The Implication Of S D Logic Marketing Essay

4272 words (17 pages) Essay

1st Jan 1970 Marketing Reference this

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Old economic world views see economic values from concrete things around. However, modern and enlightened individuals nowadays have thought through with the old thinking and dispelled some of their notions that have been in use for the past 100 years or more. Indeed their new thinking brought about some advantages. The old thinking is similar to an authoritarian way of doing things wherein an individual (in this case the consumer) is constrained to the whims and wishes of another individual (the producer) because the latter focus on the former his idea of values without the former necessarily giving consent to what the latter thinks.

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The new service dominant logic not only gives more freedom to the consumer, it also saves the producer a lot of money. For example, producing things just in time when the consumer needs it saves the producer a lot of storage fees because he doesn’t need to store things up, or allow for risks of spoilage or non disposal of that item because of the consumer’s refusal to take it.

Using the SD logic in the tourism industry presents a lot of liberating instances for both the consumer and the producer. For one, using the SD logic in this industry would allow the traveler to participate in planning for his trips, and perhaps enjoy it more or save more money. For the producer, investing on self service technologies would save him a lot of money otherwise spent for the salary of employees to facilitate the needs of the traveler.

But still, there are problems, especially in the area of customer relationship management as producers of travel services rely on the internet to accomplish travel transactions. However, there are areas that travel services can improve on and learn from, and perhaps still improve the overall experience in using SSTs in the travel industry.

Adam Smith (2010) asserted that value resides in the good’s inherent capacity to satisfy a customer’s needs or wants, or its capacity to acquire other goods. He also argued that a good’s value is reckoned by the cost of labor provided to produce such good, in addition to the cost of factors of production incurred in coming up with such a product. Marx proposed that goods become valuable because of their inherent utility. Firms, therefore, existed to make and sell goods, and thus create value to satisfy the needs and wants of the customers. Most innovations were geared towards the goods oriented system, rather than towards a service oriented economy. R&D and technological innovations were done mostly in manufacturing firms. Goods were the focus, and this marketing logic is inherited from an economic system that was created more than 100 years ago. Through efficient production and distribution of products, companies maximize profits.

Goods dominant logic can also be defined as the “manufacturing logic.” Goods refer to tangible products such as appliances, tools, food, etc, and they are pushed with little or no concern about what the customer feels or thinks about the product. This kind of marketing orientation is geared towards meeting the needs of the customer without creating long term relationship with him. This puts across the message that the company produces the product wanting to make huge sales to maximize its profits. In goods dominant logic, people exchange for goods which are operand resources and end products. The marketers try to target the customers, as the recipient of goods, for them to buy the tangible goods that the firms produce. Value is determined by the producer which is embedded in the finished product, while relation between the customer and the firm is created through transaction.

In traditional concept, with market as a place of exchange and customer aggregation, customers and goods suppliers play their roles as consumer and producer respectively (Kolter, 2002). The company-centric and product-centric market is target for the suppliers’ offerings and hardly can one see the value of co-production and co-creation. With the change in marketing logic dominance, the service dominant logic suggests a shift in focus to value co-creation, intangible goods, relationships and experiences (Vargo and Lush, 2006).

The shift from G-D logic to S-D logic of marketing

Vargo and Lush (2004) said that goods or the produced tangible things are not the reasons why we buy them. Rather it is the service rendered to us that is really the source of value. We also buy things because of the good experiences derived in using them, as well as the intangible benefits including the brand, social connectedness, self image, and meaning. Value for produced goods, determined by the customer, is perishable, and keeping inventory of tangible things depletes resources. Vargo (2009) explained that “goods are not what we fundamentally ‘own’ to exchange with others, but it is our services.” He also pointed out that in goods-dominant logic, customer is secondary and seen as value receiver and destroyer (Service-Dominant Logic: An Introduction).

Meanwhile, service is the application of competencies such as knowledge and skills to create values for somebody’s benefit. In traditional GD logic, it enhances value and serves as add on to produced goods. It is characterized by intangibility, heterogeneity, and inseparability. In GD Logic, services are adjuncts of production and distribution. Service, in essence, involves process. According to Vargo and Lusch (2006), “Service, then, represents the general case, the common denominator, of the exchange process; service is what is always exchanged. Goods, when employed, are aids to the service-provision process”. For example, advancements in information technology allow customers to vote for the car design that they like, and submit their own design as well. Customers nowadays participate in the creation of goods, and not just as end users of products.

