STEPHEN BROWN, ARIZONASTATEUNIVERSITY, KEYNOTE ADDRESS ON 10/27/04
Welcome everybody; it is very exciting to be here. I am speaking in part on behalf of the sponsor of tonight’s dinner, ASUCenter for Services Leadership. I can’tthink of anything that the Center does that is more important than encouraging leadership among buddingscholars. We are very excited to be sponsoring the dinner; we hope everyone has a fantastic evening.
Eileen Bridges asked me to talk a little about services marketing today and servicesmarketing in the future. I’m also going to talk to you a little about services marketing inthe past, too, because some of the history is very relevant to wherewe are today and where we are heading. I pulled together a handout for you. This is not meant to be a PowerPoint presentation…the handout includesthings that I think the doctoral students would want to know and where you could get them, some of the materialrepresents classics and some ofit is are very current.
I’ve introduced speakers and used the standard introduction for a dinner meeting: “This is thespeaker that stands between you and dinner,” and now I’m one of them. So one of the things
Eileen said when she first approached me was please talk for about 45 minutes. I’m notgoing to talk 45 minutes; I’m only going to talk for about 30 minutes or less. I’d like to, first of all, ask you a question: How many peoplein the room here have ever seen a real roadrunner? Not the animated cartoon, the realroadrunner? OK, good. A roadrunner is a bird that is native to the desert southwest where I’m from (Arizona). Probably the most distinguishing feature about a roadrunner is it’s classified as a bird but it doesn’t fly; it spends all of its time scurrying around the desert floorlooking for insects, herbs and all kinds of things to eat. It’s very, very tactical, very, veryfocused on the ground. How many people have ever seen an eagle? Everybody… OK.Could you get up for a minute, stand up? Could you give me your best imitation of an eagle?Now spread your wings. Very good, very good, this group has some potential. OK, sitdown. Now the difference between an eagle and a roadrunner is very important for today.
As I was thinking about this opportunity to share some thoughts with you, I was thinkingabout so much of the work of doctoral students, and anyone else whose faculty is focusedvery much on specific projects. I’ve know what it means to move that along – I’ve got somethings I’m working on in terms of new service development, I’ve got to reanalyze some ofthat data I have on service failure and service recovery. But what we are going to do today isvery macro, very strategic or eagle-like about the field. We’re not going to be roadrunners and get into any specific piece ofresearch, or any specific article, or any criticism or accolades for any particular piece ofwork. I feel that services marketing, and marketing for that matter, are at critical juncturesright now, today, and this presents tremendous opportunities and tremendous challenges aswell. I think for those of us that are interested in services marketing, it’s because of a lot ofpositive contributions to services marketing over the last 25 years that we’re in this positionright now today. It’s a critical juncture and a tremendous opportunity for us.
As I see it today, our field has at least 3 options:
1. We have the option of abandoning services marketing – get rid of it – no moreservices marketing. If we did that, I think we could actually declare victory! I thinkthe argument would be that, in fact, services marketing is the new marketing. Andthose of you who have been around for a while would almost be aghast if you thoughtway back to the early times when we were trying to justify our existence to say thatservices marketing could very well be the new marketing.
2. We could consider abandoning our core paradigm. I’m not sure if it’s a paradigm,but I recently read an article that referred to it as a core paradigm. Or, we mightrethink that paradigm, or even come up with a whole new paradigm forservices marketing. That’s another option or issue.
3. The third option is to abandon that core services paradigm, and seek multiple newparadigms, recognizing that services of today are extremely diverse. This option argues that it’s impossible to try to capture everything that’s a part of services or services marketingwith a single paradigm.
I want to talk to you about each of these ideas during the next 25 minutes or so, but I want tofirst acknowledge a couple of people who have really helped me think through some of theseideas. One of these is Len Berry – you’ll see Len tomorrow morning – and also mycolleague Mary Jo Bitner who is coming in tomorrow night to talk about some of topics (at the Frontiers meeting). I’ve also benefitedfrom three very thought provoking articles that came out in 2004. 2004 is going to be alandmark year for services marketing. The first one of course was Steve Vargo and BobLusch’s lead article in the Journal of Marketing in January. This was then followedup by two significant, thought provoking articles, in the Journal of Service Researchagain by Steve Vargo and Bob Lusch in May and followed by another article by ChristopherLovelock and Evert Gummesson – and I’d like to touch on a few things from those articles aswell.
