Marketing and the Logic of Service: Value Facilitation, Value Creation and Co-creation, and Their Marketing Implications

The discussion of a service-dominant logic has made the findings of decades of service marketing research a topic of interest for marketing at large. Some fundamental aspects of the logic such as value creation and its marketing implications are more complex than they have been treated as so far and need to be further developed to serve marketing theory and practice well. Following the analysis in the present article it is argued that although customers are co-producers in service processes, according to the value-in-use notion adopted in the contemporary marketing and management literature they are fundamentally the creators of value for themselves. Furthermore, it is concluded that although by providing goods and services as input resources into customers’ consumption and value-generating processes firms are fundamentally value facilitators, interactions with customers that exist or can be created enable firms to engage themselves with their customers’ processes and thereby they become co-creators of value with their customers. As marketing implications it is observed that 1) the goal of marketing is to support customers’ value creation, 2) following a service logic and due to the existence of interactions where the firm’s and the customer’s processes merge into an integrated joint value creation process, the firm is not restricted to making value propositions only, but can directly and actively influence the customer’s value fulfilment as well and extend its marketing process to include activities during customer-firm interactions, and 3) although all goods and services are consumed as service, customers’ purchasing decisions can be expected to be dependant of whether they have the skills and interest to use a resource, such as a good, as service or want to buy extended market offerings including process-related elements. Finally, the analysis concludes with five service logic theses.

Perceived Value of Mobile Service Use and its Consequences

The thesis is positioned in the services marketing field. Previous mobile service research has identified perceived value or relative advantage as a stable predictor of use of services. However, a more detailed view of what customers value in mobile services is needed for marketing diverse types of mobile content and attracting committed customers. The direct relationships between multidimensional value and loyalty constructs have received limited attention in the previous literature, although a multidimensional view is needed for differentiating services. This thesis studies how perceived value of mobile service use affects customer commitment, repurchase intentions, word-of-mouth and willingness to pay. The doctoral thesis consists of three journal articles and one working paper. The four papers have different sub-aims and comprise individual empirical studies. Mixed methods including both personal interviews and survey data collected from end-users of different types of mobile content services are used. The conceptual mobile perceived value model that results from the first explorative empirical study supports a six- dimensional value view. The six dimensions are further categorized into two higher order constructs: content-related perceived value (emotional, social, convenience and monetary value) and context-related (epistemic and conditional value) perceived value. Structural equation modeling is used in the other three studies to validate this framework by analyzing the relationships between context- and content-related value, and how the individual perceived value dimensions affect commitment and behavioral outcomes. Analyzing the direct relationships revealed differences in the effect of perceived value dimensions between information and entertainment mobile service user groups, between effects on commitment, repurchase intentions and word-of-mouth intentions, as well as between effects on commitment to the provider and to the mobile channel as such. This thesis contributes to earlier perceived value literature by structuring the value dimensions into two groups. Most importantly, the thesis contributes to the value and loyalty literature by increasing understanding of how the different dimensions of perceived value directly affect commitment and post-purchase intentions. The results have implications for further theory development in the electronic services field using multidimensional latent constructs, and practical implications for enhancing commitment to content provider and for differentiated marketing strategies in the mobile field. The general conclusion of this thesis is that differentiated value-based marketing of mobile services is essential for attracting committed customers who will use the same providers’ content also in the future. Minna Pihlström is associated with the Centre for Relationship Marketing and Service Management (CERS) at Hanken.

Multi-user resource-sharing problem for the Internet

In this thesis we study a series of multi-user resource-sharing problems for the Internet, which involve distribution of a common resource among participants of multi-user systems (servers or networks). We study concurrently accessible resources, which for end-users may be exclusively accessible or non-exclusively. For all kinds we suggest a separate algorithm or a modification of common reputation scheme. Every algorithm or method is studied from different perspectives: optimality of protocols, selfishness of end users, fairness of the protocol for end users. On the one hand the multifaceted analysis allows us to select the most suited protocols among a set of various available ones based on trade-offs of optima criteria. On the other hand, the future Internet predictions dictate new rules for the optimality we should take into account and new properties of the networks that cannot be neglected anymore. In this thesis we have studied new protocols for such resource-sharing problems as the backoff protocol, defense mechanisms against Denial-of-Service, fairness and confidentiality for users in overlay networks. For backoff protocol we present analysis of a general backoff scheme, where an optimization is applied to a general-view backoff function. It leads to an optimality condition for backoff protocols in both slot times and continuous time models. Additionally we present an extension for the backoff scheme in order to achieve fairness for the participants in an unfair environment, such as wireless signal strengths. Finally, for the backoff algorithm we suggest a reputation scheme that deals with misbehaving nodes. For the next problem -- denial-of-service attacks, we suggest two schemes that deal with the malicious behavior for two conditions: forged identities and unspoofed identities. For the first one we suggest a novel most-knocked-first-served algorithm, while for the latter we apply a reputation mechanism in order to restrict resource access for misbehaving nodes. Finally, we study the reputation scheme for the overlays and peer-to-peer networks, where resource is not placed on a common station, but spread across the network. The theoretical analysis suggests what behavior will be selected by the end station under such a reputation mechanism.

