Chapter 14 Overheads

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Delivering Service Through Intermediaries and
Electronic Channels

• Service Distribution
• Direct or Company-Owned Channels
• Franchising
• Agents and Brokers
• Electronic Channels
• Common Issues Involving Intermediaries
• Strategies for Effective Service Delivery Through
  Intermediaries

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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)

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Services Intermediaries

• Franchisees
• service outlets licensed by a principal to
  deliver a unique service concept it has created
• e.g., Jiffy Lube, Blockbuster, McDonalds
• Agents and Brokers
• representatives who distribute and sell the
  services of one or more service suppliers
• e.g., travel agents, independent insurance agents
• Electronic Channels
• all forms of service provision through electronic
  means
• e.g., ATMs, university video courses, TaxCut
  software

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Table 14.1 Benefits and Challenges
forFranchisers 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

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Table 14.1 (Continued)Benefits and Challenges
forFranchisees 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

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Table 14.2Benefits and Challenges in
Distributing Services through Agents and Brokers

• Benefits
• Reduced selling and distribution costs
• Intermediarys 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

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Table 14.3Benefits 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

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Common Issues Involving Intermediaries

• conflict over objectives and performance
• difficulty controlling quality and consistency
  across outlets
• tension between empowerment and control
• channel ambiguity

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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