Distributing Services Through Physical and Electronic Channels

Chapter 5
Distributing Services
through Physical and
Electronic Channels
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4- 1
Distribution in a Services Context
Applying the Flow Model of
Distribution to Services
Distribution impacts the typical sales cycle in three ways:
1. Information and promotion flow
2. Negotiation flow
3. Product flow
Using Websites for Service Delivery
Information
Read brochure/FAQ; get schedules/
directions; check prices
Payment Consultation
Pay by bank card Conduct e-mail dialog
Direct debit Use expert systems
Billing Order-taking
Receive bill Core Make/confirm reservations
Make auction bid Submit applications
Check account status Order goods, check status
Exceptions Hospitality
Make special requests
Record preferences
Resolve problems
Safekeeping
Track package movements
Check repair status
Core: Use Web to deliver information-based core services
Determining Type of Contact: Options
for Service Delivery
Distribution Options for
Serving Customers
 Customers visit service site
 Service providers go to customers
 Service transaction is conducted remotely
Six Options for Service Delivery
(Table 4.1)
Availability of Service Outlets

Type of Interaction between Customer Single Site Multiple Sites
and Service Organization
Theatre Bus service

Customer goes to service organization
Barbershop Fast-food chain
House painting Mail delivery

Service organization comes to
customer Mobile car wash
Credit card Broadcast

Customer and service organization company network
transact remotely (mail or electronic
communications) Local TV station Telephone
company
Channel Preferences Vary
among Customers
 For complex and high-perceived risk services, people rely

on personal channels
 Individuals with greater confidence and knowledge about a

service/channel use impersonal and self-service channels
 Customers with social motives use personal channels
 Convenience is a key driver of channel choice
Delivering Services in Cyberspace
Service Delivery Innovations
Facilitated by Technology
 Technological Innovations
 Development of “smart” mobile telephones and PDAs as well as
Wi-Fi high-speed Internet technology that links users to Internet
from almost anywhere
 Voice-recognition technology
 Websites
 Smart cards
- Store detailed information about customer
- Act as electronic purse containing digital money
 Increase accessibility of services

 Deliver right information or interaction at right time
 Create and maintain up-to-date real-time information
e-Commerce: Move to Cyberspace (1)
 Internet facilitates 5 categories of “flow”

 Information
 Negotiation
 Service
 Transactions
 Promotion
 Electronic channels offer complement/alternative to
traditional physical channels
 Convenience (24-hour availability, save time, effort)
 Ease of obtaining information online and searching for
desired items
 Better prices than in many bricks-and-mortar stores
 Broad selection
e-Commerce: Move to Cyberspace (2)
 Recent Developments link Websites, customer management

(CRM) systems, and mobile telephony
 Integrating mobile devices into the service delivery

infrastructure can be used as means to:
 Access services
 Alert customers to opportunities/problems
 Update information in real time
 See “Online versus Bricks-and-Mortar” (SP 4.4)
Role of Intermediaries
Splitting Responsibilities For
Supplementary Service Elements (Fig 4.4)
As created by As enhanced As experienced

originating firm by distributor by customer
Core + = Core
Core product Supplementary Total experience

services and benefits
Challenges for original supplier

 Act as guardian of overall process
 Ensure that each element offered by intermediaries fits overall service concept
Franchising (1)
 Popular way to expand delivery of effective service

concept
 Franchising is a fast growth strategy, when
 Resources are limited
 Long-term commitment of store managers is crucial
 Local knowledge is important
 Fast growth is necessary to pre-empt competition
 Study shows significant attrition rate among franchisors in

the early years of a new franchise system
 One-third of all systems fail within first 4 years
 Three-fourths of all franchisors cease to exist after 12 years
Franchising (2)
 Disadvantages of franchising
 Some loss of control over delivery system and, thereby, over how
customers experience actual service
 Effective quality control is important yet difficult
 Conflict between franchisees may arise especially as they gain
experience
 Alternative: license another supplier to act on the original

supplier’s behalf to deliver core product, for example:
 Trucking companies
 Banks selling insurance products
The Challenge of Distribution in
Large Domestic Markets
The Challenge of Distribution In
Large Domestic Markets
 Marketing services (i.e., physical logistics) face challenges

due to:
 Distances involved (geographic areas)
 Existence of multiple time zones
 Multiculturalism (especially, immigrants and indigenous people)
 Differences in laws and tax rates
 Large U.S. companies counter this by:

