Sample Undergraduate Management Essay
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Interactions in the Service Industry and Relationship Management
There has been a shift in the marketing paradigm. In the older days, traditional marketing focused more on increasing cash flows and earning revenues. Even though the goal has not differed much, achieving this goal has changed a lot.
The concept of‘ service-dominant logic has driven this change.’ In addition to this, the importance of marketing interactions has increased a lot, and today, more and more companies focus on this aspect of the business.
Moreover, the concept of relationship management has successfully emerged in marketing, according to which companies are required to maintain beneficial and profitable relationships with their customers. This paper will explore all these concepts and their various aspects in detail.
Service-Dominant Logic is a marketing discipline with a paradigm shift from goods dominant Logic to service-dominant Logic (Vargo & Lusch, 2016). The service-dominant logic applies skills with processes, activities, and performance designed to benefit themselves and a third entity. These entities may be related directly or indirectly.
Additionally, this concept focuses on co-creating value as opposed to offering value only to its customers. There are eleven foundational premises of service-dominant Logic, these are:
- Service is the fundamental basis of exchange.
Skills and knowledge, also known as operant resources, are defined as services under service-dominant Logic (Lusch & Vargo, 2014). According to this principle, operant resources (services) are the basis of all exchanges.
- Indirect exchange masks the fundamental basis of exchange.
Service is offered through a complex mix of goods, institutions, and money. Thus ‘service’ is a basis not clearly identified.
- Goods are a distribution mechanism for service provision.
Both durable and non-durable goods derive their value through the service they provide, i.e., their use.
- Operant resources are a fundamental source of strategic benefit.
The operant resources are regarded as the comparative ability that causes change, and as a result, drives competition.
5. All economies are service economies.
Service, the singular word and not ‘services’ the plural, is now related to increased outsourcing and specialization (Lusch & Vargo, 2006).
6. Value is co-created by multiple actors, always including the beneficiary.
This principle implies that the creation of value is interactional.
- Actors cannot deliver value but can participate in creating and offering value propositions.
With the help of their resources, companies can create value and provide value propositions; however, they cannot create or offer value independently.
8. A service-centered view is inherently beneficiary-oriented and relational.
Service is defined as the benefits offered to the customers. Thus it is customer-oriented as well as relational (Lusch & Vargo, 2014).
9. All social and economic actors are resource integrators.
This principle implies that the value creation context is a network of networks, i.e., resource integrators.
10. Value is always uniquely and phenomenologically determined by the beneficiary.
Value, for customers, is more than a decision. Companies should learn about their customers before creating value for and with them (Vargo & Lusch, 2016).
The Conceptualization of Interactions in the Service-Dominant Logic Literature for Value Co-Creation
Interaction is one of the essential aspects of service-dominant logic literature. Without interaction, companies will be unable to offer their best services to their customers. The service-dominant logic highlights the importance of collaborative communication as an interaction method (Skålén et al., 2015.
With collaborative communication, companies can focus on the co-creation of value. The concept is based on learning, trust, and compromise, but it is limited to the relationship between companies and customers. It also includes interactions amongst stakeholders such as employees, shareholders, and others involved or impacted by service exchange. Information is shared completely and openly between customers and stakeholders.
They are considered equal partners for value co-creation, and this partnership is referred to as the operant resources, one of the service-dominant logic founding principles.
These interactions are more of face-to-face interactions between numerous people than interactions between two or three people. As a result of this interaction, value is co-created (Tynan, et al., 2014). These multiple-party conversations have become increasingly popular with the advent of the Internet.
Through social media, people can reach out to several company officials and stakeholders and state their opinion whenever they want. Even when the company is not active, these interactions can occur, resulting in value co-creation.
Learning via an exchange is another manner in which interaction can take place for value co-creation. Open communication and dynamic interaction amongst service systems offer to learn via an exchange mechanism.
In service-dominant Logic, economic and social actors exchange their knowledge to co-create value (Oly Ndubisi, 2007). However, the feedback and learning process is an additional aspect that helps companies establish relationships and interactions for value co-creation.
One essential aspect that companies should consider and look into is financial feedback. The business’ economic assessment is an aspect that should not be ignored, and all related aspects should be monitored to assist value creation in the market.
