What Are the Different Distribution Channels in a Service Business?
Distribution channels in a service business enable a firm to market its service products and deliver them to the customer in different ways. Choosing the right distribution channel gives a services firm a competitive advantage and an opportunity to expand its business at a rate that is faster than organic growth.
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Direct
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Organizations that supply products, rather than services, use distribution channels as intermediaries to deliver products to customers. This system creates an indirect relationship between manufacturer and customer. In the services sector, the relationship is direct. The services firm delivers the service directly to the customer. In the consultancy sector, for example, the customer deals directly with the person who delivers the service.
Agents
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In some service markets, an indirect marketing relationship exists. Firms selling services, such as insurance, financial services, labor, travel or entertainment, may use agents as well as selling directly to customers. However, many established insurance companies transformed their distribution model of agents and direct sales force when they faced competition from new entrants that used the Internet to sell directly to customers. The new entrants, with no field sales infrastructure to support, were able to offer customers lower premiums and win business.
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Multichannel
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Using the Internet as an additional distribution channel enables service businesses to offer their customers greater choice. In retail banking, for example, customers can carry out transactions by telephone, online banking or by visiting their branch. According to a paper presented at the American Marketing Association's 2003 AMA Servsig Services Research Conference, a multichannel strategy creates multiple points of customer interaction that an organization must manage carefully. Servsig stands for Services Marketing Special Interest Group.
Internet
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The Internet enables service firms to change their business model, as well as their distribution model. On its website, marketing firm Moderandi Inc. describes a graphic design firm that created a virtual business with no physical offices and a pool of freelance designers to offer its services globally. Clients placed orders and used Internet services, such as conferencing, to interact with the consultancy throughout a project. The low-cost Internet distribution model enabled the consultancy to offer competitive prices and bring the most appropriate design team to the project.
Partnership
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Partnership with organizations operating in a firm's target market provides a distribution channel that can accelerate growth, according to the Moderandi website. A firm offering computer maintenance services, for example, could expand its customer base by partnering with a computer manufacturer or distributor and providing services to its partners' customers.
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References
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