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Marketing ethics and the service-dominant logic of
marketing
Otago Forum 2 (2008) – Academic Papers
Paper no: 14
John Williams and Robert Aitken
Department of Marketing, University of Otago
john.williams@otago.ac.nz
Marketing ethics and the service-dominant logic of marketing
John Williams and Rob Aitken
239
Marketing ethics and the service-dominant logic of
marketing
Abstract
The “Service-Dominant Logic of Marketing” (S-D logic) introduced by Vargo and
Lusch (2004) describes recent (and not so recent) attempts to expand the prevailing
(“dominant”) paradigm of marketing of being primarily the study of exchange of
physical goods viewed from the perspective of the seller (firm). It is described by Vargo
and Lusch (Vargo 2007; Vargo and Lusch 2008a; Vargo and Lusch 2006) as being a
pre-theoretic lens through which to view markets and marketing. It is a positive (as
opposed to normative) framework for theory construction. However Vargo and Lusch
also anticipate that S-D logic can be the basis for a more general and possibly normative
framework for marketing, i.e. a framework that not only describes what happens in
markets, but also prescribes what marketers should do.
Heeding this call Abela and Murphy (2008) examined S-D logic from the viewpoint of
Marketing Ethics. They propose that one of the reasons that ethical issues persist is that
ethical decisions are “compartmentalised”, i.e. they are separated from business
decisions. They also suggest that one of the reasons for this is that ethical theory is
separated from business theory. They conclude that while S-D logic does not have
explicit ethical content, the Foundational Premises (FPs) of S-D logic have implicit
ethical content. They also conclude that what may be needed to make the implicit more
explicit is the addition of another FP.
It is this issue that we address in this paper. We examine the logical structure of the S-D
logic (as defined by its FPs) and deconstruct their meaning as explicated by Vargo and
Lusch. We also examine and critically evaluate the claim that the FPs are “inherently”
ethical. Hence the aim of this paper is to explore whether, if one wishes to construct a
theoretical framework that has ethical considerations fully integrated, S-D logic needs to
be modified.
S-D logic takes co-creation of value as a central tenet. We contend that co-creation of
value is, at least partially, values-based, and we examine the link between value, values
(Rokeach 1973) and societal norms. In particular, we discuss whether it would be useful
to extend S-D logic to encompass the logical prior of exchange, i.e. why does exchange
take place, and given the choice of competing alternatives, how does the customer
choose? As such we hope to provide the underpinning component for further
development of an S-D logic that is fully embedded in a societal and ethical context.
Finally, we also address the concern that marketing science should be value-free, and
that theories of marketing, or theoretical frameworks for thinking about market
phenomena should be amoral. People who hold this view will often state that “the
business of business is business”, i.e. that ethical, moral and social issues are of no
concern to the businessperson, and that only legal restrictions are relevant to business
decisions. However when one examines the contexts of those who have espoused such
views (most importantly, perhaps, Milton Friedman) one finds that the social context of
business, and hence societal norms, are acknowledged to be of prime importance
(Friedman 1970). Hence, an argument from authority (“Friedman says business should
be amoral”) is untenable.
Otago Forum 2: Academic Papers
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Introduction
What has come to be known as the Service-Dominant logic of Marketing (henceforth, S-D
logic) has been the subject of numerous scholarly articles, conference sessions, and
conferences worldwide since its first appearance in 2004. It appears to offer Marketing theory
a more humane aspect, by putting the customer on the same ‘level’ as the firm. It does this by
stating that in all economic exchange service is exchanged for service, and emphasising the
co-creation of value. The originators of S-D logic, Stephen Vargo and Robert Lusch, hope
that it will become the foundation for a general theory of markets and marketing. Our
concern in this paper is Marketing Ethics. S-D logic has previously been evaluated for its
ethical content, and it has been suggested that it could be extended to make ethics integral to
any future Marketing theory. It is the purpose of this paper to explore these ideas.
In the first section we will attempt to summarise what S-D logic actually is. Next, we examine
the underlying economic assumptions of S-D logic. In the third section we outline the nature
and fundamental concepts of Marketing Ethics before moving on to examine the ethical
content of S-D logic. After that we re-examine S-D logic in the light of the previous material
to see whether it is ‘inherently’ ethical, or if it will have to be modified in order to provide an
ethical foundation for future theory development. We emphasise the key role that (human)
values have in determining (economic) value. Finally we frame our findings in the larger
picture of the relationship between Marketing and society and notions of corporate
citizenship.
The service dominant logic of marketing
The concept of the “Service-Dominant Logic of Marketing” made its public debut in an
article in the Journal of Marketing (Vargo and Lusch 2004). That article is essentially an
integrative literature review. The authors are not proposing any new theory, they are
describing trends in marketing thought that have been influential and well accepted, but have
not yet reached total mainstream acceptance. These ideas are then integrated into a coherent
framework, summarised in a set of “foundational premises”.
It is important to realise that the “premises” contained in the paper are not hypotheses or
propositions in the sense that they are empirical (and hence disprovable) statements about the
world. Rather, they are concisely expressed statements of a coherent philosophical “lens” for
examining markets and marketing. They provide a framework for understanding and analysis
of Marketing phenomena, but they cannot be said to be true or false; they are simply ways of
looking at things. The following example may make these ideas more clear.
Fundamental concepts
At the Business Briefing that followed the Otago Forum on the Service-Dominant Logic,
Robert Lusch told the audience about how he teaches undergraduate marketing. He tells
students a story about a small village where some people are farmers and some are fishers.
The farmers and the fishers trade vegetables for fish, so that everyone can have a balanced
diet. But what is “really” going on? What is being exchanged?
Lusch says that it’s not fish that is being exchanged for vegetables, but rather that the farmer
is combining his or her farming knowledge and expertise as “competencies” with the
competencies derived from the fishing knowledge and expertise of the fisher to create value
Marketing ethics and the service-dominant logic of marketing
John Williams and Rob Aitken
241
(i.e. a more balanced diet and hence greater health) for both parties. Further, the application
of these competencies in a process of value creation will generally be ‘pro-consumer and pro-
society’ and at the heart of social and economic development (Lusch and Vargo 2006a).
One is free to take the view that “fish is being exchanged for vegetables”, or that “fishing
knowledge is being traded against farming knowledge”, or that “fishing knowledge is being
pooled with farming knowledge to create value”. None of these statements can be said to be
true or false: they are just ways of looking at things. They are not statements that can be
argued about or proved, only agreed with or not as a starting point for analysis. In formal
logical terms, they are axioms, not propositions. They are premises, not conclusions.
From this starting point Vargo and Lusch (Lusch and Vargo 2006c; Vargo and Lusch 2004;
Vargo and Lusch 2008a) list a set of foundational premises (FPs) that encapsulate “Service-
Dominant logic” (now commonly abbreviated as S-D logic). These are listed below for
convenience, but for more detailed explanation the reader is urged to consult the original
material.
