Distributing Services

Distinguishing between Distribution of

Supplementary and Core Services
Distribution relates to both core services and supplementary services
• Core services for people processing and possession processing services require physical
locations

• Core services for mental stimulus processing and information processing can be
distributed electronically
• Supplementary services can be tangible or intangible in nature; latter can be distributed
widely and cost-effectively via nonphysical channels

• Telephone
• Internet
Distribution Options for Serving Customers
• Customers visit service site
• Convenience of service factory locations and operational schedules important when
customer has to be physically present

• Service providers go to customers

• Unavoidable when object of service is immovable
• More expensive and time-consuming for service provider

• Service transaction is conducted remotely

• Achieved with help of logistics and telecommunications
How Should A Service Be Distributed?
Six options for service delivery
The Service Transaction Is Conducted Remotely

• A customer may never see the service facilities or meet service personnel face-to-face

when dealing with a service firm through remote transactions.

• Logistics providers offer service firms integrated, reliable and cost-effective solutions

• Examples:

• Repair services

• Information-based product

• Web and app-delivered services

Factors That Attract Customers To Use Online
Services
Convenience.

24/7 service
with prompt Ease of search
delivery.

Potential for A broader

better prices. selection.
Channel Preferences Among Customers

• Recent research has identified the following key drivers for

channel preferences among customers:
• Convenience is a key driver of channel choice for the majority of consumers
• For complex and perceived high-risk services, people tend to rely on personal
channels
• Individuals with higher confidence and knowledge about a service and/or the
channel are more likely to use impersonal and self-service channels
• Customers who look for the functional aspects of a transaction prefer more
convenience.
Where Should A Service Facility Be Located? (1
of 3)

Strategic Location Considerations

• Understanding customer needs and expectations,
competitive activity, and the nature of the service
operation.
• Firms should make it easy for people to access frequently
purchased services, especially those that face active
competition
• Markets can be segmented by accessibility preferences
and price sensitivity.
Where Should A Service Facility Be Located? (2
of 3)
Tactical Location Considerations
Key Factors:
• Population size and characteristics.
• Pedestrian and vehicular traffic and its characteristics.
• Convenience of access for customers.
• Competitors in this area.
• Nature of nearby businesses and stores.
• Availability of labor.
• Availability of site locations, rental costs, and contractual conditions and
regulations.
Where Should A Service Facility Be Located? (3
of 3)
• Locational Constraints
• The need for economies of scale and operational requirements may restrict
choice of locations.
• Innovative Location Strategies
– Innovative distribution strategies can be at the core of powerful new service
models.
– Mini Stores - An interesting innovation among multi-site service businesses involves creating
numerous small service factories to maximize geographic coverage.

– Locating in Multi-purpose Facilities - The most obvious locations for consumer services are
close to where customers live or work
Places of Service Delivery
• Cost, productivity, and access to labor are key determinants to
locating a service facility
• Locational constraints
• Operational requirements
- Airports

• Geographic factors
- Ski resorts

• Need for economies of scale

- Hospitals
Places of Service Delivery
• Ministores
• Creating many small service factories to maximize geographic coverage
- Automated kiosks

• Separating front and back stages of operation

- Taco Bell, McDonald’s Drive way.

• Locating in multipurpose facilities

• Proximity to where customers live or work
- Service stations
When Should Service Be Delivered?
• 24/7 service — 24 hours a day, 7 days a week, around the world.

• Factors determining the opening hours –

• customer needs and wants and the economics of opening hours

• Extended Operating Hours –

• Pressure from consumers,
• Changes in legislation,
• Economic incentives to improve asset utilization,
• Availability of employees to work during "unsocial" hours, Automated self-service facilities
Time of Service Delivery
• Traditionally, schedules were restricted
• Service availability limited to daytime, 40 to 50 hours a week
• Sunday historically considered as a rest day in Christian tradition, Saturday in
Jewish tradition, and Friday in Muslim tradition
• Today
• For flexible, responsive service operations:
- 24/7 service—24 hours a day, 7 days a week, around the world
• Some organizations still avoid 7-day operations, for example:
- Atlanta-based Chick-fil-A
“Being closed on Sunday is part of our value proposition”
The Role Of Intermediaries
• Many service organizations find it cost-effective to outsource certain
aspects of distribution.
• This delegation predominantly concerns supplementary service elements.
• Analysis of benefits and costs of alternative distribution channels.
• Many service firms have achieved brand equity by migrating their
customers and sales to lower cost channels to remove intermediaries, a
process also called disintermediation.
 Analysis Of Benefits And Costs Of Alternative
Distribution Channels

Challenges for original supplier

 Act as guardian of overall process
 Ensure that each element offered by intermediaries fits overall service concept