1. Distributing Services
through Physical and
Electronic Channels
2 nd P: place and
time

2.  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

3. Distribution in a Services Context

4. 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

5. Safekeeping
Track package movements
Check repair status
Core: Use Web to deliver information-based core services
Core
Consultation
Conduct e-mail dialog
Use expert systems
Order-taking
Make/confirm reservations
Submit applications
Order goods, check status
Hospitality
Record preferences
Billing
Receive bill
Make auction bid
Check account status
Exceptions
Make special requests
Resolve problems
Payment
Pay by bank card
Direct debit
Information
Read brochure/FAQ; get schedules/
directions; check prices

6. Determining Type of Contact:
Options for Service Delivery

7.  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

8.  Customers visit service site
 Service providers go to customers
 Service transaction is conducted remotely

9. 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

10. 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

11.  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

13.  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

14. • 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
multipurpose
facility

15.  Past history- fixed hours of work,legal and
social norms
 Caused inconvenience
 change to 24/7 service

16. Delivering Services in Cyberspace

17.  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

18.  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

19.  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 services
 Alert customers to opportunities/problems
 Update information in real time

20. Role of Intermediaries

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

22. 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

23.  Popular way to expand delivery of effective service
concept
 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
 Study shows significant attrition rate among
franchisors in the early years of a new franchise
system
 One-third of all systems fail within first 4 years
 Three-fourths of all franchisors cease to exist after 12 years

24.  Disadvantages of franchising
 Some loss of control over delivery system and, thereby, over
how customers experience actual service
 Effective quality control is important yet difficult
 Conflict 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 companies
 Banks selling insurance products

25. The Challenge of Distribution in
Large Domestic Markets

26.  Marketing services (i.e., physical logistics) face
challenges due to:
 Distances involved (geographic areas)
 Existence of multiple time zones
 Multiculturalism (especially, immigrants and indigenous
people)
 Differences in laws and tax rates
 Large U.S. companies counter this by:
 Targeting specific market segments
 Seeking out narrow market niches
 Serving multiple segments across a huge geographic
area is biggest marketing challenge

27. Distributing Services Internationally

28.  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

29.  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

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

31.  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

32.  Passage of free-trade legislation is important
facilitator of transnational operations
 Despite efforts of WTO and GATT, operating in
international markets still difficult

33.  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

34.  Export information-based services
 Use third parties to market/deliver service concept
 Control service enterprise abroad

35. Globalizatio
n 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

36. 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

37.  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