The Idea

I found service-dominant logic’s foundational premise #3 one of the stranger ones to get my head around. Here it is:

Goods are distribution mechanisms for service provision

Vargo & Lush (2016) – Foundational Premise #3

I was brought up and educated, like most of us, with a goods-dominant logic. Where I consider goods first and that services are poor relatives.

It turns out this is not really the case – see “Goods are good, service bad – not quite“. And that in our service-only-world there is no division. Rather, we use goods to freeze service. We can, then, move that service in time and space and unfreeze when the benefit is needed.

The steps to get to this evolution in thinking is to start with our current normal goods-first world view. Then to realise that we have to introduce a goods-services continuum since a clear division between goods and service doesn’t really exist. And then we can make the progress to where goods fit in a service-first world.

Let’s pack our bag and get going! If you want to jump straight to the evolution, click here.

Services in a goods-dominant world

If we look at the marketing field, then there is a clear emphasis that services are poor relatives to goods. Perhaps this is not so surprising. We can readily associate with goods – they are tangible, we can hold them, see them, feel them. Our world view becomes one where suppliers/manufacturers exchange goods, in which they have embedded value, for cash. We call this goods-dominant logic.

Being goods-focussed thinking, we also try and think of services like goods. That is to say, the provider embeds value in the service before it is used. And it is that value that customers are going to pay for.

Services – ugh: intangible, inconsistent, inseparable, can’t inventorise and require customer involvement!

However, when we try and define services, then we find them problematic compared to goods. We see them as intangible and inconsistent. We cannot inventorise them. And we find service delivery is inseparable (produced and consumed at the same time) as well as requiring customer involvement.

Additionally, we need to extend the marketing mix to cope with these services. We go from a simple mix of 4Ps (product, price, promotion, place) to having to add more Ps such as people and physical evidence.

(I would suggest that the goods-marketing mix is actually a subset of the marketing mix, instead of us having to add things for services. For more on this, take a quick look at my article “Marketing Mix – how many Ps are needed?“

But we soon discover that this binary goods vs services view is not real.

Evolving to see a continuum

Once we look outside the textbook, we find the world is a messy place. We rarely see a clean division between goods and services.

As an example, let’s think of an all you can eat buffet. Would you say that is goods or service? I would say it is predominantly goods – the food – but has some supporting services – such as refilling the buffet trays and lightweight waiting (cleaning tables, taking payments etc).

What about a 5-star restaurant? There we can still say food is an aspect (the goods). Yet we go to a 5-star restaurant for the service/experience in addition to the food.

We can put these two examples on a continuum between tangible and intangible dominance. As in Figure 1. And we can fill in other food-related examples. For example, a pretty pure tangible dominant is buying food from a supermarket. And so that could go on the far left of Figure 1.

I can’t think of a pure service example for food (well, I could suggest nutritional packs fed to comma patients).

But what comes out when we think it through is there is this continuum. On the left are the complete tangible products. Over on the right are the complete intangibles. And in-between we have tangible products with supporting services, and major service with supporting products, and hybrid offers.

This continuum rather negates the debate of goods vs services. And that services are problematic requiring lots of updates/fixes. Perhaps we should have started with defining service and seeing where goods fit in..which is exactly what we do next!

The service-dominant evolution

What if we were to think differently? If instead of starting at goods and trying to fit services in, we started with service and observed where goods fit in. Would we end up just reversing the goods vs service debate to a service vs goods debate and seeing goods as a poor relative to service?

We could, lazily, end up there. But it turns out there’s a much more interesting observation to make. Actually there are two observations.

The first is that we find goods allow us to transport service in time and space. And the second is we find a service-service continuum emerging. This second observation leads us to observe that jobs-to-be-done theory is baked-in to service-dominant logic). Let’s look at these two.

Goods enable us to transport service

Let’s recall that service is the application of competence/resources to benefit an entity. And that beneficiary might be the entity itself, in which case we talk about self-service. Goods allow us to capture/freeze that application of competence/resource and distribute it. Then we can benefit from it at another place and time.

This is simpler to explain with some examples! And easier still to think of examples where goods freeze a performance and freeze skills to be integrated later. These are really the same thing, but in my head easier to observe separately. [It turns out I’m not the first to think of goods as freezing service – Normann & Ramírez do so in their 1993 HBR article: “Designing Interactive Strategy“]

Goods: freezing a Service mid-performance

The way I first understood this concept was to think about a performance being frozen in time and then unfrozen – such as music reproduction.

Music Reproduction

If I go and listen to a band live, then I’m benefiting from their performance. And that performance is the application of their skills in playing musical instruments (or maybe someone else’s electronic wizardry with autotune).

But I don’t have to go and see the band live. This is a service that is not inseparable. I can listen to their CD, or vinyl, or more likely, today, stream their music on Spotify (where it is a digital good).

