Chapter 14: Delivering Service Through
Intermediaries and Electronic Channels
“When a McDonald’s franchisee cooks the McNuggets too
short a time, the customer’s perception of the company –
and of other McDonald’s franchisees – is tarnished”
“People claim that the BBQ at Corky’s in Memphis is far
better than the one in Little Rock.”
Challenge: Intermediaries are necessary, but
may contribute to Provider
.
Why Service Intermediaries?
Company goal: profit
Customers seek: value
Service Intermediaries: provide ______ and _______
convenience for the customer (value)
Specialization, expertise
Service Distribution
Services are delivered directly from service producer
to the consumer: ___________________
Service intermediaries:
• Co-produce the service, fulfilling promises to
customers:
• Make services locally available: _________
• “Glue” between brand or company name and
customers
Delivering Service Through
Intermediaries and Electronic Channels
Service Provider Participants
• service principal (originator)
– creates the service concept
• _______________________
• service deliverer (intermediary)
– key function: provide ____ and _____ convenience for
the customer
• ______________________________________
Key Issues
Involving Intermediaries
• conflict over objectives and performance: quality vs.
profit
• conflict over costs and _______: Delta changes the
commission paid to its travel agencies from 10%commission on total airfare to
$50 or less fee per ticket
• control of service ________: shoddy performance, unsanitary
conditions by one outlet can negatively affect reputation of service principal
• empowerment versus _______: franchisee’s desire to
customize McDonald’s burgers; principal demands rigid control vs.
intermediary desires independence
• channel ambiguity: role of company vs. intermediary:
determines standards for service delivery?
Who
Direct or Company-owned Channels
Advantages:
Complete control over outlets
Company owns the customer relationship
Disadvantages:
Company bears all the financial risk
Large companies are rarely experts in local markets
Services Intermediaries
____________ – service outlets licensed by a
principal to deliver a unique service concept
it has created or popularized
– e.g., Jiffy Lube, H&R Block, McDonald’s
Benefits and Challenges in Franchising (Table 14.1) –
EX: For franchiser: leveraged business format for
greater expansion and revenues vs. difficulty in
maintaining and motivating franchisees
Franchising (Table 14.1)
Benefits for Franchisers
Challenges to Franchisers
▪ Leveraged business format for
greater expansion and revenues
▪ Consistency in outlets
▪ Knowledge of local markets
▪ Shared financial risk and more
working capital
▪ Difficulty in maintaining and
motivating franchisees
▪ Highly publicized disputes and
conflict
▪ Inconsistent quality
▪ Control of customer relationship
by intermediary
Benefits for Franchisees
Benefits for Franchisees
▪ An established business format
▪ National or regional brand
marketing
▪ Minimized risk of starting a
business
▪ Encroachment
▪ Disappointing profits and
revenues
▪ Lack of perceived control over
operations
▪ High Fees
Services Intermediaries
Agents and brokers – _______________________________
______________________________________________
Agents: work for their principals continuously, rather than
just a single deal
Brokers: paid by the party that hired them
Table 14.2
Benefits: reduced selling and distribution costs, possession
of special knowledge and skills, wide geographical
representation, customer choice
Challenges: loss of control over pricing; representation of
multiple service principals
Services Intermediaries
Electronic channels – all forms of service
provision through television, telephone, interactive
multimedia, and computers
e.g., ATMs, university video courses,
TaxCut software
Benefits and Challenges in Electronic
Distribution of Services
Benefits:
• Consistent delivery for standardized services
• Low cost: efficient delivery and interaction-_____
________________________________________
• Customer convenience-_____________________
• etc
Benefits and Challenges in Electronic
Distribution of Services
Challenges
• Customers are active, not passive, and must be enticed:
_____________________________________________
• Inability to customize with highly standardized electronic
services: _________________________________
• Requires changes in consumer behavior: _____________
___________________________________________
• Security concerns: _____________________________
• etc.
Strategies for Effective Service Delivery through
Intermediaries
• Control strategies: service principal creates
standards for revenue and performance standards, measure
results, and compensates accordingly
Ex: Monitoring sales and performance of car dealerships:
__________________________________
Service principal must be the most powerful channel
member; _____________________________________
Strategies for Effective Service Delivery through
Intermediaries
• Empowerment strategies: service principal
provides information, research, or processes to help
intermediaries perform well in service
Ex: Principal conducts research on service quality and
shares this information with intermediaries
Service principal is new or lacks power to govern the
channel using control strategies.
Strategies for Effective Service Delivery through
Intermediaries
• Partnering strategies: has highest potential for
effectiveness; involves partnering with intermediaries to
learn together about end customers, set specifications,
improve delivery, and communicate honestly
• Consulting intermediaries and asking for their opinions
and views before implementing policy