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Creating Value-in-use Through Marketing Interaction: The Exchange Logic of Relating, Communicating and Knowing


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This article elaborates and extends the Vargo and Lusch (2004a) service-dominant (S-D) logic thesis. Three linked exchange-enablers and their potential for improving value-in-use are discussed: first, relationships to give structural support for the creation and application of knowledge resources (relating); second, communicative interaction to develop these relationships (communicating); and third, the knowledge needed to improve the customer's service experience (knowing). These activities are integrated within an augmented S-D exchange model, and the implications for co-creating value are discussed. Finally, the argument is put that a customer's value-in-use begins with the enactment of value propositions, and the development of reciprocal value propositions is discussed in the context of the notion of sustainable betterment.
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Creating value-in-use through marketing
interaction: the exchange logic of relating,
communicating and knowing
David Ballantyne
University of Otago, New Zealand
Richard J. Varey
University of Waikato, New Zealand
Abstract. This article elaborates and extends the Vargo and Lusch (2004a) service-
dominant (S-D) logic thesis. Three linked exchange-enablers and their potential for
improving value-in-use are discussed: first, relationships to give structural support for
the creation and application of knowledge resources (relating); second, communica-
tive interaction to develop these relationships (communicating); and third, the know-
ledge needed to improve the customer’s service experience (knowing). These activities
are integrated within an augmented S-D exchange model, and the implications for
co-creating value are discussed. Finally, the argument is put that a customer’s value-
in-use begins with the enactment of value propositions, and the development of
reciprocal value propositions is discussed in the context of the notion of sustainable
betterment. Key Words communicative interaction dialogue exchange
knowledge renewal reciprocal value propositions relationship development
service-dominant logic
A distinctive pattern of marketing management for services has evolved since the
late 1970s based on the claim that service (and services) marketing is different to
goods marketing. This claim is most commonly based on the four differentiating
service characteristics of intangibility, inseparability, heterogeneity, and perish-
ability (Fisk et al., 1993). Recently, Vargo and Lusch (2004b) challenged the use-
fulness of this service sub-set criteria, and introduced their own service-dominant
Volume 6(3): 335–348
Copyright © 2006 SAGE
DOI: 10.1177/1470593106066795
(S-D) marketing logic for debate and evaluation (Vargo and Lusch, 2004a). This
logic supports many of the insights of earlier relationship marketing scholars, and
contains reworked perspectives on the importance of intangible knowledge
resources, communicative interaction, and the much overlooked concept of value-
in-use. Nevertheless, while there are connections made with various sub-fields of
marketing and management, the S-D logic, with its pervasive service orientation
proposes a significant update in marketing orthodoxy, and offers a challenge to
marketing in practice.
The service logic of Vargo and Lusch (2004a) is ‘service dominant’ because they
seek to show that service is the undeniable core of every marketing interaction.
This is not the conventional way of thinking, but it has been emphasized by others
before, for example, in services marketing by Grönroos (1990), in relationship
marketing by Christopher et al. (1991), and, it may surprise some, in an early text
by Kotler (1976). However, Vargo and Lusch (2004a) extend their service orienta-
tion much further. They say that goods become valuable to customers as service
appliances, as distribution mechanisms for service, so that the service value is
determined at the time of its use, as value-in-use. Put another way to reveal the
controversial aspect of this agenda, the time logic of marketing exchange becomes
open-ended, from pre-sale service interaction to post-sale value-in-use, with the
prospect of continuing further, as relationships evolve.
Also of particular note is that Vargo and Lusch posit the central activity of
marketing as being interaction with customers, which generates a primary form of
service experience. This is in contrast to the conventional view of firms marketing
to customers. As mentioned, there can also be interaction with goods as appli-
ances, which generate a secondary form of service experience. It follows that
the customer is the arbiter of whatever value is derived from their particular
experience of both kinds of service interaction.1The S-D logic also emphasizes the
potential for co-creation and sharing of knowledge resources between customers,
suppliers, and other market actors. Again, value is derived from the service
experience of the particular actors in interaction.
We believe that there is a need to extend and elaborate the Vargo and Lusch
(2004a) logic by emphasizing marketing exchange as a macro concept played out
through interaction. The S-D logic does not exactly ignore interaction because
value creation requires interaction. Nevertheless, interaction as a generator of
service experience and value-in-use does seem to be treated as a given. Some
pivotal aspects of the value creation process are not in our view given adequate
prominence within their thesis. Hence the purpose of this article is to seek a
deeper understanding of the potential for creating value-in-use through market-
ing interaction. In particular, we will examine three linked enablers of exchange
and their role in creating value between customers and suppliers, and indeed
between any other market actors. Our method of inquiry is both inductive and
theory generating, with implications for practice.
Our discussion starts with the customer service experience in terms of three
value-creating activities which we have identified. First, relationships to give struc-
tural support for the creation and application of knowledge resources (relating);
marketing theory 6(3)
second, communicative interaction to develop these relationships (communicat-
ing); and third, the knowledge needed to improve the customer service experience,
especially when co-created through dialogue and learning together (knowing). We
then integrate these value-creating activities as an augmented S-D logic of
exchange. Finally, we argue the view that a customer’s value-in-use begins with the
enactment of value propositions, and offer some thoughts on the development
and practical use of reciprocal value propositions for generating sustainable better-
Value-creating activities
In the relationship marketing literature, it is well understood that marketing phe-
nomena comprises interactions within networks of relationships (Gummesson,
1999). At the macro level, these activities impact one another with the conse-
quences felt across time and place. At the micro level, this means marketing
exchange is no longer transaction bound, indeed it never really was. At macro or
micro levels, marketing exchange can be viewed as an open-ended process where
interactions with customers occur across time and place, as enactments of the
exchange process (Ballantyne, 2004).
