CHAPTER 17Marketing Channels for Services

Part 4: Additional Perspectives on Marketing Channels

Objective The Importance of Services

1. The services sector of the economy is more

than twice the size of the manufacturing sector.

2. Services account for more than half of

all

consumer expenditures.

3. Almost 80% of all new jobs created

over the

past 10 years have been in the service

sector.

1

Objective Characteristics of Services

Characteristics of Services that Distinguish them from Products

• The intangibility of services

• The inseparability of services from service providers

• The difficulty of standardizing services

• The high degree of customer involvement in services

• The perishability of services

3

Objective Intangibility &

Channel Management

Marketing channels provide the most direct & potent basis

for making a service more tangible.

The customer is directly exposed to and experiences the service provided by the channel.

4

Why?

Objective Inseparability &

Channel Management

The inseparability of services from the providermeans that the service provider does not have

the “safety net” available to the product manufacturer,whereby the product itself can make up for

poor distribution.

All aspects of the marketing channel with which the consumer comes into contact

are thus a reflection of the quality of the service.

5

Why?

Difficulty of Standardization& Channel Management

In the case of franchises, it is difficult for the channelmanager to get the franchisees to deliver a

consistent level of service.

The amount of human involvement—behavior— isoften involved in providing services.

Why?

Objective Customer Involvement &

Channel Management

In a channel containing services such as barbers, fitness clubs, and tax preparation, the channel design should facilitate customer involvement.

Such services generally require input from thecustomer in order to be performed successfully.

6

Why?

Objective Perishability of Services

& Channel Management

The channel must be designed so as to connectas efficiently as possible those providing the

service with those desiring to obtain it.

Because of the high degree of perishability of unsold services, design should maximize the sale of service

during its limited exposure to the target market.

7

Why?

Firms of all sizes have developed many kinds of social-networking tools, instant messaging programs, and text messaging systems to deal with customer service inquiries. But a recent survey by American Express Co. found that almost 90 percent of the respondents said they still want their inquiries handled by real customer service representatives in real time over the “old-fashioned” telephone.

In light of all the new technology available to customers, why do you think they still prefer the old-fashioned telephone-based service channel? Discuss.

Discussion Question #1

Objective Additional Perspectives

Important considerations for developing & operating marketing channels for

services

1. Shorter Channels

2. Franchised Channels

3. Customization of Services

4. Channel Flows

8

Need Shorter Channels

The direct structure in a short channel Eliminates the challenge of designing

a channel structure in terms of:

• Length, intensity, & type of intermediaries at each level

• The selection of intermediaries

• The need to motivate intermediaries to do an effective job of selling the product.

Benefits of Franchised Channels

Using business format franchising can give the service provider the potential

to reap benefits: The scale of economies of a large organization

The entrepreneurial drive & motivation associated with independently owned businesses

The degree of control necessary to foster standardization in services offered by the

individual franchised units

Customization of Services

Many services provide for a high degree of customization.

For services requiring a high degree of customization, small-scale channel consisting

of local independent service providers are likely to continue to play a major role.

Channel Flows

Flows that “carry” the service through the channel are those of information,

negotiation, & promotion.

Many can be handled electronically,with the role of technology becoming

even greater in the future than it already is.

Automated teller machines (ATMs) and, more recently, online banking, were thought to provide such a valuable service alternative that customers would need far fewer personal banking services with human tellers in traditional bank branches. In short, these new technologies were supposed to reduce drastically the number of bank tellers and branches. But things did not work out that way. Between 1995 and 2005 the number of bank branches grew from 50,000 to 70,000, an increase of 40 percent. The number of tellers to staff the branches also increased in roughly the same proportion during this decade. This happened despite the fact that the number of banking firms actually decreased dramatically from 10,000 to less than 8,000 during that same period.

What do you think is going on here? Why do you think so many consumers still demand “old-fashioned” bank branches and tellers in spite of new technological alternatives? Discuss.

Discussion Question #5