MODULE - II

Quality Issues and Models, Gap Analysis, SERVQUAL, Application of

SERVQUAL, Service product, New service development, Branding,

Packaging, Pricing, Promotion, Service delivery channels: direct

channels, franchising, agents, brokers, internet channels, channel

conflicts and resolution.

 SERVICE QUALITY
 Quality means the degree of excellence in service performance.

 Service quality forms an important aspect in the perception of services.

 One of the major ways a service firm can differentiate it is by delivering

consistently higher quality than its competitors do.

 Managing the quality of products and services is very important to ensure

that the business excels in meeting the customer requirements and
achieves organizational goals .

 Quality is the totality of features and characteristics of a product or

service that bears on its ability to satisfy given needs.
DEFINING QUALITY IN SERVICE:
 In manufacturing, quality is defined by the degree of compliance between

stated goals and achieved targets. It is therefore rather easy to measure

and conform to a standard.

 In service it becomes difficult to comprehend the concept of quality and

measure it. Because of its intangibility, measurement and assessment of

service quality is extremely challenging.

 Perception of service quality is, additionally, felt by all parties involved in a

service delivery process: service providers, customers and suppliers.

 Quality in service has two-window viewpoints: internal and external to the

service firm.

 Internal quality is all about the entire service delivery process from

concept to encounter/experience/ transaction/consumption.

 While internal quality is all about conformance and compliance to design

standards, external quality is about the customer's perception.

 While the former can be controlled by the service firm, service quality is

as perceived by the customers - and should be measured from that

perspective.
 PERCEIVED SERVICE QUALITY

 Service Quality and perception are linked.

 Experienced Quality: Due to its intangible nature, services can be defined as

an experience.

 Intangibility of services leads the customer to perceive the quality based on

the image of the company, which can either be the corporate image, local
image, or both.

 This image is the result of technical quality and functional quality.

 Technical quality: It is the outcome dimension. It relates to ‘what’ the
customers receive on interacting with the firm and is an important dimension
in quality assessment. This quality reflects the basic design of the service,
i.e., its blueprint and its execution. This forms the first impression of
customers.

 Functional quality: It is a 'process-related dimension. It comes into play only

when the customer has a positive impression of the technical quality and
comes for product trial or re-purchase. It relates to "how the service is meted
out to the customer at the time-of-service delivery. This is highly subjective
and can depend upon several factors such as appearance and behaviour of
employees, what they say, and how they say it.
 Expected quality: This is related to customer expectations when they purchase any
service. Customer expectations may be based on market communication,
organization's image, word of mouth referral, and customer needs as described below:

 Market communication: The information provided by organizations regarding their

products and services. It is directly controlled by the organization

 Image of the organization: Image of proven skills, innovativeness, ability to handle

problems, performance, etc. It can only be controlled partly by the organization.

 Word-of-mouth: This is an informal, influential communication done voluntarily by

the consumers based on their own knowledge and experience with the service.

 A positive word of mouth communication is favourable for the organization, but if the
customer is dissatisfied, he/she can adversely affect the image of the organization by
creating negative word of mouth communication.
 Customer needs: Customer needs at a particular point of time influence the
quality perceptions. Customers who are hard-pressed for time will expect a
prompt response in a beauty salon, but if they have ample time they will
expect to be pampered and indulged.

 If the expected quality matches the experienced quality, it will result in

customer satisfaction.

 However, if the customer experience exceeds the customer expectations, it

leads to customer delight.

 The idea is to move from customer satisfaction towards customer delight.

 DIMENSIONS OF SERVQUAL
 The most eminent instrument in attempting to systematize the service quality is the

‘gap model of service or SERVQUAL that was developed by Parasuraman et al. (1985).

 SERVQUAL assumes that service quality is crucially determined by inconsistency

between expectations and perceptions of customers.

 According to Parasuraman et al. (1988), service quality includes 5 dimensions of service

such as reliability, responsiveness, assurance, empathy and tangibles.

 Reliability: This is the consistent ability to perform the promised service both

steadfastly and accurately. This means that the service provider provides the service in

the same manner, without making errors, and on time. Reliability is very important to

consumers decision-making process, as they need to be confident that the promise the

service organization is making will be fulfilled.

