Services Marketing
Chapter 5:
Distributing Services
Through Physical
And Electronic Channels
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 1
Overview Of Chapter 5
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 2
Services Marketing
Distribution in a Services
Context
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 3
Distribution in a Services Context
Services Marketing
In a services context, we
often dont 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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 4
Applying the Flow Model of
Distribution to Services
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 5
Distinguishing between Distribution
of Supplementary and Core Services
Services Marketing
Most core services require
physical locations
Many supplementary
services are informational;
can be distributed widely
and cost-effectively via
other means
Telephone
Internet
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 6
Information and Physical Processes
of Augmented Service Products
Services Marketing
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 7
Using Websites for Service Delivery
Services Marketing
Information
Read brochure/FAQ; get schedules/
directions; check prices
Payment Consultation
Pay by bank card Conduct e-mail dialog
Direct debit Use expert systems
Billing Order-Taking
Receive bill Core Make/confirm reservations
Make auction bid Submit applications
Check account status Order goods, check status
Exceptions
Make special requests Hospitality
Resolve problems Record preferences
Safekeeping
Track package movements
Check repair status
CORE: Use Web to deliver information-based core services
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 8
Services Marketing
Options for Service Delivery
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 9
Distribution Options for Serving
Customers
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 10
Six Options For Service Delivery
Services Marketing
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 11
Channel Preferences Vary Among
Customers
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 12
Services Marketing
Place and Time Decisions
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 13
Place Decisions of Service Delivery
Services Marketing
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)
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 14
Place Decisions of Service Delivery
Services Marketing
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
- Service Perspectives 5.2
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 15
Time of Service Delivery
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 16
Services Marketing
Delivering Services in
Cyberspace
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 17
Service Delivery Innovations
Facilitated by Technology
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 18
E-Commerce: Move to Cyberspace
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 19
E-Commerce: Move to Cyberspace
Services Marketing
Recent developments: 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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 20
Services Marketing
Role of Intermediaries
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 21
Splitting Responsibilities
for Service Delivery
Services Marketing
Challenges for original supplier
Act as guardian of overall process
Ensure that each element offered by intermediaries fits overall service concept
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 22
Franchising
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 23
Franchising
Services Marketing
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
suppliers behalf to deliver core product
Trucking companies
Banks selling insurance products
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 24
Services Marketing
Challenge of Distribution in
Large Domestic Markets
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 25
The Challenge of Distribution in
Large Domestic Markets
Services Marketing
Distributing services (i.e., physical logistics) faces
challenges due to:
Distances involved
Multiple time zones
Multiculturalism
Differences in laws and tax rates
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 26
Services Marketing
Distributing Services
Internationally
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 27
Factors Favoring Adoption of
Transnational Strategies
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 28
Factors Favoring Adoption of
Transnational Strategies
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 29
How Service Processes Affect
International Market Entry
Services Marketing
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
Import customers
- Inviting customers from overseas to firms home country
e.g., hospitals catering to medical tourism
Transport customers to new locations
- Passenger transportation (air, sea, rail, road)
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 30
How Service Processes Affect
International Market Entry
Services Marketing
Possession processing involves services to customers
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 31
Impact of Globalization Drivers on
Various Service Categories
Services Marketing
Globalization People Processing Possession Information Based
Drivers Processing
Competition Simultaneity of production Technology drives Highly vulnerable to
and consumption limits globalization of global dominance by
leverage of foreign competitors with competitors with
competitive advantage, technical edge. monopoly or
but management systems competitive advantage
can be globalized. in information.
Market People differ Level of economic Demand for many
economically and development impacts services is derived to a
culturally, so needs for demand for services to significant degree from
service and ability to pay individually owned economic and
may vary. goods. educational levels.
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 32
Impact of Globalization Drivers on
Various Service Categories
Services Marketing
Globalization People Processing Possession Information
Drivers Processing Based
Technology Use of IT for delivery of Need for technology- Ability to deliver core
supplementary services based service delivery services through
may be a function of systems depends on remote terminals may
ownership and familiarity possessions requiring be a function of
with technology. service and the cost investment in
trade-offs in labor computerization, etc.
substitution
Cost Variable labor rates may Variable labor rates may Major cost elements
impact pricing in labor- favor low-cost locations. can be centralized
sensitive services. and minor cost
elements localized.
Government Social policies (e.g., Policies may Policies may impact
health) vary widely and decrease/increase cost demand and supply
may affect labor cost, etc. and and distort pricing
encourage/discourage
certain activities
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 33
Barriers to International Trade in
Services
Services Marketing
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 agreed upon accounting standards
Cultural issues
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 34
Summary
Services Marketing
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
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 35
Summary
Services Marketing
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 (people processing services, possession
processing services, and information-based services) affect
international market entry via the drivers:
Market drivers Cost drivers
Competition drivers Government drivers
Technology drivers
Slide 2011 by Lovelock & Wirtz Services Marketing 7/e Chapter 5 Page 36
