1. Marketing Channels for Services
Part 4: Additional Perspectives on Marketing Channels
Marketing Channels for Services

2. The Importance of Services1
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.

3. Characteristics of Services3
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

4. Intangibility & Channel Management4
Marketing channels provide
the most direct & potent basis
for making a service more tangible.
Why?
The customer is directly exposed to and
experiences the service provided by the channel.

5. Inseparability & Channel Management5
The inseparability of services from the provider
means 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.
Why?
All aspects of the marketing channel with
which the consumer comes into contact
are thus a reflection of the quality of the service.

6. Difficulty of Standardization & Channel Management
In the case of franchises, it is difficult for the channel
manager to get the franchisees to deliver a
consistent level of service.
Why?
The amount of human involvement—behavior— is
often involved in providing services.

7. Customer Involvement & Channel Management6
In a channel containing services such as barbers,
fitness clubs, and tax preparation, the channel
design should facilitate customer involvement.
Why?
Such services generally require input from the
customer in order to be performed successfully.

8. Perishability of Services & Channel Management7
The channel must be designed so as to connect
as efficiently as possible those providing the
service with those desiring to obtain it.
Why?
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.

9. Discussion Question #1
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.

10. Additional Perspectives8
Important considerations for developing
& operating marketing channels for
services
Shorter Channels
Franchised Channels
Customization of Services
Channel Flows

11. 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.

12. 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

13. 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.

14. Channel Flows Many can be handled electronically,
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.

15. Discussion Question #5
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.