Distributing Services Through Physical and Electronic Channels

OVERVIEWDistribution in a Services ContextDetermining Type of Contact: Options for Service DeliveryPlace and Time DecisionsDelivering Services in CyberspaceThe Role of IntermediariesThe Challenge of Distribution in Large Domestic MarketsDistributing Services Internationally

APPLYING THE FLOW MODEL OF DISTRIBUTION TO SERVICESDistribution embraces three interrelated elements:Information and promotion flowTo get customer interested in buying the serviceNegotiation flowTo sell the right to use a serviceProduct flowTo develop a network of local sites

DISTINGUISHING BETWEEN DISTRIBUTION OF SUPPLEMENTARY AND CORE SERVICESDistribution relates to both core services and supplementary servicesCore services for people processing and possession processing services require physical locationsCore services for mental stimulus processing and information processing can be distributed electronically Supplementary services can be tangible or intangible in nature; latter can be distributed widely and cost-effectively via nonphysical channelsTelephone Internet

INFORMATION AND PHYSICAL PROCESSES OF AUGMENTED SERVICE PRODUCT

USING WEBSITES FOR SERVICE DELIVERYSafekeepingTrack package movementsCheck repair statusCore: Use Web to deliver information-based core servicesConsultationConduct e-mail dialogUse expert systemsOrder-takingMake/confirm reservationsSubmit applicationsOrder goods, check status HospitalityRecord preferencesBillingReceive billMake auction bidCheck account statusExceptionsMake special requestsResolve problemsPaymentPay by bank cardDirect debitInformationRead brochure/FAQ; get schedules/directions; check prices

DISTRIBUTION OPTIONS FOR SERVING CUSTOMERSCustomers visit service siteConvenience of service factory locations and operational schedules important when customer has to be physically presentService providers go to customersUnavoidable when object of service is immovableMore expensive and time-consuming for service providerService transaction is conducted remotelyAchieved with help of logistics and telecommunications

SIX OPTIONS FOR SERVICE DELIVERY

Customer goes to service organizationService organization comes to customerCustomer and service organization transact remotely (mail or electronic communications)TheaterBarbershopBus serviceFast-food chainHouse paintingMobile car washCredit card companyLocal TV stationMail deliveryBroadcast networkTelephone companyType of Interaction between Customer and Service OrganizationSingle SiteMultiple SitesAvailability of Service Outlets

CHANNEL PREFERENCES VARY AMONG CUSTOMERSFor complex and high-perceived risk services, people tend to rely on personal channelsIndividuals with greater confidence and knowledge about a service/channel tend to use impersonal and self-service channelsCustomers with social motives tend to use personal channelsConvenience is a key driver of channel choice

PLACES OF SERVICE DELIVERYCost, productivity, and access to labor are key determinants to locating a service facilityLocational constraintsOperational requirementsAirportsGeographic factorsSki resortsNeed for economies of scaleHospitals

PLACES OF SERVICE DELIVERYMinistoresCreating many small service factories to maximize geographic coverageAutomated kiosksSeparating front and back stages of operationTaco BellLocating in multipurpose facilitiesProximity to where customers live or workService stationsService Perspectives 4.2

TIME OF SERVICE DELIVERYTraditionally, schedules were restrictedService availability limited to daytime, 40 to 50 hours a week Sunday historically considered as a rest day in Christian tradition, Saturday in Jewish tradition, and Friday in Muslim traditionTodayFor flexible, responsive service operations:24/7 service24 hours a day, 7 days a week, around the world (Service Perspectives 4.3)Some organizations still avoid 7-day operations, for example:Atlanta-based Chick-fil-A Being closed on Sunday is part of our value proposition

SERVICE DELIVERY INNOVATIONS FACILITATED BY TECHNOLOGYTechnological InnovationsDevelopment of smart mobile telephones and PDAs as well as Wi-Fi high-speed Internet technology that links users to Internet from almost anywhereVoice-recognition technologyWebsites Smart cardsStore detailed information about customerAct as electronic purse containing digital moneyIncrease accessibility of servicesDeliver right information or interaction at right timeCreate and maintain up-to-date real-time information

E-COMMERCE: MOVE TO CYBERSPACEInternet facilitates 5 categories of flowInformationNegotiationService TransactionsPromotionElectronic channels offer complement/alternative to traditional physical channelsConvenience (24-hour availability, save time, effort)Ease of obtaining information online and searching for desired itemsBetter prices than in many bricks-and-mortar storesBroad selection

E-COMMERCE: MOVE TO CYBERSPACERecent Developments link Websites, customer management (CRM) systems, and mobile telephonyIntegrating mobile devices into the service delivery infrastructure can be used as means to:Access servicesAlert customers to opportunities/problemsUpdate information in real timeOnline versus Bricks-and-Mortar

SPLITTING RESPONSIBILITIES FOR SUPPLEMENTARY SERVICE ELEMENTSChallenges for original supplier Act as guardian of overall process Ensure that each element offered by intermediaries fits overall service concept

FRANCHISING (1)Popular way to expand delivery of effective service conceptFranchising is a fast growth strategy, whenResources are limitedLong-term commitment of store managers is crucialLocal knowledge is importantFast growth is necessary to preempt competitionStudy 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 (2)Disadvantages of franchisingSome 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 experienceAlternative: license another supplier to act on the original suppliers behalf to deliver core product, for example:Trucking companiesBanks selling insurance products

DUNKIN BRANDS DISTRIBUTES ITS BRANDED SERVICE CONCEPTS THROUGH FRANCHISEESDunkin brands: Dunkin Donuts (coffee and backed goods), Baskin Robbins (ice cream), Togos (sandwiches)

THE CHALLENGE OF DISTRIBUTION IN LARGE DOMESTIC MARKETSMarketing 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 ratesLarge U.S. companies counter this by:Targeting specific market segmentsSeeking out narrow market nichesServing multiple segments across a huge geographic area is biggest marketing challenge

HOW SERVICE PROCESSES AFFECT INTERNATIONAL MARKET ENTRY (1)People processing services require direct contact with customersExport service conceptActing alone or in partnership with local suppliers For example, e.g., chain restaurants, hotels, car rental firmsImport customersInviting customers from overseas to firms home countryFor example, hospitals catering to medical tourismTransport customers to new locationsPassenger transportation (air, sea, rail, road)

HOW SERVICE PROCESSES AFFECT INTERNATIONAL MARKET ENTRY (2)Possession processing involves services to customers physical possessionsFor example, repair and maintenance, freight transportInformation-based services include mental processing services and information processing servicesExport the service to a local service factoryHollywood film shown around the worldImport customersExport the information via telecommunications and transform it locallyData can be downloaded via CDs or DVDs

FACTORS FAVORING ADOPTION OF TRANSNATIONAL STRATEGIESCompetition driversCompetitors from overseas; interdependence of countriesFirms may be obliged to follow competitors into new markets to protect own positions elsewhereTechnology driversAdvances in information technologyminiaturization/mobility of equipment, digitization of voiceCost driversEconomies of scaleLower operating costsGovernment driversFavorable trade policies, compatible technical standards, common marketing regulations

MODES OF INTERNATIONALIZATIONExport information-based servicesTransmit via electronic channels Store in physical media, ship as merchandiseUse third parties to market/deliver service conceptLicensing agentsBrokersFranchisingAlliance partnersMinority joint venturesControl service enterprise abroadDirect investment in new businessBuyout of existing business

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