Distributing Services through Physical and Electronic Channels2 nd P: place and time

LEARNING OBJECTIVES

Examine the role that distribution plays in services

Determine challenges faced by people-processing, possession-processing, and information based services

Implications of delivery through physical and electronic channels

Understand the role of intermediaries

Determine the drivers of globalization of services

Distribution in a Services Context

APPLYING THE FLOW MODEL OF DISTRIBUTION TO SERVICES

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

USING WEBSITES FOR SERVICE DELIVERY

SafekeepingTrack package movementsCheck repair statusCore: Use Web to deliver information-based core

services

Core

ConsultationConduct e-mail dialogUse expert systems

Order-takingMake/confirm reservationsSubmit applicationsOrder goods, check status Hospitality

Record preferences

BillingReceive bill

Make auction bidCheck account

status

ExceptionsMake special requests

Resolve problems

PaymentPay by bank

cardDirect debit

InformationRead brochure/FAQ; get schedules/directions; check prices

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

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)

Customer goes to service organization

Service organization comes to customer

Customer and service organization transact remotely (mail or electronic communications)

Theatre

Barbershop

Bus service

Fast-food chain

House painting

Mobile car wash

Credit card company

Local TV station

Mail delivery

Broadcast network

Telephone company

Type of Interaction between Customer and Service Organization

Single Site

Multiple Sites

Availability of Service Outlets

OPTIONS FOR SERVICE DELIVERY

Customers visit the service site

•Location convenience, operation schedules –imp if customer has to be physically present-thro service delivery or for transaction•Models used for location analysis: traffic, retail gravity transport etc•Focus on less people processing

Service providers go to customers

•Supplier visits the customer•Catering services, corporate services

Transact remotely

•Never see facilities or meet personnel face to face•Few service encounters through mail, email etc

CHANNEL PREFERENCES VARY AMONG CUSTOMERS

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

PLACE AND TIME DECISIONS

HOW TO DECIDE ON PLACE AND TIME 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 the location. Eg airport•Geographic constraint,economies of scale Eg multispecialty hospital

Location constraints

•Small service factories to maximize geographic coverage•Eg banks in supermarkets

Ministores

•Closer to customers residential/workplace•Petrol pumps with retail chains

Locating in multipurpos

e facility

WHEN SHOULD BE DELIVERED Past history- fixed hours of work,legal

and social norms Caused inconvenience change to 24/7 service

Delivering Services in Cyberspace

SERVICE DELIVERY INNOVATIONS FACILITATED BY TECHNOLOGY

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

E-COMMERCE: MOVE TO CYBERSPACE 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

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 servicesAlert customers to opportunities/problemsUpdate information in real time

Role of Intermediaries

Many organizations find it cost effective to outsource certain service tasks. Eg travel agents booking etc

SPLITTING RESPONSIBILITIES FOR SUPPLEMENTARY SERVICE ELEMENTS

Challenges for original supplier Act as guardian of overall process Ensure that each element offered by intermediaries fits overall service concept

As created by originating firm

As enhanced by distributor

As experienced by customer

+Core = Core

Core product Supplementary services

Total experience and benefits

FRANCHISING Popular way to expand delivery of effective service

concept Franchising is a fast growth strategy, when

Resources are limitedLong-term commitment of store managers is crucialLocal knowledge is importantFast growth is necessary to pre-empt competition

Study shows significant attrition rate among franchisors in the early years of a new franchise systemOne-third of all systems fail within first 4 years Three-fourths of all franchisors cease to exist after 12

years

FRANCHISING Disadvantages of franchising

Some loss of control over delivery system and, thereby, over how customers experience actual service

Effective quality control is important yet difficultConflict 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 companiesBanks 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 zonesMulticulturalism (especially, immigrants and

indigenous people)Differences in laws and tax rates

Large U.S. companies counter this by:Targeting specific market segmentsSeeking 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

HOW SERVICE PROCESSES AFFECT INTERNATIONAL MARKET ENTRY

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

HOW SERVICE PROCESSES AFFECT INTERNATIONAL MARKET ENTRY

Possession processing involves services to customer’s physical possessions. Eg repair an dmaintenance ,cleaning,warehousing

HOW SERVICE PROCESSES AFFECT INTERNATIONAL MARKET ENTRY

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

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)

Globalization drivers

People processing

Possession processing

Information based

Competition Simultaneity of production and consumption limits leverage of foreign competitive advantage, but management systems can be globalized

Technology drives globalization of competitors with technical edge

Highly vulnerable to global dominance by competitors with monopoly or competitive advantage in information

Market People differ economically and culturally, so needs for service and ability to pay may vary

Level of economic development impacts demand for services to individually owned goods

Demand for many services is derived to a significant degree from economic and educational levels

IMPACT OF GLOBALIZATION DRIVERS ON VARIOUS SERVICE CATEGORIES (2) (TABLE 4.2)

Globalization Drivers

People processing

Possession processing

Information based

Technology Use of IT for delivery of supplementary services may be a function of ownership and familiarity with technology

Need for technology- based service delivery systems depends on possessions requiring service and the cost trade-offs in labour substitution

Ability to deliver core services through remote terminals may be a function of investment in computerization, etc.

Cost Variable labour rates may impact on pricing in labour-sensitive services

Variable labour rates may favor low-cost locations

Major cost elements can be centralized and minor cost elements localized

Government

Social policies (e.g., health) vary widely and may affect labour cost, etc.

Policies may decrease/increase cost and encourage/ discourage certain activities

Policies may impact demand and supply and distort pricing

SUMMARY - CHAPTER 4 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