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Chapter 4 Distributing Services through Physical and Electronic Channels Copyright © 2008 Pearson Education Chapter 4 Distributing Services through Physical and Electronic Channels Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 1

Learning Objectives - Chapter 4 § Examine the role that distribution plays in services Learning Objectives - Chapter 4 § Examine the role that distribution plays in services § Determine challenges faced by people-processing, possession-processing, and information based services § Implications of delivery through physical and electronic channels § Understand the role of intermediaries § Determine the drivers of globalization of services Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 2

Distribution in a Services Context Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Distribution in a Services Context Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 3

Applying the Flow Model of Distribution to Services Distribution impacts the typical sales cycle Applying the Flow Model of Distribution to Services Distribution impacts the typical sales cycle in three ways: 1. Information and promotion flow 2. Negotiation flow 3. Product flow Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 4

Using Websites for Service Delivery Information Read brochure/FAQ; get schedules/ directions; check prices Consultation 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 Order-taking Receive bill Make auction bid Check account status Core Exceptions Make special requests Resolve problems 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 Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 5

Determining Type of Contact: Options for Service Delivery Copyright © 2008 Pearson Education Canada Determining Type of Contact: Options for Service Delivery Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 6

Distribution Options for Serving Customers § Customers visit service site § Service providers go Distribution Options for Serving Customers § Customers visit service site § Service providers go to customers § Service transaction is conducted remotely Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 7

Six Options for Service Delivery (Table 4. 1) Availability of Service Outlets Type of Six Options for Service Delivery (Table 4. 1) Availability of Service Outlets Type of Interaction between Customer and Service Organization Customer and service organization transact remotely (mail or electronic communications) Copyright © 2008 Pearson Education Canada Multiple Sites Theatre Bus service Barbershop Fast-food chain House painting Customer goes to service organization Service organization comes to customer Single Site Mail delivery Mobile car wash Credit card company Broadcast network Local TV station Telephone company Services Marketing, Canadian Edition Chapter 4 - 8

Channel Preferences Vary among Customers § For complex and high-perceived risk services, people rely Channel Preferences Vary among Customers § For complex and high-perceived risk services, people rely on personal channels § Individuals with greater confidence and knowledge about a service/channel use impersonal and self-service channels § Customers with social motives use personal channels § Convenience is a key driver of channel choice Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 9

Delivering Services in Cyberspace Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Delivering Services in Cyberspace Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 10

Service Delivery Innovations Facilitated by Technology § Technological Innovations Ø Development of “smart” mobile Service Delivery Innovations Facilitated by Technology § Technological Innovations Ø Development of “smart” mobile telephones and PDAs as well as Wi -Fi high-speed Internet technology that links users to Internet from almost anywhere Ø Voice-recognition technology Ø Websites Ø Smart cards - Store detailed information about customer Act as electronic purse containing digital money § Increase accessibility of services § Deliver right information or interaction at right time § Create and maintain up-to-date real-time information Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 11

e-Commerce: Move to Cyberspace (1) § Internet facilitates 5 categories of “flow” Ø Information e-Commerce: Move to Cyberspace (1) § Internet facilitates 5 categories of “flow” Ø Information Ø Negotiation Ø Service Ø Transactions Ø Promotion § Electronic channels offer complement/alternative to traditional physical channels § Convenience (24 -hour availability, save time, effort) § Ease of obtaining information online and searching for desired items § Better prices than in many bricks-and-mortar stores § Broad selection Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 12

e-Commerce: Move to Cyberspace (2) § Recent Developments link Websites, customer management (CRM) systems, e-Commerce: Move to Cyberspace (2) § Recent Developments link Websites, customer management (CRM) systems, and mobile telephony § Integrating mobile devices into the service delivery infrastructure can be used as means to: Ø Access services Ø Alert customers to opportunities/problems Ø Update information in real time § See “Online versus Bricks-and-Mortar” (SP 4. 4) Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 13

Role of Intermediaries Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter Role of Intermediaries Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 14

Splitting Responsibilities For Supplementary Service Elements As created by originating firm Core product (Fig Splitting Responsibilities For Supplementary Service Elements As created by originating firm Core product (Fig 4. 4) As enhanced by distributor + As experienced by customer = Supplementary services Core Total experience and benefits Challenges for original supplier Ø Act as guardian of overall process Ø Ensure that each element offered by intermediaries fits overall service concept Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 15