The world is moving towards a more service oriented economy wherein customers have greater freedom to co-create goods and to interact with the firms making them. However, new business models, methods and tools are needed in a new perspective, including non-technological innovations such as new marketing, organizational concepts, or new types of value delivery, etc.

Co-production can be defined as an element of co-creation. According to Lusch and Vargo (2008), co-production means the customer is undertaking production task(s) before usage and experience. In co-creation, Hilton and Hughes (2008) pointed out; customers receive benefits and derive value in using, consuming, and experiencing products. In co-production perspective, customers also act as producer and are involved with firms in creating products. IKEA, for example, emphasizes the importance of self service. Customers must assemble the product themselves with the materials and services that IKEA provides in order to experience the value of co-creation. In co-creation perspective, creating value among firms and customers is essential. If firms are keen to advance their performance in terms of value maximization, they should make a balance between customer’s and their own operant resources such as knowledge, skills, and expertise. For example, empowered, informed, and proactive consumers can co-create the value of products with service providers through the processes of design, implementation, evaluation, and improvement. During interactions, if firms can understand the processes of customer value creation, they can have better chances to know how and where they should improve their tangible and intangible products in order to meet service expectation effectively. Customers, on the other hand, can derive personalized products and have a good relationship with firms.

Basic to SD Logic is the shift in marketing focus from goods to services. Therefore, firms shift from selling maximum number of goods to maximum flow of service from the firm to the customer. The firm thinks about the service system by thinking about the configuration of goods, level of service or the network configuration to maintain a high level of service to the customer. Another concept would be selling a solution, not a thing. That is, from tangible to intangible which sells the brand more, and the goods less. A static operand resource requires some operation for it to be useful and valuable, while an operant resource is dynamic and can produce a result or effect. Exchanges between firms and customers, in the new SD Logic, are symmetric, not asymmetric. This kind of customer-firm relationship fosters trust because symmetric flow of information is promoted between firms and customers. Unfair advantage between trading partners is also discouraged in this new service logic. Furthermore, communication between firms and customers is transformed from propaganda to conversation because firms are encouraged not just to talk to customers but to listen to them as well (Vargo and Lusch, 2008). Furthermore, the new SD logic sees all businesses as service firms. Here are the foundational premises of the SD logic according to Lusch and Vargo (2004):

Operant resources are vital in the SD logic. These are core competencies such as technology, knowledge and skills that can be used to create values on operand resources. Value creation becomes the driver in building of brands built around the customers’ rather than company’s requirements. Branding is built more on relationship and based on consumer-brand interaction. The customer can have greater involvement in co-creating a brand by contributing innovative ideas and co-designing it, thus deeper bond can exist between him and the brand. “Brand identity is co-created with consumers and other stakeholders and this element of co-creation is especially apparent in consumer groups such as brand communities. Typically, these groups become active carriers of brand meaning, rather than followers of the company’s idea of the constitution of their brand” (Payne, 2009).

Consumers form attachment with brands mirroring their social relationships. Relationships are defined as “a sequence of interactions between parties where the probable course of future interactions between them is significantly different from that of strangers” (Payne, 2009). Service quality and customer satisfaction are considered the importance of marketing theory and practice. Companies continually evaluate customer satisfaction of their products in the belief that a satisfied customer becomes a loyal customer, and may even result in additional customers through word of mouth referral from the satisfied customer (Bowden 2009). Customer satisfaction, however, “is not in itself sufficient to encourage repeat visits and purchases. Research has found that factors such as relationship benefits or product attributes, previously thought important to customer satisfaction, do not necessarily affect customer retention. It is the customers’ perception of value and their previous purchasing behavior that contribute to retention” (Stockdale 209). Friendship and loyalty are required from the firm. Discounts and perks offered by the firm proved to be insufficient to retain customers’ loyalty. Customer-provider relationships is dynamic and complex, and “where customers show loyalty in the firm they subsequently behaviors to protect or justify their experiences” (Stockdale 209). Efficient communication is essential element in customer-provider relationships. For a long-term interaction to be maintained mutual understanding is necessary. Customers require accurate and complete information, good access, information searching facilities, prompt system response and reliable service if they are to commit to any online firm (Stockdale 209).

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4. The emergence of self service technologies in the market

Technology plays an increasingly important role in today’s fast paced world. More customers use services facilitated by technology rather than human beings. These technology facilitated services are referred to as self service technologies (SSTs) which are interfaces enabling customers to access services without the involvement of a human employee. For example, fast-food restaurants are developing electronic self ordering, while shoppers can purchase products over the internet without having to visit a store or talk to an employee. Technological advances will be a critical component of customer-firm interactions, and are expected to become a key criterion for long-term business success. However, before SSTs become prevalent in recent times, to accomplish the service, a human employee and the customer are usually involved doing interpersonal interaction (Meuter, 2000).

