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

7- 2

Information and Physical Processes of the

Augmented Service Product (Fig. 7.1)
Information
Processes
Payme
nt

Information
Consultation

Billing

Core

OrderTaking

Exceptio
Hospitality
ns
Safekeeping

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Physical
Processe
s

7- 3

Using Websites for Service Delivery

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

Consultation

Payment

Conduct e-mail dialog

Use expert systems

Pay by bank card

Direct debit

Billing
Receive bill
Make auction bid
Check account status

Core

Exceptions
Make special requests
Resolve problems

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

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

7- 4

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
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

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Multiple Sites

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

7- 6

Place vs. Cyberspace

Place - customers and

Required for people processing

suppliers meet in a physical

environment

services

Offers live experiences, social

interaction, e.g., food services

More emphasis on eye-catching

servicescape, entertainment

Cyberspace - customers Ideal for info-based

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

Slide 2004 by Christopher Lovelock and Jochen Wirtz

services

Saves time
Facilitates information gathering
May use express logistics

service to deliver physical core

products

Services Marketing 5/E

7- 7

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

Core

As enhanced
by distributor

Slide 2004 by Christopher Lovelock and Jochen Wirtz

As experienced
by customer

Services Marketing 5/E

Core

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

7 - 12

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

7 - 13

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

7 - 16

Impact of Globalization Drivers on Different

Service Categories (Table 7.2)

Globalization
Drivers

People
Processing

Possession
Processing

Information
Based

Competition

Simultaneity of
production and
consumption limits
leverage of foreign
competitive advantage,
but management
systems can be
globalized

Technology drives
globalization of
competitors with
technical edge.

Highly vulnerable to
global dominance by
competitors with
monopoly or
competitive
advantage in
information.

Market

People differ
economically and
culturally, so needs for
service and ability to
pay may vary.

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

Demand for many

services is derived to
a significant degree
from economic and
educational levels.

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

Possession
Processing

Information
Based

Technology

Use of IT for delivery of

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

Need for technologybased service delivery

systems depends on
possessions requiring
service and the cost
trade-offs in labor
substitution

Ability to deliver
core services
through remote
terminals may be a
function of
investment in
computerization etc.

Cost

Variable labor rates may

impact on pricing in
labor-sensitive services.

Variable labor rates

may favor low-cost
locations.

Major cost elements

can be centralized &
minor cost elements
localized.

Government

Social policies (e.g.,

Policies may
health) vary widely and
decrease/increase
may affect labor cost etc. cost &
encourage/discourage
certain activities

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Policies may impact

demand and supply
and distort pricing

7 - 18