Franchising (1) § Popular way to expand delivery of effective service concept § Franchising Franchising (1) § Popular way to expand delivery of effective service concept § Franchising is a fast growth strategy, when Ø Resources are limited Ø Long-term commitment of store managers is crucial Ø Local knowledge is important Ø Fast growth is necessary to pre-empt competition § Study shows significant attrition rate among franchisors in the early years of a new franchise system Ø One-third of all systems fail within first 4 years Ø Three-fourths of all franchisors cease to exist after 12 years Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 16

Franchising (2) § Disadvantages of franchising Ø Some loss of control over delivery system Franchising (2) § Disadvantages of franchising Ø Some loss of control over delivery system and, thereby, over how customers experience actual service Ø Effective quality control is important yet difficult Ø Conflict between franchisees may arise especially as they gain experience § Alternative: license another supplier to act on the original supplier’s behalf to deliver core product, for example: Ø Trucking companies Ø Banks selling insurance products Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 17

The Challenge of Distribution in Large Domestic Markets Copyright © 2008 Pearson Education Canada The Challenge of Distribution in Large Domestic Markets Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 18

The Challenge of Distribution In Large Domestic Markets § Marketing services (i. e. , The Challenge of Distribution In Large Domestic Markets § Marketing services (i. e. , physical logistics) face challenges due to: Ø Distances involved (geographic areas) Ø Existence of multiple time zones Ø Multiculturalism (especially, immigrants and indigenous people) Ø Differences in laws and tax rates § Large U. S. companies counter this by: Ø Targeting specific market segments Ø Seeking out narrow market niches § Serving multiple segments across a huge geographic area is biggest marketing challenge Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 19

Distributing Services Internationally Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter Distributing Services Internationally Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 20

How Service Processes Affect International Market Entry § People processing services require direct contact How Service Processes Affect International Market Entry § People processing services require direct contact with customers § Possession processing involves services to customer’s physical possessions § Information-based services include mental processing services and information processing services Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 21

Barriers to International Trade in Services § Passage of free-trade legislation is important facilitator Barriers to International Trade in Services § Passage of free-trade legislation is important facilitator of transnational operations § Despite efforts of WTO and GATT, operating in international markets still difficult Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 22

Factors Favoring Adoption of Transnational Strategies § Transnational strategy involves integration of strategy formulation Factors Favoring Adoption of Transnational Strategies § Transnational strategy involves integration of strategy formulation and its implementation across all countries § Market drivers of common customers across countries and corporate standardization leading to supplier consolidation § Competition § Technology § Cost § Government policies Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 23

Internationalization Approaches § Export information-based services § Use third parties to market/deliver service concept Internationalization Approaches § Export information-based services § Use third parties to market/deliver service concept § Control service enterprise abroad Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 24

Impact of Globalization Drivers on Various Service Categories (1) (Table 4. 2) Globalizatio n Impact of Globalization Drivers on Various Service Categories (1) (Table 4. 2) Globalizatio n 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 development impacts demand for services to individually owned goods Demand for many services is derived to a significant degree from economic and educational levels Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 25

Impact of Globalization Drivers on Various Service Categories (2) (Table 4. 2) Globalization Drivers Impact of Globalization Drivers on Various Service Categories (2) (Table 4. 2) Globalization Drivers Technology Cost Government People processing Possession processing Information based 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 labour substitution Ability to deliver core services through remote terminals may be a function of investment in computerization, etc. Variable labour rates may impact on pricing in may favor low-cost labour-sensitive services locations Major cost elements can be centralized and minor cost elements localized Social policies (e. g. , health) vary widely and may affect labour cost, etc. Policies may impact demand supply and distort pricing Copyright © 2008 Pearson Education Canada Policies may decrease/increase cost and encourage/ discourage certain activities Services Marketing, Canadian Edition Chapter 4 - 26

Summary - Chapter 4 § Distribution enables information and promotion flow, negotiation flow, and Summary - Chapter 4 § Distribution enables information and promotion flow, negotiation flow, and product flow § Physical and electronic channels play different roles in the distribution and need to compliment each other § The original service supplier should manage the overall process of supplementary services to the customer § The drivers of globalization of services are competition, technology, cost and government § People processing services, possession processing services, and information-based services impact five groups of drivers differently Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 4 - 27