Service Dominant Logic (SDL) is one of the most significant visions of the future of marketing and strategy of the last 10 years.
Its basic premises is that all economies are service economies and managers should adapt their practices to be successful.
It has a reputation of being quite academic and conceptual, maybe that’s one reason why product oriented practices keep prevailing in management. That’s unfortunate, because SDL is worth the attention of managers and leaders in all sorts of industries.
Below are 10 principles that hopefully can help making it more tangible.
1. Think customer jobs to be done, and outcomes
People don’t buy a lawn mower because they want to have one, but because they want a mowed lawn. You could say the exchange of the product is just a reflection of the real exchange: the exchange of the possibility to have a nice mowed lawn.
2. Think usage, not ownership
Most of us own a lot of stuff we ‘just have’. I personally own a drill, a sander, while I hate DIY and use it twice a year at best. These things that aren’t used, have no value (except maybe an speculative/option value for the moment we resell). Value is derived from use. This is suggested by the rise of collaborative consumption, the sharing economy: car sharing, garden sharing,
3. You don’t do things TO customers, you do things WITH your customer.
On the traditional –goods focused- value chain of Porter the customer comes right at the end. Services are co-created and co-produced together with customers and partners throughout the value chain, not at the end. The better customers contribute to that, the more value is created, help you customers play their role better.
4. Don’t assume your customer doesn’t know better.
Customers have never been smarter than today. They have instant access to information from all over the world. Sources on the internet are often richer than your corporate tools. This means you need absolute transparence. Actually it’s even worse, your challenge is to trying not to look stupid.
5. Communicate on their terms
Smart phones and mobile internet have allowed people to communicate, any time, instant and with various channels simultaneously. Companies need to facilitate that in their co-production of services. That involves not only sending, but more listening and responding. Hence the rise of social media/ conversation teams. Hey, and stop hiding the customer service phone n°.
6. Knowledge, skill and behavior, not assets are the main source of competitive advantage.
In a industrial economy it’s possible to compete primary on assets, a specific technology or machine you have or resources you own. As in the service economy value is created in interaction, that’s no longer the case, it’s what you DO with your customer that makes the difference. And though digital channels are increasing in importance, the most impactful channel is still the person-to-person one. How your employees interact with customers matter enormously, that one of the reasons why there’s a renewed attention to company culture in management.
7. Stop thinking in traditional marketing segments
Value is individual: It is defined by personal experiences, in my personal context and the meaning I personally give it. Your segmentation must smartly reflect all these individual segments, and that is impossible based on demographic or buying variables. Also your internal organization must be oriented towards and individual customer, not an abstract segment.
In a posh restaurant, one person may feel important, somebody else may feel nervous.
8. Assign budgets to brand realization, not brand promise
The last 3 decades, the stars in marketing where the ones who were best at communicating a promise. In the future, it is those that are best in exceeding what they promise and allowing customers to communicate that to a wider audience.
9. Avoid that a transaction endangers a relationship. Think lifetime value.
A goods driven companies focus on the sale. A service dominant one focuses on the whole customer journey, including the decision before, and the (long) after sales period.
10. Stop obsessing over profit maximalisation
The bottom line is where it should be, at the bottom of the page. Profit signals the strategic (business model) strength and price the fit of your value proposition with market preferences. If both are not satisfactory, learn from it and adapt.
By Jürgen Tanghe