Page 234 - DMGT510_SERVICES_MARKETING

Unit 12: Distribution of Services

10. A hotel uses its distribution strategies well enough to keep abreast with the other popular Notes
hotels. This is known as offensive strategy.

12.2 Growth Options and Internationalisation of Distribution

It is imperative for the service firm to control the intermediaries to attain their strategic goals -
be it in terms of image, profit, revenue, efficiency, effectiveness of performance, etc. But the
problem invariably lies in the perception of the role of the intermediary: as a customer, partner
or an extension of the service firm. SOTC/Kuoni would thus always be pondering over how it
should take on its intermediaries - as customers to its designs and services, extensions of itself
like franchisees or as partners in the marketing mix. Thus, accordingly, there are a variety of
intermediary management strategies namely control strategies, empowerment strategies and
partnering strategies to grow the distribution channel effectively:

Control Strategies: This strategy can be implemented only when the service principal is more
powerful and assertive than the intermediary and dictates the terms of control, compliance and
conformance. The service principal derives its power from the following:
It possesses intimate knowledge of customer preferences;

It is in possession of unique services and process know-how which has customer demand

and loyalty;
It has access to economic resources and wields other forms of economic power, like deciding

compensations, territorial over-rides, new promotional schemes, setting goals and targets,
etc.
Thus it can ensure the best performance of the intermediary if it can set up standards for revenues
and service performance, measure results and accordingly administer compensation.
Measurement of the intermediary’s performance is done by the service firm by monitoring
internal data like sales figures, turnovers etc., external data generated through regular customer
surveys and competition analysis. Customer surveys are used to develop the Customer
Satisfaction Index (CSI), which is used as a performance benchmark.

Review of the intermediary’s performance is done through judicious usage of quotas, sales
goals, termination of contracts, non-renewals, restrictive supplier sources, expansion of networks
by co-opting more intermediaries leading to encroachments in territories, etc.
Empowerment Strategies: This strategy is mostly used when the service principal is new, and the
intermediary is a known player, financially strong and has local clout politically. The service
firm thus becomes non-assertive, lacking the power to govern the channel through control
strategies. A lot of autonomy and flexibility devolves on the intermediary with the belief that
participation instead of plain acquiescence would bring out its talents. Empowerment of the
intermediary is done by providing information, research and processes that will help them to
perform better.
The intermediary may be too small a player to afford research studies, advertisements, etc. The
service principal shares analyses of research studies with its intermediaries to make them get a
better idea of the service background and trend. This knowledge will help them to improve
their service process and service delivery. Life Insurance Corporation of India (LIC) shares with
its agents/advisors the research data on the policy holders to enable them to sell policies
effectively.
With information circulated, there will be some intermediaries who may not have any knowledge
of implementation. The service principal then supports them in implementation through
consulting, training, etc.

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