Fundamentals of Services Management

.
Distributing Services Through Physical and
Electronic Channels

Chapter 5

Prof. Prakash A
Prakash_pspl@hotmail.com
Prakash1412hari@gmail.com
Mobile # 93412 20241
 Services distribution
Distribution in service context, Experiences, Performances and
solutions are not physically shipped or stored.

A typical service sale cycle, distribution task embraces Three

phases:
Information and
promotion flow -
Promo materials relating to service
offerings. To Get Customers’ interest to
buy services

Product flow – specially

involving people processing, possession Negotiation flow -
processing requires physical facilities for reaching an agreement on service
delivery features , configuration and T&C so
that purchase contract can be closed
Information and Physical Processes of Augmented Service Offering
Information

Payment Consultation

Billing CORE
Order-taking

Exceptions
Hospitality
Safe keeping
 Services distribution Options
 Customers Visit the Service Site
 Service providers Go to Their Customers
 Service Transactions is Conducted Remotely
 Channel preferences vary among Consumers
 Six Options for Services delivery
.Nature of Interaction
between customer and Availability of Service Outlets
Service Organization Single site Multiple sites
Customer goes to service oTheatre oBus service
organization oSpa oFast food chain
Service organization comes oHouse painting oMail delivery
to customer oCar wash oAutomobile road
service
Customer and Service Org oCredit card co oBroadcast Network
transact remotely (mail or oLocal TV station oTelephone Co.
e-communication)
 Services distribution
Place and Time Decisions

Where should the services be delivered in a Brick-

and-Mortar context?
 ATM
 Mini stores
 Locating in Multipurpose facility
 Location Constraints
 Where should the service be delivered
 Delivering Services in Cyberspace
Factors that encourage Extended Operating Hours:
• Economic pressure from the customers
• Economic incentives to improve asset utilization
• Availability of employees during “unsocial” hours
• Automated self-service facilities
 Services distribution
Service Delivery Innovations facilitated by technology:
 Development of “smart devices”- mobile phones,
PDA (Personal Digital Assistants) and WiFi
 Usage of IVRS (Interactive Voice Response Systems)
 Creation of Websites
 Commercialization of “smart cards”
 Role of Intermediaries
• Cost effective to Outsource certain tasks
(supplementary service elements )
• Franchising
Impact of Globalization Drivers on Various Service Categories
Globalization People Processing Possession Processing Information based
Drivers
Competition Simultaneity of Lead role of technology Highly vulnerable to
production and creates driver for global dominance by
consumption limits globalization of competitors with
leverage of foreign- competitors with monopoly or
based competitive technical edge. (HAL competitive
advantage in front and Tata Aerospace advantage in
stage of service overhaul hubs) information
factory
Market People differ Less variation for Demand for many
economically and service to corporate services is delivered
culturally, hence possessions, but level of to a significant
needs for service and of economic degree from
ability to pay may development affects economic and
vary demand for service to educational levels.
individually o0wned Cultural issues may
goods affect demand for
entertainment
 Impact of Globalization Drivers on Various Service Categories
Globalization People Processing
Drivers
Technology Use of IT for delivery of
supplementary services
may be a function of
ownership and familiarity
Cost Variable labor rates may
affect pricing in labor-
intensive services
(consider self-service in
high cost locations)
Government Social policies (eg. health
care) vary widely & may
affect lobour costs, ..
Possession Processing
Need for technology based
service delivery systems is a
function of the types of
possessions requiring
service and the cost
tradeoffs in labor
substitution
Variable labor rates may
favour low-cost locations if
not offset by shipment
costs. Consider substituting
equipment for labour
Tax laws, Environmental
regulations and technical
standards may affect costs
and certain types of
activities
Information based
Ability to deliver core
services through remote
terminals my be a
function of investments
in computerization,
quality of telecom
infrastructure and
educational level
Major cost elements can
be centralized and minor
cost cost elements
localized
Policies on Education,
censorship, public
ownership of
communications, Infra
standards may affect
demand and supply
 Channel Configuration of Services
.
Producer of Creator of Service

Agent or Broker
(selling)

Agent or Broker Agent or Broker

(buying)

Consumer or Industrial Customer

Services distribution
QUIZ
 Services distribution QUIZ
1. Any decision on pricing strategy must be based on a clear understanding of the:
organisation's objectives

2. Service firms typically have relative high:

fixed costs

3. Revenue management allows service firms to:

vary price according to demand

4. Which of the following is a patronage oriented pricing objective?

recognise differing abilities of different segments to pay and price accordingly

5. Price can be used for all of the following strategic purposes except:
information based products can be delivered almost instantaneously through the Internet
deregulation of the telecommunications industry has allowed greater service product offerings
telecommunications companies have expanded their service offerings by increasing their
reliance on supplementary services
all of the above are strategic objectives that can be met through pricing
.
 Services distribution QUIZ
6. The three foundations of pricing strategy are:
cost, competition, value to the customer

7. Activity based costing has which benefit over traditional cost analysis for services firms?
pinpoints differences in the costs of serving different customers

8. Traditional cost accounting approaches work best for services with:

significant variable costs

9. Traditional cost accounting tends to load the same ________ on customers leading to the assumption
that larger purchases are ______ profitable.
fixed costs; more

10. Which of the following is not one of the four broad expressions of customer value identified by
Zeithaml?
availability
This is one of the expressions of value.
.
 Services distribution QUIZ
11. Functional value is created when:
the service has the desired characteristics, is useful and performs
This is symbolic or expressive value.

12. Which of the following is not a means by which service providers can decrease perceived consumer cost?
reinforce the mental effort involved in using the service

13. Price competition for services will intensify in all of the following situations except:
strengthened regulatory frameworks

14. Which of the following is a significant customer cost?

the devolution of power
potential for inconsistency
potential for increased competition
all of the above

15. Dynamic pricing for services is also known as:

customised pricing
.
 Services distribution QUIZ
. 16. Yield management involves setting prices according to:
predicted demand

17. Revenue management is also referred to as:

yield management

18. Under which conditions is revenue management most relevant?

all of the above conditions

19. Golf courses are an example of a service organisation which has _______ prices and
_________duration.
fixed; unpredictable

20. When a change in price for a service results in a reasonably equal change in sales, price elasticity is said
to be:
unity
 Services distribution QUIZ
21. Revenue management is built around the concepts of _____ and _____discrimination.
price; product

22. When a firm implements a program which results in customers self segmenting on the basis of service
characteristics and willingness to pay this is known as:
price fencing

23. An example of a physical price fence would be:

service levels

24. Which of the following is not a way that marketing can help maximise asset revenue-generating
efficiency?
focusing on the promotion of common service benefits across segments

25. Which of the following methods can be used to build fairness into the pricing of complex services?
all of the above are methods of building in fairness
.