Those mediums have frozen a performance given by the band in the studio onto a goods. That goods has been transported through a supply chain, or over a network. And now when I listen to it, I am unfreezing the performance, at a time and place different to when it was frozen. The goods has been used as a distribution mechanism for the service.

Let’s take a more abstract example of this freezing/unfreezing view – that of bottled water.

Bottled water

I’m quite a thirsty chap. And if I want a glass of water I generally have three choices. First I could go to my tap and pour a glass of water from there. Second, I could drink from a bottle of water I have bought from a shop. And thirdly, I could go to a water source and grab a drink from there (these wells still exist in Stockholm, and when in the northern mountains there’s nothing better than water straight out of a glacier-fed stream!)

Getting the water myself uses very little goods – in the most basic case I use my hands to cup the water. But the other two examples are clear cases of distribution – even if you likely think of one as a service and the other as a goods.

When I turn my tap on, I access the water company’s service. They’ve cleaned the water and piped it to my apartment. That, I think we’d all agree is a service.

Alternatively, when I open the bottle of water I’m drinking water that a company has cleansed and shipped to my hands. Is this a goods or a service? I’d argue it is a service that has been frozen, distributed, and unfrozen when I open the bottle.

But it is not just freezing a performance; goods freeze the application of skills for distribution.

Goods: freezing application of skills to be used elsewhere

The above is a useful prop when we can see the service as a performance. But what about an axe, or the growing trend of weekly meal bags? These are not performances. How are they distributing service?

Well, in exactly the same way. But it is perhaps useful to remember that service is the integration of resources. The above examples had limited need for actors to integrate resources. In these new examples, there’s more integration required. [There’s some concept of full/partial service here, I believe]. So we have to think less about freezing a performance. And more about freezing (capturing) skills.

Cutting trees with an axe

When you want to cut down a tree, you really need an axe. And that axe is made by an entity that knows what is needed to cut down a tree. What type of blade, it’s strength, the angles of the cutting edge etc.

In the old days, you’d have a blacksmith with you pouring his skills into the axe. To which you’d integrate your forestry skills and chop down the trees. You’d also co-create value by talking to the blacksmith, giving feedback and getting improvements with each tree you chop down.

Nowadays we don’t have a blacksmith on call and at site. Instead, some organisation in a different place and time has captured the application of their skills and knowledge in a mass produced axe. That has gone through the supply chain and is now in your hands.

So the service (application of skills/resources) has been frozen into the aze. You unfreeze that when integrating them with your own forestry skills. The co-creation of value is still there – the axe maker will have many value propositions (types of axes), and you’ll spend some time relationally discussing your needs. And you’ll surely feedback if it didn’t work, or if you’re trying something different and need changes.

Menu/food bags

All the rage recently is buying a bag of food items that come with some menus for you to cook a few nights meals from. Here we freeze the skills and resources of a chef that has created the menus and chosen the items. But we need to integrate our cooking skills at a later time and different place to create the meals.

Again, the goods (ingredients and menus) have become a distribution mechanism for service.

One other observation pops out of this discussion. And that is that rather than a goods-services continuum, we have a service-service continuum. One that captures, in a sense, how much integration we as a beneficiary have to do.

Service-Service continuum

Let’s go back to our eating example. There are many solutions. Ranging from buying the ingredients and cooking ourself, through self-service buffets, sitting at a 5-star restaurant.

Based on the above description we can change our perspective of goods-service continuum to one of (self)-service-(full)-service continuum. Where goods are used to distribute some aspect of the service.

And, all of these service tease out that the beneficiary is trying to achieve something. Which brings us nicely to job to be done theory.

Job to be done theory

The insight that Christensen et al make in 2016’s “Competing Against Luck” is that beneficiaries (customers in their case) are hiring things in order to get a job done.

What is the customer hiring you to do?

Competing Against Luck

Where the job is

“Job” is shorthand for what an individual really seeks to accomplish in a given circumstance.

Christensen, Hall, Dillon, Duncan (2016), “Know your customer’s job to be done“

And that there is plenty of competition offering to get that job done. Some of which may not be obvious in the old marketing approach of customer segmentation. Reed Hastings’ noted that Netflix’s competition is not just other streaming services, they are competing with anything that helps you fill your time (including a bottle of wine!).

Now we can say that jobs-to-be-done have potential solutions along the service-service continuum. Which are all value propositions that vary in the amount of resource integration that the beneficiary needs to perform.

Wrapping up

So we can conclude that goods are distribution mechanisms for service.

We use them to freeze a service mid-performance – a band playing, water being processed to drink, for examples. And then unfreeze that performance – play the CD, drink the bottle of water – at another time/place.

Or we use them to capture the skills and knowledge of one or more actors so that that can be applied elsewhere. In this case, those skills are often complemented with the users own skills to give a complete service. A carpenter uses their carpentry skills together with the saw-makers skills, captured in a saw, to cut wood.