Electronic Channels Direct versus Indirect Channels Direct Channels

Electronic Channels

Direct versus Indirect Channels • Direct Channels • • Employed sales staff National sales staff Brand. com Voice/CRS/Mobile • Indirect – Intermediaries • Why use them? • Why so many of them?

Getting the Customer to the Product • Reservation services • Representation firms • Consortia • Incentive travel organizations • Corporate travel management • Global distribution systems (GDS) • Traditional off-line travel agents • Central reservation systems (CRS) • Internet channels • Websites

Push vs. Pull strategies • Pushing the product “down” through the distribution channel TO the customer • Incentives to travel agents and intermediaries • Pulling the customer “up” through the distribution to the channel • Traditional media/private sales/CRM

Why Use Intermediaries? • History of travel • Selling through wholesalers and retailers usually is much more efficient and cost effective than direct sales • Fragmentation of the travel purchase and travel inventory, transportation (idea of “lift”), hotels, attractions, meeting facilities, restaurants, and so on.

Delivering Service Through Intermediaries & 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

Objectives: Delivering Service Through Intermediaries • Identify the primary channels through which services are delivered to end customers. • Provide examples of each of the key service intermediaries. • Discuss the benefits and challenges of each method of service delivery. • Outline the strategies that are used to manage service delivery through intermediaries.

Internet Intermediaries • History of the internet as a discount channel • Price and convenience key drivers still • Dominance about inventory allocation • Consistency of all 4 Ps by channel • How Product is described • Pricing parity • Channel profitability • Communication needs to vary by segment (channel)

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)

Services Intermediaries • Franchisees • service outlets licensed by a principal to deliver a unique service concept it has created • e. g. , Jiffy Lube, Blockbuster, Mc. Donald’s • 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, Tax. Cut software

Benefits and Challenges for Franchisers of Service (Mc Donald) • 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

Benefits and Challenges for Franchisees of Service • Benefits: • An established business format • National or regional brand marketing • Minimized risk of starting a business • Challenges: • Encroachment of other outlets into franchisee territory • Disappointing profits and revenues • Lack of perceived control over operations • High fees

Benefits and Challenges in Distributing Services through Agents and Brokers (Travel Agent) • Benefits: • Reduced selling and distribution costs • Intermediary’s 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

Benefits and Challenges in Electronic Distribution of Services (ATM) • Benefits: • Consistent delivery for standardized services • Low cost • Customer convenience • Wide distribution • Customer choice and ability to customize • Quick customer feedback Table 14. 3 • Challenges: • Price competition • Inability to customize • Lack of consistency due to customer involvement • Changes in consumer behavior • Security concerns • Competition from widening geographies

Common Issues Involving Intermediaries • conflict over objectives and performance • difficulty controlling quality and consistency across outlets • tension between empowerment and control • channel ambiguity (mendua)

Major Issues/Challenges • Costs have risen as has competition • Global differences in systems • Technology also flattening this • System hard to change and complex to manage • Historical controls of GDS, OTA • Diversity of travel “parts” makes all of the distribution points part of the experience and if an intermediary fails, so does the experience

Major Issues/Challenges • Fragmented owner-manager relationships • Capital costs for technology and talent • Travel agents reinvention imperative remains • Battle of the brands—brand channels that is! • Big data: not new • Proliferation: more • Mobile? • Monetizing social media

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

H&R Block: Providing Multiple Service Channel Options r o l o t C e l n a r n i e t g i n r I O m t r o r e F s n e I g a Im

Evaluation of Channels • • Control and cost of each channel Tracking of statistics to better negotiate contracts in the future Understand when and why to use a channel Good channel management ensures customer satisfaction AND revenue optimization AND profit maximization