PREFACE
This book is about the service perspective in business, that is, how to adopt service logic in management, regardless of whether the core of the offering is a service or a physical product. It is a how-to-think rather than a how-to-do book. Therefore, it is not a traditional textbook with all the usual chapters. It is intended to help readers – students and practitioners alike – to realize the importance of service in today’s competitive environment, and to see the opportunities for creating and maintaining a sustainable competitive advantage in any kind of market.
The text takes a unique approach to management and marketing from a service logic perspective. Previous editions have served well in academic education, especially on masters and doctoral levels. The book has also been used successfully by top- and middle-level managers, at board level, and in executive education to introduce the service perspective on business as well as service management and marketing in service competition for service firms and manufacturing firms alike.
Services exist alongside goods and other types of resources of course, but following the research on service as logic rather than as a category of products only, here service is first and foremost considered a way of approaching customers and facilitating their life and business processes by supporting their everyday practices rather than only delivering products and services as resources for their use.
Customers integrate anything they buy in their consumption or usage processes, that is, they use it in a process which can be characterized as a service process. Hence, customers consume and use goods, services or any resource as service to achieve something. As a consequence, firms will be better off directing their activities and processes towards facilitating these customer processes in a value-supporting manner. This requires service logic to be adopted in the firm, and that management thinking and attitudes, and management behaviour are geared towards this perspective. A service perspective cannot be adopted by implementing conventional manufacturing-oriented management attitudes and models. New service-focused thinking and, to a large extent, new management models and instruments are needed. The term service management is used for this new attitude to management and the new theories and models that go with it. This is what this book is all about.
Service logic and a service perspective require that the firm knows its customers well enough to be able to support their processes successfully. Although customers are by no means always right – they do not always have enough information to be able to make optimal purchasing decisions – the obligation of a firm is to help their customers to achieve their goals as well as possible. This makes the firm meaningful to its customers. To be able to implement such a service approach to customers requires that the firm’s processes and activities are indeed customer-focused throughout the organization. Therefore, service management is a truly customer-focused management approach. This has consequences for marketing.
Traditionally, when delivering resources such as consumer goods, marketing is treated as one business function alongside other functions, and in business practice marketing is implemented as an isolated process in the firm. However, facilitating customers’ life and business processes by successfully supporting their everyday practices, requires that all processes of a firm, which one way or the other have an impact on this, are focused on the customer. In other words, all such processes must be implemented in a marketing-like manner, with the interest of the customer in mind. Otherwise the customers will become unsatisfied with the firm’s way of supporting them.
Hence, marketing is more a customer-focused attitude than one separate business function only. Such a customer-focused attitude is needed throughout the organization. This means that the customer becomes a top management issue. The importance of marketing-like attitudes in the whole organization – in managerial decision making and implementation alike – is the reason for the title of this book: Service Management and Marketing.
Every firm, regardless of whether it is a one which is traditionally categorized as a service firm or as a product manufacturer or as any other type of organization, faces what can be labelled service competition. Service competition can be defined as a competitive situation where the core of a firm’s offering – a physical product or a service concept – is a prerequisite only for a sustainable competitive advantage, but where the firm, by taking a service perspective, competes with an integrated offering – or more accurately an integrated service offering – which also includes all additional resources and activities needed to facilitate the customer’s processes in a satisfactory, value-supporting way. If the firm does not function like this, it will not act in a way its customers are expecting. Then the firm’s logic and the customers’ logic will collide. Firms that manage to support their customers’ processes more effectively and efficiently than their competitors will survive in this competitive situation. The challenges are the same for firms operating on business-to-business and business-to-consumer markets, and for firms in what are traditionally called service industries and manufacturing industries. As a matter of fact, the biggest challenge of all is for traditional manufacturers to manage to transform themselves into service businesses and learn how to adopt service logic in management.
In management and marketing books, service firms have always been considered a special case, if considered at all. However, now we are approaching a point where the scale is tipping in the other direction. Service as a perspective on management is becoming the norm, and goods-based logics special cases that may sometimes apply. We are not there yet, and it may still take more time than firms deserve until management attitudes have changed. It is fascinating, and unfortunate, how steadfast the grip of the traditions from the industrial era is on management and all its subfields, and how slowly old and outdated corporate cultures let go. However, in the not-too-distant future the service-led environment and service economy in which firms have already competed for a long time will break down the resistance of the old world attitudes, and management approaches will change. Inside-out management will be replaced by outside-in management.
As national statistics demonstrate, in the developed world and beyond, services and what is labelled the service sector dominate economies and employment. No statistical proof is needed anymore to justify a book on service management, and therefore, there are no such statistics in these pages. However, official statistics do not tell the whole truth. Instead they underestimate the role of services. For example, the official figures do not include the many service activities which manufacturing firms produce and perform and which may amount to a remarkable value. If these service activities are removed from the manufacturing sector in the statistics, this sector shrinks dramatically, and the service sector grows correspondingly. Furthermore, when putting statistics aside and considering how large a part of product manufacturers and organizations in the agricultural sector, in reality faces service competition, the importance of service, and of understanding service management, grows even more.
It is my intention that this book will help students and managers to cope with the competitive environment – service competition – which is already here, but which is not yet properly recognized. Furthermore, it will help them to understand the nature and scope of a service perspective and the role of customer relationships therein, the characteristics of service competition, and what adopting service logic demands from management and from the whole organization. The book also demonstrates what it takes to manage the firm and to take care of the firm’s customers from the perspective of service logic.
For this fourth edition, in addition to an upgrading of the content warranted by new research, some structural changes have been made. For example, the two first chapters of the previous edition have been merged into a new introductory chapter, where service logic and strategic and tactical aspects of a service and relationship strategy are discussed. The service profit logic and the corresponding need for an outside-in management approach form the foundation of the service perspective. The chapter on return on service and relationships has been updated with models of reciprocal return on relationship (RORR), and metrics needed for calculation of reciprocal returns are presented. The use of RORR is illustrated with a case study based on research by Pekka Helle at Hanken School of Economics. The discussion of the marketing implications of service logic has been further developed. Marketing is understood as customer-focused management with the ultimate goal to make a firm meaningful to its customers. The chapter on internal marketing has been restructured. In the chapter on how to transform a manufacturing firm into a service business, a major new case study illustrating such a process has been added. In other chapters some new short cases have also been included. A totally new chapter on social media in service written by Johanna Gummerus at Hanken School of Economics has also been included. I want to thank her especially for contributing this important chapter.
I also want to thank Aaro Cantell, Ray Fisk, Peter Murphy and Kaj Storbacka, who have contributed to this book with cases and illustrations. I also appreciate the continuous support that Steve Hardman, Georgia King and Juliet Booker from John Wiley & Sons have provided throughout the writing process. Last but not least I would like to acknowledge the support I have received from colleagues at Hanken School of Economics, Finland and from my wife Viveca throughout this endeavour.
Please note that ‘he’ and ‘his’ have been used in this book to mean ‘he/she’ and ‘his/her’. This is intended to ensure that the text flows more smoothly and is not meant to be sexist.
Christian Grönroos
Tölö, Finland