Value co-creation is one of the most important aspects of service-dominant Logic. It is known as the driver of interaction and relationship development. Spohrer et al. (2008), in their study, mention three significant activities for service companies to co-create value.
These are proposing value, accepting the proposal, and lastly, realizing the proposal. To engage in the application and integration of resources, at least two service systems should be involved. This would help in effective value co-creation. Even though service-dominant Logic focuses on the customer, the process of value co-creation does not only focus on the customers.
Value co-creation is based on mutually beneficial relationships amongst the service systems, and every system ensures a decision generates value for all parties involved.
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Importance of Interactions in the Service Experience
There is no doubt that customer interactions hold a lot of importance in the service industry. When services are offered, customer experience and feedback are the only way that can help the company improve its services and enhance the customer experience.
In addition to this, businesses should offer their customers the best services based on their interactions with their customers (Kuzgun & Asugman, 2015). In service-dominant logic, several exchanges take place. First is the firm-customer interaction. This type of interaction takes place for two reasons.
One type of interaction takes place when the firm is proposing the value. Under this type of interaction, values are attributed to a focus on creating a long-term relationship. Under this type of interaction, the companies’ value attributes include utility benefits, price benefits, service staff skills, and knowledge and service quality.
The second type of interaction under firm-customer interaction occurs when the customer creates value (Kuzgun & Asugman, 2015). This happens during the usage stage in response to the value that the service provider proposes.
The second type of interaction that takes place is customer-customer interaction. Under this, the value is derived from these interactions regarding the service. This is also referred to as word-of-mouth communication. Usually, the positive mouth of word values is derived from this type of interaction.
The third type of interaction is between complex networks, i.e., the interaction between many people (Jaakkola & Alexander, 2014). The value derived from this interaction is customer engagement in this environment, where many customers gather to share information and feelings regarding the company and its services.
All these interactions hold importance for the company in one way or the other. With all these interactions, the value can be co-created; however, the business needs to ensure that the best results are achieved to maintain a positive reputation.
All the types mentioned above of interactions have positive results for the service firm, thus hold the same importance; however, companies should consider certain aspects (Grönroos, 2011). They should ensure that the company-customer interactions allow the customers to offer their opinions and express their views without any hesitation.
Furthermore, these interactions are essential for the development of the business. When companies interact with their customers, they have to make sure that they are heard, their feedback is taken positively, and most importantly, implemented.
Nothing creates a bad reputation for the business more than that the customers’ feedback is unheard of and not acted upon (Clauß et al., 2014). Thus, the companies need to ensure that their services are beneficial for the customers and satisfied.
Management of Interactions
There are a lot of ways in which service companies can manage these interactions. First and foremost, the trend of social media interaction is on the rise.
Thus it can prove to be a successful and efficient way to manage customer interactions. Of the different interactions mentioned above, customer-company interaction is regarded as the best, most successful, and co-created value (Christopher et al., 2013). This means that the companies should focus on this type of interaction and ensure that the best ways are adopted to enhance customer interaction.
With social media interaction, companies will be able to interact with customers on a one-to-one basis. They will be in a position to gain all related feedback from them. This will assist the business in the formulation and building strategies that follow the customers’ feedback.
Another way of managing these interactions is to ensure that all interaction channels are always available to customers and reach out to officials and the company whenever they need it. The company’s responsibility is to offer uninterrupted interaction channels to provide feedback whenever they need to.
Furthermore, they should also ensure that the customers are heard every time they reach out (Grönroos, 2011). Officials or customer representatives should be friendly and should offer help and support to every customer.
Another type of interaction that is essential for service-dominant logic is the complex network interaction. There are different parties involved in this type of interaction. Thus the management is challenging. However, businesses should ensure that they gather all information related to these parties and possess knowledge regarding all their interactions, views of each party, and what they are looking for in the company’s services.
Companies should ensure that the best platforms are offered to every party (Grönroos & Voima, 2013). This will help them manage interactions better and efficiently and act on the customers’ feedback.
New Aspects of Service-Dominant Logic Literature
Value co-creation is a very new aspect that is introduced in the service-dominant logic literature. This aspect has helped companies to create value along with their customers for them. The value co-creation concept focuses on working together to ensure that the best results are achieved and that all the parties involved can extract maximum benefit (Kuzgun & Asugman, 2015).