In the services marketing literature, the servicescape or service setting is the place
or space in which various time-based interactions involving customers are located.
This setting for service is critical to how a seller’s offering is valued (Bitner, 1992).
Across time and place, and through various interaction episodes, sales take place
in hopefully a virtuous cycle of recurrent service and sales. In addition, all such
interactions can be understood as part of the customer relationship development
process, a process in which the customer ultimately determines what is of value
(Christopher et al., 2002; Varey, 2002a).
Relationships are always present wherever there is an interaction between two
or more parties. However, the quality of relationships is emergent, derived from
the experience of interacting together over time. It is the quality of the relationship
that can be ‘managed’, not the relationship as such, and this is a common mis-
conception. How to manage relationship quality is a consequence of learning
together over time. This is an important issue, because relationships that are
beneficial to all parties provide structural support that is useful for sustaining
further value-creating activities.
These relational perspectives are not new in the relationship marketing, B2B
marketing, services marketing, or strategy literatures. However, consumer prod-
uct dominant marketing texts tend to footnote it, possibly because a seller cannot
manage relationship development as a one-way affair, especially through tradi-
tional unidirectional communication systems.
Creating value-in-use
David Ballantyne and Richard J. Varey
Marketing communication is the underlying process through which marketing
activity and resources are converted into economic outcomes. However, if we con-
stantly emphasize outcomes over processes, we miss the point that marketing
communication is grounded in purposeful social interaction (Varey, 2000b). Of
course, many managers tend to strive to control their own destiny and that of their
firm, rather than anticipate and respond to service needs (including the provision
of service-able goods). A range of ethical issues can then disappear within the
assumed ethical appropriateness of self-interested profit maximization.
Several related observations on marketing communication are appropriate
here. First, the dominant forms of marketing communication today operate as
one-way message making systems. In this context, commonplace thinking has
come to accept as normal the decoupling of interaction and communication.
Managers and firms may gain short-run advantage from this, but it is unclear how
societies or indeed any of a firm’s constituent stakeholders benefit in the long run.
This hegemonic communication logic remains dominant in marketing texts, and
in use, notwithstanding the emergence of more interactive perspectives repre-
sented by Integrated Marketing Communication (Duncan and Moriarty, 1998;
Grönroos and Lindberg-Repo, 1998). Even these newer perspectives give limited
cover to the rich variety of ways to reconnect communication with interaction,
generate and circulate information, co-create meaning, acquire knowledge,
achieve flashes of inspired understanding, and to make value together.
We propose that S-D logic needs to put the variety of communicative inter-
action back together again, grounded in interaction in potentially three ways.
First, as informational; second, as communicational; and third, as dialogical (see
Table 1). This classification comprises pure (ideal) constructs and some category
overlap is likely in practice. No distinction is made between communication using
voice, text, image, or gesture.
The informational mode includes all message-making which has the useful
intention to inform. The more manipulative practices of ‘transactional marketing’
and much of what currently passes as Customer Relationship Management
(CRM) represent extreme versions of this. Next, much of integrated marketing
communication’s (IMC) aspirations are grounded in the communicational mode,
where listening and informing are both key aspects of interaction. Finally, we
see dialogue as an advanced form of marketing communication because it sup-
ports co-creation of value and sustainable competitive advantage. It also makes a
strong counterpoint to mainstream (i.e. goods-oriented) marketing’s monological
assumptions and the constraints on innovation that flow directly from that. This
is not given any depth of treatment in the original S-D logic thesis, although there
are some supportive references made (Vargo and Lusch, 2004a: 13–14).
In everyday use the term dialogue is unreflectively taken to mean an extended
conversation among two or more people. By way of contrast, our notion of dia-
logue embodies a pre-industrial learning perspective on human interaction in
which dialogue operates as an interactive process of learning together (Ballantyne,
marketing theory 6(3)
2004). The ethical underpinnings for dialogue are built on trust (Varey and
Ballantyne, 2005). Without receiving the trust of another, and being trustworthy,
dialogue comes to an end. Dialogical interaction fits well with the notion of rela-
tionship development and knowledge generation in marketing, even in an epoch
of e-commerce (Varey, 2002a). We also see dialogue as an essential basis for the
authentic pursuit of innovation and creativity in markets, within firms, and
between firms. The test for dialogical authenticity is whether interaction brings
opportunities for learning together. Such a test might focus on creating common
‘rules of engagement’ including acceptable processes for disrupting strongly held
but unexamined assumptions.
Mainstream goods-based marketing has locked itself into seeing persuasive
message-making as the dominant communication mode. By way of contrast,
dialogue holds the promise of revealing something new, and implies a develop-
mental shift in the relationship between the parties involved. Dialogue is useful in
approaching knowledge development within and between firms and the co-
creation of new and previously unknown knowledge positions. A dialogical
approach will also allow participants to disagree on what those knowledge posi-
tions might be.
