© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

14 Chapter Delivering Service Through Intermediaries and Electronic Channels  Service Distribution  Direct or Company-Owned Channels  Franchising  Agents and Brokers  Electronic Channels  Common Issues Involving Intermediaries  Strategies for Effective Service Delivery Through Intermediaries

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Objectives for Chapter 14: Delivering Service Through Intermediaries  Identify the primary channels through which services are delivered to end customers.  Provide examples of each of the key service intermediaries.  View delivery of service from two perspectives—the service provider and the service deliverer.  Discuss the benefits and challenges of each method of service delivery.  Outline the strategies that are used to manage service delivery through intermediaries.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Service Provider Participants  service principal (originator)  creates the service concept (like a manufacturer)  service deliverer (intermediary)  entity that interacts with the customer in the execution of the service (like a distributor/wholesaler)

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Services Intermediaries  Franchisees  service outlets licensed by a principal to deliver a unique service concept it has created  e.g., Jiffy Lube, Blockbuster, McDonald’s  Agents and Brokers  representatives who distribute and sell the services of one or more service suppliers  e.g., travel agents, independent insurance agents  Electronic Channels  all forms of service provision through electronic means  e.g., ATMs, university video courses, TaxCut software

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Table 14.1 Benefits and Challenges for Franchisers of Service  Benefits:  Leveraged business format for greater expansion and revenues  Consistency in outlets  Knowledge of local markets  Shared financial risk and more working capital  Challenges:  Difficulty in maintaining and motivating franchisees  Highly publicized disputes and conflict  Inconsistent quality  Control of customer relationship by intermediary

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Table 14.1 (Continued) Benefits and Challenges for Franchisees of Service  Benefits:  An established business format  National or regional brand marketing  Minimized risk of starting a business  Challenges:  Encroachment  Disappointing profits and revenues  Lack of perceived control over operations  High fees

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Table 14.2 Benefits and Challenges in Distributing Services through Agents and Brokers  Benefits:  Reduced selling and distribution costs  Intermediary’s possession of special skills and knowledge  Wide representation  Knowledge of local markets  Customer choice  Challenges:  Loss of control over pricing  Representation of multiple service principals

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Table 14.3 Benefits and Challenges in Electronic Distribution of Services  Benefits:  Consistent delivery for standardized services  Low cost  Customer convenience  Wide distribution  Customer choice and ability to customize  Quick customer feedback  Challenges:  Price competition  Inability to customize with highly standardized services  Lack of consistency due to customer involvement  Changes in consumer behavior  Security concerns  Competition from widening geographies

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Common Issues Involving Intermediaries  conflict over objectives and performance  difficulty controlling quality and consistency across outlets  tension between empowerment and control  channel ambiguity

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Strategies for Effective Service Delivery Through Intermediaries  Control Strategies:  Measurement  Review  Partnering Strategies:  Alignment of goals  Consultation and cooperation  Empowerment Strategies:  Help the intermediary develop customer-oriented service processes  Provide needed support systems  Develop intermediaries to deliver service quality  Change to a cooperative management structure