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Mktg 436 - Chapter 5
1.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 1 Chapter 5: Distributing Services Through Physical And Electronic Channels Services Marketing 7e, Global Edition
2.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 2 Overview Of Chapter 5 Distribution in a Services Context Options for Service Delivery Place and Time Decisions Delivering Services in Cyberspace The Role of Intermediaries The Challenge of Distribution in Large Domestic Markets Distributing Services Internationally
3.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 3 Distribution in a Services Context
4.
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by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 4 Distribution in a Services Context In a services context, we often don’t move physical products Experiences, performances, and solutions are not being physically shipped and stored More and more informational transactions are conducted through electronic and not physical channels
5.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 5 Applying the Flow Model of Distribution to Services The three interrelated elements of distribution are: Information and promotion flow To get customer interested in buying the service Negotiation flow To sell the right to use a service Product flow To develop a network of local sites
6.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 6 Distinguishing between Distribution of Supplementary and Core Services Most core services require physical locations Many supplementary services are informational; can be distributed widely and cost-effectively via other means Telephone Internet
7.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 7 Information and Physical Processes of Augmented Service Products
8.
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by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 8 Using Websites for Service Delivery Order-Taking Make/confirm reservations Submit applications Order goods, check status Safekeeping Track package movements Check repair status CORE: Use Web to deliver information-based core services Core Consultation Conduct e-mail dialog Use expert systems 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
9.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 9 Options for Service Delivery
10.
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by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 10 Distribution Options for Serving Customers Customers visit service site Convenience of service factory locations and operational schedules important when customer has to be physically present Service providers go to customers Unavoidable when object of service is immovable More expensive and time-consuming for service provider Service transaction is conducted remotely Achieved with help of logistics and telecommunications
11.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 11 Six Options For Service Delivery
12.
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by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 12 Channel Preferences Vary Among Customers For complex and high-perceived risk services, people tend to rely on personal channels Individuals with greater confidence and knowledge about a service/channel tend to use impersonal and self-service channels Customers with social motives tend to use personal channels Convenience is a key driver of channel choice
13.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 13 Place and Time Decisions
14.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 14 Place Decisions of Service Delivery Cost, productivity, and access to labor are key determinants to locating a service facility Location constraints Operational requirement (e.g., airports) Geographic factor (e.g.,ski resorts) Need for economies of scale (e.g., hospitals)
15.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 15 Place Decisions of Service Delivery Ministores Creating many small service factories to maximize geographic coverage Separating front and back stages of operation Purchasing space from another provider in complementary field Locating in Multipurpose Facilities Proximity to where customers live or work - Service Stations
16.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 16 Time of Service Delivery Traditionally, schedules were restricted Service availability limited to daytime, 40-50 hours a week Today For flexible, responsive service operations: 24/7 service, 24 hours a day, 7 days a week, all around the world
17.
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by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 17 Delivering Services in Cyberspace
18.
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by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 18 Service Delivery Innovations Facilitated by Technology Technological Innovations Development of “smart” mobile telephones and PDAs, and presence of Wi-Fi Voice-recognition technology Websites Smart cards - Store detailed information about customer - Act as electronic purse containing digital money Electronic channels can be offered together with physical channels, or replace physical channels
19.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 19 Voice Recognition Technology
20.
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by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 20 E-Commerce: Move to Cyberspace What are the factors that encourage you to use virtual stores? Convenience Ease of search Broader selection Potential for better prices 24-hour service with prompt delivery As a distribution channel, The Internet facilitates five categories of “flow”: Information, Negotiation, Service, Transactions and Promotion
21.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 21 E-Commerce: Move to Cyberspace Recentdevelopments: websites, customer management (CRM) systems, and mobile telephony Integrating mobile devices into the service delivery infrastructure can be used as means to: Access services Alert customers to opportunities/problems Update information in real time
22.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 22 Role of Intermediaries
23.
