Electronic Channels

1. Electronic Channels

2. 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?

3. 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

4. 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

5. 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.

6. Delivering Service ThroughIntermediaries & 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

13. 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.

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

15. 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)

16. Services Intermediaries • Franchisees • service outlets licensed by a principal to deliver a unique service concept it has created • e.g., Jiffy Lube, Blockbuster, McDonald’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, TaxCut software

17. Benefits and Challenges forFranchisers 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

18. Benefits and Challenges forFranchisees 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

19. 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

23. 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 • Challenges: • Price competition • Inability to customize • Lack of consistency due to customer involvement • Changes in consumer behavior • Security concerns • Competition from widening geographies Table 14.3

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

27. 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

28. 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 more more more Mobile? Monetizing social media

29. 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

30. H&R Block: Providing Multiple Service Channel Options Insert Original Color Image From Internet

31. 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