Let me share a little background on myself: I’ve beeninvolved in research and teaching services marketing for about 25 years. Nineteen years ago,I became the founding director of ASUCenter for Services Leadership. The mission of theCenter is to be a global thought leader and source for research and education on competingfor service. And we’ve attracted the interest and membership of 43 companies who are veryinterested in what we are doing and have joined us in this effort. They actually support theCenter. The Center is essentially, with a little support from the university, selffunded. We’ll have some material for you at the end of the consortium tomorrow about the Center,and also, I put a couple slides at the very end to tell you a little about the firms that areinvolved.
So let’s look at the first issue: Is services marketing the new marketing? I challenge anybodyto answer that question. I think the article by Steve Vargo and Bob Lusch could lead us toabandon services marketing and declare victory. They say we don’t need services marketinganymore; the new marketing is what services marketing has become. The authors say, and
I’m going to quote from their article, “the service-centered dominant logic represents areoriented philosophy that is applicable to all marketing offerings, including those thatinvolve tangible output (goods)” (p.2). Everybody is touched by services marketing. Nowthis prospective is congruent with a lot of things that I’ve been saying and others that you’llhear from tomorrow have been saying, quotes like: “all firms market services,” “all firms areservice businesses,” and “services marketing is actually contemporary marketing.” Severalpeople have been talking about that for some time now.
However, although this idea may be attractive and interesting and perhaps provocative to some people,it’s also controversial to many marketing scholars. This idea is not controversial to enlightened businesses that are interacting with our Center. They arevery interested in what we’re talking about in services marketing, and I’m not sure if theywould be as interested if we were just doing traditional marketing research, traditionalmarketing kinds of education. It’s not only the long standing service leaders like the MarriottCorporation, which is one of our members, that are interested in what we are doing, it’scompanies like IBM and H-P who we wouldn’t have thought of as beingservice businesses, but are nowreinventing themselves as solutions providers, offering goods andservices.
One of the biggest challenges facing our Center today is – we have a model in terms of ourmembership that’s based upon about 40 members – we are actually having companiescoming to us now asking if they can join the Center and we don’t know what to tell them, weare actually telling most of them no. If GE came and said they wanted to join the Center,we’d say yes, but 90% of the companies that are coming to show interest and ask us about being a member, we have to say no because our current model is based upon a certain level of intimacyand relationships with these companies, and we are fearful that if we get bigger we may notbe able to keep that strong relationship. We would have to change our model in some way,so this is a big strategic issue that our Center is facing; it’s a good one, but it’s also kind of challenging. So I feel that within the business community we can actually declare victory. We canactually say that services marketing is what enlightened firms are interested in. As a matterof fact, what we study in services marketing is actually of tremendous interest to a lot ofpeople outside of marketing in businesses. It’s always amazing to us when we offer anexecutive program and people are contacting us, we ask them and they say “I’m inoperations” or “I’m in human resource management.” So, this field that we are all here tofocus on in the next few days is really of interest not only to marketing but to lots of peoplein businesses and lots of people even in the executive offices. A recent survey about CEOsby the Conference Board lists a whole series of issues that they are concerned about, andright at the top are issues that we talk about in services research all the time. So reaching outside ofmarketing, or reaching very high in organizations, are the topic areas that we are interestedin.
Now IBM is often thought of as a poster child for this transformation for a lot of companiesmoving into services. It wasn’t that long ago that we thought of IBM strictly as amanufacturer of hardware and some software. And if you talk to some of the executives atIBM, they’ll tell you now (10 years later) that in the late 1980s and the early 1990s theircompany was very close to bankruptcy. But fortunately, during that time period, they werelistening to their customers and their customers were asking them things in the early 90s like(again, you have to put yourself back 12 or 15 years ago) “how can we have a web presencefor our organization?” and “how can we get into e-commerce?” IBM, being customeroriented, started to help them in various ways, and to make a long story short, today IBM is aservice business. The majority of the employees at IBM work in services. Most of IBM’sgrowth, most of IBM’s profit is in services. What most people don’t realize is IBM has aservice annuity, multi-year contracts that amount to over $100 billion andthat’s what’s insulated them from the plunge that most technology firms had in the late 90sand early 2000s.
Take a company like Pitney Bowes, not a marquee name like IBM. Pitney Bowes, what is their traditional business?Making mail room equipment, really sexy stuff. But what happened withPitney Bowes is, they were so successful that they commanded 85% of the market in NorthAmerica. They did this by listening to their customers. Andtheir customers began to tell them “weget a lot of complaints about our mailroom,” “the mail doesn’t get out to the departments,”“when we send something out to our customers it takes longer,” and so on. “You make allthis great equipment, do you think you can come in and advise us?” Well, the first couple oftimes it was free, and they gave away all of the service. Then, they started to realize “hey,maybe we should just get into this business.” And today in North America, Pitney Bowesruns the mailrooms for over a thousand corporations.
