Unit-V

Distributing Services
Through Physical and
Electronic Channels

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 1
Distribution in a Services Context

 In a services context, we often move nothing

 Experiences, performances and solutions are not
being physically shipped and stored
 More and more informational transactions are
conducted through electronic and not physical
channels

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 2
Distribution Options for
Serving Customers

 Customers visit service site

 Service providers go to customers
 Service transaction is conducted remotely

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 3
Six Options For Service Delivery

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 4
Channel Preferences Vary
Among Customers

 For complex and high-perceived risk services, people

tend to rely on personal channels
 Individuals with greater confidence and knowledge about
a service/channel tend to use impersonal and self-service
channels
 Customers who are more technology savvy
 Customers with social motives tend to use personal
channels
 Convenience is a key driver of channel choice

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 5
Places of Service Delivery (1)

 Cost, productivity and access to labor are some of the

key determinants to locating a service facility
 Locational constraints
 Operational requirements
-Airports
 Geographic factors
-Ski Resorts
 Need for economies of scale
-Hospitals

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 6
Places Of Service Delivery (2)

 Creating many small service factories to maximize geographic

coverage
-Automated kiosks
 Purchasing space from another provider in complementary field
-Dunkin Donuts with Burger King
 Proximity to where customers live or work
-Service Stations

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 7
Time of Service Delivery

 Traditionally, schedules were restricted

 Service availability limited to daytime, 40-50 hours a week

 Today
 For flexible, responsive service operations:
-24/7 service – 24 hours a day, 7 days a week, around the
world

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 8
 Delivering Services in
Cyberspace
Integration of Technology

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 9
Distribution of Supplementary Services
in Cyberspace

 Five of the supplementary services are information-based

 These services can all be distributed electronically. They
are:
 Information
 Consultation
 Order-taking
 Billing
 Payment

 Distribution of information, consultation and order-taking

has reached very sophisticated levels in global service
industries (e.g., hotels, airlines, car rental companies)

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 10
Information and Physical Processes of
Augmented Service Product

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 11
Service Delivery Innovations
Facilitated by Technology

 Technological Innovations
 Development of “smart” mobile telephones and PDAs, and Wi-Fi
high-speed Internet technology that links users to Internet from
almost anywhere
 Voice-recognition technology
 Web sites
 Smart cards
-Store detailed information about customer
-Act as electronic purse containing digital money

 Electronic channels can be offered together with physical

channels, or take the place of physical channels

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 12
e-Commerce: Move to Cyberspace

 Among the factors luring customers to virtual stores are:

 Convenience
 Ease of search
 Broader selection
 Potential for better prices
 24-hour service with prompt delivery

 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

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 13
 The Role of
Intermediaries
What value they add?

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 14
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
Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 15
Franchising

 Popular way to expand delivery of effective service concept, without a

high level of monetary investments compared to rapid expansion of
company-owned and -managed sites
 Franchisor provides training, equipment and support marketing
activities. Franchisees invest time and finance, and follow copy and
media guidelines of franchisor
 Growth-oriented firms like franchising because franchisees are
motivated to ensure good customer service and high-quality service
operations
 Study shows significant attrition rate among franchisors in the early
years of a new franchise system
 One third of all systems fail within first four years
 Three fourths of all franchisors cease to exist after 12 years

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 16
Franchising

 Disadvantages of franchising
 Some loss of control over delivery system and, thereby, over how
customers experience actual service
 Effective quality control is important but 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, e.g.
 Trucking companies
 Banks selling insurance products

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 17
 Distributing Services
Internationally
Emerging Trends

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 18
How Service Processes Affect International
Market Entry

 Export service concept

-Acting alone or in partnership with local suppliers

e.g., chain restaurants, hotels, car rental firms

 Import Customers
-Inviting customers from overseas to firm’s home country

e.g., hospitals catering to “medical tourism”

 Transport customers to new locations
-Passenger transportation (air, sea, rail, road)

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 19
How Service Processes Affect International
Market Entry

 Export the service to a local service factory

-Hollywood film shown around the world
 Import customers
 Export the information via telecommunications and transform it
locally
-Data can be downloaded via CDs or DVDs

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 20
 Channel System May Be Direct or Indirect

Greater
GreaterControl
Control

Lower
LowerCost
Cost

Internet
InternetMakes
Degree
MakesDirect
Degreetotouse
DirectDistribution
useInternet
Internet Easier
Distribution Easier

Direct
DirectContact
Customer
with
withCustomer
Needs
Needs Needs
Some Contact
Customer Customer Needs

Reasons Quicker
QuickerResponse
ResponseororChange
ChangeininMarketing
MarketingMix
Mix

For Choosing
Direct Channels Suitable
SuitableMiddlemen
MiddlemenNot
NotAvailable
Available

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 21
 What may be the probable reasons
of channel conflict?

Sales target, ROI, Quality Deviation,

Multi-channel, Personal Involvement,
Cross territory, Pricing, Infrastructure,
Marketing support etc.

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 22
 Managing Conflict

Dual Compensation

Superordinate goal

Employee exchange

Joint membership

Diplomacy, Mediation and Arbitration

Legal Re-Course

Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services Marketing Chapter 1 - Page 23