Chapter 7 Distributing Services

Applying the Flow Model of Distribution to Services  Information and promotion flow  Negotiation flow  Product flow Distribution embraced three interrelated elements

Information and Physical Processes of the Augmented Service Product Exceptions Billing Payment Information Processes Information Consultation Safekeeping Physical Processes Order- Taking Core Hospitality

Using Websites for Service Delivery Safekeeping Track package movements Check repair status CORE: Use Web to deliver information-based core services Core Consultation Conduct dialog Use expert systems Order-Taking Make/confirm reservations Submit applications Order goods, check status Hospitality Record preferences Billing Receive bill Make auction bid Check account status Exceptions Make special requests Resolve problems Payment Pay by bank card Direct debit Information Read brochure/FAQ; get schedules/ directions; check prices

Options for Service Delivery  Customer goes to the service provider (or intermediary)  Service provider goes to the customer  Interaction at arm’s length (via the Internet, telephone, fax, mail, etc.) There are 3 types of interactions between customers and service firms

Method of Service Delivery Availability of Service Outlets Nature of Interaction between Customer and Service Organization Single SiteMultiple Sites Customer goes to service organization  Theater  Barbershop  Bus service  Fast-food chain Service organization goes to customer  House painting  Mobile car wash  Mail delivery  Auto club road service Customer and service organization transact at arm’s length  Credit card company  Local TV station  Broadcast network  Telephone company

Place vs. Cyberspace  Place - customers and suppliers meet in a physical environment  Cyberspace - customers and suppliers do business electronically in virtual environment created by phone/internet linkages  Required for people processing services  Offers live experiences, social interaction, e.g., food services  More emphasis on eye-catching servicescape, entertainment  Ideal for info-based services  Saves time  Facilitates information gathering  May use express logistics service to deliver physical core products

“24/7” - Factors Encouraging Extended Operating Hours  Economic pressure from consumers  Changes in legislation  Economic incentives to improve asset utilization  Availability of employees to work nights, weekends  Automated self-service

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”

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

Splitting Responsibilities for Delivering Supplementary Services As created by originating firm As enhanced by distributor As experienced by customer + Core =

Franchising  Resources are limited  Long-term commitment of store managers is crucial  Local knowledge is important  Fast growth is necessary to pre-empt competition Franchising is a fast growth strategy, when

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

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)

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

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

Impact of Globalization Drivers on Different Service Categories 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.

Impact of Globalization Drivers on Different Service Categories Globalization Drivers People 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 technology- based 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., health) vary widely and may affect labor cost etc. Policies may decrease/increase cost & encourage/discourage certain activities Policies may impact demand and supply and distort pricing