Service Distribution free essay sample

A service can be defined as an essentially intangible benefit either on its own right or as a significant part of a tangible product which through some form of exchange satisfies an identified need (Palmer, 2001). From the dictionary it is said to be a system or organization that provides for a basic public need. Distribution is the process of making a product or service available for use or consumption by a consumer or business user. A channel is simply a route and/or means. We can therefore say that service distribution channels are the routes through which economic activities are allocated, spread or positioned within a given area to create value and provide benefits to customers thus resulting in a desired change of state on the part of the service recipients by making these activities available. There are different types of service offers i. e. †¢Pure tangible good: These are primarily tangible goods with no accompanying service e. We will write a custom essay sample on Service Distribution or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page g. toothpaste, sugar, etc. †¢Tangible goods with accompanying service. Hybrid: consists in equal parts both service and goods e. g. a restaurant offers food (good) as well as ambience (service). †¢Major Service with accompanying goods and services e. g. airline travelers get both the service of transport and goods in form of food and magazines etc. †¢Pure service: is primarily a service offer e. g. massage, etc. Hotels, for example, may sell their services (typically rooms) directly or through travel agents, tour operators, airlines, tourist boards, centralized reservation systems, etc. Services are normally located where the target market is or at points convenient to them e. g. schools, banks, nightclubs, etc. Various factors come into play when choosing a distribution channel. Therefore those designing the channels have to decide what is ideal, feasible and available, but these have to be adjusted according to the situation at hand. Such factors include: Customer characteristics Size of the market, geographical dispersion, etc. Company characteristics The company’s objectives, financial status, desired degree of control, etc. Intermediary characteristics – what markets do they serve? Are they financially stable? Are they feasible? Etc. Competitive characteristics – will you use the channels already being used by competitors or your own? Environmental characteristics – political, economic, socio-cultural, technological, legal and ecological factors. Channels chosen must be evaluated for: Economy – Each chosen channel will produce a different level of sales and costs. The cost of selling different volumes through a sales agency should be weighted against using the company’s own sales force. Control – How much power does the company have over the channel? A sales agency is an independent business firm seeking to maximize its profits and may thus concentrate on the customers who make the most purchases and not on the service offer at hand. Adaptive – channel members and the channels make a certain level of commitment to each other and have a certain level of dependency on each other for a certain period of time. In this highly dynamic market, the service provider must look for structures and policies that give him enough room to conform to the current market without incurring unnecessary extra costs. Services are typically distributed through direct channels due to their inseparable nature; however this is not an automatic limitation to a distribution system. There have been some innovations in the distribution of services, improving and increasing the number of ways in which services can be spread out. These include: Direct selling – This involves approaching the consumer directly and selling the service directly without use of intermediaries e. . via mail order, internet, door-to-door salesmen and telephone sales. This method is effective in that it allows the seller to obtain immediate feedback and can therefore easily change to suit the situation and the tastes and preferences of the would-be consumer. It also enables the seller to personalize the service to the customer’s specifications. DEMERITS. It is highly influenced by external factors. For example the targeted customer may be rude and /or hostile towards the salesman; language barrier and possibly transport barrier as well as weather may prevent the seller from effectively making his sale. It limits the geographic market that the service seller can reach. Franchising – This is the selling of goods or services of a company in a particular area as granted by the company. The company stipulates the details of the business e. g. layout, colors, etc. and in effect controls all the franchisee’s activities, giving him little or no room for innovation. Through this method the company can easily offer its services in a large geographical area. Franchisees often have to put up some level of capital thus saving the company that expense. The franchising company, therefore only has to give some sort of basic training or manual and a possibly a starter kit. DEMERITS. The franchisee may not have the best interest of the franchise in mind and may concentrate on maximizing sales at the expense of quality. He may also not have mastered the technical details of the service or handle the promotional materials as should be. With the absolute control from the franchiser, the franchisee can not include some of his ideas which may prove beneficial to the business. The franchisee may only have capital that’s enough to keep the business above water. Examples of franchises include Kenchic, Bata, Hilton hotels etc. Service integration – This is whereby services are linked together, particularly in the travel and tourism sectors e. g. some airlines liaise with hotels and car rental firms to provide their passengers with whole packages. This proves to be very convenient especially for the frequent travelers who don’t have the time to go through all these firms and also it tends to be cheaper than employing each of these services individually. DEMERITS Consumer preferences may, however, differ from the integrated ones. The standards of one of the firms in the liaison may not be at per with the others, this maybe detrimental to the reputation of the other firms. Examples include Safaricom in conjunction with Equity bank and Pesa Point. Agents: This is a person who typically sells direct on behalf of the producer e. g. insurance brokers. He is given express authority by the mother company to make sales in their name. He may deal with the products of only one company or with a variety depending on his contractual agreement with the firms.. Agents may be unscrupulous and dishonest and in the process destroy the name of the company. They may also secretly breach contract by dealing with competing products in an attempt to maximize sales and in effect downplay the firm. For example Clear Insurance Brokers, etc. Company staff: these are the sales staff under the direct employment of the service firm. They are on the payroll of the employing service firm. Their main duties include marketing the firm and promoting its service offers. The means and ways in which they carry out their duties is dictated by the firm. They undergo training and orientation into the firm after recruitment and selection. They may lack the proper skills to perform the job effectively and efficiently especially so if recruitment was not done properly. Retail outlets for the service sector. This involves selling the service in small ‘bits’ so to speak e. g. banks retail to individuals and other small account holders while wholesale in their case refers to corporate clients. With the increased need to have individualized, personalized services, more and more service firms have shifted their focus to the individual customer. This point of view reduces their expenses in terms of quantity and number of personnel committed to one client as opposed to several people being served at the same time thus increasing turnover.   Retailers may focus on increase in speed and the number of people that they serve instead of service quality and effective and efficient service delivery. Rapid mushrooming of outlets may lead to eventual collapse of the organization if not well thought out. Automated teller machines (A. T. M) – This is a computerized way of distributing services. They are self service booths or kiosks that allow the consumer to pick from a set of predetermined options by using an A. T. M card and a PIN number. They have been widely embraced by banks and are steadily penetrating into other service sectors e. g. the airline industry now has self-check-in terminals if one doesn’t have any luggage to check in. They are conveniently located all over and operate 24 hours a day. They allow service firms e. g. banks to deliver services to places where it might not be feasible to have a whole branch. They are prone to vandalism as there is little or no security around them. Breakdown in the network renders them useless. Rental services a number of service industries, especially those that have hybrid service offers, rent out their tangible products that go hand in hand with the service. A very good example is the catering industry which rents out its facilities e. g. cutlery and crockery as well as the services of the chef and the waiters. It’s cheaper and involves less hassle than when done by the company because these companies focus solely on their specialty.