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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 1
Chapter 5:
Distributing Services Through PhysicalAnd Electronic Channels
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 2
Overview Of Chapter 5
Distribution in a Services ContextOptions f or Service Delivery
Place and Time Decisions
Delivering Services in Cyberspace
The R ole o f Intermediaries
The C hallenge o f Distribution in Large Domestic Markets
Distributing Services Internationally
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Services Marketing
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Distribution in a ServicesContext
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age %
Distribution in a Services Context
In a services context, weoften don’t move physicalproducts
Experiences, performances,and solutions a re n ot beingphysically s hipped andstored
More an d more informationaltransactions a re c onductedthrough electronic a nd notphysical channels
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age !
Applying the Flow Model ofDistribution to Services
The three interrelated elements of distribution are:
Information and promotion owTo get customer interested in buying the s ervice
Negotiation owTo sell the right to use a service
Product owTo develop a network of local sites
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age
Distinguishing between Distributionof Supplementary and CoreServices
Most core services requirephysical locations
Many supplementaryservices are informational;can be distributed widelyand cost-effectively viaother means
Telephone
Internet
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 7
Information and Physical Processesof Augmented Service P roducts
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age '
Using Websites for Service Delivery
Order-TakingMake/conrm reservationsSubmit applicationsOrder goods, check st atus
SafekeepingTrack package movementsCheck r epair status
CORE: Use W eb to deliver information-based core se rvices
Core
ConsultationConduct e-mail dialogUse exp ert systems
HospitalityRecord preferences
BillingReceive billMake auction bid
Check acco unt status
ExceptionsMake sp ecial requests
Resolve problems
PaymentPay by ba nk card
Direct debit
InformationRead brochure/FAQ; get schedules/directions; check p rices
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age (
Options for Service Delivery
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 10
Distribution Options for ServingCustomers
Customers visit service s iteConvenience of service factory locations and operationalschedules important when customer has t o be physically present
Service providers g o to customersUnavoidable when object of service is immovable
More expensive and time-consuming for service provider
Service transaction is c onducted remotelyAchieved with help of logistics and telecommunications
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 11
Six Options F or Service Delivery
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Services Marketing
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Channel Preferences Vary AmongCustomers
For complex and high-perceived risk services, people tendto rely on personal channels
Individuals w ith greater condence and knowledge a bout aservice/channel tend to use impersonal and self-servicechannels
Customers w ith social motives tend to use personalchannels
Convenience is a key driver of channel choice
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 1$
Place and Time Decisions
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Services Marketing
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Place Decisions of Service Delivery
Cost, productivity, and access to labor are key d eterminantsto locating a service facility
Location constraints
Operational requirement (e.g., airports)Geographic factor (e.g., ski resorts)
Need for economies o f scale (e.g., hospitals)
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 1!
Place Decisions of Service Delivery
MinistoresCreating many s mall service factories to maximize g eographiccoverage
Separating front and back stages of operation
Purchasing space from another provider in complementary eld
Locating in Multipurpose FacilitiesProximity to where customers live or work
-Service Stations-Service Perspectives 5.2
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 1
Time of Service Delivery
Traditionally, scheduleswere restricted
Service availability limited todaytime, 40-50 hours a w eek
TodayFor exible, responsiveservice operations: 24/7service, 24 hours a day, 7days a week, all around theworld
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 17
Delivering Services inCyberspace
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Services Marketing
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Service Delivery InnovationsFacilitated by Technology
Technological InnovationsDevelopment of “smart” mobile telephones an d PDAs, andpresence o f Wi-Fi
Voice-recognition technology
WebsitesSmart cards
- Store d etailed information about customer- Act as electronic p urse c ontaining digital money
Electronic channels can be offered together with physicalchannels, or replace physical channels
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 1(
E-Commerce: Move to Cyberspace
What are the factors that encourage you to use v irtualstores?
Convenience
Ease of search
Broader selection
Potential for better prices
24-hour service w ith prompt delivery
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 20
E-Commerce: Move to Cyberspace
Recent developments: websites, customer management(CRM) systems, and mobile telephony
Integrating mobile devices into the service deliveryinfrastructure c an be u sed as means t o:
Access s ervices
Alert customers t o opportunities/problems
Update information in real time
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 21
Role of Intermediaries
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 22
Splitting Responsibilitiesfor Service Delivery
Challenges f or original supplier ) Act as guardian of overall process) Ensure t hat each element offered by intermediaries ts o verall service concept
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 2$
Franchising
Franchisor provides t raining, equipment, and supportmarketing activities.
Franchisees invest time a nd nance, and follow copy andmedia guidelines of franchisor.