It follows that dialogue cannot be reduced to one person’s activity alone, or
reduced to one person’s perspective alone – it is inherently relational. Engaging in
dialogical interaction is not unidirectional, self-serving, or accomplishment by
control. On the contrary, the purpose is open-ended, discovery oriented, and
value creating.
Creating value-in-use
David Ballantyne and Richard J. Varey
Table 1
A classification of forms of interaction
Mode of social Underlying Source Form of ‘market’
association decision practices of value system governance
Persuasive message Controlling Promised by Power inequivalence
making and coercing selling the benefits (perceived as domination)
Informing and Ethical Co-produced by Relational norms
being informed communication making and (perceived as
with stakeholders keeping promises equitable exchanges)
A bias to learning Finding a voice in Emergent in Networked
co-determination learning together: (perceived as
co-created and spontaneity)
Source: Revised from Varey and Ballantyne (2005)
Vargo and Lusch have recognized the fundamental importance of human skills,
competencies, and the accumulated work experiences of employees (Vargo and
Lusch, 2004a). However, following Nonaka and Takeuchi (1995), knowledge takes
two forms – tacit and explicit. Tacit knowledge is employee know-how or compe-
tencies gained through observation, imitation, and mutual experience. It operates
more or less at an unconscious level of application, which means it tends to be
under-recognized as a firm-based (collective) resource. This second form of
knowledge, explicit knowledge, is media-based and can be digitized, duplicated,
and circulated.
Both forms of knowledge are valued as resources, but are different. The first is
applied directly in creating value. The second is a store of knowledge that can be
usefully accessed in creating value. The first is an operant resource and the second
is an operand resource, in the way that Vargo and Lusch (2004a: 2–3) use these
terms. Many firms have over-invested in building up explicit forms of knowledge,
using expensive data-warehousing or customer relationship management (CRM)
systems (Kelly, 2005), and at the same time, ignored the active resource within:
their operant resource, the employees’ tacit knowledge. Tacit knowledge is derived
especially from learning together as employees work across functional borders
to achieve cost efficiencies, or working with customers or suppliers to improve
customer value.
Vargo and Lusch (2004a: 9) have argued that ‘knowledge is the fundamental
source of competitive advantage’. However, as Storbacka and Lehtinen (2001)
have noted, a firm’s tacit knowledge (know-how) tends to ‘expire’ at a faster rate
than explicit (recorded) knowledge within the firm. This is especially apparent
when the external business environment is changing rapidly. So we would want to
amend Vargo and Lusch’s proposition to affirm that it is knowledge renewal (the
generation, sharing and application of knowledge) that is more aptly designated as
a fundamental source of competitive advantage.
Competition between firms stimulates explicit (recorded) knowledge renewal,
but at least equal emphasis on tacit knowledge renewal is needed at the level of the
firm. A critical input to the knowledge renewal process is the willingness of people
(whether customers, suppliers, or employees) to participate and pass on what
amounts to their know-how, that is, their tacit knowledge. To do this, they need to
trust the motives of those seeking their involvement. That said, knowledge sharing
of any kind is by no means a simple matter. By way of example, Figure 1 describes
three core knowledge exchange patterns within firms. In looking at the three
patterns shown, the nature of the structural constraints working against know-
ledge renewal becomes clear. Pattern 1 (hierarchical exchange) is so pervasive in
many firms that the other two more fluid knowledge exchange modes become
blocked off or ignored.
The point is this: many managers do not understand that the quality of the rela-
tionships between employees is based on trust, which in turn has a strong impact
on the rate of knowledge renewal within the firm. To activate knowledge renewal
marketing theory 6(3)
within the firm, a relationship oriented internal marketing process can be used
(Ballantyne, 2003; Varey and Lewis, 2000). Also, if we conceive of firms as net-
works of relationships, and if trusting relationships can be developed within firms
and extended selectively between co-operating firms, we can begin to talk of
knowledge networks, or value constellations (Normann and Ramirez, 1993). We see
such networks operating as a consequence of exchange interdependencies, which
in turn are enabled by relationship development, knowledge renewal, and com-
municative interaction.
Knowledge sharing and application is a ‘hidden’ source of competitive advan-
tage according to Vargo and Lusch (2004a: 9). While we agree, we have argued the
case for recognizing the importance of tacit knowledge generation. All three we see
as part of a process of knowledge renewal. One additional point here is that an
effective knowledge renewal strategy demands open interaction and dialogue
Creating value-in-use
David Ballantyne and Richard J. Varey
Figure 1
Knowledge exchange patterns within organizations
Source: Ballantyne (2003)
Pattern 2: Inter-functional exchange
Knowledge is exchanged between internal suppliers and
internal customers along ‘value chains’, end to end.
Knowledge claims are legitimized by reference to external
customers’ needs. The utility of these internal exchanges is
often constrained by a lack of customer consciousness,
producing self-serving links in the value-chain.
Pattern 1: Hierarchical exchange
Expert knowledge is exchanged and legitimized through
formal hierarchical channels. The dominant distribution
path is from the top of the organization to the bottom.
Upward moving knowledge claims also occur, subject to
explicit rules or implicit constraints.
Pattern 3: Network exchange
Knowledge is generated and circulated by exchanges
within spontaneous, internal communities. Common
social or economic interest drives these voluntary,
employee networks. They may seek to legitimize their
knowledge claims through the hierarchical organization in
which they are embedded.
within the firm, and between supplier firms and their customers. In this way,
managers and employees can constantly re-examine what they take for granted.
