Customer-Dominant Logic

The customer-dominant logic is a new marketing logic that pursues a stronger and more consistent customer perspective and places the customer at the center of all corporate activities. In the customer-dominant lLogic, the provider must understand itself as a customer partner, whose business success is based on the identification of its own role in the customer ecosystem. The provider has to contribute to the fulfillment of customer goals through suitable offers. According to the customer-dominant logic, a change of perspective is therefore necessary, which does not focus on the integration of the customer at the provider, but on the integration of the provider at the customer. The chapter illustrates that the customer-Dominant Logic is to be distinguished and delimited from the service- and goods-dominant logic in terms of the source of value creation, the actors and logics of value creation, the characteristics of value creation, and the result of value creation.

The customer-dominant logic establishes an innovative concept of customer-oriented business management—the so-called customer-dominant management. This is understood as a management process of analysis, planning, implementation, and control. It is a valid approach for all types of companies and industries to consistently focus on the customer. Customer-dominant management aims to develop a deep understanding of customer logic—with the goal of contributing to the realization of the customer’s and the company’s objectives through the provider-initiated establishment of a partnership in the customer’s ecosystem with value-creating offers for provider integration. The chapter explains the customer-dominant decision orientation, the penetration of customer logic, thinking in the customer ecosystem, and presence generation as central characteristics and overarching guiding principles of a customer-dominant business management.

The guiding principles of relationship marketing and its differentiated economic and behavioral explanatory approaches underpin the customer-dominant logic. Through the customer-dominant logic, the basic ideas of relationship marketing are to be considered and applied to the question of value-creating customer processes. Neoclassical approaches such as utility and profit theory provide a foundation for the customer-dominant logic of the provider and the logic of the customer through the concept of customer value. Neo-institutional approaches such as information economics and the principal-agent theory underpin customer-dominant measures to reduce information asymmetries between providers and customers. Social psychological approaches such as interaction approaches, exchange theory, and the theory of social penetration serve the customer-dominant logic in explaining the development of long-term customer relationships. The individual theoretical approaches are interpreted in relation to the customer-dominant logic.

The customer-dominant logic is defined by the core elements of the provider’s customer-dominant logic, the customer’s logic, customer ecosystem, customer’s life spheres and life phases, customer value generation, and integration offers. The core elements show a holistic understanding of value creation relationships between the provider, customers, and actors in the customer ecosystem. The conception of the core elements allows a consideration of the customer-dominant logic with regard to individual as well as collective purchasing decisions on business-to-consumer and business-to-business markets. Crucial for the success of customer-dominant management is a holistic understanding of the customer, his individual logic, his ecosystem, his life spheres and life phases, as well as his value generation. This understanding is presented in the chapter and forms the basis for the systematic activities of customer-dominant management and the creation of integration offers for the customer.

Customer-dominant management follows a decision-oriented approach that underpins the phases of marketing management. Due to the value creation thinking of the customer-dominant logic, a differentiated perspective is in the foreground, which fundamentally affects the phases of marketing management. Customer-dominant management considers the decision-making processes of the provider and the customer equally. While the decision-making processes at the customer involve purchasing decisions that arise against the background of individual logic, the decision-making processes of the provider relate to the provider’s marketing decisions depending on the customer-side decision-making processes. The chapter makes it clear that this includes customer-dominant market research and segmentation as an information basis, customer-dominant marketing strategies for planning, customer-dominant marketing instruments for implementation, and customer-dominant marketing controlling for testing provider integration.

Customer-dominant market research is the systematic and continuous exploration, processing, and interpretation of relevant information about the individual customer, their logic, ecosystem, life sphere, and life phase, to substantiate strategic and operational marketing decisions for provider integration. Customer-dominant market research follows the basic understanding of an ethnographic research approach and is thus characterized by a qualitative orientation and combination of observation and survey forms. The chapter explains the application of a multi-method approach to obtain (un-)structured data and to design the research process evolutionarily by depending on the knowledge gained about the customer logic, the customer ecosystem, and the life sphere and life phase of the customer, a step-by-step and flexible combination of data and research methods is carried out.

