Delivering services, managing demand and supply and pricing of services

Channel Decisions
Franchisee Service provider

Electronic channels

Customer

Sellers & buyers agents

Agent and brokers

Factors that a service provider needs to take into consideration while making channel decisions
Easy accessibility and convenience to customers Value addition to customers

Chosen channel should not eat into the margins of service provider (service providers budget)
Cover all the target market Reliability
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Direct Distributions
Advantages Control Healthy customer relations Flexibility and confidentiality
Disadvantages Financial risks Lack of knowledge

Key Intermediaries in Service Delivery

Franchising
Service Offerings by Companies Target Customers

Types of Intermediaries
Electronic channels Agents and Brokers

Franchising
Franchisers view:-

Advantages
Business expansion Improved revenues Reduced risks Consistency Local presence through global franchising Increased working capital and minimized financial risks

Disadvantages
Trouble in motivating franchisee Conflict between the two Quality Maintenance Relationships with customers

Franchising
Franchisees view:-

Advantages
Established business processes Reduced risk

Disadvantages
Reduced profits and revenues Strict adherence Encroachment Termination of the contracts High Expectations

Agents and Brokers

Advantages
Reduced cost Special skills and knowledge Large representations Knowledge of local markets Choice of customers

Disadvantages
Reduced control on pricing and other marketing areas Promotion of various service providers-offers

Electronic Channels
Advantages
Lower cost Increased customer convenience Increased bargaining power of the customers Extensive distribution Ability to customize services and gain quick feedback

Disadvantages
Uncontrolled competition Customer variability Security challenge price

Demand and supply of services and constraints

Capacity Constraints
Equipment Facilities

Labor Times
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Strategies to Match Demand and Capacity

Demand shift Varying the original service offer Communication with customers Altering the timing of service delivery Price differentiation

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Strategies to Match Demand and Capacity

Adjusting Capacity to Meet Demand
Time Labor Facilities Equipment
Employ part-time or contract workers Outsourcing Share facilities or rent equipment Schedule downtime Cross-training employees Modify facilities or move equipment

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Yield Management
Yield management aims at earning the highest possible revenue in capacityconstrained services through service providers operations.

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Yield Management
Segment the market based on customer needs

Collecting information

Setting different prices for the same product or service

Communicate the pricing strategies to customers

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Pricing Objectives
Survival Present Profit Maximization Present Revenue Maximization Prestige Product Quality Leadership

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Approaches to Pricing Services

Cost based pricing Cost-plus pricing/ Basic cost covering Contribution pricing Working back method/ Expected return

Market-oriented pricing/ Demand based pricing

Competition based pricing

Market skimming Penetration pricing Price discrimination Pricing to meet customer expectations Discount and sales

Destroyer pricing Price matching/going rate pricing Price bidding/ close bid pricing

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Incorporating Perceived Value into Service Pricing

The image of service organization Physical evidence that substantiates the quality of the service Behavior of personnel convenience service and Quality and value of the service compared to competitor's service Process adopted by the service company to communicate their offers

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Value Strategies in Pricing of Services

Satisfaction Based Pricing
Service guarantees Benefit driven pricing Flat rate pricing Convenience pricing

Relationship Pricing
Long term contacts Price Building Efficiency Pricing Activity based costing Efficiency through innovation
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