Avoiding the Mistake of Overmarketing

Robert F. Lusch
University of Arizona

Stephen Vargo
University of Maryland

Academy of Marketing Science

2004 Cultural Perspectives in Marketing
Conference
Puebla, Mexico
September 24, 2004

The Old Dominant Logic

1.
2.

3.
4.
5.

The purpose of economic activity is to make and distribute

things that can be sold.
To be sold, these things must be embedded with utility and
value during the production and distribution processes and
must offer to the consumer superior value in relation to
competitors offerings.
The firm should set all decision variable at a level that
enables it to maximize the profits from the sale of output.
For both maximum production control and efficiency, the
good should be standardized and produced away from the
market.
The good can then be inventoried until demanded and then
delivered to the consumer at a profit.

Old Logic Led to Overmarketing

Make & Sell
Philosophy

Loss of
Customer
Contact

Marketing as
Propaganda
OVERMARKETING
Aggressive
Price Cutting
Reliance on
Mass
Markets

Technology Contributed to Failure

Division of
Labor in
Society

Growth of
Marketing
Technology

Micro
Specialists &
Professionals

Loss of
Contact
With
Customer

The Failure of Marketing

1950s 1990

1990s +

The Old
Dominant
Logic

Informed
Customer
Overmarketing

Growth
of Marketing
Technology

21st Century
Customer
Alienation

Marketing Resistance

Networked
Customer

Societal
Alienation

Failure of Marketing: Evidence

Customer Alienation Rising
Marketing Expenditures Less
Productive
Marketing Losing Influence in the
Organization

The Rise of Consumer Alienation

What Needs More Government
Regulation
1. Water pollution
2. Toxic wastes
3. Air pollution
4. Advertising
5. Nuclear safety
Source: Yankelovich, Inc. 2004

The Rise of Consumer Alienation

54% of consumers wish for a quieter and
simpler life even if it means less stuff.
61% of consumers feel the amount of
marketing and advertising is out of control.
36% believe shopping experiences less
enjoyable because of all the pressures to
buy.
Source: Yankelovich, Inc. 2004

The Image of Marketing

Positive Words
Creative
Fun, funny
Attractive

Negative Words
Lies
Deceitful, deceptive
Annoying
Manipulative
Gimmicks
Exaggeration
Invasive
Intrusive
Brainwashing

Source: Raj Sisodia; Bentley College

Marketing Loses Influence in Organization

Marketing is being forced out of the equation.
Sales is not guided by marketing strategy, but by
the need to hit metrics for volume and margin.
Marketing managers are not finance-literate.
Other managers are often not marketing-literate.
Marketing and strategic planning require
investment and then promise only uncertain
future results.
Marketing ideas are not linked to driving profits.
Making the financial numbers isnt the only
thing, its everything.
Source:

Fred Webster (Dartmouth & U of Arizona)

Evolving To a New Frame of Reference

To Market
(matter in motion)

Through 1950

Market To
(management of
customers &
markets)

Market With
(collaborate with
customers & partners
to produce &
sustain value)

1950-2010

Future

All Exchange is Service Centered

the great economic law is this: Services are
exchanged for services. It is trivial, very
commonplace; it is, nonetheless, the
beginning, the middle, and the end of
economic science. - Frederic Bastiat
1860
services are the application of specialized
competences (knowledge and skills)
through deeds, processes, and
performances for the benefit of another
entity or the entity itself. (Vargo and Lusch
2004)

Growth of Marketing
Institutions
Institutions

C o m m e r c ia l o r
C iv il S o c ie t y

Institutions
Institutions
D iv is io n o f L a b o r

Institutions
Institutions

M a rk e ts
G oods

Service for Service

M oney

O r g a n iz a t i o n s

Goods, Money,
Organizations are
Intermediaries

Marketing Assists Change & Evolution

Division of
Labor

Exchange

Increasing Degree of Change in Society

Change

The Emerging Reform of Marketing

Goods Logic
Goods

Less

Global
Sustainability

Service Dominant
More

Services

Tangibles

Intangibles

Operand Resources

Operant Resources

Asymmetric

Symmetric

Propaganda

More

Customer
Alienation

Less

Conversation

Value Added

Value Propositions

Transactional

Relational

Maximize Profits

Financial Feedback
Less

Respect for
Marketing
In Firm

More

Meta-Competences for Competitive Advantage

Competences for a
Highly Specialized World
Relational
Collaborative

Competences for a
Rapidly Changing World
Absorptive
Adaptive

Reforming the Marketing Curriculum

Fundamental of
Marketing
(service
dominant)

Competency
Building and
Competitive
Advantage

Managing Cross
Functional
Business
Processes

Designing Value
Propositions &
Pricing Strategy

Integrated
Marketing
Communication

Managing
Networks &
Value
Constellations

Consumer Buying,
Usage & CoProduction

Designing and
Delivering
Service Flows

The Role of
Marketing in
Society

Closing Comments