sm7 ch05 distribution

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Services Marketing

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Chapter 5:

Distributing Services Through PhysicalAnd Electronic Channels



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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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Distribution in a ServicesContext



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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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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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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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Information and Physical Processesof Augmented Service P roducts



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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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Options for Service Delivery



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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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Six Options F or Service Delivery



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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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Place and Time Decisions



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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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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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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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Delivering Services inCyberspace



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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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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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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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Role of Intermediaries



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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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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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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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Challenge of Distribution inLarge Domestic Markets

ThChllfDitibtii



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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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Distributing ServicesInternationally

FactorsF avoringAdoptionof



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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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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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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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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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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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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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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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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



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

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