Types of self services technology have been adapted in the market

Video or compact disc (CD) technologies, direct online connections and Internet-based interfaces, interactive voice response systems, telephone-based technologies, and interactive free-standing kiosks are some of the SSTs today. They are either used individually or in combination with other technologies. A company may provide a CD enabling a customer to view products or services linked directly to a website for more information or ordering. In similar fashion, through an automated telephone system a customer may buy a mail-order item and track package delivery time through a website that tracks packages automatically. SSTs are provided by companies for a variety of purposes. Some forms of customer service are now available with the enablement of technology. Customer services provided through SSTs include questions regarding accounts, bill paying, frequently asked questions, and delivery tracking. Direct transactions are rapidly growing arenas for SSTs. Through technology, customers can now order, buy, and exchange resources with companies without any direct interaction with the firm’s employees. Examples are Charles Schwab’s online trading service, Amazon.com, and the Sabre Group’s Travelocity. Internet-based transactions are rapidly growing for both consumer and business-to-business sales.

Self help, the broad category which refers to technologies enabling customers to learn, receive information, train themselves, and provide their own services, is another field using SSTs. This includes health information websites, tax preparation CDs and software, self-help videos, and telephone-based information lines. An example would be GE Medical Systems providing video and satellite-television-based “just-in-time training” on its equipment for hospital and clinic customers, enabling customers to train themselves at their convenience (Meuter, 2000).

Case discussion: S-D logic of marketing within E-tourism

The travel and tourism industry players, at the forefront of internet business development, are presented with new challenges in this new marketing medium. Traditional firms now invest in e-commerce strategies, giving rise to the emergence of new online agents. Customer self service technologies increased rapidly resulting in consumers being able to plan and book their travel requirements with little direct human interaction. The role of online intermediaries dramatically changed from selling travel products to booking services and facilitating information searches. A study on online intermediaries found that respondents believe the internet offers opportunities to identify market segments more closely, reach a wider market and develop closer relationships with customers (Stockdale 2007). Thus, tourist behaviors changed, with consumer loyalty to a particular site down to low levels as they appear motivated by the search for bargains. Customers move towards reliance on self-service technologies with higher expectations on customization, value, choice, and convenience. The intensely competitive electronic environment emphasizes the need to manage customer relationships for firms to gain competitive advantage (Stockdale 2007).

5.1 The development of S-D logic, co-production, and co- creation: value creation within Tourism

Booking a travel package with the travel agent is a good example of co-production and co-creation. When planning a travel, customers can initially design a plan to show their interests, and expectations. They can discuss with travel agents such issues as destinations, flights, hotels or resorts, preferred restaurants and pubs, and special indoor and outdoor activities. Through the processes of schedule design, agents can know better the tastes and desires of traveling individuals based on psychographic, demographic, and geographic attributes. Agents may then be able to provide personalized and suitable trips to fit on customers’ appetites. Once satisfied, not only does the firm know its customers better, but the latter may have good experiences and relationship with the travel firm, creating the value of co-creation. In this light, not only sales and benefits are built, but also relationship and brand loyalty in the long run. In essence, service dominant (S-D) logic represents the value of intangible resources, co-creation, and relationship with service providers, instead of a simple marketplace for product exchange.

5.2 Self service technologies as the future trend in the tourism industry

Automated teller machines, self-fill petrol pumps and other SST offerings have become widespread nowadays, but the development of the worldwide web pushed self-service technologies to a new level. The ability of customers to do online purchasing and to gather information has increased with the use of the web for business. The aim of self-service technologies, from a consumer perspective, is to enable them to access all needed information for them to do business with a company. According to Parasuraman (1996), it seems that mass markets are progressing from traditional people to people contact service to people to machine interaction, which means customers have more means and higher requirements on the quality of their products and the value they receive. Self service technologies (SSTs) are now prevalent in the modern society where airline, banking, quick serve restaurants, hotel, tourism, and supermarket industries make SSTs accessible and available to meet customers’ needs (Meuter, 2000). For example, SSTs in the tourism industry benefit tourists by time savings, better pricing, convenience, availability of the desired destination, and avoiding argument with service providers through e-booking. Travel firms arranging customized products and services according to customers’ needs also witness growth in sales through SSTs. Through SSTs, travel providers have better control over service resources allowing them savings on investments on redundant resources needed for face to face interaction service.

