Service Provider Participants

1
Service Provider Participants

• service principal (originator)
• creates the service concept
• (like a manufacturer of physical goods)
• service deliverer (intermediary)
• entity that interacts with the customer in the
  execution of the service
• (like a distributor/wholesaler of physical goods)

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Delivering Service Through Intermediaries and
Electronic Channels
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• Unlike Physical Goods, Services
• Cannot be owned
• Cannot be produced
• Cannot be warehoused
• Cannot be retailed
• Many primary functions of distribution channels
  have no meaning in services.

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Delivering Service Through Intermediaries and
Electronic Channels
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• Service Distribution
• Direct delivery of service
• Creator of service interacts directly with
  customer
• Examples air travel, healthcare

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Delivering Service Through Intermediaries and
Electronic Channels
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• Service Distribution
• Delivery of service through intermediaries
• Intermediaries often deliver services and perform
  several functions for service principals.
• coprodouce the service
• Make service locally available
• Provide a retailing function
• Build trusting relationship with customers

5
Services Intermediaries

• Franchisees
• service outlets licensed by a principal to
  deliver a unique service concept it has created
• e.g., Jiffy Lube, Blockbuster, McDonalds
• Agents and Brokers
• representatives who distribute and sell the
  services of one or more service suppliers
• e.g., travel agents, independent insurance agents
• Electronic Channels
• all forms of service provision through electronic
  means
• e.g., ATMs, university video courses, TaxCut
  software

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Delivering Service Through Intermediaries and
Electronic Channels
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• Direct or Company-Owned Channels
• Many services delivered directly from provider to
  customer
• Local services with limited distribution area
• Doctors, dry cleaners, and hairstylists
• National chains with multiple outlets
• Starbucks
• Benefits of company-owned outlets control,
  consistency, and maintenance of image

7
Company-Owned Channels

• Advantages of company-owned outlets
• Company has complete control over outlets
• Consistency across outlets
• Maintenance of image across outlets
• Company owns customer relationship
• Disadvantages of company-owned outlets
• Company must bear all financial risk
• Large companies not local market experts

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Delivering Service Through Intermediaries and
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• Franchising
• Relationship in which service provider
  (franchiser) develops and optimizes a service
  format that it licenses for delivery by other
  parties (franchisees)
• Most common type in distribution of services
• Examples McDonalds, jiffy Lube, Marriott Hotels

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Benefits and Challenges forFranchisers of Service

• Benefits
• Leveraged business format for greater expansion
  and revenues
• Consistency in outlets
• Knowledge of local markets
• Shared financial risk and more working capital

• Challenges
• Difficulty in maintaining and motivating
  franchisees
• Highly publicized disputes and conflict
• Inconsistent quality
• Control of customer relationship by intermediary

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Benefits and Challenges forFranchisees of Service

• Benefits
• An established business format
• National or regional brand marketing
• Minimized risk of starting a business

• Challenges
• Encroachment
• Disappointing profits and revenues
• Lack of perceived control over operations
• High fees

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Delivering Service Through Intermediaries and
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• Agents and Brokers
• Agent
• acts on behalf of a service principal or a
  customer
• authorized to make agreements between the
  principal and the customer

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Delivering Service Through Intermediaries and
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• Agents and Brokers
• Broker
• brings buyers and sellers together
• assists in negotiation
• Paid by party who hired them
• Rarely become involved in financing or assuming
  risk
• Not long-term representatives of buyers or sellers

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Benefits and Challenges in Distributing Services
through Agents and Brokers

• Benefits
• Reduced selling and distribution costs
• Intermediarys possession of special skills and
  knowledge
• Wide representation
• Knowledge of local markets
• Customer choice

• Challenges
• Loss of control over pricing
• Representation of multiple service principals

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Delivering Service Through Intermediaries and
Electronic Channels
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• Electronic Channels
• Do not require human interaction
• Do require a pre-designed service and an
  electronic vehicle to deliver it
• A service is less characterized by inseparability
  and nonstandardization when
• a service relies more on technology and/or
  equipment for service production
• and when a service relies less on face-to-face
  contact with service providers.

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Benefits and Challenges in Electronic
Distribution of Services

• Benefits
• Consistent delivery for standardized services
• Low cost
• Customer convenience
• Wide distribution
• Customer choice and ability to customize
• Quick customer feedback

• Challenges
• Price competition
• Inability to customize with highly standardized
  services
• Lack of consistency due to customer involvement
• Changes in consumer behavior
• Security concerns
• Competition from widening geographies

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Common Issues Involving Intermediaries

• Channel conflict over objectives and performance
• Difficulty controlling quality and consistency
  across outlets
• Tension between empowerment and control
• Channel ambiguity

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Delivering Service Through Intermediaries and
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• Strategies for Effective Service Delivery Through
  Intermediaries
• 3 Categories
• Control strategies
• Empowerment strategies
• Partnering strategies

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Strategies for Effective Service Delivery
Through Intermediaries

• Control Strategies
• Measurement
• Review
• Partnering Strategies
• Alignment of goals
• Consultation and cooperation

• Empowerment Strategies
• Help the intermediary develop customer-oriented
  service processes
• Provide needed support systems
• Develop intermediaries to deliver service quality
• Change to a cooperative management structure