A triangulated view of value creating activities
So far we have reflected on three exchange-based activities for creating value
between customers and suppliers, and other market actors. We have emphasized
that relationships can provide structural support that is useful for sustaining
value-creating activities. Also, we have more fully developed the concept of dia-
logical communication and set it within an integrated schema of communicative
interaction. And we have extended the Vargo and Lusch (2004a) concept of
knowledge sharing and application by coupling it with the idea of knowledge
generation to make a more self-sustaining knowledge renewal system.
At this point we have a disagreement with Vargo and Lusch on two counts. They
have said that the application of specialized skills and knowledge is the funda-
mental unit of exchange (2004a: 6). First, we propose that the term ‘enabler of
exchange’ is a better descriptor as the phenomena under reference is a process, not
an object, and so cannot be an irreducible fundamental unit. More importantly,
we argue that there are three (not one) enablers of exchange, that is, three strands
of value-creating activities that make up a logical conceptual unity in a service-
dominant theory of exchange.
Bringing these three exchange-enablers together, we offer a triangulated view of
value-creating activities as an elaboration and extension of the S-D logic (see
Figure 2). This schema includes knowing through knowledge renewal (knowledge
generation and application), relating through relationship development, and com-
municating through dialogue and other forms of communicative interaction.
These strands of value-creating activities are not located uniquely with the suppli-
er firm or even exclusively within the customer domain, but between customer and
supplier – as productive exchange connections.
We find a notable cause for reflection in realizing that Alderson, writing at the
time of the then emerging managerial perspective of marketing, located exchange
as the shared activity that identified marketing (Alderson, 1957). In his words,
‘Marketing is the exchange which takes place between consuming groups and
supplying groups’ (1957: 15).
Once a firm grasps the nature of the activities that are of value to customers and
other stakeholders, they can choose to modify the nature of their interactions, or
introduce improvements, fix weaknesses and eliminate unwanted steps in various
upstream firm-based processes, thereby improving customer service and reducing
From the point of view of the firm, innovative exchange offerings are likely to
develop from a better knowledge of the customers’ value creation processes, which
involves asking questions like: ‘what are my customers trying to do with our goods
in use?’; and ‘what are my customers’ goals and ambitions and how can we con-
tribute?’ This may seem like a restatement of the conventional first principles of
marketing theory 6(3)
assessing customer needs and wants, however, these probing questions are less
abstracted and more grounded in the dynamics of everyday customer experience.
Taking a triangulated view of value-creating activities gives more scope for
communication in a variety of modalities and for developing relationships to sup-
port mutual learning and knowledge renewal. In the goods-dominant logic, the
marketing focus is on the exchange of material outputs and discrete associated
activities. In the service-dominant logic, the marketing focus is on the customer
experience, and managing processes and continuous flows (Vargo and Lusch,
2004a: 13). The service-dominant logic encourages the sharing of new ideas and
new knowledge within the firm, and with key customers and suppliers. Looked at
in this way, marketing innovation is a consequence of ‘breaking free’ from the
goods-dominant mental models that no longer serve the continuous renewal of
strategies and competencies.
Implications of a triangulated S-D exchange logic
In developing our value-creating exchange schema (Figure 2) we identified three
broader implications from the S-D logic that seem to throw light on the role of
marketing and its future potential: these relate to modes of creating value; ways of
Creating value-in-use
David Ballantyne and Richard J. Varey
Figure 2
S-D exchange logic based on a triangulation of value-creating activities
making promises; and the sustainability of value and its impact on quality of life.
Put in other words, we are talking about co-created value, reciprocal value propo-
sitions, and sustainable betterment of life. These are discussed below.
Co-created value
Along with Prahalad (Prahalad and Ramaswamy, 2004) and others, we take the
view that it is time to recognize the limitations of the firm-centric perspective on
how to engage with customers, and to see what opportunities there are as co-
producers of value. We see the co-production of value occurring as a consequence
of extending the range and depth of communicative interaction prior to sale as
well as post-sale, quite apart from any value-in-use outcome provided by the
goods component within any value assessment. A related point is that relationship-
specific knowledge generated in interactions over time means that all parties avoid
having to reinvent it for each and every transaction (Ballantyne, 2004).
The application of knowledge can be explicit or tacit, co-produced, or co-
created. Here we want to make a distinction between co-production of knowledge
through communicational interaction (an exchange) and co-creation through
dialogical interaction (something unique and new). In contrast to Vargo and
Lusch (2004a), we prefer to reserve the terms co-creation of value and co-creation of
knowledge for more spontaneous, collaborative and dialogical interactions, where
putting things together that others do not think go together achieves something
new and unique in the process leading to competitive advantage. If both parties
go further and trust each other in dialogue, the co-creation of knowledge might
generate value in new ways, and cost efficiencies as well.
Value becomes something judged in two time-place forms – first, exchange
value is one kind of judgement of desirability and preference, and second, because
a ‘product’ is a store of potential value, judging value-in-use is its confirmation.
One interesting question that arises is just where to delimit marketing activity,
given that the customer’s value determination under S-D logic extends beyond
point of sale to the value-in-use of goods. To rephrase Regis McKenna’s famous
assertion, marketing may well be everything but everything is not marketing
(McKenna, 1991). More work is needed to unravel these issues.