 Responsiveness: This is the willingness to help and to provide timely service to
consumers. All the employees who are dealing with customers need to be
sensitive to the customers' needs and should contribute to creating a
'memorable' experience for them.

 Assurance: This is based on communication, trustworthiness, capability,

courtesy, and security. In other words, the organization is keeping the
customer informed; they are creating feelings of credibility and honesty and
are showing that they have the knowledge and the skills to perform the
services well. During this whole process the service providers must give due
courtesy and respect to the customer and generate feelings of security that
his/her interests are safe in their hands
 Empathy: This involves the provision of caring, individualized attention to the
customers. The employees should be approachable, sensitive to the needs of
the customers, and try to understand their needs. The aim is to make the
customers feel unique and special. In industrial selling, smaller organizations
can provide more personalized service and are hence preferred in comparison
to larger organizations.

 Tangibles: These include the appearance of the physical facilities, equipment,

personnel, and communication materials. These provide evidence of the care
and attention to detail that is exhibited by the service provider.

 This SERVQUAL. model is used to measure service quality and there is general
agreement that it is a good predictor of service quality.
Gap Model of Service Quality(5 Gap Model)

 The GAP Model was first proposed by A. Parasuraman, Valarie Zeithaml and Leonard
L. Berry in 1985.
 The GAP Model of Service Quality helps the company to understand the Customer
Satisfaction.
 In-Service Industry, the GAP Model is widely used to understand the various deviations
that are occurring in the process of service delivery to potential customers.
 GAP Model creates a roadmap for the overall service delivery process and identifies
the gap between the processes so that the complete model works efficiently and
effectively.
 The GAP Model of Service quality helps to identify the gaps between the perceived
service and the expected service.
FIVE GAPS OCCUR IN THE SERVICE DELIVERY
PROCESS.

1. Management Perception Gap : The gap between Customer Expectation and Management
Perception

2. Quality Specification Gap : The gap between Service Quality Specification and Management
Perception

3. Service Delivery Gap : The gap between Service Quality Specification and Service Delivery

4. Market Communication Gap : The gap between Service Delivery and External Communication

5. Perceived Service Quality Gap : The gap between the Expected Service and Experienced Service.
 GAP 1
 Gap between Management Perception and Customer Expectation

 This gap arises when the management or service provider does not correctly analyze what
the customer wants or needs.

 It also arises due to insufficient communication between contact employees and managers.

 There is a lack of market segmentation.

 This Gap occurs due to insufficient market research, inaccurate information from market
research, poorly interpreted information, no demand analysis.

 For Instance- A café owner may think that the consumer wants a better ambience in the
café, but the consumer is more concerned about the coffee and food they serve.
 GAP 2
 Gap between Service Quality Specification and Management Perception

 This gap arises when the management or service provider might correctly
comprehend what the customer requires but may not set a performance standard.

 The organization understands what it thinks the consumer expects but is not able
to translate this into specifications for the employees to adhere to.

 Service design and performance standards are prerequisites for bridging this gap.

 It can be due to poor service design, Inappropriate Physical evidence,

Unsystematic new service Development process, management commitment,
internal quality programmes.
 GAP 3

 Gap between Service Quality Specification and Service Delivery

 This gap occurs due to the difference in the service delivery standards and the actual
service delivery by the employees. This gap may arise in situations existing to the service
personnel.

 It may occur due to improper training, incapability or unwillingness to meet the set service
standards. It can be due to inappropriate evaluation and compensation systems. Ineffective
Recruitment is the main cause of this gap.

 The failure to match the supply and demand can create this gap. There is also a lack of
empowerment, Perceived Control, and framework.

 An example would be a restaurant having very specific standards of the food

communicated but the restaurant staff may not be given proper instruction as to how to
follow these standards.
 GAP 4
 Gap between External Communication and Service Delivery

 The market communication gap occurs when the service delivered is not as per
the expectations created by the communication made by the organization.

 Consumer Expectations are highly influenced by the statements made by the

company representatives and advertisements. This gap arises when these
assumed expectations are not fulfilled at the time of Delivery of Service.

