Place or Distribution
The most important decision element in the distribution strategy relates to the issue of location of the service so as to attract the maximum number of consumers. The inseparability characteristic of service such as those of doctors, teachers, consultants, mechanics etc. poses a distribution constraint since they are able to serve only a limited, localized market. The other characteristic of services which affects the distribution strategy is the fixed location of services such as universities, restaurants, and hospitals which necessitates the customer to go to the service location rather than vice-versa.
Methods of distribution in Services
Distribution in services can be broadly classified into two categories- direct sales and sales via intermediaries.
A) Direct Sales
Direct sales has specific marketing advantages as they help in maintaining better control over how the service is provided or performed and also in obtaining direct feedback from customers. There are obvious problems also in direct sales, like; problems of expanding the business and coping with high workloads where the services of a particular individual may be in demand or direct sale means limited geographic market coverage. The following are the means of direct sales method.
a) Direct Sales through Electronic Channel - To overcome location problems, companies are exploring possibilities of direct sales through electronic channels. The typical benefits the companies see in electronic distribution of services are:
· Consistent delivery for standardized services
· Low cost
· Customer convenience
· Wide distribution
b) Franchising - Franchising is the granting of rights to another person or institution to exploit a trade name, trade mark or product in return for a lump-sum payment or a royalty.Franchise is characterized by the following features:
* Ownership by one person of a name, an idea, a secret process or specialized piece of equipment and the goodwill associated with it.
* The grant of a license by that person to another permitting the exploitation of such name, idea process or equipment and the goodwill associated his rights.
* The inclusion in the license agreement of regulations relating to operation of the business in the conduct of which the licensee exploits his rights.
* The payment by the licensee of a royalty or some other consideration for the rights that are obtained.
* Quasi Retailing The quasi-retail outlets, sell services rather than goods, like Hairdressers, Amusement arcades Travel Agents, Employment agencies, Car hire agencies, Hotels, Restaurants, Driving Schools.
B) Sales via Intermediaries
Majority of the goods are services are made available to the customers through intermediaries. The following are the dominating intermediaries in the market.
Key Issues Involving Intermediaries
The following are the major issues which should be addressed before hand in deciding the distribution strategy involving intermediaries
· Conflict over objectives and performance
· Conflict over costs and rewards
· Control of service quality
· Empowerment versus control
· Channel ambiguity
A service organization can develop an effective channel system if it helps the intermediary to develop customer-based service processes by providing the required support. Also through training it may develop the intermediary to deliver service quality and gradually move to a cooperative management system and controls.
Agent: An agent is an independent intermediary, who may act in the name of, or for a principal. His contract will define these provisions along with territorial rights, exclusivity and sales commissions.
Broker: A broker is an independent intermediary between buyer and seller who bring parties together to facilitate the conclusion of sales contract. A broker may have continuing relationship for his client under a contract period; for which he may charge fee for assistance.
Alternately, a broker may be for a special job to be undertaken.
Functions of Agents and Brokers
The major function of these agents and brokers is, like any other intermediary, to bring the producer of service and the user or consumer together. For certain services, agents can be identified and deployed with selling as the chief function to be performed by them.
These agents can be compared with the agents for goods and they are classified as brokers or sales agents. The example of this kind of channel is transportation (travel agents) and office or factory workers (employment agencies). In case of certain services, actual product is not transferable and therefore tangible representations are created and transferred. This type of channel is used for marketing insurance services, where a contact document exists as a physical and tangible representation of the services.
Another characteristic of services is that the services are generally not delivered to the buyer and the creation of time and place utilities is a vital function in the services marketing.
Irrespective of whether one uses agents or middlemen or direct sales channel the factor of location keeping in view the potential markets will be the most significant factor in channel selection decision. Duane David et.al, are of the view that location considerations along with personal sources of information are two of the critical factors in final purchase decision of many services. The problem of standardization and uniformity restrains the service organization to use middlemen to any great extent and limit the geographical area which the service organizations propose to reach and cover. This lays emphasis on the significance of good selection to attain maximum coverage at the market place. Banking organizations have started reliving this fact and introduced extension counters, mobile banking apart from opening branches in rural areas.