A customer-dominant market segmentation is an important basis for developing strategies and measures for market and customer management. The customer-dominant market segmentation aims to divide customers into internally homogeneous and mutually heterogeneous customer segments based on their customer logic. This involves a step-by-step and multidimensional market segmentation according to the customer's objectives and sphere of life, the processes of his customer logic, and his ecosystem. Based on this, an optimal design of the provider integration in the customer ecosystem is carried out with regard to type, intensity, duration, and timing. The chapter makes it clear that with the alignment of segmentation towards customer logic and the customer ecosystem, the data generated by market research can be condensed and interpreted using multivariate analysis methods or data mining techniques.

The marketing strategies in customer-dominant logic form the basis for measures for market and customer processing. Fundamental to the design of marketing strategies are the integration cycle concept and the customer-dominant success chain. The integration cycle distinguishes between an initial integration, a reintegration or deepening integration of the provider in the customer ecosystem and justifies a customer-dominant view of business relationships. Based on this, in this chapter, the success chain of the customer-dominant logic forms the strategic reference framework for customer-dominant management and substantiates, among other things, measures for market and business field demarcation. The chapter elaborates in detail that attractive integration offers must be created along the success chain, which generate a positive nominal presence in the customer ecosystem. Based on attractive integration offers, a permanent and significant factual presence in the customer ecosystem must be established.

The role of marketing instruments is to implement customer-dominant marketing strategies. For this purpose, a variety of marketing tools are available. It is crucial to understand the core offering as the original value contribution to the customer’s goal achievement and to align the integrated offer according to the customer’s principles and procedures (e.g., quality consciousness) and according to offers or actors in the customer ecosystem. Price differentiation should consistently be carried out according to the customer’s logic, and price bundling strategies should systematically be considered in relation to actors in the customer ecosystem. A multichannel distribution system tailored to the customer’s logic should be implemented using the customer-dominant journey. In addition to the communication relationships with the focal provider and its employees, explicit communication relationships of the customer with actors in the customer ecosystem should also be considered. The potential uses of marketing tools in the sense of the customer-dominant logic are detailed in this chapter.

Customer-dominant marketing controlling ensures the effectiveness and efficiency of customer-dominant management through its information, planning, coordination, and control functions. It is necessary to implement an integrated control along the chain links of the customer-dominant success chain and to consistently implement thinking in the customer ecosystem by involving actors in the customer ecosystem in one’s own controlling activities. This requires continuous control of the customer-dominant orientation of the provider, the attractiveness of the integration offers, the actual integration in the customer ecosystem, and the success of the provider integration through the use of customer performance indicators. The approaches and methods of pre-economic feature-, event-, and problem-oriented control as well as single- and multi-period economic procedures are presented in this chapter, taking into account a content and methodological modification to the provider integration.

Due to its recent history, the customer-dominant logic still has to establish itself further in practice. At present, a very scientific and conceptual orientation of the customer-dominant logic dominates. For a consistent initiation of customer-dominant management, numerous challenges will have to be overcome in the future, resulting from conceptual, analysis and control-related, strategy-related, and implementation-related problem areas (e.g., discrepancy between the customer logic perceived by the provider and the provider’s orientation towards the customer logic). In connection with science, there are also methodological and empirical problem layers for the customer-dominant logic, from which challenges arise (e.g., provision of methods for analyzing the customer, his logic, and his ecosystem). The challenges are addressed in this chapter.

The relevance of the scientific discussion on customer-dominant logic is undisputed. It forms the basis for understanding customer-dominant logic and distinguishing it from marketing logics (goods-dominant logic, service-dominant logic) and marketing concepts (customer orientation, customer centricity). Therefore, this chapter provides an overview of selected literature on customer-dominant logic and the marketing concepts of customer orientation and customer centricity. Based on two literature analyses, a detailed description of the scientific discussion is given, and tips are formulated to identify further relevant literature on these topics.