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Unit 12: Distribution of Services
competitors (defensive strategy) or to derive some competitive advantage over the others Notes
(offensive strategy).
Example: Dominos Pizza has used distribution and not its pizzas (product) to derive
competitive advantage. Similarly Grameen Bank of Bangladesh has used its unique distribution
methods to become a case study in effective rural banking. There was no creation of expensive
retail branches: its banking services were spread through relationships.
A customer of some service would bring other customers, gaining incentive points, and would
also stand guarantee for them to be responsible for the collection of payments.
2. Selecting the type of channel: The service firm must then choose the most suitable
distribution channel for its offers, which should be effective in achieving the firms goals.
This is where a need for an intermediary would be felt, and a decision on the type of
middlemen should be taken accordingly. For a firm in the goods business the array of
choices are many - with various benefits and consequences.
Example: A book publisher can, at the retailing level, choose from book stores
(speciality), catalogue or mail-order, a Web retailer like amazon.com, discount stores, flea
markets (footpath vendors), department stores, convenience stores (at petrol pumps), and direct
marketing firms who use personal selling, etc. The book publisher could also go for middlemen
as wholesalers. Similarly, new general insurance entrant Royal Sundaram could choose
freelancing agents, direct marketers or mail-orders to achieve its organisational goals.
3. Determining the intensity of distribution: The firm has to decide on the intensity of
distribution. If it is intensive, then the number of middlemen required would be more at
each level of distribution. But if the distribution is limited, as in the introduction or trial
stage, say, then there will be less number of middlemen.
Example: In the goods business, marketers whose products have high technology and
have high obsolescence (Microsoft and computer hardware manufacturers) will need intensive
distribution for rapid market penetration. But diamond monolith De Beers would look for
limited distribution for its prestige products like Nakshatra Diamonds, underscoring their
exclusivity.
Services require both intensive and limited distribution.
Example: Deutsche Bank and Bank America looked for limited distribution to focus on
corporate finance and other value-added services and class banking as opposed to SBIs mass
banking. Worldwide, coffee latte major Starbucks has chosen intensive distribution while
up-market jeweller Tiffanys has limited distribution.
4. Choosing specific intermediaries: Once the service firm has decided on the channel, it now
has to choose specific firms.
Example: If OM Kotak chooses to sell its insurance online, it could choose from a host of
e-business firms like rediff.com, bazee.com, yahoo.com, etc.
The service firm has to choose specific firms in specific towns that would enable it to cover
specific markets. The service marketer should assess the strengths and effectiveness of the
intermediary member in achieving the desired market penetration.
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