The development of information and communication technologies (ICTs) brought new innovations to the way businesses do things. This influences the development of the tourism industry as well. Traditionally, outbound and inbound travel agents give out travel information through TV advertising, radio, and telemarketing (Buhalis and Laws 2001). However, travelers seem unavailable to arrange trips by themselves, and they could only rely on travel agencies which designed travel packages and booked reservations for them through computer systems linked to the global distribution network. Such complex processes need to be improved. Thanks to e-commerce, B2B and B2C, work efficiency has witnessed a considerable improvement in performance. For example, e-tourism is a strategic and operational innovation in the tourism industry, which advances the systems of information sharing, communication, transaction, and marketing research services. E-tourism introduces four main types of online traveling websites accessible for customers worldwide (Buhalis and Licata, 2002). The first one is websites of individual suppliers such as those of British Airways and Holiday Inn hotels that allow customers to directly make online reservations. The second one, such as in the case of Orbitz.com, is for multi-suppliers for airlines, car rental companies, and hotels which may cooperate in providing services on the same website enabling customers to link to them. Still, web pages of travel destinations are also available for tourists planning their trips using the internet. Finally, a variety of travel agencies such as Liontravel.com in Taiwan also provide relevant services through their websites. The internet seems to be the tool to advance sales performances in the tourism industry.

6.2 The advantages and disadvantages of SSTs within the E-tourism

With the development of e-commerce, customers now have better chances to design and decide their own trips based on desired prices, places, time and transportation through the online booking system. Because tourists may have different points of view on value creation, they may choose transportation services like budget airplanes, but have higher quality requirement in their hotels. If e-commerce is available, they can plan their own trips, according to their needs, with different suppliers through the internet. Meanwhile, travelers can gather all needed information through online travel pages to do business with suppliers. Customers can also save money in booking flights and rooms online and directly with service providers without extra administration fees collected by travel agents. Finally, saving time is also possible through self-service e-commerce. Many airlines have available self service technology such as self check-in machine to save customer’s time in queuing (Stockdale 210). Through self service e-commerce, customers can benefit from the value of co-creation where firms sell customized products to satisfy customers’ needs, wants, and desires.

In the firm’s perspectives, if customer relationship management has been adapted and emphasized by service providers through the self-service platform on the internet, they can also derive benefits from it. Firstly, with self-service e-commerce, services providers can better understand the marketing segments, especially the high profit ones. For example, Lion Travel targets their main customer segments by designing well their web pages, through which customers can derive more information about the most popular travel packages, destinations, as well as reasonable prices in different seasons. If customers have questions and inquiries, companies may be able to include FAQs in their websites, from which companies can put the answers to the customers’ most frequent asked questions (Stockdale 212). In addition, companies can provide social network systems such as MSN, Skype, and Yahoo Live messengers to answer questions and provide booking services to customers directly on the internet. By doing so, companies may save money on extra investment in communication with customers.

Even with these advantages, Stockdale in 2007 states that around 70 percent of online retailers lack comprehensive CRM strategies. This is also likely in the tourism industry, which means many traveling companies still fail to efficiently respond to customer’s online questions. Because of this failure, it seems hard for travel and tourism firms to create and maintain customers’ loyalty and trust.

Conclusion

Hackel (1999) observes that “successful firms move from practicing a make- and-sell strategy to a sense-and-respond one”. Indeed, the current marketing orientation has evolved from goods-dominant logic to service-dominant logic because of the increasing attention on customers’ requirements on the perceived value that firms provide. In the S-D logic, customers emphasize not only tangible products, but also the intangible products such as service, experience, and memory through interactions with service providers. This concept considerably affected the tourism industry. Consequently, tourists now playing roles as employees of tourism firms contribute ideas and share opinions on development of travel packages according to their experiences and interests. In this light, co-production and co-creation with service providers seem to start value creation for customers. With the advent of new technologies, self-service technologies have been changing customers’ behaviors. They now focus on control of value creation while developing products and benefits contributed by firms through machines such as self check-in kiosks in many airlines. Furthermore, since the coming of the dotcom era, businesses seem to have unlimited potentials. Through the internet, tourism firms and service providers now have different types of websites available for customers directly or indirectly booking their own trips on the internet. It seems true that both firms and customers benefit a lot from the potentials of e-commerce, and have been experiencing progress in doing business. Even if e-CRM is a difficult task for e-tourism, there are some possible solutions that tourism firms can implement, such as providing employees training in efficient response to customer’s messages on the website to build long term loyalty and trust between firms and customers.