Advantages:Expand delivery of effective service concept without a high level ofmonetary investment
Franchisees ar e m otivated to ensure g ood customer service a ndhigh-quality service operations
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Services Marketing
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Franchising
Disadvantages of franchisingLoss o f control over delivery sys tem and how customersexperience a ctual service
Effective quality control is difficult
Conict between franchisees may arise especially a s t hey gainexperience
Alternative: license another supplier to act on the originalsupplier’s behalf to deliver core product
Trucking companies
Banks s elling insurance products
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Services Marketing
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Challenge of Distribution inLarge Domestic Markets
ThChllfDitibtii
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 2
The Challenge of Distribution inLarge Domestic Markets
Distributing services (i.e., physical logistics) faceschallenges due to:
Distances i nvolved
Multiple time zones
MulticulturalismDifferences in laws a nd tax rates
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Services Marketing
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Distributing ServicesInternationally
FactorsF avoringAdoptionof
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Services Marketing
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Factors F avoring Adoption ofTransnational Strategies
Transnational strategy involves integration of strategyformulation and its i mplementation across a ll countries i nwhich company elects to do business
Market DriversCommon customer needs across countries
Corporate c ustomers s eek to standardize an d simplify su ppliers u sed indifferent countries – ad agencies, logistics suppliers, Big 4 accountingrms
Government DriversFavorable trade policies, compatible technical standards, commonmarketing regulations
FactorsF avoringAdoptionof
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age 2(
Factors F avoring Adoption ofTransnational Strategies
Competition DriversCompetitors from overseas; interdependence o f countries
Firms m ay b e o bliged to follow competitors into new markets t o protectown positions e lsewhere
Technology DriversAdvances i n information technology – miniaturization and mobility o fequipment, digitization of voice
Cost Drivers
Economies o f scale
Lower operating costs
HowServiceProcessesAffect
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age $0
How Service Processes AffectInternational Market Entry
People p rocessing services require d irect contact withcustomers
Export service concept- Acting alone or in partnership with local suppliers
e.g., chain restaurants, hotels, car rental rms
Import customers-Inviting customers from overseas to rm’s h ome co untry
e.g., hospitals catering to “medical tourism”
Transport customers to new locations
-Passenger transportation (air, sea, rail, road)
HowServiceProcessesAffect
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age $1
How Service Processes AffectInternational Market Entry
Possession processing involves s ervices to customer’sphysical possessions
- Repair and maintenance, freight transport
Information-based services include mental processing
services a nd information processing servicesExport the service to a local service factory
- Hollywood lm shown around the world
Import customers
Export the information via telecommunications and transform itlocally- Data can be downloaded via CDs or DVDs
ImpactofGlobalizationDriverson
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Services Marketing
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Impact of Globalization Drivers onVarious S ervice Categories
GlobalizationDrivers
People Processing PossessionProcessing
Information Based
Competition Simultaneity o f productionand consumption limitsleverage of foreigncompetitive advantage,but management systemscan be globalized.
Technology drivesglobalization o fcompetitors withtechnical edge.
Highly v ulnerable toglobal dominance bycompetitors withmonopoly orcompetitive advantagein information.
Market People d iffereconomically a nd
culturally, so needs forservice and ability t o paymay va ry.
Level of economicdevelopment impacts
demand for services t oindividually ownedgoods.
Demand for manyservices is derived to a
signicant degree fromeconomic andeducational levels.
ImpactofGlobalizationDriverson
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Services Marketing
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Impact of Globalization Drivers onVarious Service Categories
GlobalizationDrivers
People Processing PossessionProcessing
InformationBased
Technology Use of IT for delivery o fsupplementary ser vicesmay be a function ofownership and familiaritywith technology.
Need for technology-based service deliverysystems depen ds onpossessions requiringservice and the costtrade-offs in laborsubstitution
Ability to deliver co reservices throughremote terminals m aybe a function ofinvestment incomputerization, etc.
Cost Variable labor rates mayimpact pricing in labor-sensitive services.
Variable labor rates mayfavor low-cost locations.
Major cost elementscan be centralizedand m inor cost
elements localized.
Government Social policies (e.g.,health) vary widely a ndmay a ffect labor cost, etc.
Policies maydecrease/increase costandencourage/discouragecertain activities
Policies m ay impactdemand and suppl yand distort pricing
BarrierstoInternationalTradein
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Services Marketing
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Barriers to International Trade inServices
Passage of free-trade legislation is important facilitator oftransnational operations
Notable d evelopments: NAFTA, Latin American economic b locs,EU
Despite efforts of WTO and GATT, barriers s till exist:Restrictions on international airline operating rights
Heavy taxation
Legal restrictions
Lack of broadly a greed upon accounting standards
Cultural issues
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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Cha ter ! " #age $!
Summary
Distribution relates to both core and supplementaryservices a nd embraces t hree interrelated elements
Information and promotion ow, negotiation ow, product ow
Channel options include:Customers visit the service site
Service p roviders g o to their customers
Service t ransaction is c onducted remotely
Place a nd time d ecisions include where s ervices s hould bedelivered in bricks-and-mortar context, when it should bedelivered
S
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Services Marketing
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Summary
Delivery in cyberspace is facilitated by technology;e-commerce allows 24-hour delivery, saving time and effort
Intermediaries play roles in distributing services
Service processes (people p rocessing services, possessionprocessing services, and information-based services) affectinternational market entry via the drivers:
Market drivers
Competition driversTechnology d rivers
Cost drivers
Governmentdrivers