Reciprocal value propositions
We agree with Vargo and Lusch (2004a: 11) about the provisional or promise-
bound state of value propositions. We see value-in-use as the enactment of the
value propositions that buyers and sellers express. The firm can only make value
propositions (offerings), since it is the customer who determines value and
co-produces it (Vargo and Lusch, 2004a). This means that exchange value for the
customer includes the estimated value-in-use of any goods exchanged.
However, there can be no satisfactory ongoing relationship development unless
suppliers also determine their own sense of value, which means that, realistically,
value propositions are reciprocal promises of value, operating to and from suppli-
marketing theory 6(3)
ers and customers seeking an equitable exchange. Thus value propositions are
always two-way, quid pro quo (Ballantyne, 2003). Otherwise, there is no sale. Of
course a firm may set up value propositions in advance which may or may not be
accepted. They may be informal, or take the form of a negotiated co-created agree-
ment, which may in turn be the outcome of prior dialogical interaction (Payne et
al., 2005: 864).
In adopting a theory of subjective value making as we believe we must, things
(objects or the conditions produced by actions) cannot have an embedded value.
Things have value only insofar as they serve needs. Of course, the judgement of the
value of things will change according to the needs of the particular evaluator.
Thus, in any marketing exchange, there will be at least two evaluators, and their
value perspectives become linked together as a reciprocal value proposition.
This point is so obvious that it can be overlooked, hence our emphasis on the
reciprocity of value propositions.
Sustainable betterment
One weakness of the modern market mechanism is the waste caused by inefficient
distribution and competitive over-production. In other words, goods produced
which are not valued-in-use create waste.
The alternative (S-D logic) thesis that we support is that marketing is a
resource-generating activity from which customers derive value because they are
the arbiters of that value (Vargo and Lusch, 2004a: 11). Thus it no longer makes
sense to maintain the fiction that the firm can be the distributor of self-proclaimed
value. Of course, the price of an offering may be proclaimed, but this is a part of a
reciprocal value proposition, a provisional value assessment by the customer.
Vargo and Lusch (2004a: 11–12) have also argued that the S-D logic is pro-
environmental because it shifts the focus from selling tangible product to selling
the service flows derived from it. In this way, marketing facilitates the efficient
alignment of production and consumption through its resource integration role.
This meta-explanation of economic activity and wealth creation puts much less
emphasis on the consumption (destruction) of material goods since value is
obtained through efficient service ‘production’.
S-D logic takes the view that customer value judgements are linked to the time
and place of the service experience. By way of contrast, the goods-dominant logic
assumes that customer value is appropriately pre-figured in the accumulation of
various resources and functions used to produce material goods for sale. Further-
more, we understand service to mean that kind of social interaction which aims to
improve the situation of a person, and as such is a valued route to the betterment
of quality of life. In this sense, value is ultimately a social judgement of the desir-
ability of community benefit and associated costs and this preferential calculus
includes attitudes towards our natural environment and technology.
Evolving to a form of marketing logic that is capable of providing sustainable
well-being for all would require a set of societal values that sees beyond ownership
of material possessions, to the underlying net value of service experiences that are
Creating value-in-use
David Ballantyne and Richard J. Varey
derived from them and to the interactions played out in making reciprocal value
propositions and choices.
We have argued that a variety of communication modes is needed to augment
the S-D marketing logic. We have also emphasized that dialogical interaction is the
fast-track route to learning together and hence to knowledge renewal. Within the
firm, external and internal resources of knowledge are always subject to attrition
over time. If knowledge is to be renewed within the firm as we have recommended
and likewise renewed between the firm and its external stakeholders, then market-
ing communication will necessarily be fluid and interactive.
We have also emphasized that co-production of value requires that marketers
view service interactions relationally. Relationships are emergent by nature, a con-
sequence of learning together over time. This applies to firms, customers, and all
other exchange parties. Clearly, S-D logic will only function if marketing’s
involvement is collaborative, and seen to be so. This means that instead of think-
ing about relationships, communication, and knowledge renewal as a conse-
quence of managerial action, as is common in hierarchical organizations, the
appropriate management model becomes one of interaction.
The three value-creating activities that we have identified (relating, communi-
cating and knowing) augment the S-D logic as enablers of the service experience.
Furthermore, we see ‘value’ as a preferential judgement of the meaning of service
experience, whether from the perspective of buyers, sellers, or others.2Our aug-
mented S-D logic also includes the organization of place and space for service
experiences, and the meanings and judgements that are drawn from that. And
following Vargo and Lusch (2004a), any interaction with goods (as appliances) is
a secondary form of service experience on which more judgements of value are
Finally, the S-D logic as we have interpreted it asserts the centrality of inter-
action in marketing theory. Interaction is seen as the enactment of exchange, and
services are exchanged for services. In practice, marketing’s role as a relationship
facilitator and co-creator of the service experience becomes clear but challenging.
1 The authors, not Vargo and Lusch (2004a, b), designate the two kinds of service inter-
action as primary and secondary.
2 We understand value as meaning a ‘preferential judgement’ (Holbrook, 1994), whilst
‘values’ are the criteria, or guiding principles, by which the judgement is made.
