Factors Affecting the Channel of Distribution of Service
The selection
of a good channel of distribution in the marketing of services was being
ignored till recently due to various reasons. Most of the marketers felt that a
channel of distribution, except a direct one, was not at all feasible. However,
the concept is found to be changing gradually.
As consumers’
buying habits are changing and competition is increasing, many service
industries are taking another look at their channel of distribution. Some have
shown considerable ingenuity in making their services available at convenient
locations.
An example is
the widespread arrangement for the distribution of cooking gas which was not
conceivable at all two decades ago. Yet another example is that of banking
services. Today we have “drive-in-banks”, payment on the spot, etc., offered by
most of the banks.
However, there
are-certain factors that prevent an easy selection of a good channel in the
marketing of services.
Some of these
factors are discussed below:
(1) Geographical
Area:
The seller of
a service can reaches only a limited area mainly because of the fact that he
could employ only a few agencies. This, emphasizes the importance of the
selection of a good channel that will fully expose the service in the market.
Banking institutions have come to realize the importance of this fact in recent
years. Accordingly, they have initiated many innovations in the distribution of
banking services.
(2) Limited View of
Marketing:
Because of the
nature of their product, many service firms depend mainly on population growth
to expand their sales. It is not the increase in the size of population that
matters but it is really the expanding needs of a growing population that is
important. As the population’s educational level and the standard of living go
up, the need for new and diversified services arises. Service firms can meet
these changing needs by developing new channels, or altering existing channels.
(3) Lack of
Competition:
Many services
in the past faced only very little competition. Most of them are monopolies
even today. The lack of competition is not conducive to innovative marketing.
However, the scene is changing and banks, financial institutions, etc., are
facing stiff competition.
(4) Lack of
Creative Management:
Most of the
services are necessary and ‘consumer orientation’ is still not a powerful
ingredient in the marketing of services. This leads to inaction and makes the
service firms inert.
(5) No Fear for
Obsolescence:
Most services,
because of their intangibility, are not greatly subject to obsolescence. This
is definitely an advantage. But it has led many firms to be slow in their
approach to marketing. The manufacturers of products, on the other hand, are
always alert in revising their marketing plans and seeking new methods to
distribute their products, lest they should become obsolete because of a change
in fashions.
In the service
context, distribution is making services available to prospective users.
Marketing intermediaries are the entities between the actual service provider
and the consumer that make the service more available and more convenient to
use. The distribution of services is very closely related to product
development. Indirect distribution of services may be made possible by a
tangible representation on a facilitating good (for example, Bank Credit Card).
Thus, as
far as the marketing of services is concerned the marketing managers in future
will have to be highly imaginative and creative at least in the matter of
innovations in the channel of distribution. There in every chance that the
service will grow in importance and such services should be made available at
convenient locations. A proper decision in the channel of distribution alone
would help the service firms to meet the challenge in future.
Distribution of services | Direct Sale | Factors
governing Choice
A distribution channel consists of a
sequence of firms distributing a service from a producer to a consumer. There
are two methods of distribution of services, namely,
1.
Direct sale and
2.
Delivery of service through intermediaries.
Direct sale method of distribution of services
Many services are distributed directly
from provider to customer. Direct sale is chosen due to inseparability of
service and provider. Services of doctors, dry cleaners, beauticians, personal
care services, consultancy services, entertainment etc. are examples of direct
selling. The direct sale of service takes place in two ways: the consumer
goes to the service firm e.g., restaurants, hospitals, etc. Alternatively, the
service provider goes to the customer in the case of domestic services,
interior design, building repairs, etc.
Factors governing the choice of direct sale method
A host of factors influences the service
firms to sell directly to the customers. These factors include resources of the
firm, type of service geographic location, customer preference and the level of
technical skill.
1. Resources of the firm: The resources that a
service firm has at its disposal will influence the choice of distribution
strategy. Generally, firms which have adequate resources prefer direct
marketing without involving intermediaries in the channel of distribution.
To know the customers better, the firms employing direct channels maintain a
data bank. When the service provider has enormous resources, he can make use of
multiple outlets. These are national chains which are completely run and
managed by the company itself. These are also regarded as direct channel.
Example: Bata showrooms.
2. Type of service: Provision of services involves
interaction between the services provider and customers. The interaction
depends upon the channel decisions. There are two types of services, namely,
equipment-based services and people-based services. Equipment-based services involve
use of equipment in provision of services. For example, car rental, vending
machines and dry cleaning are equipment-based services which do not involve a
high degree of personal involvement. People-based services involve close contact
with customers and are best suited for direct distribution.
3. Geographic location: Services of doctors, dry
cleaners, beauticians etc., are local services whose area of distribution is
limited. Services of this type may be rendered directly to customers. Where the
market area is wide, the service firm has two options. It may create national
chains with multiple outlets which are considered direct channels. Such
multiple outlets are completely run and managed by the company itself.
Alternatively, the company may build a network of intermediaries.
4. Customer preference: The tastes, requirements and
buying habits of the customers vary. So, the needs and wants of customers must
be carefully considered while selecting the channel of distribution. Customers
who are loyal to the service company will prefer to have all their dealings
with that company only. If customers lack confidence in the service company,
they may switch over to other competing service firms. Moreover, some customers
like to deal directly with the service provider whereas some others may want to
deal with intermediaries such as agents and brokers. In case of financial services,
customers prefer to deal through agents who are able to guide them properly.
5. Levels of technical skills: Delivery of some
services require skill and expertise. People involved in the delivery of
services such as financial services require a relatively high degree of
technical skills. Direct distribution where services are delivered directly to
customers, only involves people with adequate skill. Keeping this factor in
mind, some service organizations like banks and insurance companies provide
training to their agents and employees, by offering refresher courses, etc., in
order to update their knowledge.
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