Distribution- Place Decision
Applying the Flow Model of
Distribution to Services
Distribution embraced three interrelated elements
• Information and promotion flow- Distribution of information or promotional
material relating to service offer
• Negotiation flow- Reaching on agreement on service features & terms of offer
• Product flow
Options for Service Delivery
There are 3 types of interactions between customers and service
firms
• Customer goes to the service provider (or intermediary)
• Service provider goes to the customer
• Interaction at arm’s length (via the Internet, telephone, fax, mail, etc.)
Here the nature of service is considered
• People Processing
• Possession Processing
• Mental Stimulus Processing
• Information Processing
Four Categories of Services
Nature of the Who or What is the Direct Recipient of the
Service Act Service?
DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS
TANGIBLE People Processing Possession Processing
ACTS
e.g., airlines, hospitals, e.g., freight, repair,
haircutting, restaurants cleaning, landscaping,
hotels, fitness centers retailing
INTANGIBLE Mental Stimulus Information Processing
ACTS
Processing
e.g., broadcasting, e.g., accounting, banking,
consulting, insurance, legal, research
education, psychotherapy
Decision about place & time
• Locational constraints
• Ministores
• Locating in multipurpose Facilities
Place vs. Cyberspace
Place - customers and Required for people processing
services
suppliers meet in a Offers live experiences, social
physical environment interaction, e.g., food services
More emphasis on eye-catching
servicescape, entertainment
Ideal for info-based services
Saves time
Cyberspace - customers
Facilitates information gathering
and suppliers do business May use express logistics service
electronically in virtual to deliver physical core products
environment created by
phone/internet linkages
Technology Revolutionizes Service
Delivery: Some Examples
• Smart mobile telephones to link users to
Internet
• Automated kiosks for self-service (e.g. bank
ATMs)
• Web sites
– provide information
– take orders and accept payment
– deliver information-based services
E-Commerce:
Factors that Attract Customers to
Virtual Stores
• Convenience (24-hour availability, save time,
effort)
• Ease of obtaining information on-line and
searching for desired items
• Better prices than in bricks-and-mortar stores
• Broad selection
Franchising
Franchising is a fast growth strategy, when
• Resources are limited
• Long-term commitment of store managers is
crucial
• Local knowledge is important
• Fast growth is necessary to pre-empt
competition
Service Process and Market Entry
People Processing Services
Export the service concept
Import customers
Possession Processing Services
Most require an ongoing local presence, whether it is the
customers dropping off items or personnel visiting customer
sites
Information Based Services
Export the service to a local service factory
Import customers
Export the information via telecommunications and
transform it locally
Barriers to International Trade in
Services
• Operating successfully in international markets
remains difficult for certain services despite
control relaxations
• Barriers include
– Refusal by immigration offices to issue work permits
– Heavy taxes on foreign firms
– Domestic preference policies
– Legal restrictions
– Lack of broadly-agreed accounting standards
– Cultural differences (esp. for entertainment industry)
Forces for Internationalization
•Market drivers
•Competition drivers
•Technology drivers
•Cost drivers
•Government drivers
Impact will vary by service
type (people, possessions,
information)
Modes of Internationalization
Export information-based services
transmit via electronic channels
store in physical media, ship as merchandise
Use third parties to market/deliver service concept
licensing agents
brokers
franchising
alliance partners
Control service enterprise abroad
direct investment in new business
buyout of existing business