5 Distributing Services through

PHYSICAL AND ELECTRONIC CHANNELS

1
Services Marketing and Management
Dr Eszter Jakopánecz
Assistant Professor
University of Pécs
Faculty of Business and Economics
jakopanecz.eszter@ktk.pte.hu

Lovelock & Wirtz: Services Marketing and Management.

People, Technology, Strategy. Pearson, 2011

Witz & Lovelock: Essentials of Services Marketing.

Pearson, 2018

WIRTZ LOVELOCK



 Learning Objectives
5.1 Know the four key questions that form the foundation of any service
distribution strategy: What? How? Where? When?
5.2 Describe the three interrelated flows that show what is being
distributed.
5.3 Know how services can be distributed using three main options, and
understand the importance of distinguishing between the distribution of
core and supplementary services.

Copyright © 2018 Pearson Education Ltd. 2

 Learning Objectives
5.4 Recognize the issues of delivering services through electronic
channels, and discuss the factors that have fueled the growth of service
delivery via cyberspace.
5.5 Understand the determinants of customers’ channel preferences.
5.6 Know the importance of channel integration.
5.7 Describe the where (place) decisions of physical channels, and be
familiar with the strategic and tactical location considerations.

Copyright © 2018 Pearson Education Ltd. 3

 Learning Objectives
5.8 Describe the when (time) decisions of physical channels and the
factors that determine extended operating hours.
5.9 Understand the role, benefits, and costs of using intermediaries in
distributing services.
5.10 Know why franchising is such a common way of delivering services
to end users.
5.11 Understand the challenges of distribution in large domestic
markets.

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 Learning Objectives
5.12 Be familiar with the forces that drive service firms to go
international.
5.13 Appreciate the special challenges of distributing services
internationally.
5.14 Explain the determinants of international market entry strategies.

Copyright © 2018 Pearson Education Ltd. 5

 Distributing Services through Physical and

Electronic Channels

5.1 Know the four key questions that form the

foundation of any service distribution
strategy.

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
The foundation of any service distribution strategy
AND ELECTRONIC CHANNELS

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DISTRIBUTING SERVICES THROUGH PHYSICAL
Distribution in a Services Context
• What is being
distributed?
AND ELECTRONIC CHANNELS

• How should a service be

distributed?
• Where should a service
facility be located?
• When should service be
delivered?

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 Distributing Services through Physical and

Electronic Channels

5.2 Describe the three interrelated flows that

show what is being distributed.

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
What is being distributed?
• In a typical service sales cycle, distribution embraces three
interrelated flows:
AND ELECTRONIC CHANNELS

o Information and promotion flow

o Negotiation flow
o Product flow

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 Distributing Services through Physical and

Electronic Channels

5.3 

How services can be distributed using three main
options; the importance of distinguishing between
the distribution of core and supplementary
services.

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
How should a service be distributed?
AND ELECTRONIC CHANNELS

Copyright © 2018 Pearson Education Ltd. 12

 Distributing Services through Physical and
Electronic Channels

5.4 

Recognize the issues of delivering services
through electronic channels, and discuss the
growth of service delivery via cyberspace.

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
Delivering services through electronic channels
• Information, consultation, order-taking, billing, and payment can all be transmitted using
online channels.
AND ELECTRONIC CHANNELS

• Service businesses that involve physical core products are closing physical branches and
shifting delivery of many supplementary services to the internet.
• Factors that attract customers
to online services:
o Convenience
o Ease of search
o A broader selection
o Potential for better prices
o 24/7 service with prompt
delivery

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 Distributing Services through Physical and

Electronic Channels

5.5 Understand the determinants of

customers’ channel preferences.

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
Channel Preferences Vary among Customers
• For complex and high-perceived risk services, people tend to rely on
personal channels.
AND ELECTRONIC CHANNELS

• Individuals with greater confidence and knowledge about a service/

channel tend to use impersonal and self-service channels
• Customers who are more technology savvy
• Customers with social motives tend to use personal channels
• Convenience is a key driver of channel choice

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 Distributing Services through Physical and

Electronic Channels

5.6 Know the importance of channel

integration

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
The importance of channel integration
• A service that is delivered through multiple channels requires
a seamless and consistent user experience.
AND ELECTRONIC CHANNELS

• New delivery channels are prone to inconsistent and

disjointed experiences for customers
• Service providers need effective pricing strategies to deliver
value and capture it through the appropriate channel.

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 Distributing Services through Physical and

Electronic Channels

5.7 

Describe the where (place) decisions of
physical channels, and be familiar with the
strategic and tactical location
considerations.
WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
Strategic and tactical location considerations
• To develop a location strategy, a firm must understand customer needs and expectations,
competitive activity, and the nature of the service operation.
AND ELECTRONIC CHANNELS

• The following factors need to be considered for selecting a specific site:

o Population size and characteristics
o Pedestrian and vehicular traffic
and its characteristics
o Convenience of access for
customers
o Competitors in this area
o Nature of nearby businesses and
stores
o Availability of labor
o Availability of site locations, rental costs and contractual conditions, and regulations

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DISTRIBUTING SERVICES THROUGH PHYSICAL

Strategic and tactical location considerations
Places of service delivery
• Ministered:
AND ELECTRONIC CHANNELS

o Creating many small service factories to maximize geographic coverage (automated

kiosks)
o Separating front and back stages of operation (Taco Bell)
o Purchasing space from another provider in complementary field (Dunkin Donuts with
Burger King)
• Locating in Multipurpose Facilities:
o Proximity to where customers live or work (service stations)

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DISTRIBUTING SERVICES THROUGH PHYSICAL

Strategic and tactical location considerations
Places of service delivery
• Cost, productivity and access to labor are key determinants to locating a
AND ELECTRONIC CHANNELS

service facility.
• Locational constraints:
o Operational requirements (airports)
o Geographic factors (ski resorts)
o Need for economies of scale (hospitals)

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 Distributing Services through Physical and

Electronic Channels

5.8 Describe the when (time) decisions of

physical channels and the factors that
determine extended operating hours.

