DELIVERING SERVICE THROUGH INTERMEDIARIES AND ELECTRONIC CHANNELS Chapter 13

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DELIVERING SERVICE THROUGH INTERMEDIARIES AND
ELECTRONIC CHANNELS Chapter 13

• Donna J. Hill, Ph.D.
• Fall 2000

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Objectives for Chapter 13Delivering Service
through Intermediaries and Electronic Channels

• Identify the primary channels through which
  services are delivered to end customers
• Provide examples of each of the key service
  intermediaries
• View delivery of service from two
  perspectives--the service provider and the
  service deliverer
• Identify the benefits and challenges of each
  method of service delivery
• Outline the strategies that are used to manage
  service delivery through intermediaries

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Distribution---Time and Place Utility

• Availability ---when
• Access --- easy to conduct transaction
• Operating Hours
• Direct channels ---no intermediaries
• Indirect channels ---

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Service Provider Participants

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

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Functions Performed by Intermediaries

• Co-producing the service
• Making services locally available
• Functioning as a link between the brand and the
  customer

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Types of Intermediaries

• Agents
• selling --- contractual authority to sell
• purchasing--- purchase for a buyer
• facilitating --- help with marketing process
• Brokers --- bring buyers and sellers together
• Electronic Channels --- do not require human
  interaction
• Franchises --- Service outlets licensed by a
  principal to deliver a unique service concept it
  had created or popularized.

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Characteristics of Agents

• A agent works for the pricipal continuously
• An agent receives commissions (usually two to six
  percent of selling price)
• An agent delivers the rights to services
• An agent is entrusted with influence over prices,
  terms, and conditions of sale.

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• Travel Agent (selling agent)

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Services Intermediaries

• franchisees
• e.g., Jiffy Lube, HR Block, McDonalds
• agents and brokers
• e.g., travel agents, independent insurance agents
• electronic channels
• e.g., ATMs, university video courses, TaxCut
  software

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Key Issues Involving Intermediaries

• conflict over objectives and performance
• conflict over costs and rewards
• control of service quality
• empowerment versus control
• channel ambiguity

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Exhibit 13-4 Summary of Benefits and Challenges
for Franchisers of Service
Benefits
Challenges

• Leverages the business format to gain expansion
  and revenues
• Maintains consistency in outlets
• Gains knowledge of local markets
• Shares financial risk and frees up capital

• Difficulty in maintaining and motivating
  franchisees
• Highly publicized disputes and conflict
• Possibility of inconsistent quality that can
  undermine the company name
• Control of customer relationship by intermediary

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Summary of Benefits and Challenges for
Franchisees of Service
Benefits
Challenges

• Obtaining an established business format on which
  to base a business
• Receiving national or regional brand marketing
• Minimizing the risks of starting a business

• Disappointing profits and revenues
• Encroachment and franchise saturation
• High failure rates and unfair terminations
• Lack of perceived control
• High fees and rigid contracts
• Unrealistic expectations

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Exhibit 13-6 Summary of Benefits and Challenges
in Distributing Services through Agents and
Brokers
Benefits
Challenges

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

• Loss of control over pricing and other aspects of
  marketing
• Representation of multiple service principals

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Exhibit 13-7Summary of Benefits and Challenges
in Electronic Distribution of Services
Challenges
Benefits

• Customers are active, not passive
• Lack of control of electronic environment
• Price competition
• Inability to customize with standardized services
• Lack of consistency with customer involvement
• Security concerns
• Competition from widening geographies

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

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Strategies for Effective Service Delivery
through Intermediaries
Empowerment Strategies
Control Strategies

• Measurement
• Review

• Help the intermediary develop customer-based
  service processes
• Provide needed support
• Develop the intermediary to deliver service
  quality
• Change to a cooperative management structure

Partnering Strategies

• Alignment of goals
• Consultation and cooperation

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Examples

• www.garden.com
• www.ticketmaster.com
• www.mediconsult.com
• www.priceline.com
• www.schwab.com
• www.starbucks.com

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Answer these questions

• Does this represent a direct or indirect channel?
  If indirect, which type?
• Describe how each of the following reasons for
  channel conflict is problematic for these
  businesses?
• conflict over objectives and performance
• conflict over costs and rewards
• control of service quality
• empowerment versus control
• channel ambiguity
• What is the main benefit the business gets from
  using this channel? What is the main challenge?

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Customer-Focused Distribution

• Identify market segments.
• Identify benefits sought by customers.
• Match customer needs to channel and distribution
  strategies.
• Manage quality control.
• Manage corporate growth.