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A customer-dominant logic of service

Kristina Heinonen, Tore Strandvik and Karl-Jacob Mickelsson
Hanken School of Economics, CERS, Helsinki, Finland

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Received 9 November 2009 Revised 9 February 2010 Accepted 19 February 2010

m Bo Edvardsson and Erik Sundstro

CTF, Karlstad University, Karlstad, Sweden, and

Per Andersson
Stockholm School of Economics, CIC, Stockholm, Sweden
Abstract
Purpose The paper seeks to introduce to a new perspective on the roles of customers and companies in creating value by outlining a customer-based approach to service. The customers logic is examined in-depth as being the foundation of a customer-dominant (CD) marketing and business logic. Design/methodology/approach The authors argue that both the goods- and service-dominant logic are provider-dominant. Contrasting the provider-dominant logic with CD logic, the paper examines the creation of service value from the perspectives of value-in-use, the customers own context, and the customers experience of service. Findings Moving from a provider-dominant logic to a CD logic uncovered ve major challenges to service marketers: company involvement, company control in co-creation, visibility of value creation, scope of customer experience, and character of customer experience. Research limitations/implications The paper is exploratory. It presents and discusses a new perspective and suggests implications for research and practice. Practical implications Awareness of the mechanisms of customer logic will provide businesses with new perspectives on the role of the company in their customers lives. It is proposed that understanding the customers logic should represent the starting-point for the companys marketing and business logic. Originality/value The paper increases the understanding of how the customers logic underpins the CD business logic. By exploring consequences of applying a CD logic, further directions for theoretical and empirical research are suggested. Keywords Services, Customers, Customer relations, Consumer behaviour, Logic Paper type Conceptual paper

1. Introduction The mental models guiding not only managers but also researchers in service settings have lately been eagerly discussed in terms of underlying logics (Edvardsson et al., nroos, 2006; Holbrook, 2006; Gummesson, 2007; Vargo and Lusch, 2004, 2005; Gro 2008b; Vargo et al., 2008). A goods-dominant (GD) logic has been contrasted with a service-dominant (SD) logic. This debate has its roots in earlier contributions to the
This work was conducted within the international research project ESCAPE embedding service in customer contexts, activities, practices, and experiences. The project was supported by Tekes, the Finnish Funding Agency for Technology and Innovation (www.tekes.).
Journal of Service Management Vol. 21 No. 4, 2010 pp. 531-548 q Emerald Group Publishing Limited 1757-5818 DOI 10.1108/09564231011066088

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nroos, 1982; Normann, 1984; Normann and Ramirez, 1993), marketing literature (Gro but has been rephrased and repackaged in several papers by Vargo and Lusch (2004, 2006, 2008a, b) with additional comments and suggestions from other researchers in nroos, 2006, 2008a, b; Gummesson, 2007). The debate the eld of service research (Gro has largely stayed on a general conceptual level, with few elaborations on the suggested key concepts. It has been characterized by a rather limited positioning of the body of earlier research in service managements well as a narrow view on the implications for management. Thus, the discussion has primarily been based on philosophical reasoning without substantial empirical data. The main focus has been on distinguishing service in terms of process (SD logic) from goods and services in terms of outcome (GD logic). Over time marketing thinking has developed from goods-focused approaches to the service- and interaction-focused approaches of SD logic (Vargo and Lusch, 2004, 2008a, b). We argue that, even though the SD logic has widened the scope of understanding the function of marketing, the view on SD logic is still very productionand interaction-focused, i.e. service provider-dominant (provider-dominant logic), not customer-dominant (CD). For example, approaches in service research are either focused on analyzing an individual service system from the companys point of view (service blueprinting, see for example Bitner et al., 2008) or on customer-provider interactions over time (Payne et al., 2009). In both cases, service is viewed as co-creation dominated by and from the perspective of the service provider. However, when other researchers argue that the ultimate goal for service should be to facilitate value for the nroos, 2008a, b), the aforementioned approaches will inevitably lead to customer (Gro an incomplete understanding of what the customer does with the service. Additionally, in contrast to the perspective on consumption practices (Holt, 1995; Korkman, 2006) and activity chains (Sawhney et al., 2004) which gives an in-depth view of concrete uses of a service we envision value as also emerging from mental and emotional experiences, for example, when reecting on a potential or already realized service. This insight uncovers a gap in our understanding, and results in the need to explore what a CD logic would entail in contrast to a provider-dominant logic. The notion of putting customers at the center is not new as such. In his classic paper, Levitt (1960) argued that companies are too focused on their own production processes and not sufciently oriented towards customer satisfaction. Instead management should identify how the organization can deliver customer satisfaction, then create processes that enable the achievement of satisfaction, and only then identify needed resources. Drucker (1974, p. 61) argued that the business purpose is to create a customer: It is the customer who determines what a business is. He saw marketing as the business as perceived by a customer: It is the whole business seen from the point of view of its nal result, that is, from the customers point of view (p. 63). Drucker argued that business starts out with the needs, the realities, the values of the customer. It demands that business dene its goal as the satisfaction of customer needs (p. 64). Druckers and Levitts classic studies represent important corner stones in current management thinking, especially when considering the importance of the customer. However, we argue that these studies have assigned customers a passive role, expecting them to do little beyond buying and consuming offerings. Interest in the customers life beyond direct service use has, until now, mainly been the domain of sociology-based approaches, such as consumer culture theory (Arnould and Thompson, 2005;

