Delivering Service through Intermediaries

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)

Services Intermediaries Franchisees service outlets licensed by a principal to deliver a unique service concept it has created e.g., KFC Agents and Brokers representatives who distribute and sell the services of one or more service suppliers e.g., insurance agents Electronic Channels all forms of service provision through electronic means e.g., distance learning

Franchising Most common type of distribution of services Works well with services that can be standardized and duplicated through the delivery process, service policies, warranties, guarantees, promotion and branding It is a relationship or partnership in which the service provider – develops and optimizes a service format that it licenses for delivery by other parties – the franchisees

Benefits and Challenges for Franchisers of Service Benefits: Leveraged business format for greater expansion and revenues Consistency in outlets Knowledge of local markets Shared financial risk and more working capital Challenges: Difficulty in maintaining and motivating franchisees Highly publicized disputes and conflict Inconsistent quality Control of customer relationship by intermediary

Benefits and Challenges for Franchisees of Service Benefits: An established business format National or regional brand marketing Minimized risk of starting a business Challenges: Encroachment Disappointing profits and revenues Lack of perceived control over operations High fees

Agents and Brokers An agent w acts on behalf of a service principal or a customer and is authorized to make agreements between the principal and the customer A broker is an intermediary who brings buyers and sellers together while assisting in negotiation Agents and brokers have legal authority to market services as well as to perform other marketing functions on behalf of producers

Benefits and Challenges in Distributing Services through Agents and Brokers Benefits: Reduced selling and distribution costs Intermediary’s possession of special skills and knowledge Wide representation Knowledge of local markets Customer choice Challenges: Loss of control over pricing Representation of multiple service principals

Electronic Channels These channels do not require human interaction Various services are made possible through such vehicles which include movies on demand, remote health services etc. Use of electronic channels helps in overcoming some of the problems associated with service inseparability

Benefits and Challenges in Electronic Distribution of Services Benefits: Consistent delivery for standardized services Low cost Customer convenience Wide distribution Customer choice and ability to customize Quick customer feedback Challenges: Price competition Inability to customize with highly standardized services Lack of consistency due to customer involvement Changes in consumer behavior Security concerns Competition from widening geographies

Common Issues Involving Intermediaries conflict over objectives and performance difficulty controlling quality and consistency across outlets tension between empowerment and control channel ambiguity

Strategies for Effective Service Delivery Through Intermediaries Control Strategies: Measurement Review Partnering Strategies: Alignment of goals Consultation and cooperation Empowerment Strategies: Help the intermediary develop customer-oriented service processes Provide needed support systems Develop intermediaries to deliver service quality Change to a cooperative management structure