Marketing Channels for Services Part 4: Additional Perspectives on Marketing Channels Marketing Channels for Services

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.

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 The perishability of services

Intangibility & Channel Management 4 Marketing channels provide the most direct & potent basis for making a service more tangible. Why? The customer is directly exposed to and 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 thus 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 consistent level of service. Why? The amount of human involvement—behavior— is often involved in providing services.

Customer Involvement & Channel Management 6 In a channel containing services such as barbers, 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.

Perishability of Services & Channel Management 7 The channel must be designed so as to connect as efficiently as possible those providing the service with those desiring to obtain it. Why? Because of the high degree of perishability of unsold services, design should maximize the sale of service during its limited exposure to the target market.

Discussion Question #1 Firms of all sizes have developed many kinds of social-networking tools, instant 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. 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.

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

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

Benefits of Franchised Channels Using business format franchising can give the service provider the potential to reap 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 #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 drastically 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. 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.