Analysis of Heterogeneous IP Traffic in Wireless Environment

Wireless access is expected to play a crucial role in the future of the Internet. The demands of the wireless environment are not always compatible with the assumptions that were made on the era of the wired links. At the same time, new services that take advantage of the advances in many areas of technology are invented. These services include delivery of mass media like television and radio, Internet phone calls, and video conferencing. The network must be able to deliver these services with acceptable performance and quality to the end user. This thesis presents an experimental study to measure the performance of bulk data TCP transfers, streaming audio flows, and HTTP transfers which compete the limited bandwidth of the GPRS/UMTS-like wireless link. The wireless link characteristics are modeled with a wireless network emulator. We analyze how different competing workload types behave with regular TPC and how the active queue management, the Differentiated services (DiffServ), and a combination of TCP enhancements affect the performance and the quality of service. We test on four link types including an error-free link and the links with different Automatic Repeat reQuest (ARQ) persistency. The analysis consists of comparing the resulting performance in different configurations based on defined metrics. We observed that DiffServ and Random Early Detection (RED) with Explicit Congestion Notification (ECN) are useful, and in some conditions necessary, for quality of service and fairness because a long queuing delay and congestion related packet losses cause problems without DiffServ and RED. However, we observed situations, where there is still room for significant improvements if the link-level is aware of the quality of service. Only very error-prone link diminishes the benefits to nil. The combination of TCP enhancements improves performance. These include initial window of four, Control Block Interdependence (CBI) and Forward RTO recovery (F-RTO). The initial window of four helps a later starting TCP flow to start faster but generates congestion under some conditions. CBI prevents slow-start overshoot and balances slow start in the presence of error drops, and F-RTO reduces unnecessary retransmissions successfully.

Service Composition on a Mobile Phone

With the recent increase in interest in service-oriented architectures (SOA) and Web services, developing applications with the Web services paradigm has become feasible. Web services are self-describing, platform-independent computational elements. New applications can be assembled from a set of previously created Web services, which are composed together to make a service that uses its components to perform a certain task. This is the idea of service composition. To bring service composition to a mobile phone, I have created Interactive Service Composer for mobile phones. With Interactive Service Composer, the user is able to build service compositions on his mobile phone, consisting of Web services or services that are available from the mobile phone itself. The service compositions are reusable and can be saved in the phone's memory. Previously saved compositions can also be used in new compositions. While developing applications for mobile phones has been possible for some time, the usability of the solutions is not the same as when developing for desktop computers. When developing for mobile phones, the developer has to more carefully consider the decisions he is going to make with the program he is developing. With the lack of processing power and memory, the applications cannot function as well as on desktop PCs. On the other hand, this does not remove the appeal of developing applications for mobile devices.

The Nature of Learning about Customers in a Customer Service Setting - A Study of Frontline Contact Persons

The starting point of this thesis is the notion that in order for organisations to understand what customers value and how customers experience service, they need to learn about customers. The first and perhaps most important link in an organisation-wide learning process directed at customers is the frontline contact person. Service- and sales organisations can only learn about customers if the individual frontline contact persons learn about customers. Even though it is commonly recognised that learning about customers is the basis for an organisation’s success, few contributions within marketing investigate the fundamental nature of the phenomenon as it occurs in everyday customer service. Thus, what learning about customers is and how it takes place in a customer-service setting is an issue that is neglected in marketing research. In order to explore these questions, this thesis presents a socio-cultural approach to understanding learning about customers. Hence, instead of considering learning equal to cognitive processes in the mind of the frontline contact person or learning as equal to organisational information processing, the interactive, communication-based, socio-cultural aspect of learning about customers is brought to the fore. Consequently, the theoretical basis of the study can be found both in socio-cultural and practice-oriented lines of reasoning, as well as in the fields of service- and relationship marketing. As it is argued that learning about customers is an integrated part of everyday practices, it is also clear that it should be studied in a naturalistic and holistic way as it occurs in a customer-service setting. This calls for an ethnographic research approach, which involves direct, first-hand experience of the research setting during an extended period of time. Hence, the empirical study employs participant observations, informal discussions and interviews among car salespersons and service advisors at a car retailing company. Finally, as a synthesis of theoretically and empirically gained understanding, a set of concepts are developed and they are integrated into a socio-cultural model of learning about customers.