In order to fully understand the FPs we need to define some terms. Perhaps the most
important is “service”. In later writing (Vargo and Lusch 2008b) the importance of, and
rationale for, using the term “service” was explained in detail. In S-D logic “service” is
defined as the application of specialised competencies (operant resources) for the benefit of
others. “Operant resources” are resources that act on other resources: operand resources
(Constantin and Lusch 1994). In S-D logic operant resources are skills and knowledge. So,
referring to the farmers and fishers above, farmers are applying their operant resources for the
benefit of fishers, and fishers are applying their operant resources for the benefit of farmers:
service is being exchanged for service.
The foundational premises
There were originally eight “foundational premises” (FPs) of S-D logic. In later writing
Vargo and Lusch added two more and re-worded most of the original eight. We present here
the list of premises current at the time of writing:
1. Service is the fundamental basis of exchange
2. Indirect exchange masks the fundamental basis of exchange
3. Goods are distribution mechanisms for service provision
4. Operant resources are the fundamental source of competitive advantage
5. All economies are service economies
6. The customer is always a co-creator of value
7. The enterprise cannot deliver value, but only offer value propositions
8. A service-centred view is inherently customer oriented and relational
9. All social and economic actors are resource integrators
10. Value is always uniquely and phenomenologically determined by the beneficiary
How “foundational” are the FPs? In particular, are some of them conclusions, rather than
Otago Forum 2: Academic Papers
242
premises? At the outset it seems fairly easy to see that:
• If FP1 is true, then FP2, FP3, FP4, FP5 and FP9 are logical consequents
• If FP10 is true, then FP6, FP7 and FP8 are logical consequents (in the case of FP8 it is
not so obvious; we will explain in more detail below)
• FP1 does not seem to imply FP10; nor does FP10 seem to imply FP1
• Hence FP1 and FP10 are axioms (premises) and the other FPs are conclusions
(probably theorems, at least in some cases)
To see these assertions more clearly, consider the “farmers and fishers” scenario outlined
above, which in essences says that “service is exchanged for service”. If we accept that
“farming knowledge is combined with fishing knowledge to create value for both the farmers
and the fishers”, then it follows that service is the fundamental basis of exchange (FP1).
If application of operant resources for the benefit of another party (service) is the fundamental
source of exchange, then goods can't be fundamental, and if they appear to be so, that
appearance is false (FP2). Goods therefore must be distribution mechanisms for service
provision (FP3). If we are considering a competitive situation then competition must be
based on providing superior service (the basis of exchange), and because service is the
application of operant resources (by definition) then application of superior operant resources
is (by definition) superior service. Hence application of superior operant resources is the
basis of competition, and therefore possession of those resources is a competitive advantage
(FP4). Perhaps most obviously, if goods are merely distribution mechanisms for service
provision, then all economies are service economies by definition (FP5). Finally if all
exchange is the application of operant resources, then all actors must be “resource integrators”
(FP9). A resource integrator is simply an economic actor that combines resources to create
value.
Now we turn to co-creation of value. If only the beneficiary can evaluate whether the
intended benefit of that service has been realised (FP10), then value is always co-created by
the customer (FP6), and the enterprise cannot deliver value (FP7).
Now we turn to FP8. At first glance FP8 seems to be independent of the whole “farmers and
fishers” story, and more about how S-D logic fits with Relationship Marketing and Customer
Centricity. These are normative theories of Marketing (they say what marketers should do).
However (Vargo and Lusch 2008a) explain that this is a positive (non-normative) statement
because value is co-created by (at least) two actors, the value creation process is inherently
relational. This appears supportable within one meaning of the word “relationship” (in that
value is created by the “interaction” between the actors).
However they also argue that because co-creation of value involves the customer, this makes
S-D logic inherently customer-centric. We find it difficult to follow this line of reasoning.
One could, with equal validity, say that because co-creation involves the firm, S-D logic is
firm-centric!
Perhaps it is more appropriate or illuminating to say that FP8 shows the consequences that
accepting or adopting this view of economics (S-D logic) has for Marketing theory. It forces
us to regard the customer not just as a source of cash for the firm, but rather as a source of
value in a wider sense. Moreover, it forces firms to recognise the customer as central to value
creation. Furthermore, by taking value-creation processes as the fundamental unit of analysis
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Otago Forum 2: Academic Papers
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Table 1.
Marketing ethics and the service-dominant logic of marketing
John Williams and Rob Aitken
245
Table 1: Operand and operant resources help distinguish the logic of the
goods- and service-centred views
Attribute Traditional goods-centred
dominant logic Emerging service-centred
dominant logic
Primary unit of
exchange People exchange for goods.
These goods serve primarily as
operand resources
People exchange to acquire the
benefits of specialised
competencies (knowledge and
skills), or services. Knowledge
and skills are operant resources.
Role of goods Goods are operand resources
and end products. Marketers
take matter and change its
form, place, time and
possession.
Goods are transmitters of
operant resources (embedded
knowledge); they are
intermediate “products” that are
used by other operant resources
(customers) as appliances in
value-creation processes.
Role of customer The customer is the recipient of
goods. Marketers do things to
customers; they segment them,
penetrate them, distributed to
them, and promote to them.
The customer is an operand
resource.
The customer is a co-producer of
service. Marketing is a process
of doing things in interaction
with the customer. The
customer is primarily and
operant resource, functioning
only occasionally as an operand
resource.
Determination and
meaning of value Value is determined by the
producer. It is embedded in the
operand resource (goods) and
is defined in terms of
“exchange value”.
Value is perceived and
determined by the consumer on
the basis of “value in use”.
Value results from the beneficial
application of operant resources
sometimes transmitted through
operand resources. Firms can
only make value propositions.
Firm-customer
interaction The customer is an operand
resource. Customers are acted
on to create transactions with
resources.
The customer is primarily an
operant resource. Customers are
active participants in relational
exchanges and co-production.
Source of economic
growth Wealth is obtained from
surplus tangible resources and
goods. Wealth consists of
owning, controlling and
producing operand resources.
Wealth is obtained through the
application and exchange of
specialised knowledge and skills.
It represents the right to future
use of the operant resource.
Otago Forum 2: Academic Papers
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It can be seen from the rightmost column that the six attributes actually add nothing to the
logical or semantic content of the FPs. Therefore we may feel somewhat confident in stating
that, in a sense, the FPs “are” the S-D logic.
But wait. Vargo and Lusch have written many articles and book chapters on the S-D logic.
Maybe there’s something we’re missing that we can’t find in the articles that deal solely with
stating and modifying the FPs (Lusch and Vargo 2006c; Vargo and Lusch 2004; Vargo and
Lusch 2008a; Vargo and Lusch 2006)?
A striking passage is found in the final chapter (Vargo and Lusch 2006) of the S-D logic book
edited by Lusch and Vargo (Lusch and Vargo 2006b). That chapter deals with S-D logic as
the foundation for a general theory of marketing. They say (p. 407) that S-D logic “... is
implicitly normative and thus can point managers toward practical action and organisations to
standards for ethical action and social well-being.” Later (p. 415) in a subsection “Normative
Guidelines” they list the following:
1. The firm should be transparent and make all information symmetric in the exchange
process. Since the customer is someone to collaborate with, anything other than
complete truthfulness will not work.
2. The firm should strive to develop relationships with customers and should take a long-
term perspective. Firms should thus always look out for the best interest of the
customer and protect the customer’s long-term well-being.
