7 Distributing Services

Chapter 7 Distributing Services

Applying the Flow Model of Distribution to Services Distribution embraced three interrelated elements

 Information and promotion flow  Negotiation flow  Product flow

Information and Physical Processes of the Augmented Service Product Information Processes Paymen t Billing

Information Consultation

Core

OrderTaking

Exception Hospitality s Safekeeping

Physical Processes

Using Websites for Service Delivery Information Read brochure/FAQ; get schedules/ directions; check prices

Consultation

Payment

Conduct e-mail dialog Use expert systems

Pay by bank card Direct debit

Billing Receive bill Make auction bid Check account status

Core

Exceptions Make special requests Resolve problems

Order-Taking Make/confirm reservations Submit applications Order goods, check status

Hospitality Record preferences

Safekeeping Track package movements Check repair status

CORE: Use Web to deliver information-based core services

Options for Service Delivery There are 3 types of interactions between customers and service firms

 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.)

Method of Service Delivery Availability of Service Outlets Nature of Interaction Single Site Multiple Sites between Customer and Service Organization

Theater Barbershop Service organization goes to House painting customer Mobile car wash Customer and service Credit card company organization transact at arm’s Local TV station length Customer goes to service organization

Bus service Fast-food chain Mail delivery Auto club road service Broadcast network Telephone company

Place vs. Cyberspace  Place - customers and

 Required for people processing services  Offers live experiences, social interaction, e.g., food services  More emphasis on eye-catching servicescape, entertainment

 Cyberspace - customers

 Ideal for info-based services  Saves time  Facilitates information gathering  May use express logistics service to deliver physical core products

suppliers meet in a physical environment

and suppliers do business electronically in virtual environment created by phone/internet linkages

“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

Core

As enhanced by distributor

+

As experienced by customer

=

Core

Franchising Franchising is a fast growth strategy, when

   

Resources are limited Long-term commitment of store managers is crucial Local knowledge is important Fast growth is necessary to pre-empt competition

Service Process and Market Entry Processing Services  People 

Export the service concept  Import customers  Transport customers to new locations

Processing Services  Possession 

Most require an ongoing local presence, whether it is the customers dropping off items or personnel visiting customer sites

Based Services  Information 

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 Technology drives production and globalization of consumption limits competitors with leverage of foreign technical edge. competitive advantage, but management systems can be globalized

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.

Demand for many services is derived to a significant degree from economic and educational levels.

Level of economic developments impacts demand for services to individually owned goods

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 technologybased 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 Variable labor rates may Major cost elements impact on pricing in labor- favor low-cost locations. can be centralized & sensitive services. minor cost elements localized.

Government

Social policies vary widely Policies may Policies may impact and may affect labor cost decrease/increase cost demand and supply etc. & and distort pricing encourage/discourage certain activities