Advantages & Disadvantages of direct distribution method of services

The service marketer derives the following advantages by employing direct distribution.

Advantages of direct distribution method of services

1. Direct channels are owned by the company itself. The major benefit of company-owned channels of distribution is that the company has complete control over its outlets. This direct control enables the company to maintain consistency in service provision. Control over hiring, training and motivating employees is also a benefit of company owned channels.

2. In direct channels, the skilled workers or professionals develop individual relationships with customers. Therefore, the customers develop loyalty for the individual service employee or for the company. For example, most men are loyal to certain hairstylists.

3. Direct channels are suited for local service providers such as doctors, dry cleaners, consultants, interior decorators, etc., whose area of distribution is limited.

4. Companies are able to obtain direct feedback from customers on their existing needs. Thus, they can also understand how the perceptions of the customers towards offerings are changing.

5. Greater confidentiality can be maintained with information relating to the customer. For example, maintenance of secrecy of customer accounts is very important in banking services. Direct channels enable the bankers to enjoy the trust and confidence of their customers.

6. Direct channels eliminate the role of middlemen and hence the consequent cost of commission, brokerage etc. This leads to lower distribution costs thereby enhancing the profitability of the organization.

7. As the service provider is in regular and direct contact with customers, two way communication becomes effective.

8. Direct sale is accomplished by the customer going to the service provider (hairstylists, tourist information centre) or by the provider going to the customer (plumbing, house cleaning, building repair etc). Thus, many personal as well as business services benefit from direct sale. Personal and business services like beauty parlors, photographic studios, shoe repair shops, funeral service firms, consultancy, services, car rentals etc., are very much benefited from direct channel of marketing.

Disadvantages of direct distribution

In spite of the advantages discussed above, several disadvantages arise out of company-owned channels.

1. Probably, the largest impediment to most service chains is that the company must bear all the financial risks. While expanding, the company must mobilize all the capital required for store proliferation, advertising, service quality or new service developments.

2. Companies rarely enjoy expertise in local markets. When companies expand into other unfamiliar regions or other countries, they are not able to adapt their business formats to suit local needs. In such situations, joint venturing is preferable.

3. When two or more companies want to offer a service and neither has the full financial capability and expertise, they undertake service partnerships. Partnerships are common in areas such as telecommunication, high-technology areas, internet-based services and entrepreneurial services.