3. The firm should view goods as transmitters of operant resources (embedded
knowledge); they are intermediate “products” that are used by other operant resources
(customers) as appliances in value-creation process.[sic] The firm should focus on
selling service flows.
4. The firm should support and make investments in the development of specialized
skills and knowledge that is the fountainhead of economic growth.
It is easy to see that some of these guidelines (i.e. 3 and 4) are mere restatements of, and
elaborations upon, the FPs. However others (i.e. 1 and 2) are not contained in the FPs and,
we contend, not deducible from the FPs without the use of auxiliary premises. It is what such
auxiliary premises might look like that we explore in this paper.
We note, however, that in later writing (Lusch and Vargo 2006c) the authors softened their
assertions somewhat:
“It points almost directly to normative notions of investment in people (operant
resources), long-term relationships, quality service flows, and only somewhat less
directly toward notions of symmetric relations, transparency, ethical approaches to
exchange, and sustainability.” (p. 283)
So it appears that, if the norms espoused in the list above do not flow directly from the FPs,
there may be some theoretical structure missing.
Finally, Lusch et al. (2007) give a table where they list not only the FPs, but the rationale
behind each one. The rationale behind FP9 (Organisations exist to integrate ...) is “The
organisation exist [sic] to serve society and themselves through the integration and application
of resources.” How are we to interpret the assertion that “The organisation exists to serve
society and themselves”? One could argue that economic organisations benefit society by the
Marketing ethics and the service-dominant logic of marketing
John Williams and Rob Aitken
247
very fact of their existence (a positive statement) or alternatively that the purpose of the
organisation is to serve society (a normative statement). It is unclear in which sense the
rationale behind FP9 is intended.
However later in that paper (p. 16) they give an example of a “big box” retailer establishing
operations in a new area. They discuss the negative social impacts this could have and
suggest ways to ameliorate these. They say that “Unfortunately, most businesses (including
retailers) tend to view external environments as resistances, if not countervailing forces rather
than resources.” Note the difficulty of writing about S-D logic to a G-D audience! In S-D
logic the social fabric of the community in which the customer lives is part of their value-
creation network, and is hence an operant resource. How can it be an “external environment”.
The social world is not a passive stage in which value creation takes place: it is an integral
part of the value creation system. Vargo and Lusch realise this, as is apparent in their other
writing, but the G-D mindset still has power, even over them. They say “A truly S-D retailer
would view the entire community as a storehouse of resources to collaborate with, to not only
help the community but to provide the retailer with relative competitive advantage.” Again
we have a mixture of positive and normative statements: if the community is endogenous it’s
an exploitable (operant) resource. That much is fully consistent with the FPs. But “to not
only help the community” is an ambiguous statement: is it positive or normative. Is “helping
the community” simply a means of overcoming costly resistance, or is it an end in itself?
The latest paper by the originators of S-D logic to appear at the time of writing (Vargo et al.
2008) includes the table reproduced in our Table 2.
Note that the authors explicitly acknowledge the use of public resources in the value-creation
process, and that the measure of value is the adaptability and survivability of the beneficiary
system (presumably they mean the “beneficiary’s system”?)
Now we have finished our deconstruction of S-D logic. The aim of this paper is to assess
whether S-D logic can be seen to incorporate an ethical component as it stands, or if it can be
used as the foundation for developing theories in market that have fully integrated ethical
foundations, or whether it must be modified. To do this, we need to outline our conception of
Marketing ethics and our requirements for ethical theories in marketing. But ethics is a
philosophical subject that strikes to the very roots of personal beliefs. In order to treat S-D
logic properly we need to examine its underlying paradigm.
Otago Forum 2: Academic Papers
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Table 2: G-D logic vs. S-D logic on value creation
Attribute G-D logic S-D logic
Value driver Value-in-exchange Value-in-use, or value-in-context
Creator of value Firm, often with input from
firms in a supply chain Firms, network partners, and
customers
Process of value
creation Firms embed value in “goods”
or “services”, value is ‘added’
by enhancing or increasing
attributes
Firms propose value through
market offerings, customers
continue value-creation process
through use
Purpose of value Increase wealth for the firm Increase adaptability,
survivability, and system
wellbeing through service
(applied knowledge and skills) of
others
Measurement of value The amount of nominal value,
price received in exchange The adaptability and
survivability of the beneficiary
system
Resources used Primarily operand resources Primarily operant resources,
sometimes transferred by
embedding them in operand
resources-goods
Role of firm Produce and distribute value Propose and co-create value,
provide service
Role of goods Units of output, operand
resources that are embedded
with value
Vehicle for operant resources,
enables access to benefits of firm
competences
Role of customers To ‘use up’ or ‘destroy value’
created by the firm Co-create value through the
integration of firm-provided
resources with other private and
public resources
The Economics of S-D Logic
S-D logic is mostly about economics (FPs 1, 2, 3, 5, 6, 9 and 10) and partly specific to
marketing (FPs 4, 7 and 8). Vargo and Lusch state that S-D logic is a conceptual framework
to enable thinking about markets and exchange. It is not a theory, nor is it a paradigm. If it is
not a paradigm, it must be based within an already existing paradigm. They state that their
work is grounded in Resource-Advantage theory (Hunt 2000). Hunt’s work in turn is based on
the Resource Based View of competitive advantage. They refer to the work of economists
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John Williams and Rob Aitken
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Frédérick Bastiat (Bastiat 1860), who was an early critic of Adam Smith and asserted that
“service is exchanged for service”, and Edith Penrose (Penrose 1959), who provided the basis
for the Resource Based View.
Penrose eschews use of the term “factor of production” because it does not clearly
differentiate between resources and services. She states (p. 25) “Strictly speaking, it is never
resources that are the ‘inputs’ in the production process, but only the services that the
resources can render.” She notes that the services rendered by resources are a result of how
they are used: that two firms with exactly the same set of resources may render different
services (and hence be more or less successful) depending on how they put resources to use.
This is in stark contrast to neoclassical economic theory, where firm resources (labour and
capital) are homogenous and mobile (can be bought and sold easily).
The Resource-Based View (RBV) was named as such by Wernerfelt (1984), but has been
attributed largely to the work of the economist Jay Barney (Barney 1991; Barney 1992). The
fundamental principle of the RBV is that the basis for a competitive advantage of a firm lies
primarily in the application of the bundle of valuable resources at the firm’s disposal. In this
early conception resources were defined (Barney 1991) as “... all assets, capabilities,
organizational processes, firm attributes, information, knowledge, etc; controlled by a firm
that enable the firm to conceive of and implement strategies that improve its efficiency and
effectiveness.”
Barney built on Penrose’s work by noting that heterogeneity and immobility of resources was
not sufficient to guarantee sustained competitive advantage. Advantage arises partly because
of inimitability of resources. Inimitability, in turn, arises from three factors : (1) Historical
accidents; (2) “causally ambiguous” resources; and (3) “socially complex” resources (Barney
1992). The term “Causally ambiguous” means that the competition cannot gain knowledge of
how to use the resources. “Socially complex” refers to those resources that enable the firm to
enact strategy due to the “values, beliefs, symbols and interpersonal relationships possessed
by individuals or groups in a firm.” (p. 45).
