Chapter 7

Distributing Services

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

7- 1

Applying the Flow Model of Distribution to Services

Distribution embraced three interrelated elements

Information and promotion flow Negotiation flow Product flow

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Information and Physical Processes of the Augmented Service Product (Fig. 7.1)
Information Processes
Payment

Information Consultation
OrderTaking

Billing Exceptions

Core

Hospitality Safekeeping

Physical Processes
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Using Websites for Service Delivery

Information
Read brochure/FAQ; get schedules/ directions; check prices

Payment
Pay by bank card Direct debit

Consultation
Conduct e-mail dialog Use expert systems

Billing
Receive bill Make auction bid Check account status Core

Order-Taking
Make/confirm reservations Submit applications Order goods, check status

Exceptions
Make special requests Resolve problems

Hospitality
Record preferences

Safekeeping
Track package movements Check repair status

CORE: Use Web to deliver information-based core services

Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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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 arms length (via the Internet, telephone, fax,
mail, etc.)

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

7- 5

Method of Service Delivery (Table 7.1)

Availability of Service Outlets Nature of Interaction Single Site Multiple Sites between Customer and Service Organization
Customer goes to service organization

Service organization goes to customer

Customer and service organization transact at arms length

Theater Barbershop House painting Mobile car wash Credit card company Local TV station

Bus service Fast-food chain Mail delivery Auto club road service Broadcast network Telephone company

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

7- 6

Place vs. Cyberspace

Place - customers and
Required for people processing services suppliers meet in a physical Offers live experiences, social environment interaction, e.g., food services More emphasis on eye-catching servicescape, entertainment

Cyberspace - customers

and suppliers do business electronically in virtual environment created by phone/internet linkages

Ideal for info-based services Saves time Facilitates information gathering May use express logistics service to deliver physical core products

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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24/7 - Factors Encouraging Extended Operating Hours (Mgt Memo 7.1)

Economic pressure from consumers Changes in legislation

Economic incentives to improve asset utilization

Availability of employees to work nights, weekends Automated self-service

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

7- 8

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

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

7- 9

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

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

7 - 10

Splitting Responsibilities for Delivering Supplementary Services (Fig. 7.2)

As created by originating firm

As enhanced by distributor

As experienced by customer

Core

Core

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

7 - 11

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

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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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
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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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)

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

7 - 14

Forces for Internationalization

Market drivers Competition drivers Technology drivers Cost drivers Government drivers Impact will vary by service type (people, possessions, information)

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

7 - 15

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

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Impact of Globalization Drivers on Different Service Categories (Table 7.2)

Globalization Drivers Competition

People Processing
Simultaneity of production and consumption limits leverage of foreign competitive advantage, but management systems can be globalized People differ economically and culturally, so needs for service and ability to pay may vary.

Possession Processing
Technology drives globalization of competitors with technical edge.

Information Based
Highly vulnerable to global dominance by competitors with monopoly or competitive advantage in information. Demand for many services is derived to a significant degree from economic and educational levels.

Market

Level of economic developments impacts demand for services to individually owned goods

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

7 - 17

Impact of Globalization Drivers on Different Service Categories (Table 7.2, contd)

Globalization People Drivers Processing Use of IT for delivery of Technology Possession Processing
Need for technologybased service delivery systems depends on possessions requiring service and the cost trade-offs in labor substitution Variable labor rates may favor low-cost locations. Policies may decrease/increase cost & encourage/discourage certain activities

Information Based
Ability to deliver core services through remote terminals may be a function of investment in computerization etc. Major cost elements can be centralized & minor cost elements localized. Policies may impact demand and supply and distort pricing

supplementary services may be a function of ownership and familiarity with technology.

Cost

Variable labor rates may impact on pricing in labor-sensitive services. Social policies (e.g., health) vary widely and may affect labor cost etc.

Government

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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