 An example would be a restaurant that has printed on its menu that it serves
100% Vegetarian Food but, it serves Non-Vegetarian Food as well. In this situation,
consumer expectations are not met.
 GAP 5

 Gap between Experienced Service and Expected Service

 This gap results when the perceived or experienced service is not as per the
expectations of the customers.

 This gap arises when the consumer misunderstands the service quality.

 For Instance, A Restaurant Manager may keep visiting their consumer to

ensure quality check and consumer satisfaction, but the consumer may
interpret this as an indication that something is fishy or there is something
wrong in the service provided by the restaurant staff.
SERVICE PRODUCT

 A service ‘product’ is a bundle of features and customers benefits. A customer has

various needs attached to a service ‘product’.

 To understand a service ‘product’, it is necessary to understand different levels of

product within a service.

 According to Philip Kotler, a marketer needs to think through five levels of the service

‘product’
Product Levels in Services
 Core Product : This refers to the basic product. Here, the focus is on the purpose for
which the product is intended.

 Generic Product :This represents all the qualities of the product.

 Expected Product : This refers to all the benefits consumers expects to get when they
purchase a product.

 Augmented Product: This refers to all the additional factors which set the product
apart from competition, that is, its brand identity and image.

 Potential Product : This refers to the augmentations and transformations that the
product may undergo in the future.
 The Flower of Service
 • There are two types of supplementary
services
 • Facilitating: either needed for service
delivery, or help in the use of the core
product
 • Enhancing: add extra value for the
customer
 • In a well-managed service
organization, the petals and core are
fresh and well-formed
 • Market positioning strategy helps to
determine which supplementary
services should be included
Product Levels Example – Hospitality
Service [5 Star Hotel]
 Core product – Rest and sleep
 Basic product – Hotel room, bed, bathroom, towels, desk, closet.
 Expected product – Clean bed, fresh towels, working lamps and the relative degree of
quietness.
 Augmented benefits – Supply of food that suits customer health, Tablet based control,
Voice-activated controls
 Potential product – Smart mirrors, Keyless entry, Underwater hotels
New Service Development Stages
 1. Idea Generation: The ideas can be generated through internal sources like sales staff, front
line employees and market research department and external sources like customers, experts
in the field, market information system and trade journals, seminars and conferences.

 2. Idea Screening: In this stage those ideas are identified that are promising and have
potentials to be successful. The evaluation committee screens various service ideas
rigorously in order to ensure that the ideas are consistent with the company’s mission, image
and capability.

 3. Concept Testing: Concept testing involves translating the service idea into service
concept with specific need satisfying aspects. Testing is done through presenting the idea to
a consumer panel with the help of brochure, literature and other visual presentations to test
the reactions of the group.
 Service Development : The business proposal must then be converted into the actual
service that will be delivered to the customer. All tangible elements and service
delivery process must be designed.

 Launch: The final stage of the new service development process is launching the
service. The life-cycle of the service begins. The new service will now start earning
revenue for the firm.

 Market Testing: Market testing helps the service firm to ‘re-mix’ the marketing mix
elements in order to reduce the risk of launch.
BRANDING
 Branding is a major strategic issue for service marketers.
 Branding begins with giving an identity to the service beyond the one it has
within trade circles.
 Consumers feel that they are getting more in a branded service than
otherwise.
 A brand creates a mental patent.
 It has become one of the strategic weapons of business.
 Brand building though expensive is profitable.
What is a brand?

 According to the American Marketing Association, a brand is a name, term, sign,

symbol or design or a combination of these, intended to identify the goods or
services of one seller or a group of sellers and to differentiate them from those
of their competitors.
 Service characteristics such as intangibility, variability and perishability make
branding a strategic requirement to promote beliefs and values in the target
market.
 Most service companies promote product brand names along with corporate
branding.
 Telecom companies BSNL, Airtel, Hutch, Tata Cellular and Reliance Infocom,
banking companies, insurance companies, transport companies and courier
services are all promoting corporate branding along with individual names to
specific service packages.
Benefits of Branding

 The following are the benefits of branding services:

