1. DELIVERING SERVICE THROUGH INTERMEDIARIES AND ELECTRONIC CHANNELS
DELIVERING SERVICE THROUGH INTERMEDIARIES AND ELECTRONIC CHANNELS Chapter 13
Donna J. Hill, Ph.D.
Fall 2000

2. Objectives for Chapter 13: Delivering Service through Intermediaries and Electronic Channels
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
Identify the benefits and challenges of each method of service delivery
Outline the strategies that are used to manage service delivery through intermediaries

3. Distribution---Time and Place Utility
Availability ---when
Access --- easy to conduct transaction
Operating Hours
Direct channels ---no intermediaries
Indirect channels ---

4. 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)

5. Functions Performed by Intermediaries
Co-producing the service
Making services locally available
Functioning as a link between the brand and the customer

6. Types of Intermediaries
Agents
selling --- contractual authority to sell
purchasing--- purchase for a buyer
facilitating --- help with marketing process
Brokers --- bring buyers and sellers together
Electronic Channels --- do not require human interaction
Franchises --- Service outlets licensed by a principal to deliver a unique service concept it had created or popularized.

7. Characteristics of Agents
A agent works for the pricipal continuously
An agent receives commissions (usually two to six percent of selling price)
An agent delivers the rights to services
An agent is entrusted with influence over prices, terms, and conditions of sale.

8. Travel Agent (selling agent)

9. Services Intermediaries
franchisees
e.g., Jiffy Lube, H&R Block, McDonald’s
agents and brokers
e.g., travel agents, independent insurance agents
electronic channels
e.g., ATMs, university video courses, TaxCut software

10. Key Issues Involving Intermediaries
conflict over objectives and performance
conflict over costs and rewards
control of service quality
empowerment versus control
channel ambiguity

11. Exhibit 13-4 Summary of Benefits and Challenges for Franchisers of Service
Leverages the business format to gain expansion and revenues
Maintains consistency in outlets
Gains knowledge of local markets
Shares financial risk and frees up capital
Difficulty in maintaining and motivating franchisees
Highly publicized disputes and conflict
Possibility of inconsistent quality that can undermine the company name
Control of customer relationship by intermediary

12. Summary of Benefits and Challenges for Franchisees of Service
Obtaining an established business format on which to base a business
Receiving national or regional brand marketing
Minimizing the risks of starting a business
Disappointing profits and revenues
Encroachment and franchise saturation
High failure rates and unfair terminations
Lack of perceived control
High fees and rigid contracts
Unrealistic expectations

13. Benefits Challenges Reduced selling and distribution costs
Exhibit Summary of Benefits and Challenges in Distributing Services through Agents and Brokers
Benefits
Challenges
Reduced selling and distribution costs
Intermediary’s possession of special skills and knowledge
Wide representation
Knowledge of local markets
Customer choice
Loss of control over pricing and other aspects of marketing
Representation of multiple service principals

14. Challenges Benefits Customers are active, not passive
Exhibit 13-7 Summary of Benefits and Challenges in Electronic Distribution of Services
Benefits
Challenges
Customers are active, not passive
Lack of control of electronic environment
Price competition
Inability to customize with standardized services
Lack of consistency with customer involvement
Security concerns
Competition from widening geographies
Consistent delivery for standardized services
Low cost
Customer convenience
Wide distribution
Customer choice and ability to customize
Quick customer feedback

15. Strategies for Effective Service Delivery through Intermediaries
Control Strategies
Empowerment Strategies
Measurement
Review
Help the intermediary develop customer-based service processes
Provide needed support
Develop the intermediary to deliver service quality
Change to a cooperative management structure
Partnering Strategies
Alignment of goals
Consultation and cooperation

16. Examples www.garden.com www.ticketmaster.com www.mediconsult.com

17. Answer these questions
Does this represent a direct or indirect channel? If indirect, which type?
Describe how each of the following reasons for channel conflict is problematic for these businesses?
conflict over objectives and performance
conflict over costs and rewards
control of service quality
empowerment versus control
channel ambiguity
What is the main benefit the business gets from using this channel? What is the main challenge?

18. Customer-Focused Distribution
Identify market segments.
Identify benefits sought by customers.
Match customer needs to channel and distribution strategies.
Manage quality control.
Manage corporate growth.