Others (Amit and Shoemaker 1993) distinguish between resources and capabilities. In this
view, which has been widely adopted in the RBV literature (Conner and Prahalad 1996),
resources are tradable and non-specific to the firm, while capabilities are firm-specific. This is
very similar to the distinction made in S-D logic to operant and operand resources (Constantin
and Lusch 1994).
A key feature of the RBV is “sustainable competitive advantage”. This runs counter to
standard economic theory, which states that any abnormally large profits gained by any
particular firm will be “competed away” in the long run, providing optimal social benefit.
Hence the RBV can be seen as a theory of economics that is anti-competitive and detrimental
to social welfare (Hunt 1999). Resource-Advantage theory (R-A theory) rejects this notion
however (Hunt 2000). As R-A theory is one of the bases of S-D logic, and as the basis of this
rejection has implications for the social impact of firm behaviour, we need to examine these
issues more closely.
Standard economics regards Perfect Competition (PC) as an ideal to strive for. Competition
is good, anti-competitive practices are bad. Why? It is simply this: under PC, prices will be
the lowest they can be in order for firms to stay in business. So society gets the benefits of
the service provided by firms at minimum cost. Any increase in price above the PC
Otago Forum 2: Academic Papers
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equilibrium (the point where supply is equal to demand) results in a loss of “social welfare”.
Firms that price (and sell) above the equilibrium price are said to be extracting “abnormal
profits”, or “economic rents”.
However R-A theory rejects the above analysis for the reason that it denies that Perfect
Competition is a situation that is an ideal worth striving for (Hunt 2000). R-A theory, in
contrast asserts that superior (above norm) financial performance of firms “... contributes to
social welfare because the dynamic process of R-A competition furthers productivity and
economic growth through both the efficient allocation of scarce tangible resources and, more
important, the creation of new tangible and intangible resources.” (p. 86).
The Fundamental Propositions of R-A theory are shown in Table 3. Of particular interest for
our discussion are the propositions relating to motivation and objectives. This is because they
reject the maximisation norms of “standard” economic and business discourse. It is these
very norms which have come under such withering criticism in recent times.
Table 3: Fundamental Propositions of Resource-Advantage Theory
Attribute Perfect Competition Resource-Advantage
Theory
Demand Heterogeneous across
industries, homogeneous
within industries, and static
Heterogeneous across
industries, heterogeneous
within industries, and
dynamic
Consumer motivation Perfect and costless Imperfect and costly
Human motivation Self-interest maximisation Constrained self-interest
maximisation
Firm objective Profit maximisation Superior financial
performance
Firm’s information Perfect and costless Imperfect and costly
Firm’s resources Capital, labour and land Financial, physical, legal,
human, organisational,
informational and relational
Resources Homogeneous and perfectly
mobile Heterogeneous and
imperfectly mobile
Role of management To determine quantity and
implement production
function
To recognize, understand,
create, select, implement and
modify strategies
Competitive Dynamics Equilibrium-seeking, with
innovation exogenous Disequilibrium-provoking,
with innovation endogenous
Marketing ethics and the service-dominant logic of marketing
John Williams and Rob Aitken
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Let’s look at the notions of “constrained” maximisation and “superior” performance. What
do they mean, exactly?
In what way is the utility maximisation motivation of consumers constrained? “Specifically,
R-A theory maintains that the self-interest seeking of individuals is constrained and/or
restrained by personal moral codes.” Now we can see why Vargo and Lusch claim that S-D
logic is “inherently” normative or ethical. Their work is derived largely from that of Hunt,
and morality is fundamental to demand in R-A theory. Indeed, Hunt devotes several sections
in his book (Hunt 2000) to a discussion of morality and ethics in regard to consumer and firm
behaviour.
What about the replacement of profit maximisation with “superior” performance? In the case
of owner-managed firms this is a direct consequence of human motivation. In the case of a
firm managed by people who are not the owners, the link is less clear. One could argue that
the owners influence the managers and hence are prepared to forgo profit that conflicts with
moral norms. Alternatively one could argue that since R-A theory posits that moral norms are
an integral component of economic behaviour, that managers acting as economic agents are
bound by either their own moral norms or the norms of their principals. Hunt takes a different
line, however. Firstly he notes that “superior” means “performance exceeding that of some
referent”. This means that “superior” should not be taken to mean “above average”, for
example above industry average. Also note that measures of performance are not specified by
R-A theory. Accordingly, both measures and referents are variables in R-A theory. They
may vary between firms and within firms over time. Hunt explicitly addresses the issue of
“short-termism” (p. 124) and as such R-A theory is consistent with notions of sustainability.
Finally, additional relevance of the RBV in general to this discussion is the fact that resources
are not specific to the firm, and therefore may include “public” goods as resources. Referring
to the “farmers and fishers” scenario, resources would include the ocean, for example. A
simple logical chain should suffice to show that the Stakeholder Concept (discussed below) is
compatible with the RBV, which in turn is compatible with S-D logic: firms that employ
public goods in their value co-creation activities, therefore the owners of the public goods
(society) have an interest in such firms. In the S-D logic world, with its emphasis on value-
creation networks and actors being resource integrators, it is hard to imagine a firm that does
not employ public goods in the value co-creation process. Therefore the Stakeholder Concept
is implicit in S-D logic.
Marketing ethics
Marketing ethics is the subject of a vast literature. We do not attempt to summarise or review
that literature here, but rather focus on the intersection of fundamental marketing theory and
fundamental (business) ethical theory.
Morality and ethics
Some writers distinguish between ethics and morals. Those who do often describe the
difference as that while morals and morality relate to how individuals should act, ethics
relates to how social systems (nation, state, organization, company...) should function.
Others, most notably the philosopher of ethics Peter Singer, do not see much point in making
a distinction. In what follows, we will take Singer’s position, but with the proviso that we
will refer to ethics and not morality. The reason for this is that we want our arguments to be
Otago Forum 2: Academic Papers
252
taken with a minimal amount of pre-conceived mental baggage. Unfortunately morality, in
common discourse, has come to have connotations of religion. As Singer (1993) writes:
“Some people think that morality is now out of date. They regard morality
as a system of nasty puritanical prohibitions, mainly designed to stop people
having fun. Traditional moralists claim to be defenders of morality in
general, but really they are defending a particular moral code. They have
been allowed to pre-empt the field to an extent that when a newspaper
headline reads BISHOP ATTACKS DECLINING MORAL STANDARDS,
we expect to read yet again about promiscuity, homosexuality, pornography
and so on, and not about the puny amounts that we give as overseas aid to
poorer nations, or our reckless indifference to the natural environment of our
planet.” (p. 2)
While we recognise that many of our readers may be strong believers in a particular divinely
derived moral code, we do not wish to address our remarks to any moral code at the expense
of others. Hence we use the term “ethics” in what follows. Nor are we about to make any
ethical pronouncements, or argue one ethical position against another. What we do wish to
say, however, is that those who think that questions of ethics (or morality) have no place in
business decisions are simply deluding themselves. As surely as the physicist who does not
believe that his or her experimental setup will influence the observation of either the wave or
particle nature of electromagnetic radiation, the business decision maker who ignores ethical
considerations (quite apart from legal constraints) will be confronted with reality whether it is
welcome or not.
