Chapter 17 Marketing Channels for Services

The Importance of Services 17 Objective 1: The services sector of the economy is more than twice the size of the manufacturing sector. Services account for more than half of all consumer expenditures. Almost 80% of all new jobs created over the past 10 years have been in the service sector.

17 Services Marketing Objectives Objective 2: Services Marketing Objectives = Product Marketing Objectives 1. Offer services (or products) that are targeted to meet customer demand 2. Present services (or products) to customers so as to maximize their appeal.

17 Characteristics of Services Objective 3: 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

17 Intangibility of Services Product Consumers have more definite impressions & preferences about physical products because of their tangibility Service Much less tangible than physical products Difficult to differentiate brands ≠

17 Inseparability of Services Service Inextricably tied to provider of service Services produced do not exist as entities in and of themselves Product An entity that exists apart from the manufacturer itself ≠

17 Difficulty of Standardization Service More difficult to standardize than products Variability associated with human element is much more likely to creep into the production of services than into the production of products Product High degree of standardization found in advanced industrial societies ≠

Customer Involvement in Services 17 Service Consumers are more involved in the production of services than they are in the production of products. Product Individual consumers do not play much of a role in determining the nature of products manufactured for them. = Consumer is involved only in consumption of product ≠

17 Perishability of Services ≠ Service Services cannot be produced in anticipation of customer needs & then stored in inventory until purchased. Product Products can be inventoried and stored— even the most perishable products.

17 Implications of Service Characteristics for Channel Management The relationship between the characteristics of services & the management of marketing channels includes: Intangibility & Channel Management Inseparability & Channel Management Difficulty of Standardization & Channel Management Customer Involvement & Channel Management Perishability of Services & Channel Management

17 Intangibility & Channel Management Objective 4: 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. Why?

17 Inseparability & Channel Management Objective 5: 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. All aspects of the marketing channel with which the consumer comes into contact are thus a reflection of the quality of the service. Why?

16 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.

17 Customer Involvement & Channel Management Objective 6: 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.

Perishability of Services & Channel Management 17 Objective 7: 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.

17 Additional Perspectives Objective 8: 1. Shorter Channels 2. Franchised Channels 3. Customization of Services 4. Channel Flows Important considerations for developing & operating marketing channels for services

Shorter Channels 17 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. Service provider Service user

Franchised Channels 17 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

17 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.

17 Channel Flows Flows that “carry” the service through the channel are those of information, negotiation, & promotion. Many can be handled electronically (computer, telephone), with the role of technology becoming even greater in the future than it already is.

Midterm Exam Guideline 2 parts: 1)10 T or F (with correction) (10) 2)5 Short answer questions (15) growing importance of marketing channels implications of service characteristics for channel management environment of international channel management conflict behavioral aspects of channel systems Marketing Channel Definition Sources of power Intermediaries Direct and indirect exporting