Chapter 7 Marketing Channels for Services ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The importance of services. Services marketing objectives. Characteristics of services. Intangibility and channel management . Inseparability and channel management . Customer involvement and channel management Additional perspectives.

The Importance of Services 1 1. The services sector of the economy is more than twice the size of the manufacturing sector. 2. Services account for more than half of all consumer expenditures. 3. Almost 80% of all new jobs created over the past 10 years have been in the service sector.

Services Marketing Objectives 2 Services Marketing Objectives = Product Marketing Objectives Offer services (or products) that are targeted to meet customer demand. Present services (or products) to customers so as to maximize their demand.

Characteristics of Services 3 Characteristics of Services that Distinguish them from Products The intangibility of services. The inseparability of services from service providers The difficulty of standardizing services. The high degree of customer involvement in services.

Intangibility of Services Much less tangible than physical products Difficult to differentiate Brands . Product Consumers have more definite impressions & preferences about physical products because of their tangibility ≠

Inseparability of Services Inseparably tied to provider of service Services produced do not exist as entities in and of themselves. Product An entity that exists separately from the manufacturer itself. ≠

Difficulty of Standardization Service More difficult to standardize than products Variability associated with human element is much more likely into the production of services than into the production of products Product High degree of standardization found in advanced industrial societies ≠

Customer Involvement in Services Consumers are more involved in the production of services than they are in the production of products. Product Individual consumers do not play much of a role in determining the nature of products manufactured for them. = Consumer is involved only in consumption of product ≠

Implications of Service Characteristics for Channel Management The relationship between the characteristics of services & the management of marketing channels includes: Intangibility & Channel Management. Inseparability & Channel Management. Difficulty of Standardization & Channel Management. Customer Involvement & Channel Management.

Intangibility & Channel Management 4 Marketing channels provide the most direct & effective basis for making a service more tangible. Why? The customer is directly experiences the service provided by the channel.

Inseparability & Channel Management 5 The inseparability of services from the provider means that the service provider does not have the “safety net” available to the product manufacturer, whereby the product itself can make up for poor distribution. Why? All aspects of the marketing channel with which the consumer comes into contact are a reflection of the quality of the service.

Difficulty of Standardization & Channel Management In the case of franchises, it is difficult for the channel manager to get the franchisees to deliver a steady level of service. Why? The human involvement—behavior— is often involved in providing services.

Customer Involvement & Channel Management 6 In a channel containing services such as fitness clubs, and tax preparation, the channel design should facilitate customer involvement. Why? Such services generally require input from the customer in order to be performed successfully.

Additional Perspectives 8 Important considerations for developing & operating marketing channels for services Shorter Channels. Franchised Channels. Customization of Services. Channel Flows.

Shorter Channels The direct structure in a short channel Eliminates the challenge of designing a channel structure in terms of: Length, & type of intermediaries at each level. The selection of intermediaries. The need to motivate intermediaries to do an effective job of selling the product.

Franchised Channels Using business format franchising can give the service provider the potential to gain benefits: The scale of economies of a large organization. The entrepreneurial drive & motivation associated with independently owned businesses. The degree of control necessary to foster standardization in services offered by the individual franchised units.

Customization of Services Many services provide for a high degree of customization. For services requiring a high degree of customization, small-scale channel consisting of local independent service providers are likely to continue to play a major role.

Channel Flows Many can be handled electronically, Flows that “carry” the service through the channel are those of information, negotiation, & promotion. Many can be handled electronically, with the role of technology becoming even greater in the future than it already is.

Discussion Question #1 Firms of all sizes have developed many kinds of social-networking tools, direct messaging programs, and text messaging systems to deal with customer service inquiries. But a recent survey by American Express Co. found that almost 90 percent of the respondents said they still want their inquiries handled by real customer service representatives in real time over the “old-fashioned” telephone. Q: In light of all the new technology available to customers, why do you think they still prefer the old-fashioned telephone-based service channel? Discuss.

Discussion Question #3 OpenTable.com Inc., with more than 13,000 participating restaurants, is the market leader in online restaurant reservations service providers. Restaurants pay a monthly fee as well as $1.00 per head for reservations made by diners through OpenTable.com. But OpenTable also charges 25 cents per head even if diners make reservations through the restaurants’ own Web sites. By making reservations through OpenTable, diners also earn points that can be redeemed for discount coupons. But there may be a problem with this seemingly straightforward deal between OpenTable and restaurants using its services. Some diners claim that if they make their reservations through OpenTable, the restaurants react for the extra cost involved by seating diners at inferior table locations and by providing poor service. OpenTable denies this. Q: Why would restaurants unhappy with the deal being offered to them by OpenTable take out their disappointment on diners? Discuss.

Discussion Question #5 Automated teller machines (ATMs) and, more recently, online banking, were thought to provide such a valuable service alternative that customers would need far fewer personal banking services with human tellers in traditional bank branches. In short, these new technologies were supposed to reduce extremely the number of bank tellers and branches. But things did not work out that way. Between 1995 and 2005 the number of bank branches grew from 50,000 to 70,000, an increase of 40 percent. The number of tellers to staff the branches also increased in roughly the same proportion during this decade. This happened despite the fact that the number of banking firms actually decreased dramatically from 10,000 to less than 8,000 during that same period. Q: What do you think is going on here? Why do you think so many consumers still demand “old-fashioned” bank branches and tellers in spite of new technological alternatives? Discuss.