In what follows we will find it useful to distinguish between two types of ethical norms:
things that you should (or should not) do because they will have desirable (or undesirable)
consequences; and things you should do for some other reason, usually expressed as “duty”.
Following early descriptive work in the Marketing literature (Hunt 1986) we distinguish the
former as “teleological” (more usually known in the general ethics literature as
“consequentialist”) and the latter as “deontological”.
Ethics in marketing
Research into Marketing Ethics has been defined as “the systematic study of how moral
standards are applied to marketing decisions, behaviours and institutions” (Laczniak and
Murphy 1993). The history of academic study of Marketing Ethics reveals a trajectory from
normative to descriptive and back to normative. Early approaches tended to take a normative
perspective, i.e laying out ethical guidelines for others to follow, and general frameworks for
theorizing about marketing ethics. Once this theoretical base had been established, more
descriptive research of marketers’ ethical decision-making began to appear. Most recently a
stream of literature has emerged that attempts to apply normative guidance from moral and
political philosophy to understanding provided by descriptive research (Abela and Murphy
2008).
An important point is raised by those authors, who note:
“One important cause of the persistence of such issues is the tendency in current
marketing theory to compartmentalize ethical issues. In general, theoretical
developments in marketing are introduced without explicit consideration of ethics by
their proponents, apparently on the assumption that such consideration can be
Marketing ethics and the service-dominant logic of marketing
John Williams and Rob Aitken
253
separated from the ‘business’ issues.” (p 40)
Although influential textbooks have promoted integrated ethical frameworks for decades (for
example, Kotler’s Societal Marketing Concept (SMC) first appeared in the sixties (Kotler and
Levy 1969) proposes that decisions are made for the benefit of the firm, the consumer and
society as a whole) the impact on fundamental marketing theory, education and practice
seems to have been limited (Crane and Desmond 2002).
Another reason (apart from the compartmentalisation thesis) that ethical issues persist in
marketing is that marketing, business and economics thinkers are not united in accepting the
necessity of including ethical considerations in either fundamental theory or (less often) in
practice. While it would be tedious and fruitless to yet again debate whether ethics has a
place in (free-market, capitalist) economics, we cannot resist making one point. Opponents of
ethics in business can either argue from an empirical or rational (logical) basis, or an
argument from authority. Countless times we have seen one authority figure, in particular,
put forth as either a champion or a “straw man” in the debate: Milton Friedman. He is
supposed to be firmly in the “ethics has no place in business” camp.
Those who assert that “the business of business is business” often attribute this quote to
Milton Friedman, and his famous opposition to Corporate Social Responsibility (CSR).
However it appears that few who use this argument from authority have actually consulted the
original source. It appears that an article in the New York Times Magazine entitled “A
Friedman doctrine: The social responsibility of business is to increase its profits,” (Friedman
1970), in which he railed against CSR, is the source of this sentiment. However in that article
Friedman stated that the purpose of business is:
“... to make as much money as possible while conforming to the basic rules of society,
both those embodied in the law and those embedded in ethical custom.”
So it is plain that even the arch-enemy of CSR recognises the importance of values in
economic analysis.
Now that it is plain that even Friedman agrees with us, we can move on to examining the core
ideas of Marketing Ethics, acknowledging that it is a proper subset of Business Ethics.
The stakeholder concept
Several authors in the Business Ethics and Marketing Ethics field (Laczniak 2006; Laczniak
and Murphy 1993; Schlegelmilch 1998; Smith and Quelch 1987) endorse what has come to be
known as the “Stakeholder Concept” of management (Freeman 1984) as integral to the
theoretical base of Business Ethics. The stakeholder concept simply recognises that there are
more parties to business than those directly involved in the “value chain”. Typical
stakeholders mentioned in this stream of research are government, interest groups, the media
and “society in general”.
An early author in this field (Freeman 1984: 31) notes that the word “stakeholder” first
appeared in the management literature in an internal memorandum at SRI International in
1963. It originally was defined as “those groups without whose support the organization
would cease to exist” and was meant to generalise the idea of the stockholder as the only
group to whom corporate management was responsible. Freeman defines “stakeholder” as
“all of those groups and individuals that can affect, or are affected by, the accomplishment of
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Rob Aitken
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for the
Otago Forum 2: Academic Papers
256
The figure may seem odd, especially since both firms and customers are subsets of society.
While this is true, the figure is intended to convey ideas of both causality and flow of
resources. Specifically we try to emphasise that:
1. A firm’s relationship with the society in which it operates is at least as important as its
relationships with its customers
2. Customers’ economic behaviour is largely influenced by society
3. Both firms and customers are constituents of society: they both affect and are affected
by society
4. Any marketing action, although perhaps directed only at customers, will be felt in
wider society and this may provoke an unexpected reaction if the relationships above
are not take into account in every decision
These ideas are nothing new, of course. They can even be found in an earlier version of
Kotler’s textbook (Kotler 1976), where he first introduces the Societal Marketing Concept:
“The societal marketing concept is a management orientation aimed at generating
customer satisfaction and long-run consumer and public welfare as the key to
satisfying organizational goals and responsibilities.” (p. 18)
In this edition the SMC is in the first chapter “Tasks and Philosophies of Marketing
Management”, directly following definitions and discussion of the production orientation,
selling orientation and marketing orientation. The implication is that the SMC is the way of
the future, soon to supplant the traditional marketing concept. Fast forward to 2006 and it’s
tacked on at the very end of the book, seemingly as an afterthought or optional “extension” to
core marketing theory. What happened in the intervening period?
With these ideas in mind, we return to the FPs of S-D logic. Can they encompass our
concerns? Or do they have to be modified? In later writing (Journal of Services Research,
2008) Stephen Vargo emphasises that S-D logic is not inherently dyadic, and shows his view
of both firm and customer networks (Gummeson 2006; Normann and Ramírez 1993a;
Normann and Ramírez 1993b) in a diagram. But the nodes of the networks in that diagram
are unlabelled. We cannot tell if the customer’s value-creating network (or the firm’s)
includes the broad societal concerns we have discussed above.
Extending the S-D logic of marketing
The ethical content of S-D logic
Other scholars have previously examined the ethical content of S-D logic. Recently it has
been stated (Abela and Murphy 2008) that there are ethical considerations implicit in the S-D
logic, but that they need to be made more explicit for marketing to have a firmer ethical
foundation. Those authors say that “We believe that many of the FPs of the S-D logic are
inherently ethical; they appear to presume or incorporate within them ethical norms” (p. 44).
The basis for this statement is not clear to us though. They state:
Marketing ethics and the service-dominant logic of marketing
John Williams and Rob Aitken
257
“The S-D logic, by offering a stronger relationship focus, attempts to overcome the
depersonalising effects of specialisation by recognising the human beings ‘are at the
center and are active participants in the exchange process’ (Vargo and Lusch 2004a, p.
12). As such, the logic has an inherently ethical base, because the focus of major
ethical systems is on how human beings ought to behave and relate to each other
(Laczniak and Murphy 2006). This centrality of human beings ensures integration of
ethical and business issues at the core of the theory, thus avoiding
compartmentalisation”. (p. 45).