Old economic world views see economic values from concrete things around. However, modern and enlightened individuals nowadays have thought through with the old thinking and dispelled some of their notions that have been in use for the past 100 years or more. Indeed their new thinking brought about some advantages. The old thinking is similar to an authoritarian way of doing things wherein an individual (in this case the consumer) is constrained to the whims and wishes of another individual (the producer) because the latter focus on the former his idea of values without the former necessarily giving consent to what the latter thinks.

The new service dominant logic not only gives more freedom to the consumer, it also saves the producer a lot of money. For example, producing things just in time when the consumer needs it saves the producer a lot of storage fees because he doesn’t need to store things up, or allow for risks of spoilage or non disposal of that item because of the consumer’s refusal to take it.

Using the SD logic in the tourism industry presents a lot of liberating instances for both the consumer and the producer. For one, using the SD logic in this industry would allow the traveler to participate in planning for his trips, and perhaps enjoy it more or save more money. For the producer, investing on self service technologies would save him a lot of money otherwise spent for the salary of employees to facilitate the needs of the traveler.

But still, there are problems, especially in the area of customer relationship management as producers of travel services rely on the internet to accomplish travel transactions. However, there are areas that travel services can improve on and learn from, and perhaps still improve the overall experience in using SSTs in the travel industry.

Adam Smith (2010) asserted that value resides in the good’s inherent capacity to satisfy a customer’s needs or wants, or its capacity to acquire other goods. He also argued that a good’s value is reckoned by the cost of labor provided to produce such good, in addition to the cost of factors of production incurred in coming up with such a product. Marx proposed that goods become valuable because of their inherent utility. Firms, therefore, existed to make and sell goods, and thus create value to satisfy the needs and wants of the customers. Most innovations were geared towards the goods oriented system, rather than towards a service oriented economy. R&D and technological innovations were done mostly in manufacturing firms. Goods were the focus, and this marketing logic is inherited from an economic system that was created more than 100 years ago. Through efficient production and distribution of products, companies maximize profits.

Goods dominant logic can also be defined as the “manufacturing logic.” Goods refer to tangible products such as appliances, tools, food, etc, and they are pushed with little or no concern about what the customer feels or thinks about the product. This kind of marketing orientation is geared towards meeting the needs of the customer without creating long term relationship with him. This puts across the message that the company produces the product wanting to make huge sales to maximize its profits. In goods dominant logic, people exchange for goods which are operand resources and end products. The marketers try to target the customers, as the recipient of goods, for them to buy the tangible goods that the firms produce. Value is determined by the producer which is embedded in the finished product, while relation between the customer and the firm is created through transaction.

In traditional concept, with market as a place of exchange and customer aggregation, customers and goods suppliers play their roles as consumer and producer respectively (Kolter, 2002). The company-centric and product-centric market is target for the suppliers’ offerings and hardly can one see the value of co-production and co-creation. With the change in marketing logic dominance, the service dominant logic suggests a shift in focus to value co-creation, intangible goods, relationships and experiences (Vargo and Lush, 2006).

The shift from G-D logic to S-D logic of marketing

Vargo and Lush (2004) said that goods or the produced tangible things are not the reasons why we buy them. Rather it is the service rendered to us that is really the source of value. We also buy things because of the good experiences derived in using them, as well as the intangible benefits including the brand, social connectedness, self image, and meaning. Value for produced goods, determined by the customer, is perishable, and keeping inventory of tangible things depletes resources. Vargo (2009) explained that “goods are not what we fundamentally ‘own’ to exchange with others, but it is our services.” He also pointed out that in goods-dominant logic, customer is secondary and seen as value receiver and destroyer (Service-Dominant Logic: An Introduction).

Meanwhile, service is the application of competencies such as knowledge and skills to create values for somebody’s benefit. In traditional GD logic, it enhances value and serves as add on to produced goods. It is characterized by intangibility, heterogeneity, and inseparability. In GD Logic, services are adjuncts of production and distribution. Service, in essence, involves process. According to Vargo and Lusch (2006), “Service, then, represents the general case, the common denominator, of the exchange process; service is what is always exchanged. Goods, when employed, are aids to the service-provision process”. For example, advancements in information technology allow customers to vote for the car design that they like, and submit their own design as well. Customers nowadays participate in the creation of goods, and not just as end users of products.

The world is moving towards a more service oriented economy wherein customers have greater freedom to co-create goods and to interact with the firms making them. However, new business models, methods and tools are needed in a new perspective, including non-technological innovations such as new marketing, organizational concepts, or new types of value delivery, etc.

