art by University of Otago School of Business research staff, is putting service right at the centre in understanding the nature of business activity.
Traditional marketing logic had its gestation in the days of tall ships moving exotic goods from exciting new lands to the industrialising nations of Western Europe.
But in the world today, where more than 70 per cent of economic activity is generated by the service sector, the Department of Marketing has taken a leading role in creating a radical shift in marketing theory.
Associate Professor David Ballantyne says that orthodox marketing sees the value of goods and services set by what we pay for them at the time of purchase, but the new service-dominant logic sees value as realied in their use by customers.
"What we have now is a complete tumbling of the world view of marketing.
It's not goods supported by service; the new view is that goods are service appliances - meaning goods serve us," he says.
"For example, you buy a washing machine with a certain assigned price, but it is not until you put it to use that you can confirm its value."
These seemingly commonsense views stand in radical opposition to 200 years of mainstream economic thinking, re-ordering the role of goods, making them enablers of service provision.
Ballantyne says that IBM has recognised the importance of a service-based business approach through its Almaden Research Centre, with more than 500 people worldwide working on a new service-science perspective.
"IBM recognises that value is not embedded in the goods they sell. They want to keep their customers so they serve them in whatever way they would like to be served - and that could be goods or consulting services."
Otago grasped the initiative after a major 2004 journal article by US-based Professors Stephen Vargo and Robert Lusch put forward a forceful argument for a service-dominant logic, challenging the existing goods-dominant logic.
Recognising the power of emerging theory, Ballantyne and his marketing colleagues Dr Robert Aitken, Phil Osborne and Dr John Williams organised The Otago Forum in 2005 to discuss its many controversial aspects.
They invited 20 leading academics and thought leaders from around the world - including Vargo and Lusch - and were able to add more substance to the emerging theory.
The proceedings of the forum were published in 2006 in a leading international journal, Marketing Theory.
Ballantyne says Otago will continue to play an important role in developing the service-dominant logic and is helping plan another world-marketing forum, to be held in 2008.
"We want the University of Otago to take a lead in marketing theory development worldwide.
We didn't come up with the service logic idea, but we were one of the first universities to realise its potential and act on it."
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