SM: Session 6 Service Distribution

The Maharashtra Tourism Development Corporation is planning to partner vacation ownership companies and budget aggregators to sell unsold rooms in its resorts. The state tourism agency is already in talks with Mahindra Group-owned Mahindra Holidays & Resorts and OYO Rooms. According to MTDC managing director the strategy would help MTDC in increasing the revenue and boosting occupancy. The plan is to offer around 20% of unsold rooms at MTDC resorts through these firms under a revenue-share agreement. MTDC currently has 77 resorts. The strategy that MTDC is working on — tying up with a budget aggregator like OYO Rooms -— is increasingly being adopted by hotels in India and abroad to boost occupancy. The corporation has recently revamped some of its resorts and is planning to invest around ₹45 crore to build properties at destinations such as Kunkeshwar, Nashik and Mitbhav. These new facilities are expected to be operational next year. 

In Services context, distribution doesn't involve movement of physical goods. As it is not possible to physically move experiences, performances and solutions, transactions are conducted using physical and electronic channels. Service providers like MTDC brings up different offers to keep its customers interested in service. They negotiate to sell the service and building a network with Mahindra Holidays and Oyo Rooms.

In many service there is no or minimal flow of physical product though there can be flow of physical facilities like in this case the hotel rooms. In any case service provider is required to build a network of distribution to facilitate that flow. 

How are Services Distributed?

The Service Flower Perspective

The supplementary services of service flower indicates that there is information flow as well as physical processes flow in service product distribution. All facilitating elements like information, order-taking, billing and payments are based on information flow and can be managed by electronic channels. Enhancing elements mostly requires physical processes and processed through offline channels. Only consultation is one enhancing element that is based on information and hence can be online. Though many high involvement services requires face to face consultancy services. For example - home loan services.

The Type of Contact Perspective:

The service distribution is also determined by the type of contact the customer requires in a particular service. It is also on the positioning of the service provider whether they provide state of art facilities at their location or they provide convenience to the customer by going to their doorsteps.

Customers visit service site:

In case of some services convenience of service factory locations and operational schedules important when customer has to be physically present. Most the highly sophisticated services that uses complex procedures or heavy equipments requires customers to visit their location. Airports, hotels and railway stations are some services where the customers are required to visits to avail service. They have location and operational schedules to be followed. Also these facilities require heavy technical and physical specifications that can be made available only at some site.

Some other service like hospitals, education and retail service may be dynamic, depending upon the operations and equipment required to be used. 

 

Service providers go to customers:

Unavoidable when object of service is immovable. For example painting a house or pest control. Such situation makes service delivery more expensive and time-consuming for service provider. However, many service providers are gaining a competitive edge by providing home service to its customers.

Portea, founded by Meena Ganesh and Ganesh Krishnan is the largest provider of home care service expanding in 24 cities around India.  Portea’s comprehensive services encompass geriatric care, post-operative care, palliative care and physiotherapy. The company offers home visits from physiotherapists, nursing attendants, nurses and doctors. In addition, Portea also provides collection of lab samples from patients’ homes and medical equipment on hire, bringing the entire gamut of healthcare services to a patient’s doorstep.

Service transaction is conducted remotely

With the help of logistics and telecommunications the services can be located at the remote place. Many service provider uses mobile vans for the same. Mobile hospitals, eateries and other mobile service are example of this type of delivery systems.

Channel Preference amongst Consumers

Consumers have choice between selecting a channel of distribution

1. Non-personal or self -service:

Customer would require to use vending machine or a kiosk or internet facility to avail any of the given service. It is usually prefer by experienced and high in self-confident type customers. It is also convenient at times as customer waiting time is reduced. For service providers such channel provide scope for standardisation and reduces variation in service delivery.

2. Personal or full-service: 

Customers are provided with full assistant by service people. This is suitable for more customised and high involvement services like bank loan or beauty service. Customer seeking social motives tends to use more personal channel. These type of customers seek more experience than he functionality or routine of the service delivery.

Place in Service Distribution

Number of new formats are added to a service distribution  over the years to make it more and more useful and reachable to the customers. 

A service provider aiming at covering maximum target market comes up with small multi site facilities called as mini-stores. For example, ATM machines of different banks, McD, KFC and Taco Bell outlets in food courts. Usually the operations at the service site are kept at minimum and controlled by a central site.