 Targeting specific market segments
 Seeking out narrow market niches
 Serving multiple segments across a huge geographic area is

biggest marketing challenge
Distributing Services Internationally
How Service Processes Affect
International Market Entry
 People processing services require direct contact with

customers
 Possession processing involves services to customer’s
physical possessions
 Information-based services include mental processing
services and information processing services
Barriers to International
Trade in Services
 Passage of free-trade legislation is important facilitator of

transnational operations
 Despite efforts of WTO and GATT, operating in

international markets still difficult
Factors Favoring Adoption of
Transnational Strategies
 Transnational strategy involves integration of strategy

formulation and its implementation across all countries
 Market drivers of common customers across countries and

corporate standardization leading to supplier consolidation
 Competition
 Technology
 Cost
 Government policies
Internationalization Approaches
 Export information-based services
 Use third parties to market/deliver service concept
 Control service enterprise abroad
Impact of Globalization Drivers on
Various Service Categories (1) (Table 4.2)
Globalizatio People Possession Information

n drivers processing processing based
Competition Simultaneity of Technology drives Highly vulnerable
production and globalization of to global
consumption limits competitors with dominance by
leverage of foreign technical edge competitors with
competitive monopoly or
advantage, but competitive
management advantage in
systems can be information
globalized
Market People differ Level of economic Demand for many
economically and development services is derived
culturally, so needs impacts demand to a significant
for service and for services to degree from
ability to pay may individually owned economic and
vary goods educational levels
Impact of Globalization Drivers on
Various Service Categories (2) (Table 4.2)
Globalization People processing Possession Information
Drivers processing based
Technology Use of IT for delivery of Need for technology- Ability to deliver
supplementary services based service delivery core services
may be a function of systems depends on through remote
ownership and possessions requiring terminals may be a
familiarity with service and the cost function of
technology trade-offs in labour investment in
substitution computerization,
etc.
Cost Variable labour rates Variable labour rates Major cost elements
may impact on pricing in may favor low-cost can be centralized
labour-sensitive services locations and minor cost
elements localized
Government Social policies (e.g., Policies may Policies may impact
health) vary widely and decrease/increase demand and supply
may affect labour cost, cost and encourage/ and distort pricing
etc. discourage certain
activities

Distributing Services Through Physical and Electronic Channels

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Chapter 5

Distribution impacts the typical sales cycle in three ways:

1. Information and promotion flow

 Customers visit service site

 Service providers go to customers

 Service transaction is conducted remotely

Availability of Service Outlets

Theatre Bus service

House painting Mail delivery

Credit card Broadcast

 For complex and high-perceived risk services, people rely

 Individuals with greater confidence and knowledge about a

 Customers with social motives use personal channels

 Convenience is a key driver of channel choice

 Increase accessibility of services

 Internet facilitates 5 categories of “flow”

 Recent Developments link Websites, customer management

 Integrating mobile devices into the service delivery

 See “Online versus Bricks-and-Mortar” (SP 4.4)

As created by As enhanced As experienced

Core product Supplementary Total experience

Challenges for original supplier

 Popular way to expand delivery of effective service

 Study shows significant attrition rate among franchisors in

 Alternative: license another supplier to act on the original

 Marketing services (i.e., physical logistics) face challenges

 Large U.S. companies counter this by:

 Serving multiple segments across a huge geographic area is

 People processing services require direct contact with

 Passage of free-trade legislation is important facilitator of

 Despite efforts of WTO and GATT, operating in

 Transnational strategy involves integration of strategy

 Market drivers of common customers across countries and

 Export information-based services

 Use third parties to market/deliver service concept

 Control service enterprise abroad

Globalizatio People Possession Information

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