This is attractive rhetoric, but it does not appear to be logically supportable if one considers
the statements of the FPs to be the embodiment of S-D logic. The FPs are purely positive
statements (as opposed to normative statements), i.e. they say how things are, not how they
ought to be. Abela and Murphy are quite correct in saying that ethics is about how people
ought to behave, but it is curious to assert that because a set of statements is about people,
therefore they are ethical (normative) statements (solely by virtue of their being about
people).
While we do not agree that the FPs, or assumptions behind them, are inherently ethical, we do
not see any reason why they could not be applied in an ethical framework. Also we do not
assert that S-D logic should be value-free (one is tempted to assert that it is not even possible
for social science to be value-free). We do not think it is appropriate, however, for a general
theory of markets and marketing to be built on a foundation that presupposes a particular
moral or ethical code, but we see it as simply rational to accept that economic behaviour is at
least partly determined by ethical beliefs.
Co-creation of value and values
The idea of co-creation of value has a long intellectual history (Ramirez 1999) and can be
summarised briefly by the common sense observations that (a) anything is only worth what
someone is willing to pay; and (b) things in themselves have no value apart from the use we
put them to. As much as we hate to agree with the National Rifle Association of the USA, we
see the truth of the aphorism that “guns don’t kill people: people kill people”.
By combining these two observations it seems plain that firms can only make offerings that
they hope will be of value, in order for value to be “created”, that offer has to be taken up by
someone, who derives value from the use of that offer. Whether it is a haircut or a new car,
the principle is exactly the same. Each party needs (depends on) the other in order to create
value for themselves. At the risk of boring the reader with another trite aphorism: “it takes two
to tango”. So co-creation is a term that implies (a) reciprocal value propositions; and (b)
mutual dependence, or inter-dependence.
If the co-creation of value is essentially about mutual dependency and reciprocal exchange
then we are immediately drawn to questions regarding the ethical and moral imperatives of
such behaviour and its social consequences. To see this, consider the nature of economic
exchange. We list what could be considered some “fundamental premises” of economic logic
(as opposed to marketing logic):
1. Economic activity is about exchange of valuable tangible and intangible objects
2. People are motivated to engage in exchange because they expect that they will gain
value for themselves (in economic jargon, increase their overall utility)
Otago Forum 2: Academic Papers
258
This non-zero sum view of value (both actors gain) is only possible because two or more
people may value the same object differently, i.e. the same object has a different value to
different people. People value objects differently because they have different:
1. Needs (preferences)
2. Abilities to satisfy those needs (resources)
These differences arise partly because of circumstance, and partly out of choice. To the
extent that they arise out of choice, the differential needs of economic actors are largely
determined by their preferred goals; and their preferred ways of living. These are called, in
the Consumer Behaviour literature, terminal and instrumental values (Rokeach 1973; Rokeach
1979).
In summary, the value that people place on objects of exchange, and hence the value derived
from exchange, is determined (at least partially) by their values. Shifting from an individual
to a societal perspective, we differentiate between personal values and societal values.
Societal values are nothing more than the values of the majority in any given society. Thus
they are a democratic expression of individual preferences. So how does this link to S-D
logic?
Exchange is only possible, as stated above, because it is possible for two actors to derive or
place different value (utility) on the same object. This is a consequence of the fact that people
have different values, or the same values to differing degrees. Given that in the modern world
values relating to survival and a basic level of well-being are not usually in play in most
exchange situations, it follows that the values which come into focus are normally those that
relate to various somewhat arbitrarily equally possible or desirable outcomes. In other words,
they are a choice about what should happen, rather than what could happen. Insofar as the
situation under analysis relates to what should be desirable and how people should act, we
enter the territory of ethical and moral judgments.
From these considerations it is clear that any paradigm or set of “foundational” premises that
aim to be a basis for thinking and acting about all economic questions must include
recognition of the importance of the ethical framework of the social system(s) in which
economic action is embedded. We make a first attempt to state what such a premise might
attempt to express:
Because actors have differing values, the ethical beliefs of the actors may not be
identical. In the case of differing ethical standards, and the lack of direction about
which standards should take precedence in the case of conflict, the best course of
action that one can take is to avoid doing harm (wrong). This means ruling out
courses of action which may be “right” to one party, but “wrong” to the other. The
economic consequence of this position is that potentially profitable actions may have
to be forgone.
We realise that this is a bit long for a proposition, but it’s a good start, we think. The short
form would be something like:
Consideration of ethics is not optional, and respecting the ethical standards of
economic actors in the exchange system is required even though it may lead to a loss
of profit in the short term.
Marketing ethics and the service-dominant logic of marketing
John Williams and Rob Aitken
259
Somewhere between the long form above and the short form we hope to find a happy
compromise. In the meantime, we can observe that this “foundational” premise leads directly
to the notion of the relation of marketing to civil society, i.e. corporate citizenship and
corporate social responsibility (CSR). However the kind of CSR implied by this premise is
not “doing good” e.g. corporate philanthropy, rather it is avoiding “doing wrong”. One
company has, famously, adopted this as their corporate motto: “Don't be evil” is the motto of
Google. One might argue that there is a difference between doing wrong and being evil, but
the main sense is clear.
We can also turn here to Aristotle for insight into the essential relationships between
individual morals, or ethical prerogatives and corporate behaviours. In relation to business,
Aristotle, while inhabiting an entirely different social milieu, one which privileged status and
intellectual and cultural superiority, believed that behaviour should be motivated by an ethical
sense of doing your duty-whether individual or corporate. Further, Aristotle believed that as
groups were made up of collective wills driven by individual beliefs there should be no
difference in moral duty-to do the best for society-between the individual and the collection or
community of individuals that made up the organisation.
Thus, for Aristotle and we believe for us, one is obligated by a socio-cultural sense of duty, a
duty to behave with integrity. Aristotle would have understood this as a duty of citizenship,
the contribution that individuals and organisations should make to the betterment of society-a
constantly changing society but one underpinned by an enduring ethical belief system that
ensured society would continue to improve-for the betterment of all, (or, in Aristotle’s case,
the aristocrats!) Therefore, if a business is to function effectively, as a community of
individuals, sharing some important things in common, such as treating each other with
respect, decency and integrity and committed to a shared mission to do good for society, the
significance of co-creating value, for example, becomes fundamental.
Value in this sense is determined by a sense of reciprocity and mutuality. It is reciprocal
because a business exchange should be valued equally by consumer and company (even if
these are different), and mutual, in that the ultimate purpose of the exchange is to
incrementally improve society. Committed to a common purpose as corporate citizens,
businesses have an obligation to behave in ways that reflect socio-cultural mores and which
are conducive to social well-being. In such a community-minded business environment social
consequences would determine the aims and the measures of success.
For more explicit public good organisations such as not-for-profits, or as we prefer, for not-
for-ourselves organisations, success would be determined by the amount and the quality of
their help. Motivated by common concerns to improve the quality of life of those for whom
society makes little provision, not-for-ourselves organisations provide ethical leadership for,
and model ethical behaviour in, the development of business relationships on which they
depend. With its emphasis on relationships and the co-creation of value S-D logic provides a
framework for how these not-for-ourselves organisations operate.
