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Saturday, June 22, 2013

Focusing on Selling Experiences versus Products in the New Economy



Service dominated logic or S-D Logic may be a better viewpoint to train managers and teach college students about the nature of modern business. Considering how much society has changed over the past few decades the movement from tangible goods to service offerings creates a fundamental shift in the economic system. This fundamental shift should be incorporated into training and education so that decision-makers can master new economic conditions.

A total of 75% of all business revenue is currently service oriented while 80% of the GNP is service related (Ford & Bowen, 2008). That is a huge number! With this fundamental change from agricultural, products, and commodities to service oriented offerings it is necessary to train managers on the new S-D vantage point of seeing and perceiving their operations in a new light. Such an approach will help decision makers view organizations and problems from a perspective that actually reflects current economic activities.

The differences in technique are significant. According to Vargo and Lusch (2004), a shift from products to intangibles, specialized skills, knowledge and processes requires companies to focus more on marketing and integrate of operational processes. If an organization is selling experiences (i.e. service) then their approach to management would be completely different and decisions would focus closely on enhancing that perceived value.

The selling of experiences occurs whenever a company uses services as the stage and products as the prop (Pine & Gilmore, 1999). Where companies once showcased their products and earned revenue they are now making the majority of their revenue from the services attached to those products. There is a fundamental shift in thinking that focuses on the intangible but extremely important psychological experiences of services while less on the give market value of products.

Let us put this to an example. An organization sells an electric toothbrush and earns a few dollars of revenue. Under traditional economic models the sale is made when the transaction is completed. Yet in a service economy it is possible to sell the experience of being beautiful with white teeth. The selling of the toothbrush may be part of a beauty makeover service that transforms a person’s image and comes with teeth whitening, cosmetics, hair products and other related offerings. The products are secondary to the service.

Changing the perspective creates greater opportunities to maximize revenue generation streams. The economic approach adjusts to better reflect modern economic conditions. Operations become more of a support and enhancer to experiences than a logistical path of selling products. The very way people are trained, the type of systems used, and the marketing mix adjust to enhance the experiences and positive feelings of customers.

Tips:
-View experiences as service.
-Sell products that enhance that experience.
-Adjust management styles, organizational structure, and operations to enhance experiences of customers.
-Focus on the total customer experience.
-Raise the perceived value of products with service.
-Integrate operations into the marketing strategy.

Ford, R. & Bowen, D. (2008). A service-dominant logic for management education: its time. Academy of Management Learning and Education, 7 (2).

Pine, B. & Gilmore, J. (1999). The experience economy. Boston, MA: HBS Press.

Vargo, S.  & Lusch, R.(2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68 (1)
 

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