Slide 06

Services Marketing

Distributing Services
Distribution in a Services Context
Four key questions form the
foundation of any service
distribution strategy:

What? How? Where? When?

• What is being distributed?

• How should services be distributed?
• Where should a service facility be located?
• When should a service be distributed?

What is Being Distributed?

In services, often there is
nothing to move. • Information and promotion flow: Get the
customer interested in buying the service.

Experiences, performances, • Negotiation flow: Agreement on the

and solutions are not service features and configuration, and
physically shipped and the terms of the offer.
stored.
• Product flow: Development of a network
of local sites. Many services require
Usually services distribution physical facilities for delivery.
embraces three interrelated
flows:
What is Being Distributed?

Distribution of Core • Many core services require a physical

location, which severely restricts
Services
distribution.
Vs
Supplementary • However, many of the supplementary
services services can be distributed widely and
cost-effectively via other means.

How Should a Service be Distributed?

• Does the service or the firm’s positioning strategy require

customers to be in direct physical contact with its
personnel, equipment, and facilities?

Key questions: • If so, do customers have to visit the facilities of the

service organization, or will the service organization send
personnel and equipment to customers’ own sites?

• Can transactions between provider and customer be

completed at arm’s length through the use of either
telecommunications or physical channels of distribution?

• Should the firm maintain just a single outlet or offer to

serve customers through multiple outlets at different
locations?
How Should a Service be Distributed?

Options for Service Delivery:

• Customers visit the service site

• Service providers go to their customers
• Customer and service organization
transact remotely

How Should a Service be Distributed?

Options for Service Delivery:

How Should a Service be Distributed?
Options for Service Delivery:

• Customers visit the service site

When customers have to visit the service

site, factors e.g. costs (e.g., rental),
customer catchment areas, and the
convenience of service outlet locations for
customer.

How Should a Service be Distributed?

Options for Service Delivery:
• Going to the customer’s site is
unavoidable whenever the object of the
service is some immovable physical item.

• There may be a profitable niche in

• Service providers go to their serving individuals who are willing to pay
customers a premium for the convenience of
receiving personal visits or home
delivery.

• A growing service activity involves the

rental of both equipment and labor at
the customer’s site for special occasions
or in response to customers.
How Should a Service be Distributed?
Options for Service Delivery:
• The Service
Transaction Is
Conducted
Remotely
How Should a Service be Distributed?
Options for Service Delivery:
• The Service Transaction
Is Conducted Remotely
• Technological advancement (e.g. IT) have
spurred many new approaches to service
delivery.
• A customer may never see the service facilities
or meet service personnel face-to-face.
• Many service providers offer solutions with the
help of integrated logistics firms such as FedEx.
• Any information-based product can be
delivered almost instantly through the
Internet.
• Web and app-delivered services are
becoming increasingly sophisticated,
but also more user-friendly.
Factors that attract customers to use
online services are:
• Convenience
• Ease of search
• A broader selection
• Potential for better prices
• 24/7 service with prompt delivery
How Should a Service be Distributed?

• Channel Preferences: Vary Among

Customers

Different channels to deliver the same service:

Have both cost implications for a service
organization, and impacts on the nature of service
experience.

How Should a Service be Distributed?

• For complex and perceived high-risk services, people
tend to rely on personal channels.

• Individuals with higher confidence and knowledge

• Channel about a service and/or the channel are more likely
Preferences: Vary to use impersonal and self-service channels.
Among Customers • Customers who look for the functional aspects of a
transaction prefer more convenience.

• Customers with social motives tend to use personal

channels.
Channel Integration is Key!
• Convenience is a key driver of channel choice for the
majority of consumers. Service convenience means
saving time and effort rather than saving money.
 Service providers have to be careful when channels are
priced.

Class Practice:

Think of three services you buy or

use either mostly or exclusively via
the Internet. What is the value
proposition of this channel over
alternative channels (e.g., phone,
mail, or branch network)?
Service Facility Location
Location decisions for physical sites have
to be made unless the service is delivered
remotely.

Physical site location: Requires

significant investment, and a long-term
commitment.

Service providers cannot easily move to

another site or convert to another
format!

The farther the distance between the new

and old locations, the bigger the loss.
Service Facility Location Decision

Two-step approach/considerations

• Strategic location considerations

• Tactical considerations

Service Facility Location Decision

Strategic location considerations

Developed to help identify the general types

of location a service firm should aim for.

A location should be consistent with the

firm’s marketing strategy and target
segments for an extended period of time.

Starting point: Understanding customer

needs and expectations, competitive
activity, and the nature of the service
operation.
Service Facility Location Decision

Strategic location considerations

Difference in distribution strategies for core

and supplementary services!

Firms should make it easy for people to

access frequently purchased services (e.g.
retail banks, fast-food restaurants, saloon).

Markets can often be segmented by

accessibility preferences and price
sensitivity!

Service Facility Location Decision

Tactical location
considerations Key considerations:

Are used to choose • Population size and characteristics

between specific sites of a
similar type that fit the
overall location strategy.
• Pedestrian and vehicular traffic and its
characteristics
• Convenience of access for customers
• Competitors in this area
• Nature of nearby businesses and stores
• Availability of labor
• Availability of site locations, rental costs,
and contractual conditions.
Service Facility Location Decision

Locational Constraints

Although customer convenience is

important, the need for economies of scale
and operational requirements may restrict
choice of locations.

• Provide some example(s)

Service Facility Location Decision

Innovative Location Strategies

• Mini-stores
• Locating in Multi-Purpose Facilities
Service Facility Location Decision

Innovative Location Strategies

• Mini-stores
- Automated kiosks
- Separating the front and back stages of
the operation
- Purchasing space from another provider
in a complementary field.

Service Facility Location Decision

Innovative Location Strategies

• Multi-Purpose Facilities

- Modern buildings are often designed to

be multi-purpose.

- Interest is growing in locating retail and

other services on transportation routes
and in bus, rail, and air terminals.
Service distribution decision

Factors encouraging extended

Operating hours

Service distribution decision

Factors encouraging extended

Operating hours:

• Pressure from consumers

• Economic incentives to improve
asset utilization
• Availability of employees to work
during usual hours
• Automated self-service facilities
The role of intermediaries

Should a service organization deliver

all aspects of its service itself, or
should it involve intermediaries to take
on certain parts of service delivery?

The role of intermediaries

Many service organizations find it cost-

effective to outsource certain aspects of
distribution.

Often supplementary service elements.

Alternative Distribution Channels: Pros & Cons

The role and value-add (i.e., benefits) Example: Travel Industry

and costs of every intermediary has to - The lowest cost distribution channel -
be carefully considered when designing service firm’s own website followed by
a firm's distribution strategy. its call center-based central
reservations system.

- Retail travel agents usually charge 10%

commission, and tour operators
typically mark-up to 20–30% of the
transaction value.

- The most expensive channels are

often online distributors such as
Expedia (can charge upto 30%).

Alternative Distribution Channels: Pros & Cons

Firms now aims to follow
Disintermediation!
Reading materials

Chapter 5: Distributing Services Through Physical and Electronic

Channels.

Wirtz, J., & Lovelock, C., & Chatterjee, J. (2018). Services marketing:
People, technology, strategy (8th edition). Pearson.

Thank you