Distributing Services

through Physical and

Electronic Channels
2 nd P: place and
time
 Examine the role that distribution plays in services
 Determine challenges faced by people-processing,
possession-processing, and information based services
 Implicationsof delivery through physical and
electronic channels
 Understand the role of intermediaries
 Determine the drivers of globalization of services
Distribution in a Services Context
Experiences, performances and solutions are not shipped or
stored
Distribution impacts the typical sales cycle in three ways:
1. Information and promotion flow: distribution of
information and promo materials relating to service offer.
Objective: to get the customer to buy the service
2. Negotiation flow: reaching an agreement on service
features and configuration, terms of offer, so purchase
contract can be closed . Eg sell a ticket
3. Product flow: services like people/possession processing
require a physical facility for service delivery. Here dist
strategy requires development of local sites. Eg internet
banking etc
 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
 Decisions on when, how,where to deliver
service have an important effects on nature
of customer experience.
 They determine the type of encounters with
service personnel, price and other costs
incurred to obtain the service
 Does the nature of service or firms
positioning requires customers in physical
contact with personnel, equipment and
facilities
 Customers visit service site

 Service providers go to customers

 Service transaction is conducted remotely

 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
 Customers visit the Service providers go to
Transact remotely
service site customers
•Location •Supplier visits the •Never see facilities or
convenience, customer meet personnel face
operation schedules – •Catering to face
imp if customer has services, corporate •Few service
to be physically services encounters through
present-thro service mail, email etc
delivery or for
transaction
•Models used for
location analysis:
traffic, retail gravity
transport etc
•Focus on less people
processing
 use of diff channels to deliver the same service – cost
implications: eg banking services
 For complex and high-perceived risk services, people
rely on personal channels eg loans
 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
 Understand customer needs and
expectations, competitive activity,and
nature of service operation
 Where should a service be located in a brick
and mortar context
 Cost, productivity,access to labor
 • Operational requirements determine
Location the location. Eg airport
constraints • Geographic constraint,economies of
scale Eg multispecialty hospital

• Small service factories to maximize

Ministores geographic coverage
• Eg banks in supermarkets

Locating in • Closer to customers

multipurpose residential/workplace
• Petrol pumps with retail chains
facility
 Past history- fixed hours of work,legal and
social norms
 Caused inconvenience
 change to 24/7 service
Delivering Services in Cyberspace
 Eg Swissotel
 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
 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
 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
Role of Intermediaries
 Manyorganizations find it cost effective to
outsource certain service tasks. Eg travel
agents booking etc
 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
 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
 Studyshows 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
 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
 Marketingservices (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
 Servingmultiple segments across a huge geographic
area is biggest marketing challenge
Distributing Services Internationally
 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
 People processing services require direct contact with
customers
- Export the service concept: act alone or in partnership
with local suppliers,reach out to new customers,or
follow existing corporate or individual customers or
both. Eg chain restaurants
- Import customers: customers are invited to service
factory with distinct appeal eg bentota ,Goa,medical
tourism
- Transport customers to new locations: operate new
routes and destinations
 Possessionprocessing involves services to customer’s
physical possessions. Eg repair an dmaintenance
,cleaning,warehousing
 Information-based services include mental processing
services and information processing services: mental
processing and information processing
- Export service to local factory: college courses
- Import customers Eg students studying abroad
- Export info via telecom and transform it locally:
downloading data
 Passage of free-trade legislation is important
facilitator of transnational operations

 Despiteefforts of WTO and GATT, operating in

international markets still difficult
 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
 Export information-based services
 Use third parties to market/deliver service concept
 Control service enterprise abroad
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
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 may favor low-cost can be centralized
in labour-sensitive locations and minor cost
services 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
 Distribution enables information and promotion flow,
negotiation flow, and product flow
 Physical and electronic channels play different roles
in the distribution and need to compliment each
other
 The original service supplier should manage the
overall process of supplementary services to the
customer
 The drivers of globalization of services are
competition, technology, cost and government
 People processing services, possession processing
services, and information-based services impact five
groups of drivers differently