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Creating value-in-use
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David Ballantyne is Associate Professor of Marketing at the University of Otago
School of Business in New Zealand, and an International Fellow at the Centre for
Relationship Marketing and Service Management, Hanken Swedish School of
Economics, in Helsinki. He is co-author with Martin Christopher and Adrian Payne of
Relationship Marketing: Bringing Quality, Customer Service and Marketing Together
(1991), the first international text published in this field of inquiry. The second and
current edition (2002) is Relationship Marketing: Creating Stakeholder Value. He is a
member of the British Academy of Management and a member of the editorial review
boards of the Journal of Business-to-Business Marketing,Industrial Marketing
Management,Journal of Business Market Management,International Marketing Review
and Management Decision. His current research interests are relationship marketing,
internal marketing, and dialogue as a co-creative learning mode in marketing. Address:
Department of Marketing, University of Otago, New Zealand.
Richard Varey is Professor of Marketing and Chair of the Department of Marketing at
The Waikato Management School, Hamilton, New Zealand. His research interests
are focused on participatory and ethical issues in managed communication and
information systems, particularly in marketing systems. He received the British Institute
of Management Young Manager of the Year Award in 1991, an International
Association of Business Communicators Research Foundation Best Paper Award in
1997 and (jointly with Professor Barbara Lewis) the Outstanding Paper Award from the
European Journal of Marketing in 1999. He co-edited (with Professor Barbara Lewis)
Internal Marketing: Directions for Management (Routledge, 2000), and more recently
authored Marketing Communication: Principles and Practice (Routledge, 2002), and
Relationship Marketing: Dialogue and Networks in the e-Commerce Era (Wiley, 2002).
He is a member of the editorial review boards of the Journal of Communication
Management, the Journal of Marketing Communications, and the Atlantic Journal of
Communication, and is Editor of the Australasian Marketing Journal and the Inter-
national Journal of Applied Marketing. Address: Department of Marketing, Waikato
Management School, University of Waikato, New Zealand.
marketing theory 6(3)
... Co-creation cannot take place if a consumer's value creation process is inaccessible to a firm. Since interaction is a bidirectional process (Ballantyne, 2004;Ballantyne & Varey, 2006), the consumer and the company must engage in activities together, in which both parties are active (Grönroos & Ravald, 2011). That is to say, there must be a willingness by both to participate (Prahalad & Ramaswamy, 2004b). ...
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Co-creation activities have shown dramatic development somewhat recently. The initial step of a productive co-creation technique originates from a comprehension of people’s practices inside of these websites. Based on the limited knowledge of online co-creation behaviour in the retail sector, particularly in fashion retailing, this study develops a latent class segmentation analysis that allows examining the diversity of co-creation behaviours. Thus, the main objective of this paper is to analyse the heterogeneity of co-creators’ behaviours in the online retail environment. This study examines different indicators that determine the co-creation behaviour of users such as co-creation value and activities, engagement with the company/brand, satisfaction with the co-creation process, intention to continue co-creating) in the Spanish fashion sector. Three different segments have been obtained: “full co-creator”, “co-creator oriented to the company/brand” and “co-creator oriented to other people” that show three distinct ways of co-creating with a fashion firm. The findings offer fashion retailers an interesting perspective for attracting customers to co-creation ventures during the fashion online shopping process.
... This will mean that there are social and cultural reasons for actors to become members of a network (Gummesson and Mele 2010). From such a point of view, this is an ongoing process that links a set of activities taken by an actor to a set of particular interactions among actors with specific resources (Payne et al. 2008;Peters et al. 2014;Ballantyne and Varey 2006). ...
Although social media has been recognized to facilitate collaborative value creation, there are differences in perspectives on how to understand the process of integrating customer resources into the brand community on social media. To understand this perspective in depth, this study considers it necessary to identify the process of integration in virtual brand communities. Therefore, the purpose of this study is to explore and analyze the configuration of the resource integration process in the brand community on social media. A content analysis is used to draw the conceptual framework in this study. The proposed study assumed, first, how to configure the process of integrating customer resources into the virtual brand community on social media, second, the effectiveness of customer interaction during the integration process into the virtual brand community.
... The value of services is determined in the exchange and production of valuein-use, where the value proposition is realized in consumption. Within economic literature, abstract conceptions of needs and desires highlight services as "valuable" by improving the "quality of life" (Ballantyne and Varey 2006), "well-being" (Vargo and Lusch 2016) and "everyday practices" (Grönroos 2008) of consumers. This produces a tendency to overstate consumer demand as a driver for service offering (Fine 2013). ...
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The more distanced forest owners become from their forests, the more room there is for different kinds of advice and service provision to help them in their forest management decisions. Therefore, the quality and adaptation of these services impact the use of forest resources significantly, including at a broader scale. Even though the forest owners’ decision-making at the general level, as well as the role of advisory services and their efficiency has been the subject of various studies, literature on how forest owners make decisions in relation to the various types of service provisions appears to be limited, and no systematic review has been found. To offer a better understanding of the present state of knowledge on, and the relations between, decision-making, forest related services, and forest ownership, this literature review provides an overview of the scientific research between 2008 and 2020 on private forest owners’ decision-making related to services. The results show that the forest owners’ decision-making related to services has been gaining increasing interest as a research topic, especially during the last 5–6 years. However, it is still dominated by a few countries and contexts. In addition, in the current research decision-making concept is mostly understood as a decision outcome i.e., the forest owners’ choice between typically two alternatives. The importance of process-based understanding on decision-making, on the other hand, seemed to be largely missing from the forest owner studies. As conclusions, five proposals for future research avenues are presented.
