ĐẠI HỌC FPT CẦN THƠ

Session 9:
Chapter 5: Distributing Service Through
Physical and Electronic Channels
 Content

 Service distribution can take place

through physical and non-physical
channels
 Some firms can use electronic
channels to deliver all (or at least
some) of their service elements
 Information-based services can be
delivered almost instantaneously
electronically
 Delivery Decisions: Where, When,
How
 Time is of great importance as
customers are physically present
 Convenience of place and time
become important determinants of
The 7Ps model was originally devised by E. Jerome
effective service delivery McCarthy, published in 1960 in his book Basic Marketing 2
 Content

1. What is being distributed?

2. How should a service be distributed?

3. Where should a service facility be located?

4. When should service be delivered?

5. The role of intermediaries?

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Content

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 WHAT IS BEING DISTRIBUTED?

Distribution in service embraces three interrelated flows that

partially address the question of what is being distributed:
1. Information and promotion flow: This refers to the
distribution of information and promotion materials related to
the service offer. The objective is to get the customer
interested in buying the service.
2. Negotiation flow: This involves reaching an agreement
on the service features and configuration as well as the terms
of the offer so that a purchase contract can be closed. Often,
the objective is to sell the right to use a service (e.g., sell a
reservation or a ticket).

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 WHAT IS BEING DISTRIBUTED?

Distribution in service embraces three interrelated flows that

partially address the question of what is being distributed:
3. Product flow: Many services, especially those involving
people processing or possession processing, require physical
facilities for delivery. Here, distribution strategy requires the
development of a network of local sites. For information
processing services such as internet banking and distance
learning, the product flow can be via electronic channels,
employing one or more centralized sites.

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 HOW SHOULD A SERVICE BE DISTRIBUTED?

1. Customers visit the service site

2. Service providers go to their customers
3. The service transaction is conducted remotely
Important factors that attract customers to online services are:
 Convenience
 Ease of search (obtaining information and searching for
desired items or services)
 A broader selection
 Potential for better prices
 24/7 service with prompt delivery

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HOW SHOULD A SERVICE BE DISTRIBUTED?

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 HOW SHOULD A SERVICE BE DISTRIBUTED?

1. Customers visit the service site

 Convenience of service factory locations and operational schedules
important when customer has to be physically present

2. Service providers go to their customers

 Unavoidable when object of service is immovable
 Needed for remote areas
 Greater likelihood of visiting corporate customers than
individuals
3. The service transaction is conducted remotely
 Achieved with help of logistics and telecommunications

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 HOW SHOULD A SERVICE BE DISTRIBUTED?

1. Customers visit the service site

2. Service providers go to their customers
3. The service transaction is conducted remotely
4. Channel Preferences Vary among Customers:
 For services that are complex and have a high perceived
risk, people tend to rely on personal channels.
 Individuals with greater confidence in and knowledge about
a service and/or the channel are more likely to use
impersonal and self-service channels

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 HOW SHOULD A SERVICE BE DISTRIBUTED?

1. Customers visit the service site

2. Service providers go to their customers
3. The service transaction is conducted remotely
4. Channel Preferences Vary among Customers:
 Customers who look for the functional aspects of a
transaction prefer more convenience. This often means the
use of impersonal and self-service channels.
 Convenience is a key driver of channel choice for the
majority of consumers (convenient times, places and easy
access to supplementary services, especially information,
reservations, and problem solving,…)
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 HOW SHOULD A SERVICE BE DISTRIBUTED?

1. Customers visit the service site

2. Service providers go to their customers
3. The service transaction is conducted remotely
4. Channel preferences vary among customers
5. Channel Integration Is Key
Channel integration is essential for the successful delivery of a
service through multiple channels. Consumers are now using
smart devices as well as traditional channels (e.g., ATMs,
branches, and call centers).

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 WHERE SHOULD A SERVICE FACILITY BE LOCATED?

 Customer needs and expectations,

1. Strategic
Location  Competitive activity,
Considerations  The nature of the service operation

2. Tactical  Population size and characteristics (i.e., to

assess density and number of target
Location
customers that could be served with this site)
Considerations
 Pedestrian and vehicular traffic and its
characteristics (i.e., to assess number of
3. Innovative target customers passing a site)
Location  Convenience of access for customers (e.g.,
Strategies public transportation, availability of parking)

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 WHERE SHOULD A SERVICE FACILITY BE LOCATED?

1. Strategic Location
Considerations
 Competitors in this area
 Nature of nearby businesses and stores
2. Tactical
Location  Availability of labor
Considerations  Availability of site locations, rental costs
and contractual conditions (e.g., length of
lease, legal restrictions), and regulations
(e.g., on zoning and opening hours)
3. Innovative
Location
Strategies

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 WHERE SHOULD A SERVICE FACILITY BE LOCATED?

1. Strategic  Ministores. An interesting innovation among

Location multi-site service businesses involves creating
numerous small service factories to maximize
Considerations geographic coverage. Here are some examples:
 Automated kiosks offer many of the functions of
2. Tactical a bank branch in a self-service machine that
Location can be located within stores, hospitals, colleges,
airports, and office buildings.
Considerations
 Another approach involves separating the front
and back stages of the operation.

3. Innovative  Increasingly, firms offering one type of service

business are purchasing space from another
Location provider in a complementary field.
Strategies

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 WHERE SHOULD A SERVICE FACILITY BE LOCATED?

1. Strategic
Location
Considerations

2. Tactical
Location  Locating in Multi-purpose Facilities
Considerations The most obvious locations for consumer services
are close to where customers live or work. Modern
buildings are often designed to be multi-purpose,
3. Innovative featuring not only office or production space but
also such services as a bank (or at least an ATM),
Location a restaurant, a hair salon, several stores, and
Strategies maybe a health club

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 WHEN SHOULD SERVICE BE DELIVERED?

Key factors determining the opening hours of a

service facility are:

(1) Customer needs and wants;

(2) The economics of opening hours.

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 THE ROLE OF INTERMEDIARIES

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

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THE ROLE OF INTERMEDIARIES

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 THE ROLE OF INTERMEDIARIES

Franchising
Franchising is one of the most commonly used distribution strategies in services

Success factors for franchisors include?

 The ability to achieve a larger size with a more recognizable
brand name
 Offering franchisees fewer supporting services but longer-
term contracts
 Having lower overhead per outlet
 Providing accurate and realistic information about expected
characteristics of franchise operations and the support
given
 Building a cooperative rather than a controlling relationship

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 THE ROLE OF INTERMEDIARIES

Franchising
The top 10 franchises in the USA in 2015 and their start-up costs:

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 THE ROLE OF INTERMEDIARIES

Other Intermediaries
- Trucking companies
- Contractual

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 DISTRIBUTING SERVICES INTERNATIONALLY

Factors favoring adoption of transnational strategies

- Market Drivers.
- Competition Drivers
- Technology Drivers
- Cost Drivers
- Government Drivers.
Barriers to international trade in services
- The passage of free trade legislation in recent years has
been an important facilitator of transnational operations:
NAFTA, EU
- The efforts of the WTO and its predecessor General
Agreement on Trade and Tariffs (GATT).

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 DISTRIBUTING SERVICES INTERNATIONALLY

How to enter international markets

- How a firm can protect its intellectual property (IP) and
control its key sources of value creation
- Whether the level of desired interaction with the customer is
high or low

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