Sherry and Fischer, 2009). From a service management perspective these approaches are difcult to apply to practice, as they almost exclusively focus on consumption as meaning-creation and ignore the structural t between a service and a customers life. In the recent discussions in the service literature the emphasis has been on an active customer who co-creates value. However, we argue that current ideas in the debate concerning a SD logic (Vargo and Lusch, 2004, 2008a, b) are not still sufciently customer-focused, but rather represent a more advanced company-based view, where the consumer/customer is seen as employed by the company or as a partner in co-creation. SD logic has been criticized for idolizing customer centricity, yet a truly CD logic has been neglected (Brown, 2007). Even if there are recent indications towards a nroos, 2006, 2008b; Vargo, 2008), the studies tend to stronger customer focus (Gro emphasize only co-creation and interaction. For example, Vargo (2008, p. 214) proposes that a:
[. . .] rms activity is best understood in terms of input for the customers resource-integration, value-creation activities rather than it is in terms of its own integration of customer resources for the production of valuable output.

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However, what needs to be addressed is how value emerges for customers and how through a sense-making process customers construct their experience of value of a service providers participation in their activities and tasks. This is in line with for nroos (2008b), Holbrook (2006), Pen aloza and Venkatesh (2006), and example Gro Schembri (2006) who emphasize the customers perspective. In this paper, we take a step towards a more holistic understanding of the customers life, practices and experiences, in which service is naturally and inevitably embedded. From a customer perspective many of the arguments in the current debate can be seen in a different light, and this has concrete implications for managerial action as well as for further academic research. In contrast to a service provider focus the purpose of this paper is to apply a customer focus to service and to explore the implications of applying such a CD logic. The customers logic is proposed as the foundation of a CD marketing and business logic. Consequently, the centers of interest are not exchange and service as such, but how a companys service is and becomes embedded in the customers contexts, activities, practices, and experiences, and what implications this has for service companies. We argue that the process-outcome and provider-customer dimensions denote different business logics. Both the GD and SD logics represent a provider-dominant logic, whereas a CD logic is separate from these perspectives. By business logic we mean a strategic mindset or mental model. The term marketing logic has been used in previous nroos, 2006) but with the currently multiple understandings of the term research (Gro marketing (currently still denoting a function in companies) and the attempts to reposition marketing as a strategic issue in companies, we emphasize that CD logic is a strategic issue, and not only a concern for marketers in the traditional sense. In this paper, we contribute to the discussion on mental models or logics guiding service management by conducting a conceptual analysis of what follows from applying a CD logic in contrast to a provider-dominant logic. The paper contributes to the understanding of the mechanisms related to value-in-use in the customers own context and the customer experience of service. We also point to issues that we consider to be challenges for both practitioners and researchers when applying this logic. The derived issues are seen to apply both to consumer and to business markets.

