Chapter 7

Distributing Services

Applying the Flow Model of Distribution to Services

Information and promotion flow

Negotiation flow

Product flow

Distribution embraced three interrelated elements

Information and Physical Processes of the Augmented Service Product

Exceptions

Billing

Payment

InformationProcesses

InformationConsultation

Safekeeping

Physical Processe

s

Order-TakingCore

Hospitality

Using Websites for Service Delivery

SafekeepingTrack package movements

Check repair status

CORE: Use Web to deliver information-based core services

Core

ConsultationConduct e-mail dialogUse expert systems

Order-TakingMake/confirm reservationsSubmit applicationsOrder goods, check status

HospitalityRecord preferences

BillingReceive bill

Make auction bidCheck account status

ExceptionsMake special requests

Resolve problems

PaymentPay by bank card

Direct debit

InformationRead brochure/FAQ; get schedules/

directions; check prices

Options for Service Delivery

Customer goes to the service provider (or intermediary)

Service provider goes to the customer

Interaction at arm’s length (via the Internet, telephone, fax,

mail, etc.)

There are 3 types of interactions between customers and

service firms

Method of Service Delivery

Availability of Service Outlets

Nature of Interaction between Customer and Service Organization

Single Site Multiple Sites

Customer goes to service organization

Theater

Barbershop

Bus service

Fast-food chain

Service organization goes to customer

House painting

Mobile car wash

Mail delivery

Auto club road service

Customer and service organization transact at arm’s length

Credit card company

Local TV station

Broadcast network

Telephone company

Place vs. Cyberspace

Place - customers and suppliers meet in a physical environment

Cyberspace - customers and suppliers do business electronically in virtual environment created by phone/internet linkages

Required for people processing services

Offers live experiences, social interaction, e.g., food services

More emphasis on eye-catching servicescape, entertainment

Ideal for info-based services

Saves time Facilitates information gathering May use express logistics

service to deliver physical core products

“24/7” - Factors Encouraging Extended Operating Hours

Economic pressure from consumers

Changes in legislation

Economic incentives to improve asset utilization

Availability of employees to work nights, weekends

Automated self-service

Technology Revolutionizes Service Delivery: Some Examples

Smart mobile telephones to link users to Internet

Voice recognition software

Automated kiosks for self-service (e.g. bank ATMs)

Web sites provide informationtake orders and accept paymentdeliver information-based services

Smart cards that can act as “electronic wallets”

E-Commerce:Factors that Attract Customers to Virtual Stores

Convenience (24-hour availability, save time, effort)

Ease of obtaining information on-line and searching for desired items

Better prices than in bricks-and-mortar stores

Broad selection

Splitting Responsibilities for Delivering Supplementary Services

As created by originating firm

As enhanced by distributor

As experienced by customer

+Core = Core

Franchising

Resources are limited

Long-term commitment of store managers is crucial

Local knowledge is important

Fast growth is necessary to pre-empt competition

Franchising is a fast growth strategy, when

Service Process and Market Entry

People Processing Services Export the service concept Import customers Transport customers to new locations

Possession Processing Services Most require an ongoing local presence, whether it is the

customers dropping off items or personnel visiting customer sites

Information Based Services Export the service to a local service factory Import customers Export the information via telecommunications and transform it

locally

Barriers to International Trade in Services

Operating successfully in international markets remains difficult for certain services despite efforts of the WTO and control relaxations

Barriers include Refusal by immigration offices to issue work permits Heavy taxes on foreign firmsDomestic preference policies Legal restrictions Lack of broadly-agreed accounting standards Cultural differences (esp. for entertainment industry)

Forces for Internationalization

Market drivers

Competition drivers

Technology drivers

Cost drivers

Government drivers

Impact will vary by service type (people, possessions, information)

Modes of Internationalization

Export information-based services transmit via electronic channels store in physical media, ship as merchandise

Use third parties to market/deliver service concept licensing agents brokers franchising alliance partners minority joint ventures

Control service enterprise abroad direct investment in new business buyout of existing business

Impact of Globalization Drivers on Different Service Categories

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 developments 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 Different Service Categories

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 labor substitution

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

Cost Variable labor rates may impact on pricing in labor-sensitive services.

Variable labor rates may favor low-cost locations.

Major cost elements can be centralized & minor cost elements localized.

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

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

Policies may impact demand and supply and distort pricing