The location of these mini-stores are chosen such that they are convenient to target customers and should be able to attract new customers. They are located at malls, airports, railway stations, theme parks, entertainment hubs, colleges and so on.

As the cost of real estate in all major cities is very high, the choice of location becomes the most crucial criteria for most service providers. At times to keep the cost low they need to move out of the city and are located at suburbs. 

Hong Kong has to shift it's a old airport from Kawloon to Lantau island due to location constraints.

Walmart located its sprawling discount stores in suburbs of cities, or in small towns, where its competitors did not go. It reaped the advantages of economical real estate and larger store space, utilizing it to expand the product mix on its shelves, thus attracting large enough crowds of shoppers to make itself sustainable.

Starbucks has stores in some of the most prime and strategic location across the globe. They target premium, high-traffic, high-visibility locations near a variety of settings, including downtown and suburban retail centers, office buildings, university campuses etc. This has earned them a significant competence and advantage to be able to penetrate prime markets. The main aim for the firm is to make their stores a ‘third place’ besides home and work. 

For McDonald, the location of each unit is a major element of its success. The ideal site for a stand-alone restaurant will be 50,000 square feet, although units have been developed on both smaller and larger sites. A corner location with the option to put up signs visible from two major streets is considered optimal, as is a site near a major intersection with traffic signals. Size and space requirements are adapted for mall, airport and some downtown locations.

Service distribution requires certain strategic decision to be taken. According to a report in Economic times, Flipkart is commissioning its largest warehouse which is as big as three football fields combined and also the most technologically advanced in Telangana and may invest as much as $500 million to build scores of fulfillment centers across the country.

Timing in Service Delivery

These are the time of flexible responsive service operations: 24/7 service, 24 hours a day, 7 days a week, all around the world. In earlier times the service availability was as per the convenience of service provider. The schedules were restricted and service availability limited to daytime, 40-50 hours a week. With the development of infrastructure and connectivity most of the service providers including e-commerce companies working hard towards providing delivery in 2 hours. Timing are realized and understood as strategic advantage for service providers.

Service Delivery in Internet Age

Cyberspace has completely changed the way businesses used to look and conduct their businesses. This transformation is due to several factors, the change in overall marketing environment including the technological innovations.

Most technologically driven firms include .com with their brand name. (flipkart.com). Development of mobile technology has given rise new opportunities to entrepreneurs to start new mobile apps and websites. These technologies are very helpful in getting information from the customers. Most the firms today use internet for providing information related to various products.

HDFC bank provide the information regarding all their products through website.

They can provide individual consultancy through their website and app. Makemytrip gives option for callback for personal counselling and consultations.

Websites also take the customer through the step by step process of order taking. Airlines use website for bookings.

They also provide information regarding hospitality, safe keeping and special request handling. Billing and payments are most used supplementary service through internet. Most of us pay our utility bills online. The facilities like plastic money and mobile money has transformed the business in today's world.

For service providers, the task of keeping and updating customer information became easier using cyberspace. They can provide loyalty cards or smart cards to its customers that can store all their purchase information.

The Role of Intermediaries

Service providers use intermediaries to complete the supplementary services. Many times it is more cost effective to outsource than to do it yourself. Big corporate offices and institutions outsource the housekeeping, parking and security services, hotels and cruise operators rely on travel agencies for bookings, hospitals outsource expert advice and so on. In all such cases the service provider maintains the control of the service and ensure that all the elements are in line with the service concept.

Franchising

Franchising is a concept that takes care of the effective distribution of service and also enable service providers to maintain the standards. Franchisers provide training, equipment and support marketing activities.

Franchisees invest time and finance, and follow copy and media guidelines of franchiser.

Through franchising service providers expand delivery of effective service concept without a high level of monetary investment. Franchisees are motivated to ensure good customer service and high-quality service operations. Franchisers need to control over delivery system and how customers experience actual service otherwise effective quality control will be difficult. Problems may arise if there is conflict between franchisees arise especially as they gain experience.

Reference: Services Marketing: People, Technology, Strategy - Lovelock, Wirtz & Chatterjee & Service Marketing - Zeithmal, Bitner, Gremler & Pandit