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The paper is structured in the following way. First, we propose a conceptual model of a CD logic as an alternative to a provider-dominant logic, including traditional service management and the current SD logic. Next, we examine three issues (co-creation, value-in-use, and customer experience) that are cornerstones in the current discussions on a SD logic. We propose that it is not these issues as such that determine a marketing logic, but rather ones specic standpoint and interpretation of them that lead to suggesting a provider-customer continuum and consequently to our proposed CD logic. Finally, we discuss implications and managerial challenges that follow from a CD logic. 2. Customer-dominant logic Many of the current debates concerning marketing logic have implicitly suggested a need to revise the thinking on the roles of the seller and the buyer, and what the seller needs to do and manage in order to succeed in business. In this paper, we propose that there are unexploited opportunities in applying a CD marketing logic rather than a SD logic. A CD marketing logic here refers to a view that positions the customer in the center, rather than the service, the service provider/producer or the interaction or the system. It is thus not a subset of a SD logic but rather a different perspective. This approach differs from traditional notions of customer orientation by shifting the viewpoint: instead of focusing on what companies are doing to create services that customers will prefer, we suggest that the focus should be on what customers are doing with services and service to accomplish their own goals. The difference is subtle but important. An approach that is grounded in customer agency (Marsden and Littler, 1996) will allow companies to build a business on an in-depth insight into customers activities, practices, experiences, and context. Such insights are then converted into concrete ways for companies to participate in and support the customers processes nroos, 2008a, b) in terms of service offerings. The primary issue is not the offering (Gro as such, whether it is seen as an outcome (physical good, service, solution) or a process (service interaction), or both, but rather the customers life and tasks that the offering is related to. Hence, the customers logic should be the foundation of a CD marketing logic. To illustrate, in Figure 1 the perspectives within the traditional service management literature and the current SD logic discussions (which we consider provider-dominant) are contrasted with the proposed CD view. The proposed T-model (T referring to the shape of the model) indicates that the customers perspective does not only comprise the producers service but also the customers other activities and life as a whole. Figure 1 shows schematically the service companys world in relation to the customers world. The gure shows the respective time frames and analytical foci of service management (GD logic), SD logic, and the proposed CD logic view. At the top is a timeline that extends service X (any service) in both directions from the time frame of service management. This reects how a service, from the customers perspective, is not only consumed or used, but potentially integrated into the customers ongoing experience and activity structures beyond the service process. This is illustrated by the boxes: history, pre-service X, service X, post-service X, and future. What happens during the service process is only a part of all related and relevant activities and experiences in a customers life. Traditional service management literature only addresses the service X, focusing on the design of service blueprints (Bitner et al., 2008;

History Other activities and experiences Related activities and experiences Core activity and experience Onstage actions Customer Y

Pre service X

Service X

Post service X

Future

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Customers world

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Service dominant logic

Service companys world

Service management

Backstage actions Service company X

Support processes

Figure 1. CD logic of service contrasted with service management and SD logic

cio et al., 2008), identifying and developing service encounters (Shostack, 1985) Patr nroos, 1982; Parasuraman et al., 1985, and measuring perceived service quality (Gro 1988, 1991), and perceived service value (Zeithaml, 1988). This is also the case within relationship marketing, which considers the accumulated service encounters with a service provider (Payne et al., 2009). As well as extending the time frame of service management and SD logic, Figure 1 also extends the scope of service use. In the current SD logic discussions the act of service is put forward as marketings central unit of exchange (Vargo and Lusch, 2004, 2008b). Consequently, the service situation becomes the key focus. From the service companys perspective the customers participation in its activities and the utilization of its resources represent the use of service X. When used, it generates a service experience and consequently an experience of value. In SD logic, this view has been extended to include customer-company interaction and the co-creation of service (Vargo and Lusch, 2004, 2008b). However, we argue that the customer never uses a service in a vacuum, and that the customers understanding of service use is different from the service providers, as indicated by the shaded area in Figure 1. In addition to the customers core activities and experiences (i.e. those directly related to using a service), the gure also includes related activities and experiences, as well as other activities and experiences that inuence how value emerges. We argue that the perspective of a CD logic is totally different from the other two perspectives, as they only consider activities and experiences that are directly related to the service. Therefore, we suggest that it is not the act of service alone, but customers intentions as well as the resultant activities and experiences that should be the focus of marketers and service companies. In other words, they should nd out what the customer is doing or trying to do, and how a specic service ts into this. Thus, the challenge of the service company becomes to manage onstage and backstage actions so that they support the network of customers independently orchestrated activities. So how to approach this problem? The notion that the value of service arises within the customers domain is not new. The early studies by Levitt (1960) and Drucker (1974)