Co-production can be defined as an element of co-creation. According to Lusch and Vargo (2008), co-production means the customer is undertaking production task(s) before usage and experience. In co-creation, Hilton and Hughes (2008) pointed out; customers receive benefits and derive value in using, consuming, and experiencing products. In co-production perspective, customers also act as producer and are involved with firms in creating products. IKEA, for example, emphasizes the importance of self service. Customers must assemble the product themselves with the materials and services that IKEA provides in order to experience the value of co-creation. In co-creation perspective, creating value among firms and customers is essential. If firms are keen to advance their performance in terms of value maximization, they should make a balance between customer’s and their own operant resources such as knowledge, skills, and expertise. For example, empowered, informed, and proactive consumers can co-create the value of products with service providers through the processes of design, implementation, evaluation, and improvement. During interactions, if firms can understand the processes of customer value creation, they can have better chances to know how and where they should improve their tangible and intangible products in order to meet service expectation effectively. Customers, on the other hand, can derive personalized products and have a good relationship with firms.

Basic to SD Logic is the shift in marketing focus from goods to services. Therefore, firms shift from selling maximum number of goods to maximum flow of service from the firm to the customer. The firm thinks about the service system by thinking about the configuration of goods, level of service or the network configuration to maintain a high level of service to the customer. Another concept would be selling a solution, not a thing. That is, from tangible to intangible which sells the brand more, and the goods less. A static operand resource requires some operation for it to be useful and valuable, while an operant resource is dynamic and can produce a result or effect. Exchanges between firms and customers, in the new SD Logic, are symmetric, not asymmetric. This kind of customer-firm relationship fosters trust because symmetric flow of information is promoted between firms and customers. Unfair advantage between trading partners is also discouraged in this new service logic. Furthermore, communication between firms and customers is transformed from propaganda to conversation because firms are encouraged not just to talk to customers but to listen to them as well (Vargo and Lusch, 2008). Furthermore, the new SD logic sees all businesses as service firms. Here are the foundational premises of the SD logic according to Lusch and Vargo (2004):

Operant resources are vital in the SD logic. These are core competencies such as technology, knowledge and skills that can be used to create values on operand resources. Value creation becomes the driver in building of brands built around the customers’ rather than company’s requirements. Branding is built more on relationship and based on consumer-brand interaction. The customer can have greater involvement in co-creating a brand by contributing innovative ideas and co-designing it, thus deeper bond can exist between him and the brand. “Brand identity is co-created with consumers and other stakeholders and this element of co-creation is especially apparent in consumer groups such as brand communities. Typically, these groups become active carriers of brand meaning, rather than followers of the company’s idea of the constitution of their brand” (Payne, 2009).

Consumers form attachment with brands mirroring their social relationships. Relationships are defined as “a sequence of interactions between parties where the probable course of future interactions between them is significantly different from that of strangers” (Payne, 2009). Service quality and customer satisfaction are considered the importance of marketing theory and practice. Companies continually evaluate customer satisfaction of their products in the belief that a satisfied customer becomes a loyal customer, and may even result in additional customers through word of mouth referral from the satisfied customer (Bowden 2009). Customer satisfaction, however, “is not in itself sufficient to encourage repeat visits and purchases. Research has found that factors such as relationship benefits or product attributes, previously thought important to customer satisfaction, do not necessarily affect customer retention. It is the customers’ perception of value and their previous purchasing behavior that contribute to retention” (Stockdale 209). Friendship and loyalty are required from the firm. Discounts and perks offered by the firm proved to be insufficient to retain customers’ loyalty. Customer-provider relationships is dynamic and complex, and “where customers show loyalty in the firm they subsequently behaviors to protect or justify their experiences” (Stockdale 209). Efficient communication is essential element in customer-provider relationships. For a long-term interaction to be maintained mutual understanding is necessary. Customers require accurate and complete information, good access, information searching facilities, prompt system response and reliable service if they are to commit to any online firm (Stockdale 209).

4. The emergence of self service technologies in the market

Technology plays an increasingly important role in today’s fast paced world. More customers use services facilitated by technology rather than human beings. These technology facilitated services are referred to as self service technologies (SSTs) which are interfaces enabling customers to access services without the involvement of a human employee. For example, fast-food restaurants are developing electronic self ordering, while shoppers can purchase products over the internet without having to visit a store or talk to an employee. Technological advances will be a critical component of customer-firm interactions, and are expected to become a key criterion for long-term business success. However, before SSTs become prevalent in recent times, to accomplish the service, a human employee and the customer are usually involved doing interpersonal interaction (Meuter, 2000).