However, in a strange cooperative corollary to Marx’s belief in the inevitable destructive
trajectory of capitalism as an ever-demanding reliance on diminishing resources and an ever-
widening gap between rich and poor, not-for-ourselves organisations would themselves
become redundant as the conditions for their existence were removed in a society where
individual and business ethics were motivated by the same purpose. In Aristotle’s vision,
there was no separation between individuals, business and society. This would be a worthy
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aim for a society where business was charged with serving the needs of the community. The
duty of one was the same as the duty of the other and the holistic sense of community that
Aristotle believed in eschewed the dichotomies usually ascribed to the different demands of
individuals and businesses.
In a social environment where the golden rule of treating others as you would wish to be
treated complements the belief that business should contribute to the betterment of society, S-
D logic offers a blueprint for business that is both inclusive and exhaustive. Utopian of
course, but Erewhon is so appealing! These sentiments are aspirational, but we believe that as
S-D logic evolves from a description of exchange or transactions based on a single-minded,
product-centred, price-driven encounter, to one which recognises the value of propositions,
the importance of relationships and the enjoyment of experience, it needs to commit itself to
an ethical position in order for it to really change the way that society, as expressed, in part,
by its corporate behaviour, should be judged.
This is an opportunity for S-D logic to be as inclusive as its originators (surprisingly ahead of
their time in more ways than we knew) promised. The time for a normative FP is upon us!
Businesses that are co-creational, values-based, promise-led and relationally rewarding are
likely to bring out the best in people, and, if Maslow is right about the fundamental
importance of self-actualisation, and we believe he is, bringing out the best in people
encourages and nurtures loyalty, respect and trust-all key components of the relationships that
bind individuals, communities and, thus, society together.. And a society based on such
relationships would look after its people better. So, what is the purpose of business?
The purpose of business is to serve the interests of society and, in an S-D logic world, the
interests of society would be served by the returns on behaving with honesty, respect and
integrity. So, the business of business is to make society a better place. This was always the
promise that the authors saw in S-D logic. Convinced that contemporary business practice
was not conducive either to a happy society or to one with any long-term future we believe
that S-D logic has the potential to not only shift the emphasis in business from products and
sales to relationships, service and value, but, we believe, from individualised to collective
experiences.
We believe that the inexorable slide towards environmental destruction, fuelled by economic
and political inertia and perpetrated by corporate excess, can be halted by a change of
purpose. A S-D logic ultimately motivated by the purpose of making society a fairer and more
equitable community, and achieved through its central tenets of co-creation, relationship
building and serving the needs of its constituents, is a blueprint for a sustainable and
collective business culture.
By removing the conceptual separation between business and society, and individual and
corporation, and by emphasising business practice that is mutually beneficial and socially
constructive, S-D logic can be a powerful agent for change. In the climate of a Barackian
mission to change and with an administration committed to fairness, equity, inclusitivity and
truth it is time for S-D logic to stand up and nail its colours to the mast.
Reconfiguring the FPs
As discussed above, in our view only two of the “foundational” premises of Vargo and Lusch
are truly foundational, in the sense of being logically prior to the other “premises”. So our
first amendment to S-D logic is as follows:
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John Williams and Rob Aitken
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Premises or Axioms:
1. Service is the fundamental basis of exchange
2. Value is always uniquely and phenomenologically determined by the beneficiary
Consequences or Corollaries:
1. The customer is always a co-creator of value
2. Indirect exchange masks the fundamental basis of exchange
3. Goods are distribution mechanisms for service provision
4. All economies are service economies
5. Knowledge is the fundamental source of competitive advantage
6. The enterprise can only make value propositions
7. A service-centred view is customer oriented and relational
8. All social and economic actors are resource integrators
Axioms
More than any other element of S-D logic, the “foundational” premise that most people have
trouble with is that labelled Consequence or Corollary 1 above. Countless times we have
heard the objection that can be exemplified as “If I buy a can of beans, how have I co-created
that?” The immediate response of the student of co-creation is that it is the value that is co-
created, not the physical product. In other words, S-D logic emphasises value-in-use, rather
than value-in-exchange. (Vargo and Lusch are now using the term value-in-context.) This is
important because traditionally “Marketing Management” theory has emphasised the
exchange aspect (i.e. transactions) as opposed to the use (specifically: the needs that prompt
the consumer to engage in exchange and how the market offering satisfies those needs). The
Consumer Behaviour (and, more specifically, Consumer Culture) literature has long engaged
with these questions as being central, of course (Arnould 2006; Arnould et al. 2006).
But it appears in the S-D logic (to date) the co-creation of value proposition comes “out of
nowhere”, as it were. It does not flow directly from the single axiom (“service for service”)
or the “farmers and fishers” scenario. To address this lack of coherence we propose adding an
additional foundational premise, based on our analysis of economic exchange in general,
above:
“Value co-creation is enabled by the differential desires of economic actors, which are
in turn derived from differences in access to resources and differences in values
between actors. Differences in access to resources are also partially the result of
differences in values.”
Or
“Differential value perceptions are the result of differing values.”
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Or
“The volitional component of exchange always involves ethical decisions.”
Or
“Exchange is always a values-based process.”
Hence fundamental questions for Marketing practitioners revolve around “What are the values
of our customers?” and “How can the values of our customers be taken into account?” For
Marketing theorists the questions revolve around “Why do people have these values?” There
is, of course, a vast literature on personal and social values. However in what follows we
restrict ourselves to the role of personal and social values from a meta-theoretical perspective:
we want to explore ways in which this addition to the S-D logic can impact Marketing theory
generation.
The immediate consequence of considering values in the business setting is that business
actions must be considered as embedded in a value-laden societal context. Quite simply, for
economic success to be sustainable in the long run, business decisions must be in accord with
the value orientation(s) of the society or societies in which they are made. All of this is not
new, of course. However it is worth revisiting these issues through the S-D logic lens in light
of two relatively recent developments: the rise of what is loosely called ethical consumerism,
and the increasing ubiquity of (relatively) unmediated, uncontrolled peer-to-peer and
broadcast communication.
What has been termed “Word of Mouth” (C2C) in the past has taken on new significance in
today's densely connected world, where news and events are not filtered by the traditional
social institutions, and the issues are not framed by corporate PR departments or “official”
governmental or private agencies. Quite simply, people care about what happens in their
social surroundings. And for an increasing number of people, their social milieu is the entire
planet. It used to be said that you can fool some of the people all of the time, all of the people
some of the time, but not all of the people all of the time. But in the third millennium, with
the Internet and millions of still and video cameras connected to cellular (mobile) networks,
fooling all of the people even some of the time is increasing less likely. No matter what your
PR department says, the “truth” will be available on YouTube, CorporateWatch or Al Jazeera
before you know it.
The passions that lead people to search out and broadcast the truth (as they see it) have little
to do with economic considerations. They are profoundly linked to core values and ethical
viewpoints. The stakeholders in marketing considerations are no longer limited to customers
and shareholders (or even to those plus governmental agencies and employees). People who
have never been, and never will be, your customers may be intensely interested in your
actions, and willing to take counter action if they believe your actions to be unethical.