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include a customer centric perspective on value. Levitt (1960) suggested that customers are not buying movies or gasoline but entertainment or the ability to drive their cars. In essence, Levitts thought-provoking arguments were ahead of their time. However, with the roots in goods-marketing, Levitt (1960, p. 50) focused on the consumption of products and suggested that marketing is the idea of satisfying the needs of the product and the whole cluster of things associated with creating, delivering, and nally consuming it. Although he considered an augmented product including service-related activities, such as availability to the customer, and conditions of exchange as determined by the buyer, the focal point was the consumption of the offering. In contrast, the focus of this paper is on customers all activities and experiences. Drucker (1974, p. 61) argued that the goal of marketing is to create a customer who is ready to buy, and the focus was on the utility of the offering: what the customer buys and considers value is never a product. It is always utility, that is, what a product or service does for him. Traditionally, one of the key challenges in service management has been the notion that customers are the ultimate judges of the service companys performance. A service companys activities represent the service that is perceived and interpreted by the customer. Services are seen as designed and delivered to the customer by the company. Central concepts such as perceived service quality, perceived service value and customer satisfaction have thus dominated the service management literature nroos, 1982; Parasuraman et al., 1988; Zeithaml, 1988). Perceived service value (Gro refers to customers experience of the service companys total offering, including goods, activities, and over time the relationship between the company and the customer. From a managerial perspective, the key has been to integrate the customer in the service companys production process and allocate some tasks to the customer. Even if interactivity in general has been considered essential, it has implicitly been interactivity dominated by the service company and based on exchange value. Traditional service management has in fact applied a GD logic which represents one type of what we denote as provider-dominant logic, by focusing on customers perceptions of their offering, and assuming that the service providers process is primary and the customer is fullling scripts dened by them. It has been argued that in contrast a SD logic would focus on the co-creation of value in a process where value is realized by the customer when she uses the service companys resources. Value-in-use and value-in-context have been proposed as a completely different views compared to traditional exchange value thinking. Vargo and Lusch (2004), who initiated the current discussion on GD vs SD logic, introduced ten propositions that they believe capture important aspects of a SD logic. Their numerous papers have inspired many other researchers to discuss the propositions and nroos, 2006; Pen aloza and Venkatesh, 2006) arguments (Ballantyne and Vary, 2006; Gro and they demonstrate that there are many different approaches and foci that can be applied. In this paper, we propose that the explicit and implicit focus on the service provider needs to be shifted in order to focus instead on the customer. Is SD logic a type of CD logic? We think not, but rather that it is a type of provider-dominant logic, and this paper presents arguments to support our view. The discussion is highly topical because of the recent power shift in favor of the consumer/customer, increased volatility in the market place, and tougher, often global, competition. In contrast to the SD logic, the alternative view represented by the CD marketing logic places the focus on the customer and not on service (interaction process and

interaction system). In this vein, Holbrook (2006, p. 212) denes customer value as an interactive relativistic preference experience. Within this experience the customer uses all input, current and remembered, to form an impression of value inuenced by both cognitive and emotional perceptions. These impressions serve to create an emotionally charged marker in the customers memory, which the customer uses as a guide for future behavior (Damasio, 1996; Ravald, 2008). We argue that value emerges when the service provided by service company X and used by the customer becomes embedded in the customers context, activities, practices and experiences together with the service companys activities. This value may include both service X and all facilitating and supporting services before and after service X, as well as other only marginally related services. When combined these factors shed new light on what the process of co-creation may imply, how service experience should be dened, and how value emerges and is realized for the customer. However, the proposed approach does not mean that the service companys role is eliminated. On the contrary, it in fact builds on the idea originally introduced by nroos (2006, 2008b), and accepted by Vargo (2008) and others, namely that the Gro service companys task is to support the customers creation of value and that the potential value of a service companys activities can be larger than traditionally considered. 3. Conceptual analysis of key issues of the customer-dominant logic Among the numerous concepts discussed in the recent literature, three issues: co-creation, value-in-use, and customer experience are present in most studies (Grewal nroos, 2008a, b; Holbrook, 2006; Payne et al., 2008; Vargo et al., 2008; et al., 2009; Gro m et al., 2008; Vargo and Lusch, 2004, 2008a, b). They are employed in this Sandstro paper because of their ability to demonstrate the signicance of the proposed CD logic in relation to other logics. These issues are inter-related and have a common denominator: the question of the customers role. The concepts are used to distinguish between a provider-dominant logic (including both service management and SD logics) and the proposed CD logic. We argue that the customers value-in-use evaluation is based on the customers service experience which is embedded in the customers context. From the customers point of view, service contains three types of elements: outcomes of the service providers internal activities, co-creation processes and their outcome elements, and process and outcome elements of the customers own activities. Co-creation is seen here as an element of service by creating a part of the customer experience. 3.1 Nature of co-creation of service Co-creation of service has been strongly advocated by the proponents of a SD logic in order to emphasize the difference compared with a GD logic. However, the co-creation approach has raised many questions, and therefore a critical discussion of the nature of co-creation and the validity of emphasizing co-creation is needed. Co-creation can be interpreted in many ways. A fundamental premise of the SD logic is that the customer is always a co-creator of value together with the company (Vargo and Lusch, 2008a, b). It is argued that the company cannot unilaterally create value, but can only offer value propositions and thus potentially co-create service and the resulting customer value:

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In S-D logic, the roles of producers and consumers are not distinct, meaning that value is always co-created, jointly and reciprocally, in interactions among providers and beneciaries through the integration of resources and application of competences (Vargo et al., 2008, p. 146).

