Service Distribution Meaning, Characteristics, Channels and Strategy

Table of Contents:-

• Service Distribution Meaning
• Characteristics of Service Distribution
• Service Distribution Channels
• Service Distribution Strategy

Service Distribution Meaning

Service distribution refers to the placement or delivery of services. Distribution of services differs significantly from that of tangible goods. In the case of tangible goods, production and consumption are distinct processes. However, when it comes to services, production and consumption take place simultaneously. The service provider consumer will participate in service production at a specified location. Understanding service distribution is essential for effective service delivery and placement in business.

The basic objective of the delivery of services is to make services available at the right time at the right place and accessible to consumers with ease and convenience. All characteristics of services influence the distribution of services. If the services are intangible such as education, consultancy and so on, it becomes important for the service provider to establish a more direct and meaningful connection with the customer. When tangibles are important in delivering a service, direct contact may become less necessary or even unnecessary.

Delivery of services differs significantly from that of all manufactured goods. Distribution typically follows the production of goods, while services are typically inseparable from the service provider. Because of the inseparability characteristic, the channels for most services are short and simple. The place of distribution services revolves around the availability of a service at specific times and locations.

The special characteristics of services, for example, intangibility, inventory, inconsistency and inseparability have led to specific forms of distribution. Unlike tangible goods, service products are more about usage or rental, with little emphasis on ownership transfer. However, it must be available and accessible before its consumption. This needs an efficient distribution system. The distribution system may be defined as the channels the service provider uses to gain access to potential buyers of the service product.

Characteristics of Service Distribution

Characteristics of service distribution are as follows.

1) Difficulty in Balancing the Demand and Supply of Services

In the case of goods, inventory typically addresses the imbalance between the two. Excessive demand results in stock depletion, while the opposite leads to stock accumulation. In the realm of services, when demand surpasses the service supply rate, queues inevitably form.

2) Lack of Standardisation in Services

In most cases, service providers modify their services to cater to the specific demands of customers. Thus, the job of understanding the precise requirements of the customer, selecting suitable services to meet the customer needs, and delivering them to the customers, all become the responsibility of the frontline employees. Despite this fact, most service organisations employ less experienced or junior employees as the frontline employees.

3) Recovery Services

Unlike in the case of products, there are instances when even high-quality service providers goof up. The first-time service may fail. Fortunately, most customers seem to be willing to give the service provider a second chance. Typically, by that point, frayed nerves, a heated service delivery atmosphere, and a few exchanged words characterize the situation. Unfortunately, in the case of a failed service, the attitude of the customer towards the service provider usually becomes negative during the second delivery.

4) Inseparability of Production and Consumption

In the case of services, the production and delivery of the services have to occur in real-time when the customers want to consume them. This means that, in most service situations, the customers are present on the premises because they need to consume the service personally.

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Service Distribution Channels

Service delivery can involve using any of these distribution channels, either separately or in tandem.

1) Franchising

One of the major ways of service provision is through franchising. The parties involved are the franchisee, the franchiser, and the customers. In this category, business format franchising will mainly concentrate. In India, this type of franchising arrangement has been successful in the areas of photographic development and printing services (For example, Fotofast), restaurants and hotels (For example, Holiday Inn), tuition and coaching classes (For example, IMS), health clubs and fitness centres, computer training institutes (For example, Uptech and NIIT), etc.

2) Electronic Channels

Electronic channels are the only service distributors that do not require direct human interaction. They require some pre-designed service, almost always education, information, or entertainment and an electronic vehicle to deliver. Most people are familiar with telephone and television channels and the internet and web and may be aware of the other electronic vehicles that are currently under-development. The consumer and business services that are made possible through these vehicles include interactive news, movies on demand and music, multimedia libraries and databases, banking and financial services, distance learning, remote health services, desktop video conferencing, and interactive, network-based games.

3) Agents and Brokers

Agents are wholesalers that do not take the title of products. They work for commission or fee as payment for their services and are comprised of manufacturers/service provider agents, selling agents, purchasing agents, and facilitating agents.

i) Selling Agents

Selling agents sell a full range of services of a service of a service provider and are responsible for all aspects of marketing those services under a contractual agreement. They are empowered to negotiate on behalf of the service providers. Selling agents perform the function of wholesaling without taking the title of the product. They mostly work for small firms. For example, tour packages.

ii) Purchasing Agents

It also has long-term relationships with buyers, evaluating and making purchases for them. They are knowledgeable and provide helpful market information to clients as well as obtain the best services and prices available. Purchasing agents are frequently hired by companies and individuals to find art, antiques, and rare jewellery.

iii) Facilitating Agents

It helps with the marketing process by adding expertise or support such as financial services, risk-taking, or transportation. Brokers do not have any affiliation with any individual service provider. They specialise in certain areas and bring buyers and sellers together to negotiate the contract. A broker may define many non-competing brands in a metropolitan region. Brokers are very common in the food and financial services industries.

iv) Services Providers Agents

They work for two or more related services from non-competing service creators in a specific geographic territory. For example, a travel agent represents Indian Airlines and does the booking for passengers travelling by Indian Airlines for a fee or commission and may also provide booking for tour-related services for a tour operator.