In addition to this, the service-dominant logic has also initiated the concept that services are exchanged for services only. Thus, the whole industry is a service industry.
Furthermore, the concept also identifies multiple actors and parties involved in the value creation process. This means that the company alone is not responsible for creating value for businesses. In addition to company stakeholders, customers are the ones responsible for creating value for the company.
This is an entirely new aspect of marketing. Moreover, the interaction in this model is another aspect that is different than the traditional marketing paradigms. These interactions are an essential aspect of value co-creation and play a vital role in helping the company get in touch with its customers. The companies greatly value these customers’ feedback.
There are specific platforms through which customers can instantly get in touch with companies, such as the social media platform or direct contact with the company’s officials and stakeholders (Lusch & Vargo, 2006).
Relationship Management in Relationship Marketing Theorization
Forming and building relationships is essential for companies. Businesses need to ensure that they work helpfully for themselves and their employees, and other stakeholders. Therefore, to ensure that the company is operating successfully and is earning profits, companies need to build relationships (Tynan et al., 2014).
This means that the business should have relationships with its suppliers, employees, stakeholders, and even competitors. One of the most beneficial and prosperous relationships that the company can build is with its customers.
This helps the company earn huge profits as the customers are satisfied and happy with its products and services. Communication with customers should be done regularly to understand how the company performs in the industry and what aspects of the company’s products and services are disliked by the customers (Oly Ndubisi, 2007).
This also helps the company improve customer loyalty as customers are satisfied and happy that they are being heard and their feedback is being implemented in its processes. In addition to this, healthy relationships with suppliers, intermediaries, and other companies will also help the company reach its desired goal.
The commitment-trust theory is an essential aspect of relationship management. Trust and commitment are crucial elements of business relationships. Companies should build relationships that not only offer monetary benefits but also satisfy customers. Furthermore, companies should understand the importance of building strong bonds with customers to get feedback (Friman et al., 2002).
This will eventually improve their interactions, thus providing them with proper feedback for enhancing their operations. Customers, in turn, would feel valued. Therefore a positive relationship will be developed between the company and its customers.
With trust, customers will be able to build confidence in the company. This aspect will help them build loyalty, as customers know that the company will not betray them and completely trust the company without any doubt.
However, this puts a lot of responsibility on the company as they have to maintain their reputation and the trust level. If anything goes wrong, they will lose their loyal customers, and it will be next to impossible to get them back (Clauß, et al., 2014).
On the other hand, commitment is a long-term relationship. Commitment helps companies more as compared to customers. Businesses benefit from profit, as they have a customer base that they know will not switch or opt for another brand. However, the company should fulfill all its promises to ensure that its customers are satisfied at all times.
Following up with customers post-purchase or after receiving a service is one of the greatest ways to build effective and long-term relationships with their customers (Friman, et al., 2002. Customers feel extremely valued if their company contacts them after they have purchased as they think that the company is concerned about them and is looking for their feedback regarding their product or service. When this happens, a long-term relationship is developed, and customers stop looking for alternatives.
This whole process assures the building of value for the business. Companies put in a lot of effort to build these relationships, and when they are successful in doing so, they can offer value to their customers. In service-dominant logic, companies’ priority is to create value with the customer, for the customer.
Customers are involved in the process through interaction, and this can only occur if the company has healthy relationships with its consumers (Grönroos & Voima, 2013). Thus, companies will have to develop and build relationships to communicate with their customers appropriately to co-create values.
Furthermore, relationship development with stakeholders, including employees, is also stressed as they are also a part of the value co-creation process. All in all, companies have to build relationships for the benefit of their business and make sure that they can carry out the value co-creation process.
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Service dominant logic is a new marketing paradigm that focuses on offering services in exchange for services. According to the concept, value is co-created with customers’ help instead of the traditional view of providing value to customers. This new concept has helped the industry grow and succeed and offer the best services to all customers. In this new paradigm, interactions are offered more importance, and customer feedback is considered one of its pillars.
Additionally, the concept of relationship management has also gained popularity, and today, many companies place immense importance on making sure that beneficial, successful, and profitable relationships are built. In addition to this, companies hire experienced and professional relationship managers to offer the best services to their customers.
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