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,
- Direct sale and
- 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.