Types of self services technology have been adapted in the market

Video or compact disc (CD) technologies, direct online connections and Internet-based interfaces, interactive voice response systems, telephone-based technologies, and interactive free-standing kiosks are some of the SSTs today. They are either used individually or in combination with other technologies. A company may provide a CD enabling a customer to view products or services linked directly to a website for more information or ordering. In similar fashion, through an automated telephone system a customer may buy a mail-order item and track package delivery time through a website that tracks packages automatically. SSTs are provided by companies for a variety of purposes. Some forms of customer service are now available with the enablement of technology. Customer services provided through SSTs include questions regarding accounts, bill paying, frequently asked questions, and delivery tracking. Direct transactions are rapidly growing arenas for SSTs. Through technology, customers can now order, buy, and exchange resources with companies without any direct interaction with the firm’s employees. Examples are Charles Schwab’s online trading service, Amazon.com, and the Sabre Group’s Travelocity. Internet-based transactions are rapidly growing for both consumer and business-to-business sales.

Self help, the broad category which refers to technologies enabling customers to learn, receive information, train themselves, and provide their own services, is another field using SSTs. This includes health information websites, tax preparation CDs and software, self-help videos, and telephone-based information lines. An example would be GE Medical Systems providing video and satellite-television-based “just-in-time training” on its equipment for hospital and clinic customers, enabling customers to train themselves at their convenience (Meuter, 2000).

Case discussion: S-D logic of marketing within E-tourism

The travel and tourism industry players, at the forefront of internet business development, are presented with new challenges in this new marketing medium. Traditional firms now invest in e-commerce strategies, giving rise to the emergence of new online agents. Customer self service technologies increased rapidly resulting in consumers being able to plan and book their travel requirements with little direct human interaction. The role of online intermediaries dramatically changed from selling travel products to booking services and facilitating information searches. A study on online intermediaries found that respondents believe the internet offers opportunities to identify market segments more closely, reach a wider market and develop closer relationships with customers (Stockdale 2007). Thus, tourist behaviors changed, with consumer loyalty to a particular site down to low levels as they appear motivated by the search for bargains. Customers move towards reliance on self-service technologies with higher expectations on customization, value, choice, and convenience. The intensely competitive electronic environment emphasizes the need to manage customer relationships for firms to gain competitive advantage (Stockdale 2007).

5.1 The development of S-D logic, co-production, and co- creation: value creation within Tourism

Booking a travel package with the travel agent is a good example of co-production and co-creation. When planning a travel, customers can initially design a plan to show their interests, and expectations. They can discuss with travel agents such issues as destinations, flights, hotels or resorts, preferred restaurants and pubs, and special indoor and outdoor activities. Through the processes of schedule design, agents can know better the tastes and desires of traveling individuals based on psychographic, demographic, and geographic attributes. Agents may then be able to provide personalized and suitable trips to fit on customers’ appetites. Once satisfied, not only does the firm know its customers better, but the latter may have good experiences and relationship with the travel firm, creating the value of co-creation. In this light, not only sales and benefits are built, but also relationship and brand loyalty in the long run. In essence, service dominant (S-D) logic represents the value of intangible resources, co-creation, and relationship with service providers, instead of a simple marketplace for product exchange.

5.2 Self service technologies as the future trend in the tourism industry

Automated teller machines, self-fill petrol pumps and other SST offerings have become widespread nowadays, but the development of the worldwide web pushed self-service technologies to a new level. The ability of customers to do online purchasing and to gather information has increased with the use of the web for business. The aim of self-service technologies, from a consumer perspective, is to enable them to access all needed information for them to do business with a company. According to Parasuraman (1996), it seems that mass markets are progressing from traditional people to people contact service to people to machine interaction, which means customers have more means and higher requirements on the quality of their products and the value they receive. Self service technologies (SSTs) are now prevalent in the modern society where airline, banking, quick serve restaurants, hotel, tourism, and supermarket industries make SSTs accessible and available to meet customers’ needs (Meuter, 2000). For example, SSTs in the tourism industry benefit tourists by time savings, better pricing, convenience, availability of the desired destination, and avoiding argument with service providers through e-booking. Travel firms arranging customized products and services according to customers’ needs also witness growth in sales through SSTs. Through SSTs, travel providers have better control over service resources allowing them savings on investments on redundant resources needed for face to face interaction service.