... That has highlighted the gaps in implementing a suitable strategy in terms of Value (value proposition, value perception, value co-creation), due to lack of precise information from population groups on their practice adherence (i.e. value-in-use) [3] to tailor new practices (i.e. value-in-experience) [4], and seek the engagement of all actors, clinical and non-clinical, in the specific context of local public and private healthcare services (i.e. ...
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The pandemic has uncovered hidden, latent or unknown misalignments in healthcare worldwide. Difficulties, friction, disturbances, misunderstandings, underestimations, carelessness and other issues have ensued quickly, upsetting the ecosystem value creation mechanisms and influencing all actor’s behavior within every country’s Healthcare Service Ecosystems (H-SES). The expected health system impacts are those demarcated by the quadruple aims that include all the actors in the health ecosystem. Such aims address improving patient and caregiver experience; improving the health of populations; reducing per capita cost; and improving the work life of providers. This warranted a search for deeper understanding of the on-going dynamics and relative insights to foster actor engagement, provide a good global service in Healthcare, and fully reach the well-known quadruple aim. By referring to the cyclical model of the actor for actor model (A4A), we consider and review their shared intentionality and finality alignment, to investigate how resource integration work here and what happen in case of contingences (as in the case of a pandemic). It is a theoretical work, but entails many practical issues in Healthcare in terms of patient empowerment, improving population health, lowering cost of care, and maintaining the wellbeing of the care team.
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The purpose of this study is to better understand the consumer behaviour, analysing the impact of brand authenticity on two main behavioural outcomes. The research aims also at finding out the behavioural differences of each generational cohort and to understand the effects on consumers' willingness to pay a premium price and on brand loyalty in the case of technological brands. The study follows a quantitative research design and uses a survey as a tool to collect data. The present work may suggest firms to be more targeted in their approach to create competitive advantage and strong relationships with their audiences. In present times, academics and practitioners must therefore recognize and take into consideration the differences across generational cohorts when studying and developing new marketing strategies.
Mutated market conditions, the advent of new players, and a significant regulatory push have changed the banking industry profoundly in the past fifteen years. Banking business models have shifted from a vertical integrated paradigm, where production and distribution mostly belong to the same entity, to a platform driven model in which a combination of modular solutions can take place and evolve consequently according to an ecosystem market approach. A higher level of openness toward third parties and an increasing number of modular services bundled together have rebooted the way financial service formats can be conceived, delivered, and consumed by individuals. Digital platforms are driving open innovation and different formats are evolving in the market, driven by multilateral relationships. In this regard, open banking is becoming increasingly popular in many jurisdictions, especially in regard to stages of development, approaches, and scope. This paper explores how, through an affiliative approach, banks are seeking to retain customer loyalty as they respond to the ways in which FinTechs and BigTechs have developed more innovative financial service formats. This is also boosted by new legal frameworks—such as open banking and open finance—where many new services will be developed thanks to the sharing of customer-permissioned data, by offering customers new, more efficient payments; improved online account services, and other set of new services. The first part of this chapter highlights which trends are impacting the next banking frameworks as well as the evolving relationships between banks and FinTechs. The second part outlines the main outcomes of the evolution of new financial services and their impacts on value chains. Finally, the last section presents conclusions and describes upcoming opportunities for all the players, and identifies the next big challenge as the ability of these services to make a difference so that differentiation in value propositions, features, etc., is needed to give the customer a reason to choose a particular service.
The recent event related to the war in Ukraine has further sparked interest in cryptocurrencies and raised questions about their regulatory oversight. In November 2021, the cryptocurrency market capitalization reached a staggering US$3 trillion, which included more than 8,000 cryptocurrencies, and it is one of the most dynamic markets in the world (Crypto Market Sizing Report, 2022). There is significant exposure of the cryptocurrency ecosystem via a multitude of direct and indirect interlinkages into the banking sector. These include activities such as direct issuance and ownership of cryptocurrencies, intermediation services for customers, clearing of contracts that reference cryptocurrencies, or services for cryptocurrency issuers such as underwriting initial coin offerings or stablecoins. However, since 10 January 2020, all existing businesses carrying on cryptocurrency operations in the United Kingdom (UK) must be compliant with the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017 and be registered with the Financial Conduct Authority (FCA) in order to be able to in the business. This change of the rules had a significant impact on the cryptocurrency ecosystem and its effect on the banking industry. The FCA also reported that around £60 million was lost due to social media investment scams in 2020. This leads to the main discussion of this chapter—what is the appropriate level of regulations in the market in the context of the UK as a comparison to recent EU regulatory development? Also, how does the existing regulation impact the real-world cases from the UK banking industry and if there is any possible solution for crypto-risk and how it can be avoided?
