Distributing Services

1. Chapter 7
Distributing Services

2. Applying the Flow Model of
Distribution to Services
Distribution embraced three interrelated elements
• Information and promotion flow
• Negotiation flow
• Product flow

3. Information and Physical Processes of
the Augmented Service Product (Fig. 7.1)
Information
Processes
Information
Payment Consultation
Order-
Billing Core
Taking
Exceptions Hospitality
Safekeeping
Physical
Processes

4. Using Websites for Service Delivery
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

5. Options for Service Delivery
There are 3 types of interactions between customers and
service firms
• 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.)

6. Method of Service Delivery (Table 7.1)
Availability of Service Outlets
Nature of Interaction Single Site Multiple Sites
between Customer
and Service
Organization
Customer goes to service Theater Bus service
organization
Barbershop Fast-food chain
Service organization goes House painting Mail delivery
to customer
Mobile car wash Auto club road service
Customer and service Credit card company Broadcast network
organization transact at
arm’s length Local TV station Telephone company

7. Place vs. Cyberspace
 Place - customers and  Required for people processing
suppliers meet in a physical services
 Offers live experiences, social
environment interaction, e.g., food services
 More emphasis on eye-catching
servicescape, entertainment
 Cyberspace - customers and  Ideal for info-based services
 Saves time
suppliers do business
 Facilitates information gathering
electronically in virtual
 May use express logistics service
environment created by
to deliver physical core products
phone/internet linkages

8. “24/7” - Factors Encouraging
Extended Operating Hours (Mgt Memo 7.1)
 Economic pressure from
consumers
 Changes in legislation
 Economic incentives to
improve asset utilization
 Availability of employees to
work nights, weekends
 Automated self-service

9. 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 information
– take orders and accept payment
– deliver information-based services
• Smart cards that can act as “electronic wallets”

10. 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

11. Splitting Responsibilities for
Delivering Supplementary Services
(Fig. 7.2)
As created by As enhanced As experienced
originating firm by distributor by customer
+ =
Core Core

12. Franchising
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

13. 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

14. 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 firms
– Domestic preference policies
– Legal restrictions
– Lack of broadly-agreed accounting standards
– Cultural differences (esp. for entertainment industry)

15. Forces for Internationalization
Market drivers
Competition drivers
Technology drivers
Cost drivers
Government drivers
Impact will vary by service
type
(people, possessions, informat
ion)

16. 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

17. Impact of Globalization Drivers on
Different Service Categories (Table 7.2)
Globalization People Possession Information
Drivers Processing Processing Based
Competition Simultaneity of Technology drives Highly vulnerable to
production and globalization of global dominance by
consumption limits competitors with competitors with
leverage of foreign technical edge. monopoly or
competitive advantage, competitive
but management advantage in
systems can be information.
globalized
Market People differ Level of economic Demand for many
economically and developments services is derived to
culturally, so needs for impacts demand for a significant degree
service and ability to services to from economic and
pay may vary. individually owned educational levels.
goods

18. Impact of Globalization Drivers on
Different Service Categories (Table 7.2,
cont’d)
Globalization People Possession Information
Drivers Processing 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 familiarity possessions requiring terminals may be a
with technology. service and the cost function of
trade-offs in labor investment in
substitution computerization etc.
Cost Variable labor rates may Variable labor rates Major cost elements
impact on pricing in may favor low-cost can be centralized &
labor-sensitive services. locations. minor cost elements
localized.
Government Social policies (e.g., Policies may Policies may impact
health) vary widely and decrease/increase demand and supply
may affect labor cost cost & and distort pricing
etc. encourage/discourage
certain activities