Theories Of Relationship Marketing

Global economy has experienced profound changes at the turn of the century and services played an important role in these changes because organizations have started meeting with their markets through services (Irons, 1997). In view of these changes Robert F. Lusch and Stephen L. Vargo presented a new marketing perspective termed as service-dominant (S-D) logic of marketing in which goods and services in marketing are presented in a different perspective. Vargo and Lusch (2004, p.2) gave a new definition to service as “the application of specialized competences (knowledge and skills) through deeds, processes and performance for the benefit of another entity or the entity itself”. They further argue that all enterprises are in the service providing

The concept is similar to that of relationship marketing as it also makes customers to actively participate in the service creation and act them as co-creators of value (Gruen and Hofstetter, 2010). Though goods-dominant approach is used widely in relationship marketing practices yet it can also serve as essential step in practicing of relationship marketing from S-D Logic (Gruen and Hofstetter, 2010). According to Berry (1993, p.25) relationship marketing “is a strategy to attract, maintain and enhance customer relationships”. And also Prarvatiyar (1996) stated that it is the process of co-operating with customers to improve marketing productivity through efficiency and effectiveness” which is also reflected and represented in S-D preposition value is created in collaboration with customers and co-creation of value implies interactivity between firm and customers. Relationship marketing replaced the unit exchange paradigm with relationship and transaction represented not exchange of good but rather a marketing activity. SD logic also replaced the exchange paradigm with exchange of service (Vargo,

Similarly S-D logic based on the premises that value co-creation is through service exchange and resource integration. The ninth fundamental premises on which S-D logic resides is that “all economic and social actors are resource integrators” implying that value creation is through networks of networks (Vargo and Lusch, 2004) same as B2B marketing.

The fourth proposition of S-D logic is that “firms gain competitive advantage by engaging customers and value network partners in co-creation and co-production activities” (Vargo, Lusch and O’Brien, 2007, p.1). It reflects the concepts of relationship marketing and B2B marketing that says that engaging and building relationships with customers is key to gain competitive advantage and also that value network partners play an important role in value creation as stated by B2B marketing.

However B2B marketing was more focused on business to business relationships thus a more evolved perspective was developed that encompasses the principles of B2B marketing but also is applicable to consumer markets. Thus S-D logic emerged from concepts of B2B marketing yet is more evolved perspective of marketing.

2.3 S-D Logic and Services