Service Competition Saint Louis MO

THE OBJECTIVE AND APPROACH OF THIS BOOK

The main objective of this book is to describe the nature and scope of customer-focused or market-oriented management in service competition in an in-depth and innovative way. It takes a management approach and a strategy focus; therefore, tactical issues and instruments are only discussed briefly. Instead, the strategic issues of market-oriented management in service competition are discussed in greater detail. It is not a ‘what to do’ book, but a how to think and what to think book. Topics such as personal selling and pricing, which are typical parts of standard textbooks, are not addressed here, other than as parts of larger strategic issues.

The definition of service competition has been briefly touched upon already in this chapter. But what is market-oriented management, and what is the difference between market-oriented management and marketing management? Briefly, market-oriented management is what is needed when the competitive advantage of a firm is built upon customer relationships, including a wide variety of customer contacts consisting of physical products and services as core solutions, as well as a host of billable and non-billable services. The nature of billable and non-billable services, or hidden services, has been discussed already in this chapter. In a context where success in the marketplace is based on successful transactions or exchanges of goods and services for money with anonymous customers, marketing seen as a function alongside other business functions has been the accepted way of managing customers; and it was effective.

However, when customers’ perception of the quality and value of a firm’s products and the trustworthiness and reliability of this firm is dependent on a host of activities and interactive contacts in ongoing customer relationships, no separate function can successfully guarantee that customers will be satisfied with the quality and value they receive and will be interested in continuing and deepening the relationship. Managing customers becomes a process, one where most business functions become involved. Therefore, all areas of the firm have to be managed with a customer focus – that is, in a market-oriented manner. Market-oriented management, or customer-focused management, is a way of expressing the need to radiate an appreciation for the customers’ everyday activities and processes, needs, value systems and internal processes throughout the organization. Hence, in service and relationship contexts, market-oriented management, or customer-focused management, is a more appropriate term than marketing management. However, as discussed in the previous section, perhaps because it is shorter, from time to time we still use the term ‘marketing’ instead of ‘market-oriented management’.

Although this book is based on international research into various areas of service management and marketing, it is geared to the service-oriented marketing school of thought, which has internationally been labelled the Nordic School. The main characteristic of this school of thought is the notion that, in service as well as relationship contexts, marketing decisions cannot be separated from overall management and the management of other business functions. Neither top management decisions nor decisions concerning any business functions can be made without considering the external implications of such decisions; that is, without taking into account the customer or marketing consequences. On a research-oriented note, the Nordic School has encouraged qualitative research and conceptual development, rather than jumping into theory testing when there is no theory to test, although when appropriate theory testing and quantitative research approaches have of course been used. The position of the Nordic School has always been that the sound development of context-oriented theories is a prerequisite for any meaningful testing of theories. No quantum leaps are made based on quantitative testing of pre-existing theories; only conceptual work can provide new perspectives suited to new or changing conditions.

This book is not a traditional service marketing text, although it is intended to be used for the development of marketing knowledge or, rather, market-oriented management knowledge. The notion that it is not a traditional marketing text follows from the fact that in service competition marketing cannot remain only a separate function but instead it becomes everybody’s business. This means that marketing becomes a top management issue, much more so than it is normally thought to be. As soon as a substantial part of the management of customers – that is, of the total marketing process – is handled and managed outside a marketing department, and thus marketing becomes an interfunctional and interdepartmental issue, the person in charge has to be above the level of the department. Managing marketing has always been the responsibility of the head of the marketing department. However, managing customers today is a much larger issue and thus the responsibility of top management.

This book is intended for people who, as researchers, students or practitioners, are interested in how to cope with service competition in a customer-focused manner. It is not a book about market-oriented management and managing customers in service firms only. It is equally intended for manufacturers of physical goods operating in business-to-business or consumer markets, because the importance of service to success is constantly growing for such firms. Finally, because services and relationships are interrelated, the present book is equally based on customer relationships and relationship marketing as it is on service management and managing customers in service contexts.

In the early 1980s, the co-chair of the first of a long series of conferences on the marketing of services in North America, William R. George, now retired Professor of Marketing from Villanova University, said in a plenary speech that he waited for the day when standard marketing textbooks would be based on a service perspective, perhaps with a chapter about special characteristics of consumer goods marketing towards the end of the book. Already 30 years ago scholars from the Nordic School pointed out the shortcomings of mainstream goods-based marketing and started to develop marketing concepts and models geared towards a service-based economy.32 About a quarter of a century later, in a 2005 issue of the Journal of Marketing, 13 American and one non-American scholars discuss problems with mainstream marketing and the need for a renewal of marketing in general.

In 2004, in a Journal of Marketing article, Vargo and Lusch pointed out the importance of a service logic for understanding customers’ value creation and discussed a service-dominant logic for marketing.34 Today, marketing based on the traditional context of consumer goods still dominates most marketing texts but now, after 30 years, the scale is tipping. The importance of service marketing has already been extended far beyond what is traditionally termed service industries and the service sector. In fact, it can be argued that everybody is in services. The service perspective has slowly won more ground, and will soon in the form of service management take over and become the norm. Because the service perspective requires that marketing becomes a top management issue, and not remain an issue for a separate department, in the post-industrial society, service management is a more appropriate concept than service marketing.