Distribution and Pricing of Services

Question 1

In a typical service sale cycle, what 3 interrelated flows does distribution embrace?

Answer 1

1. Information and promotion flow: information and promotion materials relating to the service offer.
2. Negotiation flow: Reaching an agreement on service features and configuration, terms of offer etc. (e.g. ticket)
3. Product Flow: Development of a network of physical sites (people and possession processing)

Question 2

What are the 6 options for service delivery?

Answer 2

1. Customer goes to service organisation in single site: theatre or hair salon
2. Customer goes to service organisation in multiple sites: bus services, fast food chain
3. Service organisation comes to the customer in single site: house painting and mobile care washing
4. Service organisation comes to customer in multiple sites: mail delivery
5. Customer and service organisation transact remotely (mail or electronic communication) in single site: credit card company or local TV station
6. Customer and service organisation transact remotely (mail or electronic communication) in multiple sites: broadcast networks and telephone company.

Question 3

What are the key determinants to locating a service facility? and what are some location constraints? (3 & 3)

Answer 3

1. Cost
2. Productivity
3. Access to labour
4. operational requirements (e.g. airports)
5. Geographic factor (ski resorts)
6. Need for economies of scale (hospitals)

Question 4

How has service delivery time evolved? (2)

Answer 4

1. Traditionally schedules were restricted: service ability limited to daytime and 40-50 hours a week
2. Today: for flexible, responsive service operations: 24/7 service, 24 hours a day, 7 days a week, all around the word

Question 5

What are some technological innovation mediums which facilitate service delivery? (4)

Answer 5

1. Smart phones: presence of wifi
2. Voice-recognition technology (Alexa, Siri)
3. Websites
4. Smart Cards

• can be offered together with physical channels or replace physical channels entirely

Question 6

What are some recent development in E-commerce (move to cyberspace) (3)

Answer 6

1. Websites
2. CRM systems
3. Mobile telephony

Question 7

What can integrating mobile devices into service delivery infrastructure be used for? (3)

Answer 7

1. Access services
2. Alert customers to opportunities/problems
3. Update information in real time (e.g. flights)

Question 8

What are factors that encourage customers to use virtual stores? (5)

Answer 8

1. Convenience
2. Ease of search
3. Broader selection
4. potential for better prices
5. 24-hour service with prompt delivery

Question 9

Distinguish between distribution of core and supplementary services? (2)

Answer 9

1. Most core services require physical locations (e.g. Starbucks)
2. Many supplementary services are informational: can be distributed widely and cost effectively via other means

Question 10

In the flower of services which are physical and which are information processes?

Answer 10

physical:
- safe keeping
- hospitality
- exceptions

information processing:

• billing
• payment
• consulting
• order taking
• information

Question 11

What are the different elements of the service flower in complementary service delivery online? (8)

Answer 11

1. Information:
   - Read brochures/FAQ
   - Get schedules/directions
   - Check prices
2. Consultation:
   - Conduct e-mail dialogue
   - use expert systems
3. Order-taking:
   - Make/confirm reservations
   - Submit Applications
   - Order goods, check status
4. Hospitality:
   - Record preferences
5. Safekeeping:
   - Track package movements
   - check repair status
6. Exceptions:
   - make special request
   - Resolve problems
7. Billing:
   - Receive bill
   - make action bid
   - check account status
8. Payment:
   - pay by card
   - direct debit

Question 12

What is meant by splitting responsibility for service delivery and what are the challenges for original supplier? (3 and 2)

Answer 12

1. Core service delivery Features created by firm are
2. joint by some supplementary services enhanced by distributor =
3. together it creates the total experience and benefits for customer

Challenges:

1. Act as guardian of overall process
2. Ensure that each element offered by intermediaries fits overall service concept

Question 13

What does franchisors provide and invest? what are the advantages? (3)

Answer 13

1. provide: training, equipment and support marketing activities
2. invest: time, finance and follow copy and media guidelines of franchisor
3. Advantages:
   - 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

Question 14

Define franchising and what the initial fee is?

Answer 14

Franchising - the granting of a licence by one person (thefranchisor) to another (the franchisee), which entitles the franchisee to own and operate their own business under the brand, systems and proven business model of thefranchisor.

The franchisor receives an initial fee from the franchisee – payable at the outset – together with ongoing management service fees. Usually, these fees are based on a percentage of annual turnover or mark-ups on supplies.

Question 15

What are the disadvantages of franchising? and what is the alternative? (3 &1)

Answer 15

1. Loss of control over delivery system and how customers experience actual service
2. Effective quality control is difficult
3. Conflict between franchisees may arise especially as they gain experience
4. Alternative:
   License another supplier to act on the original supplier’s behalf to deliver core product
   - Trucking companies
   - Banks selling insurance products

Question 16

What challenges are faced by distributing in large domestic markets? (4)

Answer 16

1. Distances involved
2. Multiple time zones
3. Multiculturalism
4. Differences in laws and tax rates

Question 17

What pricing strategies does the pricing tripod entitle? (3)

Answer 17

1. Cost-based pricing:
   - Set prices relative to financial costs
   - Activity-Based Costing
   - Pricing implications of cost analysis
2. Value-based pricing:
   - Relate price to value perceived by customer
   - Cost- benefit analysis (costs include customer time, money and effort)
3. Competition based pricing:
   - Monitor competitors pricing strategies
   - dependent on the price leader

Question 18

How is the pricing tripod put into practice? (3 & 5)

Answer 18

1. How much to charge?
   - Pricing tripod provides a useful starting point
   - A specific figure must be set for the price
   - Need to consider the pros and cons, and ethical issues
2. What basis for pricing?
   - Completing a task
   - Admission to a service performance
   - Time based
   - Monetary value of service delivered (e.g., commission)
   - Consumption of physical resources(e.g., food and beverages)
3. Who should collect payment?
   - Service provider or specialist intermediaries
   - Direct or non-direct channels
4. Where should payment be made?
   - Conveniently located intermediaries
   - Mail/bank transfer
5. When should payment be made?
   - In advance
   - Once service delivery has been completed
6. How should payment be made?
   - Cash
   - Token
   - Stored value card
   - Electronic fund transfer
   - Charge Card (Debit/Credit)
   Vouchers
7. How to communicate prices?
   - Relate the price to that of competing products
   - Ensure price is accurate and intelligible