The development of information and communication technologies (ICTs) brought new innovations to the way businesses do things. This influences the development of the tourism industry as well. Traditionally, outbound and inbound travel agents give out travel information through TV advertising, radio, and telemarketing (Buhalis and Laws 2001). However, travelers seem unavailable to arrange trips by themselves, and they could only rely on travel agencies which designed travel packages and booked reservations for them through computer systems linked to the global distribution network. Such complex processes need to be improved. Thanks to e-commerce, B2B and B2C, work efficiency has witnessed a considerable improvement in performance. For example, e-tourism is a strategic and operational innovation in the tourism industry, which advances the systems of information sharing, communication, transaction, and marketing research services. E-tourism introduces four main types of online traveling websites accessible for customers worldwide (Buhalis and Licata, 2002). The first one is websites of individual suppliers such as those of British Airways and Holiday Inn hotels that allow customers to directly make online reservations. The second one, such as in the case of Orbitz.com, is for multi-suppliers for airlines, car rental companies, and hotels which may cooperate in providing services on the same website enabling customers to link to them. Still, web pages of travel destinations are also available for tourists planning their trips using the internet. Finally, a variety of travel agencies such as Liontravel.com in Taiwan also provide relevant services through their websites. The internet seems to be the tool to advance sales performances in the tourism industry.

6.2 The advantages and disadvantages of SSTs within the E-tourism

With the development of e-commerce, customers now have better chances to design and decide their own trips based on desired prices, places, time and transportation through the online booking system. Because tourists may have different points of view on value creation, they may choose transportation services like budget airplanes, but have higher quality requirement in their hotels. If e-commerce is available, they can plan their own trips, according to their needs, with different suppliers through the internet. Meanwhile, travelers can gather all needed information through online travel pages to do business with suppliers. Customers can also save money in booking flights and rooms online and directly with service providers without extra administration fees collected by travel agents. Finally, saving time is also possible through self-service e-commerce. Many airlines have available self service technology such as self check-in machine to save customer’s time in queuing (Stockdale 210). Through self service e-commerce, customers can benefit from the value of co-creation where firms sell customized products to satisfy customers’ needs, wants, and desires.

In the firm’s perspectives, if customer relationship management has been adapted and emphasized by service providers through the self-service platform on the internet, they can also derive benefits from it. Firstly, with self-service e-commerce, services providers can better understand the marketing segments, especially the high profit ones. For example, Lion Travel targets their main customer segments by designing well their web pages, through which customers can derive more information about the most popular travel packages, destinations, as well as reasonable prices in different seasons. If customers have questions and inquiries, companies may be able to include FAQs in their websites, from which companies can put the answers to the customers’ most frequent asked questions (Stockdale 212). In addition, companies can provide social network systems such as MSN, Skype, and Yahoo Live messengers to answer questions and provide booking services to customers directly on the internet. By doing so, companies may save money on extra investment in communication with customers.

Even with these advantages, Stockdale in 2007 states that around 70 percent of online retailers lack comprehensive CRM strategies. This is also likely in the tourism industry, which means many traveling companies still fail to efficiently respond to customer’s online questions. Because of this failure, it seems hard for travel and tourism firms to create and maintain customers’ loyalty and trust.

Conclusion

Hackel (1999) observes that “successful firms move from practicing a make- and-sell strategy to a sense-and-respond one”. Indeed, the current marketing orientation has evolved from goods-dominant logic to service-dominant logic because of the increasing attention on customers’ requirements on the perceived value that firms provide. In the S-D logic, customers emphasize not only tangible products, but also the intangible products such as service, experience, and memory through interactions with service providers. This concept considerably affected the tourism industry. Consequently, tourists now playing roles as employees of tourism firms contribute ideas and share opinions on development of travel packages according to their experiences and interests. In this light, co-production and co-creation with service providers seem to start value creation for customers. With the advent of new technologies, self-service technologies have been changing customers’ behaviors. They now focus on control of value creation while developing products and benefits contributed by firms through machines such as self check-in kiosks in many airlines. Furthermore, since the coming of the dotcom era, businesses seem to have unlimited potentials. Through the internet, tourism firms and service providers now have different types of websites available for customers directly or indirectly booking their own trips on the internet. It seems true that both firms and customers benefit a lot from the potentials of e-commerce, and have been experiencing progress in doing business. Even if e-CRM is a difficult task for e-tourism, there are some possible solutions that tourism firms can implement, such as providing employees training in efficient response to customer’s messages on the website to build long term loyalty and trust between firms and customers.

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