Discussion
Values and market behaviour
These questions, we contend, are inextricably linked to the values that underpin such
behaviour (Hitlin 2003; Hitlin and Piliavin 2004). It is clear that values are key determinants
of individual behaviour (Kamakura and Novac 1992) and, therefore, will greatly influence the
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John Williams and Rob Aitken
263
ways in which individuals conduct their business and judge the conduct of others. The co-
creation of value and the exchange of knowledge and competencies that are so important to S-
D logic will require behaviours that can be measured against such underlying values and this
is the ultimate test of the value propositions 262that firms make to their communities. A
natural corollary of this position is that businesses should conduct themselves in accordance
with the values that motivate their consumers (Durgee, Colarelli and Veryzer 1996). They
should treat others as they wish to be treated!
S-D logic, with its emphasis on the reciprocal exchange of knowledge and competencies in
the co-creation of value, is explicit in this regard. The service-centred nature of S-D logic
emphasises that all business interactions are essentially customer orientated and relational
(Lusch and Vargo 2006). Given that mutual dependency and reciprocity underpin the S-D
logic, and that value is derived through a process of co-creation, it is imperative that
businesses work together with their customers and stakeholders to foster relationships that are
socially cohesive, endless renewable and, ultimately, for the benefit of all. In privileging the
co-creation of value in such a customer centric and relational context, S-D logic provides an
exhortation to treat people fairly and equitably-how else will loyalty, trust and community be
built.
Business and society
What, then, is the role of the marketer in contemporary business and what is the role of
business in contemporary society? As traditionally configured, and conveniently simplified,
the marketer is the official company mediator between product and brand messages and those
to whom these messages are directed. The resulting messages are phrased as brand promises
and value propositions that are shaped and formed to create interest in and awareness of
whatever products the company is selling. They are framed in a variety of ways that range
from the physically literal to the mythically symbolic, and communicated via a multiplicity of
forms, from mass media advertising to personalized interactions with ‘communities’, but all
share the aim of informing and/or persuading the consumer that the promises, either implied
or explicit, are too good to be missed. As principal agents of the firm, marketers are in an
invidious position. Like court jesters, marketers must satisfy the needs of the firm while
anticipating those of the audience.
Successful performances are typically measured by increases in sales, or their financial
equivalents, and this, conventionally, stimulates a continuous cycle of production and
consumption. However, such an inexorable cycle of production and consumption, as critical
components of wealth creation and conspicuous causes of wealth depletion, presents a number
of problems for an enlightened and democratic society based on ethical and moral imperatives
and reliant on reciprocity and mutuality. Such imperatives and alliances are critical to the
development and sustainability of relationships and are centred on the rights and
responsibilities of those who comprise society, that is, its citizens. Citizens are defined by
their membership of a society and this membership is determined by birthrights. These rights
are enshrined in a variety of political, religious and cultural precepts all of which share a
common and underpinning philosophy that the consequences of an individual’s actions should
be weighed against their social impact. In this way an individual’s responsibilities are related
to a wider and more integrative sense of community as determined by their effects on others.
It is, therefore, intrinsic to all behaviour that cognizance is taken of the responsibility that is
due to society as a whole. In marketing and business and in relation to S-D logic this
responsibility is straightforward. Firms and consumers must work together in the co-creation
of value.
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It is implicit in S-D logic that there is no difference in the expectations of responsible
behaviour between those who engage in business, such as marketers, and those who engage
with business, such as consumers. Both are citizens responsible to each other and the wider
community of which they are a part. As businesses comprise of citizens, it follows that they
too should act responsibly, either collectively as corporate citizens, or individually as social
citizens. The common good is thus preserved and perpetuated as a constant feature, the
defining characteristic of which is a commitment to a more holistic and integrative society
and one which is beneficial to all. This reciprocity, based on individual and collective
responsibility underpinned by social morality, removes the artificial distinctions between
social and economic roles and encourages individuals, whether acting alone or as business
entities, to behave in ways that are, at once, mutually dependant and, at the same time,
socially beneficial.
What is needed, therefore, is a commitment by business and its professionals, particularly
marketers, to behave in morally responsible ways. While there have been exhortations to do
this in the past, the conflicting demands of different marketing logics have diffused the
argument in favour of theories such as those related to perfect competition and competitive
advantage where value is predicated on price and ownership confused with control. However,
the recent impetus provided by Service Dominant logic (S-D) and its inclusive assimilation of
essentially people-based and value driven marketing theories provides the necessary
conditions for a new, consistent and morally responsible era of business behaviour.
Society’s mores, epitomized by fairness, freedom, honesty and equality, are not typically
associated with business in general or marketing in particular. Instead, business is typified by
a relentless and selfish pursuit of profit while marketing is characterised by accusations of
dishonesty, exploitation and manipulation. As functional intermediaries, marketers are
representatives not only of a particular ‘profession’ but also of a certain amoral business ethic.
Given the negative associations accorded to both, neither perception is conducive to the
construction of a society based on the morally responsible behaviour of its citizens. S-D
logic, however, provides business with an opportunity to redress the balance by emphasizing
the fundamental importance of relationships and the arbitrary nature of exchange in a service
economy where value is determined not by perceptions of price or calculations of cost but by
reciprocal processes of co-creation. In S-D logic’s customer centric communion, value is
negotiated and dependent upon the mutuality of the exchange. Customers and companies
now have something in common: each other.
This brings us to the central questions of this paper: What are the rights and responsibilities of
firms? What are the boundaries of these rights and responsibilities? Are they bound within
marketplace activity, or is it appropriate to consider the wider societal implications?
Note that the key concept in S-D logic is (the co-creation of) value. This may or may not
involve money. We make the observation that organizations are comprised of individuals, and
that these individuals derive value from being in the organization. One of the things that
contribute to value for the individual in organizations is remuneration. But that is not the only
input to value for individuals in organizations. We also derive value from status, interactions
with our peers, job satisfaction, being part of something admirable and so on. Further, there is
no “organization” on a strict ontological level; there are only individuals (workers, managers,
shareholders and other stakeholders”) who derive value from their interactions with each
other. So we can say “how can individuals create value for themselves by serving society”,
and, “how can organisations such as businesses create value for themselves by serving
individuals and society?”
Marketing ethics and the service-dominant logic of marketing
John Williams and Rob Aitken
265
Conclusion
This paper has considered the notion of citizenship and social responsibility to be natural
corollaries of the Service Dominant logic (henceforth abbreviated as “S-D logic”) of
marketing. We argued that developing the ideas of co-creation, relational interaction and
value propositions, foundational premises of S-D logic, provides a platform on which to build
a sustainable and socially-responsible approach to business in general and marketing in
particular. Taking the notion of the ‘common good’ as a core concept, and placing citizenship
at its centre, we contend that the imperatives of S-D logic demand a level of responsibility and
reciprocity in business interaction and behaviour that lead to more ethically based and
sustainably focused relationships, the benefits of which are for the good of all. In this
context, marketing becomes an integrative and relational medium that seeks to maximize the
benefits for all at the expense of none.
If we take the boundaries of our analysis as societies, within which there are economies,
within which there are markets, we can ask questions like “what is the role of marketing and
business with respect to the value-creation processes of individuals and the mutual
dependency that underpins organizations and societies?” While these kinds of questions have
been posed in the marketing literature before, S-D logic provides a persuasive and morally
coherent framework for understanding how business and the process of exchange could be
conducted.
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