Reflections on Vargo and Lusch's systems perspective

Abstract

In their thoughtful article in this issue of Industrial MarketingManagement, Vargo and Lusch make three observations about B2Bmarketing. First, the goods-dominant (G-D) model of exchange,anchored to trading of consumer products as the origin of marketingpractice, is a major obstacle to making B2B marketing part ofmainstream marketing. I fully agree. In several of my papers in theseventies, I had also expressed the view that the differences betweenB2B and B2C are less than their commonalities (Sheth, 1977). Indeed,ourtextbook,CustomerBehavior(Sheth&Mittal,2004)wasorganizedtopointoutthatifwechangethewordconsumertocustomerthereareenormous similarities, especially if we consider the household as aunitofanalysis.Itisinmanywaysanownermanagedorganization.Infact, small business has more things in common with the householdcompared to large business in the same industry such as banks andmanufacturing. Small business can be understood better as a supra-residential customer.This blurring of demarcation between B2B and B2C marketing ismore prevalent in services industries such as telephone, utility,banking and IT services which typically have all three types ofcustomers: industrial, commercial and residential.Second, Vargo and Lusch suggest that what is more important tostudy is value co-creation between customers and suppliers. MichaelEtgarwasoneoftheearliestproponentsofthisviewpointinhispaperon the household as a production unit. In the Howard-Sheth theory ofBuyer Behavior (1969), we also wrote extensively how the householdgives value to purchased goods (fresh vegetables, canned and frozengoods) to make them consumable by the family through warming,cooking and adding ingredients.Thisnotionofvalueco-creationisobviousifweliberatemarketingfrom a trader (middleman) perspective (buyers and sellers) toproducers and consumers. Again, value co-creation between aproducer and consumer becomes a necessary condition in mostservices such as hairstyling, healthcare and education, even inconsumer markets.In B2B marketing and especially in key accounts, this value co-creation is organized, transparent, measured and often contractual. Inmy view, what we need is a joint venture perspective in marketingbetweenacustomerandasupplier.Typicaljointventureshaveagreedupon common goals, dedicated resources and compatible processesresulting in harmonious enduring relationships. Each party isdependent on the other in a joint venture. Gestalt thinking tells usthatthe wholeis morethanthesumof the parts.In thisregard,ajointventure perspective is significantly different from key accountmanagement where the supplier commits resources in the relation-ship without reciprocal commitment by the customer.In my studies of long term B2B relationships such as Whirlpool-Sears, P&G-Walmart, Lucent-AT&T, Siemens-Deutsche Telecom andAlcatel-France Telecom, I have understood them better as a jointventure model, with value co-creation as inherent to the survival andsuccess of these relationships.The third observation Vargo and Lusch make is that marketing isand should be viewed from a systems perspective, and I agree. In fact,systems perspective was a major conceptual initiative in the sixtiesleadingupto whatSheth,Garrett,andGardner(1988)referred to asaseparate school of thought. It grew out of the popularity of industrialdynamics pioneered by Jay Forrester at MIT and was intensified in theseventies by the first energy crisis. Systems perspective is thefoundation of most business simulation games such as Markstrat.Systems perspective is now even more necessary today, not onlybecause of globalization but also because of borderless concerns suchas the environment, terrorism and distributed collaborative workusing web-based technology.In my view, a systems perspective has the highest potential toelevate marketing from practice to discipline. At the same time, it willbe the most difficult to embrace unless we unlearn our scientifictraditions anchored to mechanics and physics as well as traditionaltheories of economics and behavioral sciences. It needs to embraceevolutionary and biological science perspectives with a focus more onthe context of discovery and less on the context of justification(Schikore & Steinle, 2006).Finally, a monolithic perspective, wherever it is borrowed from,(behavioral, social or economic sciences) is less likely to be useful in