McGraw-Hill

1. S M Chapter 13 DELIVERING SERVICE THROUGH INTERMEDIARIES AND ELECTRONIC CHANNELS © 2000 The McGraw-Hill Companies McGraw-Hill

2. Objectives for Chapter 13:Delivering 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

3. 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)

4. Key Issues Involving Intermediaries • conflict over objectives and performance • conflict over costs and rewards • control of service quality • empowerment versus control • channel ambiguity

5. Services Intermediaries • franchisees • e.g., Jiffy Lube, H&R Block, McDonald’s • agents and brokers • e.g., travel agents, independent insurance agents • electronic channels • e.g., ATMs, university video courses, TaxCut software

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

7. Obtaining an established business format on which to base a business Receiving national or regional brand marketing Minimizing the risks of starting a business Summary of Benefits and Challenges for Franchisees of Service Benefits Challenges • 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

8. Reduced selling and distribution costs Intermediary’s possession of special skills and knowledge Wide representation Knowledge of local markets Customer choice Exhibit 13-6Summary of Benefits and Challenges in Distributing Services through Agents and Brokers Benefits Challenges • Loss of control over pricing and other aspects of marketing • Representation of multiple service principals

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

10. Measurement Review Strategies for Effective Service Delivery through Intermediaries Empowerment Strategies Control Strategies • 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