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
Time of Service Delivery
• Traditionally, schedules were
restricted.
AND ELECTRONIC CHANNELS

o Service availability limited to daytime,

40–50 hours a week
• Today:
o For flexible, responsive service operations
o 24/7 service – 24 hours a day, 7 days a week,
around the world

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 Distributing Services through Physical and

Electronic Channels

5.9 Understand the role, benefits, and costs of

using intermediaries in distributing
services

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
The Role of Intermediaries
AND ELECTRONIC CHANNELS

• Challenges for original supplier:

o Act as guardian of overall process
o Ensure that each element offered by intermediaries fits overall
service concept
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 Distributing Services through Physical and

Electronic Channels

5.10 Know why franchising is such a common

way of delivering services to end users.

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
Franchising
• Popular way to expand delivery of effective service concept, without a high
level of monetary investments compared to rapid expansion of company-
AND ELECTRONIC CHANNELS

owned and -managed sites

• Franchisor provides training, equipment and support marketing activities.
Franchisees invest time and finance, and follow copy and media guidelines
of franchisor
• Growth-oriented firms like franchising because franchisees are motivated
to ensure good customer service and high-quality service operations

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DISTRIBUTING SERVICES THROUGH PHYSICAL

Franchising
• Study shows significant attrition rate among franchisors in the early years
of a new franchise system:
AND ELECTRONIC CHANNELS

o One third of all systems fail within first four years

o Three fourths of all franchisors cease to exist after 12 years
• Disadvantages of franchising:
o Some loss of control over delivery system and,
thereby, over how customers experience
actual service
o Effective quality control is important
but yet difficult
o Conflict between franchisees may
arise especially as they gain
experience

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DISTRIBUTING SERVICES THROUGH PHYSICAL

Franchising
• Alternative: license another supplier to act on
the original supplier’s behalf to deliver core
AND ELECTRONIC CHANNELS

product, for example:

o Trucking companies
o Banks selling insurance products

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 Distributing Services through Physical and
Electronic Channels

5.11 Understand the challenges of

distribution in large domestic markets

WIRTZ LOVELOCK

 Challenges of distribution in large domestic
markets
DISTRIBUTING SERVICES THROUGH PHYSICAL

• There are special challenges in

federal nations covering a large
AND ELECTRONIC CHANNELS

geographic area:
o the distances involved and the
existence of multiple time zones
o multiculturalism is also an issue,
leading to segmenting issues
o there are differences between the
laws and tax rates of the various
states or provinces and those of the
respective federal governments

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 Distributing Services through Physical and

Electronic Channels

5.12
Be familiar with the forces that drive
service firms to go international.

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
Forces that drive service firms to go international
• Factors favoring adoption of transnational strategies:
o Market Drivers
AND ELECTRONIC CHANNELS

o common customer needs across many countries

o global customers who demand consistent service from suppliers around the world
o availability of international
channels
o Competition Drivers
o presence of competitors
from different
o Countries
o interdependence of countries
o transnational policies of the
competitors

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DISTRIBUTING SERVICES THROUGH PHYSICAL

Forces that drive service firms to go international

• Factors favoring adoption of transnational strategies:

o Technology Drivers
AND ELECTRONIC CHANNELS

o enhanced performance and capabilities in telecommunications, computerization, and software

o miniaturization of equipment
o digitization of voice, video, and text
o the growing availability of broadband telecommunication channels

o Cost Drivers
o economies of scale
o sourcing efficiencies
o improved performance and lower operating costs for telecommunications and transportation

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DISTRIBUTING SERVICES THROUGH PHYSICAL

Forces that drive service firms to go international
• Factors favoring adoption of transnational strategies:
o Government Drivers
AND ELECTRONIC CHANNELS

o favourable trade policies

o compatible technical standards
o common marketing regulations

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 Distributing Services through Physical and

Electronic Channels

5.13 Appreciate the special challenges of

distributing services internationally.

WIRTZ LOVELOCK

DISTRIBUTING SERVICES THROUGH PHYSICAL
Challenges of distributing services internationally

• Airline access:
o If one country is willing to allow entry by a new carrier but the other is not, access will
AND ELECTRONIC CHANNELS

be blocked
o Capacity limits at certain major airports lead to denial of new or additional landing
rights for foreign airlines

• Financial, healthcare, and telecommunications service markets are

typically very highly regulated
• Companies that offer a global reservation service and connect this with
local facilities and/or micro entrepreneurs often face regulatory
roadblocks

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 Distributing Services through Physical and

Electronic Channels

5.14 Explain the determinants of

international market entry strategies

WIRTZ LOVELOCK

 Determinants of international market entry
strategies
DISTRIBUTING SERVICES THROUGH PHYSICAL
AND ELECTRONIC CHANNELS

Copyright © 2018 Pearson Education Ltd. 40

Thank You.

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