”
The Birth of Post-it Notes… Dr. Spencer Silver, a 3M scientist, was busily researching adhesives in the laboratory. In the process, he discovered something peculiar: an adhesive that stuck lightly to surfaces but didn’t bond tightly to them. At that time 3M wanted to develop bigger, stronger, tougher adhesives and this is not what they wanted. What Dr. Spencer Silver discovered later was something called microspheres which retain their stickiness but with a “removability characteristic,” allowing attached surfaces to peel apart easily. For many years, Dr. Silver didn’t know what to do with his invention. Till one day, his friend Art Fry, told he was frustrated. Every week while practicing with his church choir, he would use little scraps of paper to mark the hymns they were going to sing in the upcoming service. By Sunday, he’d find that they’d all fallen out of the book of hymns. He needed a bookmark that would stick to the paper without damaging the pages. Art Fry partnered with Dr. Spencer Silver, they began developing a product. And that’s how Post-it Notes was born. The end-user was co-creating a product with Dr. Spencer Silver. “I thought, what we have here isn’t just a bookmark,” said Fry. “It’s a whole new way to communicate.”
“Wow! A very interesting story!” said Avantika.
“Now Avantika, can you now tell me what Service-Dominant Logic mindset means?”
“Sure! Service-Dominant Logic mindset means that companies, markets, and society are fundamentally concerned with exchange of service – not the goods. The applications of knowledge and skills of the company are for the benefit of the end-user customer – the patient in pharma. That is, service is exchanged for service; all firms are service firms; all markets are centred on the exchange of service, and all economies and societies are service based.”
“Absolutely, Avantika! Hence, marketing thought and practice should be deeply rooted in Service-Dominant Logic. You should break free from Goods-Dominant Logic.”
“Service-Dominant Logic embraces concepts that companies instead of marketing to customers, should market with customers, and other value-creation partners in the firm’s value network – all the stakeholders”.
“So how would you like to summarize this topic Avantika?”
“Let me try,” said Avantika, “and correct me when I go wrong”.
“In Service-Dominant Logic the focus is not on products, but on the patients’ value-creating processes. The products value emerges for the patient, and is perceived by them. The focus of marketing must be on value creation rather than value distribution. Am I right Vivek Sir?”
“You have summed it up beautifully, Avantika. A service is an action that provides the patient (or the buyer) with an intangible benefit. The intangibility of a service creates interesting challenges for pharma marketers. Because it is the patients (the buyers) who try to judge the relative merits of one service over another. Let’s meet more often, Avantika”.