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by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 23 Splitting Responsibilities for Service Delivery Challenges for original supplier ● Act as guardian of overall process ● Ensure that each element offered by intermediaries fits overall service concept
24.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 24 Franchising Franchisor provides training, equipment, and support marketing activities. Franchisees invest time and finance, and follow copy and media guidelines of franchisor. Advantages: Expand delivery of effective service concept without a high level of monetary investment Franchisees are motivated to ensure good customer service and high-quality service operations
25.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 25 Franchising Disadvantages of franchising Loss of control over delivery system and how customers experience actual service Effective quality control is difficult 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 Trucking companies Banks selling insurance products
26.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 26 Challenge of Distribution in Large Domestic Markets
27.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 27 The Challenge of DistributioninLarge Domestic Markets Distributing services (i.e.,physical logistics) faces challenges due to: Distances involved Multiple time zones Multiculturalism Differences in laws and tax rates
28.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 28 Distributing Services Internationally
29.
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by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 29 Factors Favoring Adoption of Transnational Strategies Transnational strategy involves integration of strategy formulation and its implementation across all countries in which company elects to do business Market Drivers Common customer needs across countries Corporate customers seek to standardize and simplify suppliers used in different countries – ad agencies, logistics suppliers, Big 4 accounting firms Government Drivers Favorable trade policies, compatible technical standards, common marketing regulations
30.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 30 Factors Favoring Adoption of Transnational Strategies Competition Drivers Competitors from overseas; interdependence of countries Firms may be obliged to follow competitors into new markets to protect own positions elsewhere Technology Drivers Advances in information technology – miniaturization and mobility of equipment, digitization of voice Cost Drivers Economies of scale Lower operating costs
31.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 31 How Service Processes Affect International Market Entry People processing services require direct contact with customers Export service concept - Acting alone or in partnership with local suppliers e.g., chain restaurants, hotels, car rental firms Importcustomers - Inviting customers from overseas to firm’s home country e.g., hospitals catering to “medical tourism” Transport customers to new locations - Passenger transportation (air, sea, rail, road)
32.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 32 How Service Processes Affect International Market Entry Possession processing involves services to customer’s physical possessions - Repair and maintenance, freight transport Information-based services include mental processing services and information processing services Export the service to a local service factory - Hollywood film shown around the world Import customers Export the information via telecommunications and transform it locally - Data can be downloaded via CDs or DVDs
33.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 33 Impact of Globalization Drivers on Various 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 development impacts demand for services to individually owned goods. Demand for many services is derived to a significant degree from economic and educational levels.
34.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 34 Impact of Globalization Drivers on Various 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 pricing in labor- sensitive services. Variable labor rates may favor low-cost locations. Major cost elements can be centralized and minor cost elements localized. Government Social policies (e.g., health) vary widely and may affect labor cost, etc. Policies may decrease/increase cost and encourage/discourage certain activities Policies may impact demand and supply and distort pricing
35.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 35 Barriers to International Trade in Services Passage of free-trade legislation is important facilitator of transnational operations Notable developments: NAFTA, Latin American economic blocs, EU Despite efforts of WTO and GATT, barriers still exist: Restrictions on international airline operating rights Heavy taxation Legal restrictions Lack of broadly agreedupon accounting standards Cultural issues
36.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 36 Summary Distribution relates to both core and supplementary services and embraces three interrelated elements Information and promotion flow, negotiation flow, product flow Channel options include: Customers visit the service site Service providers go to their customers Service transaction is conducted remotely Place and time decisions include where services should be delivered in bricks-and-mortar context, when it should be delivered
37.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 37 Summary Delivery in cyberspace is facilitated by technology; e-commerce allows 24-hour delivery, saving time and effort Intermediaries play roles in distributing services Service processes (peopleprocessing services, possession processing services,and information-based services) affect international market entry via the drivers: Market drivers Competition drivers Technology drivers Cost drivers Government drivers
38.
Slide © 2010
by Lovelock & Wirtz Services Marketing 7/e Chapter 5 – Page 38 Application Exercise 1. An entrepreneur is thinking of setting up a new service business (you can choose any specific business). What advice would you give regarding the distribution strategy for this business? Address the What? How? Where? When? of service distribution. 2. Think of three services you buy or use either mostly or exclusively via the Internet. What is the value proposition of this channel over alternative channels (e.g., phone, mail, or branch network)? Short Size Bond Paper, Typewritten (Times New Roman 11) Deadline: Monday (May 13, 2019)
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