DELIVERING SERVICE THROUGH
INTERMEDIARIES AND
ELECTRONIC CHANNELS
Chapter 13
Donna J. Hill, Ph.D.
Fall 2000
Objectives for Chapter 13:
Delivering Service through Intermediaries
and Electronic Channels
• Identify the primary channels through which
services are delivered to end customers
• Provide examples of each of the key service
intermediaries
• View delivery of service from two perspectives-the service provider and the service deliverer
• Identify the benefits and challenges of each
method of service delivery
• Outline the strategies that are used to manage
service delivery through intermediaries
Distribution---Time and
Place Utility
 Availability
---when
 Access --- easy to
conduct transaction
 Operating Hours
 Direct channels --no intermediaries
 Indirect channels ---
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)
Functions Performed by
Intermediaries
Co-producing the service
 Making services locally available
 Functioning as a link between the brand
and the customer

Types of Intermediaries




Agents
 selling --- contractual authority to sell
 purchasing--- purchase for a buyer
 facilitating --- help with marketing process
Brokers --- bring buyers and sellers together
Electronic Channels --- do not require human
interaction
Franchises --- Service outlets licensed by a
principal to deliver a unique service concept it
had created or popularized.
Characteristics of Agents
A agent works for the pricipal
continuously
 An agent receives commissions (usually
two to six percent of selling price)
 An agent delivers the rights to services
 An agent is entrusted with influence
over prices, terms, and conditions of
sale.


Travel Agent (selling agent)
Services Intermediaries

franchisees
 e.g., Jiffy Lube, H&R Block, McDonald’s

agents and brokers
 e.g., travel agents, independent insurance
agents

electronic channels
 e.g., ATMs, university video courses,
TaxCut software
Key Issues
Involving Intermediaries

conflict over objectives and performance

conflict over costs and rewards

control of service quality

empowerment versus control

channel ambiguity
Exhibit 13-4
Summary of Benefits and Challenges
for Franchisers of Service
Benefits




Leverages the
business format to
gain expansion and
revenues
Maintains consistency
in outlets
Gains knowledge of
local markets
Shares financial risk
and frees up capital
Challenges
• Difficulty in maintaining and
motivating franchisees
• Highly publicized disputes
and conflict
• Possibility of inconsistent
quality that can undermine
the company name
• Control of customer
relationship by intermediary
Summary of Benefits and
Challenges for Franchisees of
Service
Benefits



Obtaining an
established business
format on which to
base a business
Receiving national or
regional brand
marketing
Minimizing the risks of
starting a business
Challenges
• Disappointing profits and
revenues
• Encroachment and franchise
saturation
• High failure rates and unfair
terminations
• Lack of perceived control
• High fees and rigid contracts
• Unrealistic expectations
Exhibit 13-6
Summary of Benefits and Challenges
in Distributing Services through
Agents and Brokers
Benefits
Challenges





Reduced selling and
distribution costs
Intermediary’s
possession of special
skills and knowledge
Wide representation
Knowledge of local
markets
Customer choice
• Loss of control over
pricing and other
aspects of marketing
• Representation of
multiple service
principals
Exhibit 13-7
Summary of 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
Customers are active, not passive
Lack of control of electronic
environment
Price competition
Inability to customize with
standardized services
Lack of consistency with
customer involvement
Security concerns
Competition from widening
geographies
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-based
service processes
• Provide needed support
• Develop the
intermediary to deliver
service quality
• Change to a cooperative
management structure
Examples
www.garden.com
 www.ticketmaster.com
 www.mediconsult.com
 www.priceline.com
 www.schwab.com
 www.starbucks.com

Answer these questions


Does this represent a direct or indirect channel? If
indirect, which type?
Describe how each of the following reasons for
channel conflict is problematic for these businesses?






conflict over objectives and performance
conflict over costs and rewards
control of service quality
empowerment versus control
channel ambiguity
What is the main benefit the business gets from using
this channel? What is the main challenge?
Customer-Focused Distribution
Identify market segments.
 Identify benefits sought by
customers.
 Match customer needs to channel
and distribution strategies.
 Manage quality control.
 Manage corporate growth.