 1. Provides corporate identity and recognition.
 2. Provides an opportunity to distinguish the competitive products.
 3. Helps customers to develop value perceptions.
 4. Helps in developing customer relationships.
 5. Builds up long term equity to the concern.
 6. Market penetration becomes easy.
 7. New service offers get quick response.
Branding Decisions
 Service firms need to decide whether to brand their service packages or not,
because branding requires consistent quality performance and accessibility.
 The cost of branding must be less than the premium that a marketer can get out
of it.
 Keeping in view the competition from unbranded local service outlets, the
service firms should be able to provide greater value perceptions to the
customers in branded services.
 Once it is decided to brand a service, there are at least four important
decisions a company must make in branding. They are:
 Should the company's own brand be promoted or should a sponsor be found for
branding?
 What should be the quality of the brand?
 Should a corporate brand or an independent product brand or a mix of the two be
promoted?
 Should the existing brand name be extended or a new brand built?
Selection of a Brand Name
 While selecting a brand name, the company's vision, mission a objectives are
to be kept in mind.
 Generally, a committee which consists of product managers, other marketing
personnel, advertising agencies, branding consultants is constituted for the
selection of a brand.
 Keeping the company's objectives in mind, the committee carefully reviews
the BSP(Business Service Provider), its benefits, the target market and the
marketing strategies.
 A list of potential brand names ranging from 100 to 200 is prepared at the
first stage. Out of the preliminary list, 10 to 20 names are selected, after
careful screening, for further consideration.
 The committee studies the consumer reactions on the selected names and
trademarking possibilities.
 Finally, they recommend a brand name to the company.
QUALITIES OF A GOOD BRAND
 A brand should possess the following qualities for greater effectiveness:
 1. The name should be associated with pleasant things and quality.
 2. The name should suggest something about the product's benefits
 3. It should be easy to pronounce and recall.
 4. It should lay stress on those characteristics of a service that are to be
impressed on the consumer.
 5. It should be distinctive and should have motivational value.
 6. The name should be capable of translation into foreign languages.
 7. The name should be free for registration and legal protection.
PRICING

 Price is the amount of money charged for a product or service.

 Price is a significant element of the marketing mix because it is the only element that
produces revenue whereas the other elements produce cost.
 Price reflects the value attached to the service by the service provider and it must
correspond with the customer’s perception of value.
 Service providers offer a range of service at different price levels to cater to the needs
of different target segments that may have different levels of purchasing power.
 Prices have different names in services. Example – Insurance (Premium), Banks
(Interest), Transport (Fares), Credit card (Fees), Share / stock services (Brokerages)
PRICING OF SERVICES
 Several factors make pricing of services different from that of pricing of
goods.
 The following are the factors that make services pricing different.
 No ownership of services: It is more difficult to calculate the costs involved
in creating an intangible service than in producing a physical good. The
absence of ownership transfer compels the customer to assess the value of
the service before its production and consumption. In the case of goods,
consumers can leisurely verify and compare with substitutes and can take a
purchase decision after production.
 Input and output variability: The invariable change in the combination of
service provider, customer, tools and equipment used, time taken, and so on
makes the output of the service variable. Therefore, price output relations
vary significantly.
 Price value relations: Often customers are not aware of costs of services and
are unable to assess price-value relationship.
 Often customers use personal reference prices. Personal reference price
consists of the price last paid, the price most frequently paid, or the average
of all prices paid for similar service offerings.
 Service firms generally explore the variable nature of the services to have
greater flexibility in the configurations of service. A large number of varieties,
combinations and permutations lead to complex price structures.
 These are not accurate because, the needs of individual customers vary from
time to time, place to place and situation to situation.
 Unlike goods, similar services cannot be offered at a single outlet. If
customers want to compare prices, they must go to individual outlets.
Alternative services cannot be compared simultaneously.
 An LIC agent cannot quickly tell you the premiums of various policies without
referring to the price table. A railway clerk cannot immediately tell you the
cargo tariffs for various goods. He has to refer to the price list of the Indian
Railways. Under these circumstances, reference prices cannot provide
adequate clues to the customer.
 Influence of non-monetary costs: The role of non-monetary costs is very
significant in services. Non-monetary costs are the sources of sacrifices
perceived by customers. They include time costs, search costs and psychic
costs, which may sometimes become more important for the customers than
monetary costs.
 Time costs refer to the spending of time by the service customer on travel to
reach the service outlet, waiting time, service process time and so on.
 Search costs refer to the effort the service customer puts in collecting
information relating to the service and the service provider takes for making a
correct decision.
 Psychic costs refer to the psychological pressure the service customer
undergoes in selecting a service provider.
 Price-quality relations: Buyers are likely to use price as an indicator of both
service cost and service quality. In the absence of complete information on
the service, price provides clues with regard to the quality of the service.
 In credence services such as medical treatment or management consultancy,
price is surrogate for quality. As price is viewed as an indicator of quality of
service, service providers should be careful in fixing prices.
 Apart from covering service costs and matching competitors, care should be
taken to convey quality through price. If the prices are set too low, there is
danger of indicating low quality of the service.
 On the other hand, if price is set high, it may raise consumer expectations on
quality; it then becomes difficult to match service delivery with service
expectations.
Pricing Objectives