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nroos (2008a, p. 4), however, argues that value creation and co-creation of service are Gro distinct: it is important to keep apart service production, in which customers take part as co-creators, and value creation. In other words, co-creation does not necessarily result in value emergence. In practice customers might not be interested in the companys offering; they can often perform all activities themselves, or wish to reduce the role of the company. If the particular service plays a minor role in their life, they might not be interested in active participation in the service or in co-operation with the service company. Next, two particular issues concerning co-creation are discussed, involvement and control. 3.1.1 Involvement. A CD logic includes understanding the role of different activities, practices, experiences, and contexts in the customers business or life. The terms co-production and co-creation indicate a service-provider oriented view in the sense that it focuses on the particular offering or service rather than on the role this offering plays for the customer. Hence, there is a need to contrast the established company-oriented view of involving the customer in service co-creation with a more radical customer-oriented view of involving the service provider in the customers life. The question is who is involving whom as an indication of initiative and scope of involvement. To understand the use and value of a service, we rst need to understand customers lives, including context, activities and experiences performing different tasks and how the service supports customers life. This shift in focus is crucial and is applicable both to business-to-business and business-to-consumer situations. 3.1.2 Control. When seen from a CD logic perspective, we argue that co-creation is not always a straightforward activity orchestrated by the company. In contrast, traditional GD marketing management literature has focused on the service providers processes and delivery, where the offering with its different characteristics is managed with the aim of inspiring customers to buy. The company is seen as the active party and the customer reacts to the companys activities. Although the customers role as co-producers of services has been accepted in the literature, the interaction has largely been seen from the companys perspective in the sense that the company controls the nroos, 1982). The relationship marketing interaction (Eiglier and Langeard, 1976; Gro literature has applied the same perspective on company-customer relationships. Increasingly, however, customers memory and experiences from one interaction, use occasion, or even relationship have been acknowledged as an inuence on customers perception of the next service and value-in-use (Roos et al., 2009). Vargo and Lusch (2008b, p. 7) suggest that value is always determined by the beneciary. However, the focus in SD logic is on co-creation and this raises unanswered questions regarding the scope of control: does uniquely and phenomenologically determined by the beneciary (Vargo and Lusch, 2008b, p. 7) mean that in practice there is little control on part of the seller? Or can companies inuence this experience so that they do not only control their own activities but also customers activities and thereby customers thinking and emotions, resulting in a company designed experience? nroos (2008a, p. 9) suggests that the control of value creation varies and that Gro companies can take the role of value facilitators where they can potentially inuence the customer:

The customers create the value for themselves, but during the interactions the service provider gets opportunities to change the process of value creation, for example so that the customers get more value than otherwise out of the service or good.

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nroos proposes that companies control their own value creation and the co-creation Gro process but not customers own value creation. Verhoef et al. (2009, p. 32) suggest that experience is created not only by retailer controlled elements but also by elements that are outside of the retailers control. 3.2 Value-in-use Contrasted with exchange value, value-in-use has been seen as a process in which nroos, 2006; Gummesson, 2007). It has been value emerges rather than is delivered (Gro argued that suppliers only create the resources or means required to make it possible nroos, 2006, p. 324). Value creation for customers to create value for themselves (Gro nroos, 2008a; Vargo and Lusch, 2008b), has been linked to an interactive process (Gro either by direct or indirect interaction:
A service is an interactive process and during such interactions the customer and the service provider co-produce the service. During this interactive part of the service process, production and consumption take place simultaneously, and hence during that process the customer nroos, 2008a, p. 7). perceives the value that is created or emerges from the service (Gro

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Thus, the SD view on value-in-use emphasizes that value emerges in the interactive process. This is in line with traditional service management that has addressed the service episode where customers and interactions are visible to the company (Shostack, 1984; Bitner et al., 2008). From the service providers point of view visibility becomes an issue. 3.2.1 Visibility. The CD logic entails a broader understanding of value-in-use. The customer and most of the value-in-use emergence might be invisible to the company, beyond the companys visibility line (in contrast to the traditional visibility line for customers described in service blueprinting). Value emerges in customers practices, in everyday life processes (or in the case of companies, their business processes) by using both goods and services. Value emerges mostly beyond the visibility of companies in three respects. First, the customers time frame is broader. Value is experienced before, during and after the service and as such it is not only related to service but is also applicable to goods. Hence, value-in-use is not only linked to the service process, but extends beyond the interactive process. For example, when thinking about a holiday trip, customer value can emerge before the trip, value is created during the holiday, but also after the holiday in terms of memories. The role of companies would thus be to understand the customers value creation processes embedded in customers practices and contexts. Second, when emphasizing that value emerges in customers contexts and practices we argue that value-in-use is more complicated and has a larger scope than only use in terms of the consumption process (Holt, 1995), the concrete interaction with the nroos, 2006; Hoolbrook, 2006) or activity chains service (Vargo and Lush, 2008b; Gro with a desired outcome (Sawhney et al., 2004). We consider use to encompass both the outcome and process of an activity. We further argue that value-in-use emerges not only in interactive processes, but also in customers non-interactive processes. Thus, value-in-use represents more than physical activity and also includes mental activity.