Purpose The purpose of this study is twofold. First, this study proposes to investigate the impact of inter-functional value co-creation (VCC) in a manufacturing firm’s value chain on supply chain performance, considering the moderating role of external integration. Second, this study proposes to validate a modified version of the VCC considering the inter-functional interaction context. Design/methodology/approach Quantitative data were collected using survey approach from 129 managers from 51 departments of 22 manufacturing firms performing roles in several areas, such as procurement, logistics, sales, marketing and production. This study uses a PLS-SEM to analyze the model measurement, through confirmatory factor analysis. Findings The empirical data supported the proposition of this study that the VCC degree (i.e. value co-production/value in use) between functions of the firm has significant positive effects on the performance of the supply chain, in customer service and flexibility. Practical implications This study could be exceedingly useful for practitioners suggesting them to improve inter-functional integration by adopting VCC practices grounded on “value co-production” and “value in use.” Such practices may help to maximize supply chain performance. Originality/value The coordination theory was useful to deepen the analysis of its quadrant named “participatory design,” considering the relationship between VCC and inter-functional integration. This paper extended the knowledge about the relationship between the participatory design quadrant and the quadrant referring to organizational structures and processes.
Online crowdsourcing is a concept which is gaining momentum among business organizations for various reasons. It is a modern age digital marketing tool. It may be considered as a tool for gathering information, views, opinions, work, assigned task, ideas, solution to problems generally from crowds (a group of people) via the internet. This has enabled organizations to save resources such as time and money by utilizing different skills and expertise of people globally. Realizing the numerous benefits that crowdsourcing offers to organizations, they are adopting online crowdsourcing models not only to engage customers for co-creation, co-engagement, and collaboration but also for brand building and creating customer satisfaction. Organizations in a crowdsourcing model throws a contest, task, or a problem in hand to the crowd. The interest lies in understanding what motivates crowd to participate in such contests, which offers them delight, perceived value, and satisfaction.
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The authors offer their personal interpretations as participant-observers together with a data-based analysis of the evolution of the services marketing literature. Bibliographic analysis of more than 1000 English-language, general services marketing publications spanning four decades provides the empirical base for the paper. Using an evolutionary metaphor as the framework, the authors trace the literature through three stages: Crawling Out (1953–79); Scurrying About (1980–85); and Walking Erect (1986-present). The discussion of the three stages shows how the literature has evolved from the early services-marketing-is-different debate to the maturation of specific topics (e.g., service quality, service encounters) and the legitimization of the services marketing literature by major marketing journals. A classification and summary of the publishing outlets where the literature has appeared is presented. The article closes with discussion and speculation on the future of the services marketing literature.
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Purpose The purpose of this paper is to examine the development, extension and use of the “six markets” model and to outline a framework for analysing stakeholder relationships and planning stakeholder strategy. Design/methodology/approach The “six markets” stakeholder model is examined. Refinement of the model and improved understanding as a result of field‐based research is described. A stakeholder relationship planning framework is proposed. Findings The paper examines the use of the “six markets” model in a wide range of organisational contexts utilizing a range of research approaches. A stakeholder relationship planning model is developed consisting of four inter‐related elements, i.e. stakeholder value propositions, value delivery design, stakeholder relationship marketing plans, and measurement and feedback. Research limitations/implications The article suggests a number of areas for future research, including the development of planning approaches for different classes of stakeholders and more detailed testing of the stakeholder model and planning framework in specific market sectors. Practical implications The research suggests that managers find that the development and implementation of relationship plans for the key stakeholder markets generates valuable new knowledge and insights into stakeholder conditions, constraints and opportunities. Originality/value This article contributes to knowledge in the relationship marketing and stakeholder theory areas through the development, refinement and use of a planning model that addresses the complexity of stakeholder relationships and networks. The stakeholder planning approach that is developed represents a means by which managers can achieve greater transparency of stakeholders' interests and improved rigour in planning relationships with stakeholders.
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Marketing was originally built on a goods-centered, manufacturing-based model of economic exchange developed during the Industrial Revolution. Since its beginning, marketing has been broadening its perspective to include the exchange of more than manufactured goods. The subdiscipline of service marketing has emerged to address much of this broadened perspective, but it is built on the same goods and manufacturing-based model. The influence of this model is evident in the prototypical characteristics that have been identified as distinguishing services from goods—intangibility, inseparability, heterogeneity, and perishability. The authors argue that these characteristics (a) do not distinguish services from goods, (b) only have meaning from a manufacturing perspective, and (c) imply inappropriate normative strategies. They suggest that advances made by service scholars can provide a foundation for a more service-dominant view of all exchange from which more appropriate normative strategies can be developed for all of marketing.
Part 1 Relationship marketing: developing a relationship strategy quality as a competitive strategy monitoring service quality performance the transition to quality leadership managing relationship marketing. Part 2 Case studies on quality leadership: just another Cambridge hi-tech company? the shift to "customer orientation" in retail banking involving senior managers in the quality improvement process at Johnson Matthey achieving real culture change at Ilford from "crisis" to quality leadership at Rank Xerox.
The traditional system of company-centric value creation (that has served us so well over the past 100 years) is becoming obsolete. Leaders now need a new frame of reference for value creation. In the emergent economy, competition will center on personalized co-creation experiences, resulting in value that is truly unique to each individual. The authors see a new frontier in value creation emerging, replete with fresh opportunities. In this new frontier the role of the consumer has changed from isolated to connected, from unaware to informed, from passive to active. As a result, companies can no longer act autonomously, designing products, developing production processes, crafting marketing messages, and controlling sales channels with little or no interference from consumers. Armed with new tools and dissatisfied with available choices, consumers want to interact with firms and thereby co-create value. The use of interaction as a basis for co-creation is at the crux of our emerging reality. The co-creation experience of the consumer becomes the very basis of value. The authors offer a DART model for managing co-creation of value processes.