Chapter

Distributing Services
Applying the Flow Model of Distribution to
Services

Distribution embraced three interrelated elements

 Information and promotion flow

 Negotiation flow
 Product flow
Information and Physical Processes of the
Augmented Service Product

Information
Processes
Information
Paymen Consultation
t
Order-
Billing Core
Taking

Exception Hospitality
s Safekeeping

Physical
Processes
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
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.)
 Method of Service Delivery

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 to House painting Mail delivery
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
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 information
 take orders and accept payment
 deliver 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 As enhanced As experienced

originating firm by distributor by customer

Core + = Core
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
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 firms
 Domestic 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 People Processing Possession Information Based

Drivers Processing
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 advantage
but management systems in information.
can be globalized

Market People differ Level of economic Demand for many

economically and developments impacts services is derived to a
culturally, so needs for demand for services to significant degree from
service and ability to pay individually owned economic and
may vary. goods educational levels.
 Impact of Globalization Drivers on Different
Service Categories

Globalization People Processing Possession Information

Drivers Processing Based
Technology Use of IT for delivery of Need for technology- Ability to deliver core
supplementary services based service delivery services through
may be a function of systems depends on remote terminals may
ownership and familiarity possessions requiring be a function of
with technology. service and the cost investment in
trade-offs in labor computerization etc.
substitution

Cost Variable labor rates may Variable labor rates may Major cost elements
impact on pricing in labor- favor low-cost locations. can be centralized &
sensitive services. minor cost elements
localized.

Government Social policies vary widely Policies may Policies may impact
and may affect labor cost decrease/increase cost demand and supply
etc. & and distort pricing
encourage/discourage
certain activities