 The first step in the pricing process is to decide the objectives of pricing.
 Christopher Lovelock classified the pricing objectives of service organizations
into three basic categories. They are:
 Revenue oriented objectives
 Operation oriented objectives
 Patronage oriented objectives
 Revenue-oriented objectives: Profit making is one of the goals of business
concerns. Companies are responsible for satisfying the stake of stockholders
and for expanding the business as per the expectations of the stockholders.
Firms will aim at a target return on investment to meet their priorities. Even
non-profit organizations look for revenues that at least break-even.
 Operation-oriented objectives: Some service organizations are capacity
constrained. They try to match demand and supply in order to ensure optimum
use of their productive capacity at any given time. Hotels, transport vehicles
and other such services seek to fill vacancies because the unfilled position
becomes an unproductive asset. Service firms may need to change prices
frequently to match demand and supply.
 Patronage-oriented objectives: Price may be used effectively to develop loyalty
and relationship with customers. Many companies are now preferring patronage
building to profit maximization as a future-oriented strategic option.
Companies can accrue multiple benefits through relationship building.
METHODS OF PRICING OF SERVICES
 The approaches for services pricing are more or less the same as that of
pricing of goods. The three recognised pricing approaches are:
 • Cost-based pricing
 • Competition-based pricing
 • Demand-based pricing

 1. Cost-based Pricing: It is also called as cost-plus pricing. Under this method the
company determines the cost of service delivery as well as a pre-determined rate of
profit in order to arrive at a price. It is necessary to analyze all costs accurately and
differentiate between fixed and variable costs in order to use cost as the basis for
pricing decisions. In the service industries it is complicated to identify and trace the
cost to the particular offering.
 2. Demand-based Pricing: Demand based pricing is generally used where the services
are price sensitive. The service providers tend to increase the price of the service
offering when demand is high. Whereas tend to lower the price of the service offerings
when demand is low.

 3. Competition-based Pricing: In this method of pricing the price is determined on the

basis of competitor’s price. Price under such situations may be used to gain short-term
competitive advantage over rivals. Companies have three main choices under this
approach: pricing above the competition, below the competition and at par with
competition.
PRICING STRATEGIES
 1. Skimming strategy: In this the services are introduced at a high price. It is assumed
that the customers are more concerned about obtaining a quality service rather than cost
of the service. As the demand for the services falls, the price level is reduced.
 2. Penetration pricing: In this, the new services are priced low. The prices are kept low
to stimulate trial and thereby ensure customer loyalty. Low pricing is possible when the
services are sensitive to price and it is possible to achieve economies of large scale
operations by operating at large volumes.
 3. Market Segmentation Pricing: The pricing strategy adopted to successfully cater to
these groups is known as discriminatory pricing on the basis of market segmentation. It
may be done on the following basis. a) Different time of consumption: Example travel
and hotel tariffs are low during off-season and high during peak season. b) Different
point of consumption: Example higher prices charged in cities than suburbs. c) Group
of buyers: Example children below 10 you are charged less in amusement parks.
 4. Price Bundling: Price bundling is a strategy whereby a seller bundles together many
different goods / services being sold and offers the entire bundle at a single price.
 5. Discount Pricing: It is used as a promotional device to encourage use during low-
demand time slots or to encourage customers to try a new service (such as an
introductory discount).
 6. Relationship Pricing : The main objective of this type of pricing is to encourage
customer loyalty by rewarding it. Thus, Relationship pricing takes the lifetime value of
the customer into account while deciding the prices.
 7. Competitors Pricing: In this method of pricing the price is determined on the basis of
competitor’s price. Price under such situations may be used to gain short-term
competitive advantage over rivals.
PROMOTION OF SERVICES
 Promotion of Services: One of the key elements of the marketing mix is promotion which is used
for the purpose of encouraging sales and conveys to the customer the position of the service.
 Promotion enables services firms to connect their brands to different people, places, events,
brands, experiences, feelings, and things.
 The various tools of promotion are:

 • ADVERTISING
 • SALES PROMOTION
 • PERSONAL SELLING
 • WORD OF MOUTH COMMUNICATION
 • PUBLIC RELATIONS AND PUBLICITY
 • SPONSORSHIP
 • DIRECT MARKETING
Guidelines for Service Communication
 1. Provide Clues to tangibilize the Service Offer: Though services are intangible, they still have
tangible components. The customers generally use these as a substitute to evaluate various service
alternatives. The tangible clues reduce the risk and eliminate the uncertainties associated with a
service not known to the customer.
 2. Make the Service easy to understand: Due to the intangible nature of the services it is generally
difficult to comprehend what exactly constitutes the offer of a service firm. The service provider
has to use tangible evidence so that the prospective customer may comprehend the offer in a better
way.
 3. Promising what is possible: Service may be difficult to grasp mentally because of their
intangibility. Tangible attributes of the service can be used to help better understand the service
offered, e.g. credit cards. Services firms need to deliver on their promises.
 4. Use of Word-of-Mouth Publicity: In professional services like doctors, lawyers, teachers,
hairdressers, schools, colleges, etc. Word of mouth publicity that have already experienced the
service holds weightage in attracting prospective customers.
 5. Maintain Communications Continuity: It is imperative to maintain continuity in communication
for achieving differentiation and to portray a unifying and consistent theme over a period of time.
Continuous advertising and publicity will enable the customer to get strongly attached to the theme.
SERVICE DELIVERY CHANNELS
 Distribution is the process of transferring goods from the place of production to the
place of consumption.
 In case of tangible goods, the distribution system involves the use of a network of
intermediaries for distribution. In some cases the goods are distributed directly.
 In case of services, they are inseparable from the service provider and can neither be
stored nor transported nor is their ownership or title passed along the channel line.
 Due to their peculiar characteristics of services, the placing of services should not be
treated in the same lines as that of tangible products.
 There are certain services where the service provider has to be present personally in
order to deliver the services according to their specifications.
 On the other hand, there are certain services which do not require the presence of
service provider E.g. ATM.
 In services, distribution means provision of personal services and information to the
customer which adds value to the service.
 Services must be made available at the right time and at right place, and it should be
accessible with care and convenience by which the customer can avail the services.
 Location of Service Premises (Choice of Location): The place of service delivery is
very important. The decision regarding location is very much concerned with the
selection of site from where the delivery of service takes place.
 The accessibility and the availability form an important base for location of service
premises.
 Accessibility refers to the convenience with which a service can be purchased, used or
received.
 Availability refers to the extent to which a service is obtainable or capable of being
purchased, used or received.
FACTORS CONSIDERED FOR SELECTING A
SERVICE LOCATION
 Nature of Service: Services are perishable and inseparable from the service provider.
In such a case there is less flexibility and more cost is involved in setting the location.
 Nature of Interaction: The nature of interaction may differ from services to services.
The question here is where the service is to be delivered? Whether at the place of
service provider or at the place of customer.
 Customer Needs and Wants: According to a market segment, the customer wants and
needs may differ. There are customers who may rate convenience as a major criterion
for a service while some others may want some special feature of the service and are
willing to go to any location.
 Natural Geographical Location: There are certain services that do not have a choice of
location. In case of holiday resorts in the hill – stations or on a beach; are dependent on
geographical locations rather than the convenience factor of both the customer and the
firm.
 Technological Advancement: Automation has advanced to such an extent that there is a
great reduction in the choice of location decisions. In case of banking services with the
introduction of ATMs it is possible to separate the service provider from the customer.
 Dependency on Other Services: There are certain services like medical services e.g. x-
ray, diagnostic laboratories, pharmacy etc. That are dependent on each other and
therefore they are required in clusters of associated services and products.
 Infrastructure Facilities: There are certain services, which require rapid communication
facilities with the other companies. Eg. Financial services. They are to be located in
large and highly developed cities with excellent communication.
 Target Market Decisions: The location must be closer to the largest customer taking
into consideration the infrastructure facilities available to access to the location. It
should be easier for the target market to reach the service outlet
Service Location
 Where to locate a service outlet is a critical decision. Such a decision will be influenced

