12-2Designing Distribution Channels: What arethe Objectives to be Accomplished?• Objectives of distribution channels:– Increase the availability of the good or serviceto potential customers.– Satisfy customer requirements by providinghigh levels of service.– Ensure promotional effort.– Obtain timely and detailed market information.– Increase cost- effectiveness.– Maintain flexibility.
12-3Service Transactions• Transactions in services can be broadly categorised intothree groups:1. Customers Calling Service OutletsExample: Educational institute, theatres, beauty carecentres, health clubs etc.2. Service Firms Calling CustomersExample: Postal services, security services, personalservices etc.3. Service Provider and Consumer Transact at ArmsLengthExample: Telecom services, cellular services, creditcards services etc.
12-4Distribution Strategy Available to ServiceOrganization• Extensive Distribution, suitable for massconsumption, E.g. Transportation, electricity,telecommunication and primary education• Selective Distribution, suitable for service thatrequire to follow specified conditions and regulationsand special skills to the service provider, E.g. Higherand technical education, tourism and courierservices• Exclusive Distribution, used for services thatreflect the corporate brand image and exclusivity inmany dimensions of the service package, E.g.Health care services, hospitality services, retailnetworks etc.
12-5Service Location• While selecting a location for serviceoutlets, the following factors are to beconsidered:ProximityImageParking FacilityConvenienceAccessibility to other servicesCompetitive Advantage
12-6Service Providers• Service firms may opt for direct distributionor private channels or they may use both• In case of service distribution through amiddleman, there are two marketers-oneis the ‘service principle’ and other is‘service deliverer’
12-7Distribution of ServicesService Principal Service ConsumerService Principal Agent/BrokersServiceConsumerServicePrincipalAgent/BrokersServiceFranchiserServiceConsumer
12-8Distribution of Services Conti..ServicePrincipalAgent/BrokersServiceFranchisersElectronicChannelsServiceConsumer
12-9Distributors for Service Delivery1. Franchising-Mostly used in educational institutions, film-processingcompanies, hotels and restaurants-Agreements and contracts are essential documents infranchising-Agreements and contracts include: Nature of the service The geographic territory The percentage share to be paid to the franchiser on the revenueof the franchisee The time period of agreement The instructions, interactions and conditions The roles and responsibilities of franchisee The rules and regulations of termination of agreement
12-10Distributors for Service DeliveryConti..• Benefits and challenges of franchising:Business expansion and revenue gainsConsistency in outletsKnowledge of local marketsSharing financial risk and less investment burdenChallenges:Problems in maintaining and motivatingfranchisesQuality inconsistency may affect company imageControl of customer relationship by thefranchisee
12-11Distributors for Service DeliveryConti..2. Agent and Brokers-Benefits of agents and brokers: Low selling and distribution cost Specialised skills and knowledge of the agentsand brokers Wider representation in the market Knowledge of local markets Customer choiceChallenge:-loss of control, in pricing and other aspects ofmarketing when agents and brokers interfere andprevail over the producers as well as consumers
12-12Distributors for Service DeliveryConti..2. Electronic Channels-Benefits and challenges of electronic channels: Quality control Low cost Customer convenience Wide distribution customer choiceChallenges: No control on electronic environment Inability to customise Customer involvement
12-13Working a Service Distribution System• Donald H. Light has suggested seven pointsthat help in making the distribution system work Align the system properly Remember each part of the sales cycle Balance retail and wholesale intermediaries Make wholesale intermediaries effectiveproduct managers Keep intermediaries loyal Pay the price to do multiple-marketingcorrectly Control the pace of change
12-14Strategies for Channel Managemento Control Strategieso Empowerment Strategieso Partnering Strategies