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Delivering Service Through

Intermediaries and Electronic Channels

Service Provider Participants

• service principal (originator)

• creates the service concept
(like a manufacturer)

• service deliverer (intermediary)

• entity that interacts with the customer in the execution of the service
(like a distributor/wholesaler)
Services Intermediaries

• Franchisees
• service outlets licensed by a principal to deliver a unique service concept it has
• e.g., McDonald’s, Burger King, Holiday Inn, Dun & Bradstreet, IDP Education -
• Agents and Brokers
• representatives who distribute and sell the services of one or more service
• e.g., travel agents, independent insurance agents
• Electronic Channels
• all forms of service provision through electronic means
• e.g., ATMs, travel agent softwares (Galileo, Dolphin),,, university video courses, TaxCut software
Direct Delivery

• Most of the Banks

• Benefits
• Complete control over the outlets
• Consistency in quality
• Control over hiring, firing and motivating employees
• Customer relationship
• Disadvantages
• Company bears all financial risk
• Lack of knowledge of local market
• Large capital required for expansion
Benefits and Challenges for
Franchisers of Service

• Benefits: • Challenges:
• Leveraged business format for • Difficulty in maintaining and
greater expansion and motivating franchisees
revenues • Disputes and conflict
• Consistency in outlets • Inconsistent quality
• Knowledge of local markets • Control of customer
• Shared financial risk and more relationship by intermediary
working capital
Benefits and Challenges for
Franchisees of Service

• Benefits: • Challenges:
• An established business • Encroachment
format • Disappointing profits and
• National or regional brand revenues
• Lack of perceived control over
• Minimized risk of starting a operations
• High fees

Emirates Fast
Foods Co
Benefits and Challenges in Distributing Services through
Agents and Brokers
• Benefits:
• Challenges:
• Reduced selling and
distribution costs • Loss of control over pricing
• Intermediary’s possession • Representation of multiple
of special skills and service principals
• Wide representation
• Knowledge of local markets
• Customer choice
Benefits and Challenges in Electronic Distribution of

• Benefits: • Challenges:
• Consistent delivery for • Price competition
standardized services • Security concerns
• Low cost • Competition from widening
• Customer convenience geographies
• Wide distribution
• Customer choice and ability
to customize
• Quick customer feedback
Common Issues
Involving Intermediaries

• difficulty controlling quality and consistency across outlets

• tension between empowerment and control

• channel ambiguity
Strategies for Effective Service Delivery
Through Intermediaries

• Control Strategies: • Empowerment Strategies:

• Measurement • Help the intermediary
• Review develop customer-oriented
service processes
• Provide needed support
• Partnering Strategies: • Develop intermediaries to
• Alignment of goals deliver service quality
• Consultation and cooperation • Change to a cooperative
management structure
Support System

• Being a McDonald’s Owner/Operator offers you many advantages – from the

training, and the support of a solid organization, to the opportunity to own a
thriving and successful business. Essentially, here’s what you receive when you
become a McDonald’s Owner/Operator:
• Own your own business and receive the rewards that come from being responsible for
your own success. With McDonald’s unique approach to training and support, you are in
business for yourself, but not by yourself.
• Use of the trademarks and operating system of the number one brand in the world.
• The tools to help you in your business: local and national support in the areas of
operations, training, advertising, marketing, human resources, real estate, construction,
purchasing, and equipment purchasing and maintenance.
Managing Demand and Capacity
Variations in Demand Relative to Capacity
Understanding Capacity Constraints
and Demand Patterns
Capacity Constraints Demand Patterns
• Time, labor, equipment, and • Charting demand patterns
facilities • Predictable cycles
• Optimal versus maximum use • Random demand fluctuations
of capacity
• Demand patterns by market
Constraints on Capacity
Nature of the Constraint Type of Service
Time Legal
Labor Law firm
Accounting firm
Consulting firm
Health clinic
Equipment Delivery services
Network services
Health club
Facilities Hotels
Strategies for Shifting Demand to Match Capacity

Demand Too Low

Demand Too High • Use sales and advertising to increase
business from current market segments.
• Use signage to communicate busy days
and times. • Modify the service offering to appeal to
• Offer incentives to customers for usage new market segments.
during nonpeak times.
• Offer discounts or price reductions.
• Take care of loyal or “regular”
customers first. • Modify hours of operation.
• Advertise peak usage times and benefits • Bring the service to the customer.
of nonpeak use.
• Charge full price for the service—no
Strategies for Adjusting Capacity to Match Demand
Demand Too High Demand Too Low
• Stretch time, labor, facilities and • Perform maintenance,
equipment. renovations.
• Cross-train employees. • Schedule vacations.
• Hire part-time employees. • Schedule employee training.
• Lay off employees.
• Request overtime work from
• Rent or share facilities.
• Rent or share equipment.
• Subcontract or outsource activities.
Waiting Line Strategies – when demand &
capacity cannot be matched
• Employ operational logic
• modify operations or adjust queuing system

• Establish a reservation process

• Differentiate waiting customers

• importance of the customer
• urgency of the job
• payment of a premium price
• duration of the service transaction

• Make waiting fun, or at least tolerable

Waiting Line Configurations

Source: J. A. Fitzsimmons and M. J. Fitzsimmons, Service Management, 4th ed. (New York: Irwin/McGraw-Hill, 2004), chap. 11, p. 296.
Issues to Consider in Making Waiting
More Tolerable

• unoccupied time feels longer than occupied time

• preprocess waits feel longer than in-process waits
• anxiety makes waits seem longer
• uncertain waits seem longer than known, finite waits
• unexplained waits seem longer than explained waits
• unfair waits feel longer than equitable waits
• the more valuable the service, the longer the customer will wait
• solo waits feel longer than group waits
Integrated Services Marketing
Communications and the Services
Marketing Triangle

Internal Marketing External Marketing

Vertical communications Communication
Horizontal communications Advertising
Sales promotion
Public relations
Direct marketing

Employees Interactive Marketing Customers

Personal selling
Customer service center
Service encounters
Approaches for Integrating Services Marketing

Manage Delivery is Improve
service greater than customer
promises or equal to education

Approaches for Managing
Service Promises


Create Coordinate Delivery is
effective external greater than
services communication or equal to
Approaches for Managing
Customer Expectations
Make realistic promises
Offer choices

Create tiered-value

Communicate criteria for

service effectiveness

Offer service

Delivery is
greater than
or equal to
Approaches for Improving Customer Education

Goal: Prepare Confirm Clarify Teach customers

Delivery is customers performance expectations to avoid peak
greater than for the to standards after the sale demand periods
or equal to service and seek slow
promises process periods
Approaches for Managing Internal Marketing
Communications Goal:
Delivery is
greater than
or equal to

effective vertical

effective horizontal

Align back-office
personnel with
external customers

• The Customer Gap
Consumer Behavior in Services
Customer Expectations of Service
Customer Perceptions of Service
• Gap 1 – Not Knowing What Customers Expect (The Knowledge Gap)
Building Customer Relationships
Service Recovery
• Gap 2 – Not Having the Right Service Quality Designs and Standards (The Service Design and Standards Gap)
Service Development and Design
Customer-Defined Service Standards
Physical Evidence and the Servicescape
• Gap 3 – Not Delivering to Service Standards (The Service Performance Gap)
Employees’ Roles in Service Delivery
Customers’ Roles in Service Delivery
Delivering Service through Intermediaries and Electronic Channels
Managing Demand and Capacity
• Gap 4 – Not Matching Performance to Promises (The Communication Gap)
Integrated Services Marketing Communications