Service firms´ action upon negative incidents in high touch services: A narrative study

The study concerns service management, and specifically the action service firms take with regard to customer dissatisfaction, customer complaints and complaining customers in high touch services. Customer dissatisfaction, customer complaints and complaining customers are called negative incidents in the study. The study fills a research gap in service management studies by investigating negative incidents as a part of an open service system. In contrast to main stream service management studies defining service quality as how the customer as a consumer defines it, in the present study, the concept of interactive service quality is adopted. The customer is considered as a co-producer of service who thus has a role to play in service quality and productivity. Additionally, the study juxtaposes the often opposed perspectives of the manager and the customer as well as the often forgotten silent voices of service employees and supervisors. The study proposes that the service firm as an entity does not act but it is the actors at the different hierarchical layers who act. Additionally, it is acknowledged in the study that the different actors at the different hierarchical layers have different knowledge of the service system and different objectives for service encounters. Therefore, they interpret the negative incidents from different perspectives and their actions upon negative incidents are subsequently guided by their interpretations. The research question is: how do service firms act upon negative incidents in high touch services? In order to answer to the research question a narrative research approach was chosen. The actors at the different hierarchical layers acted as informants of the study and provided stories about customer dissatisfaction, customer complaining and complaint handling in high touch services. Through storytelling, access to the socially constructed reality of service firms’ action was achieved. Stemming from the literature review, analysis of empirical data and my theoretical thinking, a theory about service firms’ action upon negative incidents in high touch services was developed and the research question was answered. The study contributes to service recovery and complaint management studies as well as to studies on customer orientation and its implementation in service firms. Additionally, the study has a methodological contribution to service management studies since it reflects service firms’ action with narratives from multiple perspectives. The study is positioned in the tradition of the Nordic School of Marketing Thought and presents service firms’ action upon negative incidents in high touch services as a complex human-centered phenomenon in which the actors at the different hierarchical layers have crucial roles to play. Ritva Höykinpuro is associated with CERS, the Centre for Relationship Marketing and Service Management at Hanken School of Economics.

Language Influence in Services: Perceived Importance of Native Language Use in Service Encounters

A defining characteristic of most service encounters is that they are strongly influenced by interactions in which both the consumer and the service personnel are playing integral roles. Such is the importance of this interaction that it has even been argued that for the consumer, these encounters are in fact the service. Given this, it is not surprising that interactions involving communication and customer participation in the service encounters have received considerable attention within the field of services marketing. Much of the research on interactions and communication in services, however, appear to have assumed that the consumer and the service personnel by definition are perfectly able to interact and communicate effortlessly with each other. Such communication would require a common language, and in order to be able to take this for granted the market would need to be fairly homogenous. The homogenous country, however, and with it the homogenous market, would appear to be gone. It is estimated that more than half the consumers in the world are already speaking more than one language. For a company entering a new market, language can be a major barrier that firms may underestimate, and understanding language influence across different markets is important for international companies. The service literature has taken a common language between companies and consumers for granted but this is not matched by the realities on the ground in many markets. Owing to the communicational and interaction-oriented nature of services, the lack of a common language between the consumer and the service provider is a situation that could cause problems. A gap exists in the service theory, consisting of a lack of knowledge concerning how language influences consumers in service encounters. By addressing this gap, the thesis contributes to an increased understanding of service theory and provides a better practical understanding for service companies of the importance of native language use for consumers. The thesis consists of four essays. Essay one is conceptual and addresses how sociolinguistic research can be beneficial for understanding consumer language preferences. Essay two empirically shows how the influence of language varies depending on the nature of the service, essay three shows that there is a significant difference in language preferences between female and male consumers while essay four empirically compares consumer language preferences in Canada and Finland, finding strong similarities but also indications of difference in the motives for preferring native language use. The introduction of the thesis outlines the existence of a research gap within the service literature, a gap consisting of the lack of research into how native language use may influence consumers in service encounters. In addition, it is described why this gap is of importance to services and why its importance is growing. Building on this situation, the purpose of the thesis is to establish the existence of language influence in service encounters and to extend the knowledge of how language influences consumers on multilingual markets.

Making Sense of Value and Value Co-Creation in Service Logic

In order to further develop the logic of service, value creation, value co-creation and value have to be formally and rigorously defined, so that the nature, content and locus of value and the roles of service providers and customers in value creation can be unambiguously assessed. In the present article, following the underpinning logic of value-in-use, it is demonstrated that in order to achieve this, value creation is best defined as the customer’s creation of value-in-use. The analysis shows that the firm’s and customer’s processes and activities can be divided into a provider sphere, closed for the customer, and a customer sphere, closed for the firm. Value creation occurs in the customer sphere, whereas firms in the provider sphere facilitate value creation by producing resources and processes which represent potential value or expected value-in use for their customers. By getting access to the closed customer sphere, firms can create a joint value sphere and engage in customers’ value creation as co-creators of value with them. This approach establishes a theoretically sound foundation for understanding value creation in service logic, and enables meaningful managerial implications, for example as to what is required for co-creation of value, and also further theoretical elaborations.