At the Center for Services Leadership (CSL), our greatest interest over the last 8-10 yearshas come from companies like this, companies that were goods dominant and aretransforming themselves into offering goods and services, or the more popular term “solutions.” So, the good news is we have won over the business community, at least theenlightened business community. The bad news is we haven’t won over the academiccommunity, our peers, the people that we work with, we teach with, we take seminars with.We have a lot of work to do with the academic community, if we want to say “abandontraditional marketing and everybody embrace services marketing.” Now this is probably afour-hour discussion to address this, but I think part of the controversy about “what ismarketing?” among marketing scholars stems from an awful lot of turfism that exists in our discipline. Take something like relationship marketing. I study and read aboutrelationship marketing, and I think in many ways it is very similar to services marketing.
Services marketers tend to focus their attention in consumer markets, relationship marketerstend to focus (and I’m oversimplifying) a lot of their attention in business-to-businessmarkets, but we study many of the same things. Now in teaching we tell our students wedeplore the silos that businesses have. But in our business, we have silos between ouracademic departments, and we don’t know what’s going on in Finance or what’s going on inAccounting. But also, even within our own discipline, we have this huge turfism problem.There are more commonalities than differences across the various turfs, but we tend toemphasize the differences to have a form of differentiation for our fields. And as a result ofthat, many people in marketing still think of services people as a little bit on the fringe,whereas we would argue that we are in the mainstream of marketing, that we are themainstream in any business.
Let’s talk about the second issue, the core paradigm of services. I encourage you totake a look at the Vargo and Lusch article and at the Lovelock and Gummesson article inJSR. Both articles are provocative and both articles attack what the authors (particularlyLovelock and Gummesson) consider a core paradigm of services marketing. I thinkstimulating controversy is healthy in any discipline if it is done in a constructive kind of way.I think that these two articles can provide us with a forum to discuss the whole issue of whatis at the core of services marketing. But before looking at the core, I want to give you a littlebit of historical background in terms of how we came up with what Christopher and Everttalk about as the core paradigm.
In 1993, Ray Fisk and Mary Jo Bitner and I wrote an article on the evolution of servicesmarketing. We talked particularly about the huge controversies that were associated with thefounding of the field of services marketing. These controversies began in the late 70s and continuedinto the 1980s, and there really was almost an attack on “is services a distinct field ofmarketing?” “Does it deserve to even exist?” The time period back then was characterized particularly in the United States by massive deregulation of theservice sector including banks, health care, telecommunications and transportation. The roleof marketing in these formerly regulated industries soared. In fact,practitioners in the industries were asking for help: “how do we price?” “How do we dothis?” “How do we do that?” and a handful of academics recognized their problems and triedto help them. Very quickly, Len Berry, Parsu Parasuraman and a few other people in theroom here who were part of this small cadre, realized the dominant paradigm of marketingwas anchored in packaged goods marketing, or at least tangible goods marketing, and a lot ofthings didn’t work when we were looking at how we could help budding marketers in nowderegulated industries.
Scholars who started writing and talking about this in conferences were being rebuffedby their more tradition-bound academic peers. This is often referred to as the “goods vs. services”debate and there were many, many discussions and controversies and some literaturethat exists about this. Virtually all of the services marketing researchers back in these earlydays felt compelled to argue that services marketing was different, that services weredifferent. Virtually every services scholar recognized that many people were challenging thevery legitimacy of their research and the very legitimacy of what they were trying to look at.Such challenges were, for some of these people even career threatening because most of thepeople that were out in this new field were young and in some cases untenured assistantprofessors. In the late 1970s a landmark article was published that every doctoral student shouldread, and it’s by Lynn Shostack. Lynn Shostack is not an academic, althoughshe could have easily been one. She was an executive with CitiBank. She was inthis newly deregulated environment and frustrated about how to handle all the issues that were comingat her in terms of this deregulation: pricing questions, customer questions and so on. So shewrote an article called “Breaking Free From Product Marketing” and Phil Kotler hascommented: “This article was to alter the course of our thinking about servicesmarketing, if not general marketing itself.” In her article, Shostack said many things thatwere very provocative at the time, such as “could marketing itself be myopic in having failedto create relevant paradigms for the service sector?” She also went on to say “Serviceindustries have been slow to integrate marketing into the mainstream of decision makingbecause marketing offers no guidance, no terminology, and no practical rules that are clearlyrelevant to those of us in services.”