by many factors. While selecting a location for service outlets, the following factors are

to be considered:

 Proximity The location of the service outlet should be as close to the target market as

possible. The proximity of the service outlet saves time and energy costs and also

develops affinity among the consumers.

 Image The image of the location should match the corporate image of the service

company. The level of acceptability of a location by the consumers varies. If an air-

conditioned restaurant is established in a slum area, the proximity factor does not work

to attract customers.
 Parking facility: Parking facility is becoming an important locational factor, particularly in

cities and metros. A service outlet without adequate parking facilities is less likely to

attract customers.

 Convenience: The location of the service outlet should be convenient for customers.

Convenience is often measured in terms of public transport, other shopping facilities,

safety and security and so on.

 Accessibility to other services: A service outlet requires a host of other services and

infrastructural facilities such as electricity, telecommunications, water and sanitation.

The location that provides an adequate qualitative supply of these services is more

suitable for service organisations.

 Competitive advantage: The effect of the competition cannot be ignored while taking any

decision in services. The location that provides competitive advantage can be preferred.
Intermediaries for Service Distribution
(Choice of Channel)

 Franchisees: Franchisees are service outlets licensed by a principal to deliver a unique

service concept, it has been created or popularized.

 Agents and Brokers: Agents and Brokers are representatives who distribute and sell the
services of one or more service suppliers.

 Electronic Channels: Electronic channels include all forms of service provision through
television, telephone, interactive multimedia, and computer. These also cover the
internet channels.
CHANNEL OPTIONS FOR SERVICE
COMPANIES
CHALLENGES IN SERVICE DISTRIBUTION
THROUGH ELECTRONIC CHANNELS
1. Price Competition
2. Inability to Customize
3. Lack of Consistency because of Customer Involvement
4. Security Concerns
5. Competition from different geographic locations
CHANNEL CONFLICT AND RESOLUTION
 There are conflicts over:
 objectives and performance,
 difficulty controlling quality and consistency across outlets,
 tension between empowerment and control and
 channel ambiguity.
 Channel conflict over Objectives and Performances: The parties involved in
delivering services do not always agree about how the channel should operate.
Channel conflict can occur between the service provider and the service
intermediary, among intermediaries in a given area, and between different types
of channels used by a service provider (such as when a service principal has its own
outlets as well as franchised outlets).
 The conflict most often centers on the parties having different goals, competing
roles and rights, and conflicting views of the way the channel is performing.
Sometimes the conflict occurs because the service principal and its intermediaries
are too dependent on each other.
 Difficulty controlling Quality and consistency across Outlets: Delivering of
services always involves difficulties for both principals and their
intermediaries, as it involves the inconsistency and lack of uniform quality
that result when multiple outlets deliver services.

 Tension between Empowerment and control: The strategies framed by the

service provider makes sense only when the services are delivered in exactly
the same way as the successful company outlets provide it. There has to be
empowerment and control among the service principal and the service
intermediaries.

 Channel Ambiguity: There are always doubts between the roles of the
company and the intermediary. The roles of the service principal and its
intermediaries are unclear leading confusion and conflict.
CONFLICT RESOLUTION

 Control Strategies: Standards are fixed both for revenues , service

performance, measures results, and compensates or rewards on the basis of
performance levels. Thus, with a control strategy, the service provider
believes that the intermediaries will perform their best.

 Empowerment Strategies: Service provider here allows greater flexibility to

intermediaries on the belief that their talents are best revealed in
participation.

 Partnering Strategies: This involves partnering with intermediaries to learn

together about end customers, set specifications, improve delivery and
communicate honestly.