Service Distribution Strategy

Distribution strategies for service organisations must focus on issues such as convenience, number of outlets, direct versus indirect distribution, location, and scheduling. Convenience plays an important role in the decision making process when it comes to the selection of a service provider. Therefore, service firms must offer convenience. The firm may not always go for all the channels of distribution but at the same time, a firm may not exclusively depend on its internal resources.

The nature of the services, the nature of the service product and the other delivery-specific characteristics will play a very important role in determining the strategy to be adopted by the service firm. A services firm has to focus primarily on the target customer’s expectations from the service to determine how he/she should reach this service to the specific customer segment.

If it is not done so, the service understanding gap and the service delivery gap will never he/she covered leading to a complete misunderstanding between the service firm and the customer.

A firm can choose any of the following three distribution strategies for reaching its services to the customers:

1) Exclusive Service Distribution

This type of distribution is the distribution of a product through on wholesaler or retailer in a specific geographical area. In this system, the services of the firm will be distributed to the customers through a very exclusive and limited network of service outlets. This is because the service firm may want to either retain the exclusivity of serving only a select band of customer segments or the franchisees and the distributors of services may insist upon providing them better customer share and revenue by ensuring exclusivity in terms of geographical reach and product characteristics. Although marketers may sacrifice a portion of their market coverage through exclusive distribution, they often develop and maintain an image of quality and prestige for the product.

In addition, exclusive distribution limits marketing expenses since the company deals with a smaller number of accounts. In exclusive distribution, producers and retailers cooperate closely in decision making regarding advertisement and promotion, inventory management, and pricing strategies. Exclusive distribution is typically used with high-priced products, that have considerable service requirements, particularly in situations where the number of potential buyers within a specific geographic area is limited. Exclusive distribution allows retailers and wholesalers to do lengthy sales processes for individual customers and, in some instances, comprehensive post-sale services.

2) Selective Service Distribution

Selective distribution is the distribution of a product through only a limited number of channels. This arrangement helps to control price cutting. Marketers can decrease the cost of total marketing by defining the number of retailers while establishing strong working relationships within the channel.

Moreover, selected retailers often agree to comply with the company’s rules and regulations regarding advertisement pricing and showcasing its products. Where service is important, the manufacturer usually provides training and assistance to their selected dealers. Cooperative advertising can also be utilised to achieve mutual benefits for all parties involved. Selective distribution strategies are suitable for shopping products such as clothing, household appliances, furniture, computers, and electronic devices for which consumers are willing to spend time visiting different retail outlets to compare product alternatives. Producers can choose only those wholesalers and retailers with good credit ratings, provide good market coverage, serve customers well, and cooperate effectively.

Wholesalers and retailers prefer selective distribution due to its ability to generate higher sales and profits compared to intensive distribution, where sellers have to compete on price. Selective distribution involves operating a distribution mix of the above two systems to have the services reach the customers. Somewhere the firm will have exclusive options, while the same firm in other places can go in for a moderately intensive distribution network. That means the firms dealing in premium fast food centres like Pizza Hut, Domino’s Pizza, Cafe Coffee Day, high-class fashion jewellers, signature restaurants, etc., provide their services through such a selective network.

3) Intensive Service Distribution

This distribution strategy seeks to distribute a service or product through all available channels in an area. Usually, an intensive distribution strategy suits items with wide appeal across broad groups of consumers, such as convenience services or goods. A service firm can make its services available at the maximum service outlets to make its services absolutely and conveniently available in 10 different kinds of segments that the service firms want to approach.

An intensive network of distribution will mean making as many service outlets available for service distribution, as possible. Banking services, mobile services networks, and cyber cafes are all focusing on an intensive distribution strategy to reach their services to their customers everywhere.

FAQ

1. What is the service distribution?

Service distribution refers to the placement or delivery of services to customers or clients through various channels. Service distribution is different from that of product distribution because it involves physical distribution networks, digital platforms, or a combination of both. The objective of service distribution is to ensure that the right services are reached to the right customers through the right channels, at the right time and in the right manner, to benefit both the customer and the service provider.

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