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For example, reecting on earlier experiences of a holiday may create value. In a provider-dominant logic these experiences would entail how the company has performed, for example, in offering friendly and timely service or exciting events. In contrast, in a CD logic the experiences would entail the enabling effects on the customers life, for example the emergence of new friendships. Additionally, value-in-use contains also an evaluation of the concrete or abstract outcomes irrespective of whether they were pre-determined or not. In other words, using the classic drill-hole example, we argue that value-in-use does not refer only to the hole, nor to the drill, but it resides also in the process of drilling, in the usefulness of the hole, in the unrealized potential of the drill, as well as in the pure sensation of possessing a drill. Third, although Vargo et al. (2008) introduced context through their value-in-context concept, but they did not pay explicit attention to the drivers at the collective/intersubjective customer level. We suggest, the context is dynamic and dependent on the customers role, position and interaction within a social structure, which subsequently forms the basis for both the co-creation of service and value-in-use assessment. According to social construction theory, however, the value assessment is part of the social reality and becomes more than individual and subjective: value must also be understood as part of a collective and intersubjective context. For example, the understanding of value in fashion is more or less socially constructed (DeBerry-Spence, 2008). Collective social forces often have a dominant role, but individual needs, preferences, habits and values play an important part in both service co-creation and value assessment, both from the customers and the providers perspective. In a CD logic, value-in-context is inherently included and is dynamic because experiences are continuously accumulated. From a customers perspective, earlier experiences are always present as an (to the company) invisible context and are continuously updated through new experiences. Value in context is thus inherently integrated in the value-in-use evaluation. 3.3 Customer experience In the last few years, the interest in the customer experience concept has increased considerably. One example is the latest amendment to the fundamental premises of SD logic (Vargo and Lusch, 2008a), in which value is seen as idiosyncratic, experiential, contextual, and meaning laden, i.e. a highly subjective experience. Several special issues of journals have focused on customer experience. Different terms with different focus areas have been proposed, e.g. service experience, customer experience, and Cova, 2003; Harris et al., consumer experience, and consumption experience (Caru 2003; Gentile et al., 2007; Patterson et al., 2008; Baron and Harris, 2008; Puccinelli et al., 2009). Adopting a narrow view, customer experience is seen as constructed, staged, and created by the service company. This reects the research on service experience that emerges within a certain service encounter. Here, customers are seen as a blank page and it is assumed that they will experience the service according to how it is designed by the company: Customer experience is the internal and subjective response customers have to any direct or indirect contact with the company (Meyer and Schwager, 2007, p. 118). For example, customer experience may refer to a detailed description of the perceptions of a store (Patterson et al., 2008) or the elements of a buying process (Puccinelli et al., 2009). Frequently, it is assumed that the service company can more or less control the customers experience, which thus represents both the planned process and intended outcome designed by the company.

For example, brand experience has been dened as subjective, internal consumer responses (sensations, feelings, and cognitions) and behavioral responses evoked by brand-related stimuli that are part of a brands design and identity, packaging, communications, and environments (Brakus et al., 2009, p. 53). Adopting a wider scope, the customers experience may include the relationship perspective. Here, the customer is assumed to evaluate the service providers performance in the relationship over time: customer experience arises through the combination of all contact points between the customer and the company (Grewal et al., 2009). This view is adopted within the domain of integrated relationship communication and a wide array of popular management books (Shaw, 2007). The approach does not, however, include factors contextually or temporally outside the service providers input or activities. Also, the focus is on the companys perspective and the company is assumed to manage customer experience. A third perspective includes the customers viewpoint. In the experiential and Cova, 2003; Holbrook, 2006; phenomenological stream of consumer research (Caru Schembri, 2006) consumer experience is seen as internal and emotional. Thus, experiences do not consist only of cognition, calculation and overt behavior, but are by and Cova (2003) distinguish nature also subjective and inseparable from feelings. Caru between consumption experiences and consumer experiences. Although consumption experience is clearly managerially more relevant than consumer experience, we argue that a broader perspective is needed. Therefore, one should not study only one company, because the customer may be linked to several companies. 3.3.1 Scope. Traditionally, service has been dened according to the service providers interest and way of seeing service. From a CD point of view, we argue that experiences are something that customers orchestrate themselves and that arise within their own activities. The argument for this is twofold: rst, several researchers have suggested that the customer should be seen as an active participant in the market system (Normann, 2001; Stewart and Pavlou, 2002; Beckett and Nayak, 2008; Vargo and Lusch, 2008a, b). On a general level this means that customers orientate themselves within a realm of possible purchases, practices and activities. Thus, customers are actively creating their own experience landscape by picking and choosing which type of experiences to seek out. Second, research indicates that the customers mood, understanding and frame of interpretation will inuence the experienced outcome of a m et al., service encounter (Forgas and Bower, 1987; White, 2006; Ravald, 2008; Sandstro 2008). Third, building on the theories on deliberate and emergent strategies (Mintzberg et al., 1998), companies intended experience may not always be equivalent to the realized experience of the customer. This means that the ultimate shape of the service experience is only partly under the providers control. We also suggest that customer experiences should be understood not just as direct interactions between customer and company, but as something that goes beyond direct interactions. From the customers point of view, service episodes and encounters are only parts of an ongoing ow of interrelated experiences and sense-making (Verhoef et al., 2009). Arnould and Price (1993) describe how experiences before and after the central service encounter contribute to the overall experience. Customers discussions about a shared experience may serve to re-frame it completely, meaning that the understanding of the value of a focal event may be re-negotiated outside it. However, it can be argued that the analytical focus in Arnould and Prices (1993) study is on the

