Chapter 7 Distributing Services Slide 2004 by

Applying the Flow Model of Distribution to Services Distribution embraced three interrelated elements § Information and promotion flow § Negotiation flow § Product flow Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 2

Information and Physical Processes of the Augmented Service Product (Fig. 7. 1) Information Processes Payment Information Consultation Order. Taking Core Billing Exceptions Hospitality Safekeeping Physical Processes Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 3

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 Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 4

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. ) Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 5

Method of Service Delivery (Table 7. 1) Availability of Service Outlets Nature of Interaction Single Site Multiple Sites between Customer and Service Organization Customer goes to service organization Service organization goes to customer Customer and service organization transact at arm’s length §Theater §Barbershop §House painting §Mobile car wash §Credit card company §Local TV station Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E §Bus service §Fast-food chain §Mail delivery §Auto club road service §Broadcast network §Telephone company 7 - 6

Place vs. Cyberspace v Required for people processing services suppliers meet in a physical v Offers live experiences, social environment interaction, e. g. , food services v More emphasis on eye-catching servicescape, entertainment v Place - customers and v Cyberspace - customers and suppliers do business electronically in virtual environment created by phone/internet linkages Slide © 2004 by Christopher Lovelock and Jochen Wirtz v Ideal for info-based services v Saves time v Facilitates information gathering v May use express logistics service to deliver physical core products Services Marketing 5/E 7 - 7

“ 24/7” - Factors Encouraging Extended Operating Hours (Mgt Memo 7. 1) v. Economic pressure from consumers v. Changes in legislation v. Economic incentives to improve asset utilization v. Availability of employees to work nights, weekends v. Automated self-service Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 8

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 Ø provide information Ø take orders and accept payment Ø deliver information-based services § Smart cards that can act as “electronic wallets” Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 9

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 Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 10

Splitting Responsibilities for Delivering Supplementary Services (Fig. 7. 2) As created by originating firm Core As enhanced by distributor + Slide © 2004 by Christopher Lovelock and Jochen Wirtz As experienced by customer = Services Marketing 5/E Core 7 - 11

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 Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 12

Service Process and Market Entry § People Processing Services Ø Export the service concept Ø Import customers Ø Transport customers to new locations § Possession Processing Services Ø Most require an ongoing local presence, whether it is the customers dropping off items or personnel visiting customer sites § Information Based Services Ø Export the service to a local service factory Ø Import customers Ø Export the information via telecommunications and transform it locally Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 13

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 Ø Refusal by immigration offices to issue work permits Ø Heavy taxes on foreign firms Ø Domestic preference policies Ø Legal restrictions Ø Lack of broadly-agreed accounting standards Ø Cultural differences (esp. for entertainment industry) Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 14

Forces for Internationalization v. Market drivers v. Competition drivers v. Technology drivers v. Cost drivers v. Government drivers Impact will vary by service type (people, possessions, information) Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 15

Modes of Internationalization § Export information-based services Ø transmit via electronic channels Ø store in physical media, ship as merchandise § Use third parties to market/deliver service concept Ø licensing agents Ø brokers Ø franchising Ø alliance partners Ø minority joint ventures § Control service enterprise abroad Ø direct investment in new business Ø buyout of existing business Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 16

Impact of Globalization Drivers on Different Service Categories (Table 7. 2) 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. Slide © 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 7 - 17

Impact of Globalization Drivers on Different Service Categories (Table 7. 2, cont’d) Globalization People Processing Possession Drivers Processing Use of IT for delivery of Need for technology. Technology Information Based Cost Variable labor rates may Variable labor rates impact on pricing in labor may favor low-cost -sensitive services. locations. Major cost elements can be centralized & minor cost elements localized. Government Social policies (e. g. , Policies may health) vary widely and decrease/increase may affect labor cost etc. cost & encourage/discourage certain activities Policies may impact demand supply and distort pricing supplementary services may be a function of ownership and familiarity with technology. Slide © 2004 by Christopher Lovelock and Jochen Wirtz based service delivery systems depends on possessions requiring service and the cost trade-offs in labor substitution Services Marketing 5/E Ability to deliver core services through remote terminals may be a function of investment in computerization etc. 7 - 18