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service episode. Verhoef et al. (2009) propose that customer experience is based on the total experience which extends beyond the purchase activity. Thus, customer experience should not be understood in terms of an episode, but rather as a part of customers ongoing life. All components in the customers experience can be seen as continuous processes, all of which have an outcome that is incorporated in the customers experiences of value. Some experience patterns are routine and reoccurring, while others may be unique and one-off. For example, the value of travelling is not exclusively restricted to the trip itself; rather, it also emerges within activities before and after the trip, such as planning and remembering and talking about the trip many years after. In extant service quality literature the quality of a service is traditionally evaluated at the end of a service encounter (Parasuraman et al., 1985, 1988, 1991). This means that the timing of measurement is based on the companys perspective. However, when extending the focus from service encounters to activities beyond the interaction, as we suggest, the time frame inevitably changes. 3.3.2 Character. In addition we propose that the service experience is more than a process of perception: it is a process of long-term and context-bound relating. Even though both experience and perception refer to a persons subjective understanding of some external object or event, experience contains an element of activity and reection that is not innate in perception. Thus, perception can be seen as the act of subjectively registering information and forming initial impressions about it, while experience is the process of realizing how these impressions relate to oneself and how one understands and feels about them. In the customers mind, a service is always put into a context of some kind, be that of function or time. With different emotions, thoughts and activities, the customer experiences a different process, outcome, and context. Therefore, we argue that companies need to understand how customers integrate service into their own activity systems. We want to emphasize the importance of understanding how customers create their own experiences and the problems and opportunities they are facing. At present, there are no managerial concepts for understanding the role of service in the consumption experience. Based on CD logic we propose that instead of emphasizing only one type of activity, i.e. customer-company interactions, the focus should be on customers activities and different consumption and Cova (2003), who suggest that experiences can be both contexts. In line with Caru ordinary and extraordinary, we claim that customer experience includes all types of activities, also routine, mundane, everyday activities. In Table I, we summarize the main differences between the provider-dominant logic, and the CD logic. Three core issues are employed to illustrate how service can be seen
Provider-dominant logic Co-creation Involvement Control Value-in-use Visibility Customer experience Scope Character CD logic

Customer involved in co-creation Company involved in customer activities Company controls co-creation Customer controls value creation Focus on visible interactions Formed within the service Extraordinary and special Also considers invisible and mental actions Emerges in customers life Also mundane and everyday

Table I. The provider-dominant vs the CD logic of service

as embedded in customers contexts, activities, practices and experiences: co-creation, value-in-use, and customer experience. 4. Discussion and contribution In this paper, we have discussed the shift from a GD logic to a SD logic that has lately become topical and has changed marketings focus from the companys internal processes to the points of interaction between company and customer. We claim that both these logics are examples of a provider-dominant logic. We have argued that, if we only focus on interaction, we will fail to take into account what the role of the company is in the customers life. Therefore, we propose that marketing should start considering CD logic as the next step towards an in-depth understanding of customer experience. This means that the ultimate outcome of marketing should not be the service but the customer experience and the resulting value-in-use for customers in their particular context. Thus, the central question is how companies can support customers ongoing activity and experience structures. The paper contributes to the current discussion on marketing logics. It demonstrates how the customers logic underpins the CD business logic. The CD logic was contrasted with the provider-dominant logic, and subsequently ve challenges to management were derived and discussed: company involvement, company control in co-creation, visibility of value creation, scope of customer experience, and character of customer experience. When questioning the basics of business logics, the denitions of marketing concepts and terminology need to be revised. A CD understanding of service highlights several topics for further research. Within all three of the core issues presented in this paper there are questions that should be explored further. Table II summarizes theoretical and managerial challenges that result from adopting a CD logic. Whereas the SD logic seems to adopt a single logic perspective (Brown, 2007) by describing the ideal scenario where the customer is always seen as a co-creator of value, the CD logic takes a more open-ended stance: is the customer always a co-creator of value? So far research has not explicitly focused on the mechanisms of co-creation from both the customers and the providers perspective. In this paper, it is argued that a more critical view of the role of co-creation in service is needed, a view where the roles and input of both the customers and the company are evaluated. For example, there may be a large number of actors involved in co-creation, some of them providing important complementing services. In addition, we argue that value-in-use should be seen as everything that the company does that the customer can use in order to improve his life or business. Value is a relative preference evaluation (Holbrook, 2006) that an individual can perform at any time when needed concerning a particular part of their activities or life. Value-in-use refers to the fact that value emerges when the customer uses a service. Use, however, tends to be dened rather narrowly, but a service might be used before purchase, during interaction, or after purchase. It might not be related to exchange or integration of resources as such, but can be a mere mental activity concerning a coming or a past service interaction. Because value is created within experiences, focusing only on value creation within the interactions between service provider and customer is too narrow. All experiences are not co-created with the service provider. From the service providers point of view

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Concept

Co-creation Involvement

Control

Value-in-use Visibility

Customer experience Character

Scope

Table II. Implications for theory and marketing practice Managerial challenge Rather than focus on involving their customers in co-creation, should service companies focus on involving themselves in the customers business or life? If value creation is not orchestrated by the company but rather by the customers, what implications does this have for the companys service strategy, service design, and service operations? Should the focus move beyond the interactions visible to the service company to those (to the company) often invisible and mental activities and experiences that lead to value emergence? If customer experience is not restricted to traditional service episodes or relationships, how should the company support customer experience that is continuously emerging in the customers business or life structured by the customers timing and time frames? How to support customer experiences related to all types of activities, some of them extraordinary, but most of them routine everyday activities embedded in the customers context?

Theoretical challenge

How many actors are involved in creating the outcome of the service? What is the proportion of customer and provider participation and inuence in different stages of the co-creation process realizing a service process? What activities and interactions are carried out simultaneously and/or sequentially? When and on what basis is co-creation judged as harmonious? When and why is the customer in control of the co-creation process and when is the provider in control? When and why can there be a struggle between the parties involved in co-creation? What roles do norms, values, habits, and social forces play?

What kinds of activities are customers engaged in and why? How can value-in-use be explicitly expressed? Which are the boundaries of such an activity? In what types of activities does value emerge for the customer? What factors in different contexts are critical for favorable and unfavorable value-in-use? How, when and where can value-in-use be measured?

What are the dimensions inuencing an experience?

What are the time frame and the time units of an experience? Where and how does an experience start and end?

this means that customers create value beyond their role as participators. Such value might contain a business opportunity for the service providers, and consequently represent an interesting innovation opportunity. A managerial implication resulting from this line of reasoning is that service providers need to change their mindset and to a higher degree consider customers in the customers own context. Awareness of the mechanisms of the customers logic will provide businesses with new perspectives on the role of the company in their customers lives. Compared to the traditional view this means that, besides visible and controlled interactions, service providers should expand their perspectives in order to get to know their customers on a deeper level than before. This means going beyond the co-creating activities to identifying activities that customers are involved in with other individuals, companies, or service systems. Further, adopting a CD logic has implications for how research should be conducted, both from an academic and a practitioner perspective. Companies and researchers need to revise their tools and approaches for understanding customers. Traditionally, understanding customers has been based on studies of customers perceptions and thoughts about offerings. Currently, in line with the academic focus on co-creation, some companies are trying to nd out how customers use and experience offerings in their own context. In contrast, we argue that companies should try to discover the potential, unrealized value of a service by learning what processes customers are involved with in their own context, and what different types of input, both physical and mental, they would need to support those processes. This means setting out from understanding of customers activities, and then supporting those activities, rather than starting from products/services and then identifying the activities where a company can t in. In other words, companies need to do more in-depth ethnographical studies. A third managerial implication is the need to design a service based on the new in-depth knowledge of customers. Rather than trying to persuade customers that the offering is valuable to them, companies need to try to embed service in customers existing and future contexts, activities, and experiences. This means that the design is not based on what the offering can do, but what customers want to achieve, be it functional performance, mental experience, or both. CD logic entails facilitating and enhancing customers activities, and this has not been given sufcient attention in current service thinking and business practice. However, it does not necessarily mean that companies should customize their operations to individual customers. Rather, we argue that companies need deeper insights into their potential role in the customers activities. Based on an understanding of the customers scripts, service companies can construct their own scripts and service blueprinting to be effective. These scripts should be based on a common mental model that cuts through the organization, in which the customer, not the encounters or internal processes, is in focus. Even if the company currently has the power to compel customers to follow the companys script, the development global competition and empowered customers may radically change the situation.
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Further reading nroos, C. (1994), From marketing mix to relationship marketing: towards a paradigm shift in Gro marketing, Asia-Australia Marketing Journal, Vol. 2 No. 1, pp. 9-29. Corresponding author Kristina Heinonen can be contacted at: kristina.heinonen@hanken. To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints