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Marketing Basics - Kotler Philip

Service Channels

The concept of distribution channels implies the distribution of not only physical goods. Producers of services and ideas also face the challenge of making their offerings accessible to target audiences. To do this, they create “knowledge dissemination systems”, “health systems”, etc. In order to reach a widely scattered audience, they need to consider both the nature and placement of their representations.

Hospitals should be located geographically so that all residents of the region have the opportunity to receive full medical care. Schools need to be built near the places of residence of children who need to learn. Fire brigades should be dispersed so that firefighters can quickly get to the centers of possible fires. Polling stations should be located in such places so that they can be reached and vote without wasting time, effort and money. In many states, there is the problem of choosing a location for campus affiliates to accommodate the younger generation of highly educated people. In cities, you need to build children's playgrounds and properly place them. Many overpopulated countries need to build family planning centers that disseminate information on ways to limit birth rates among the population3.

Service enterprises must create their own distribution systems that match the characteristics of their products. An example of such an enterprise is Delta Airlines, which is described in Box 29. Distribution channels are also used in the marketing of “personalities”. Until 1940, professional comedians could make contact with the audience through seven channels: variety shows, special performances, night clubs, radio, cinema, carnivals, theaters. In the 50s, variety shows disappeared, but a new powerful channel appeared - television. Politicians should also look for financially cost-effective channels for disseminating their messages to voters — the media, rallies, and conversations over coffee at lunchtime.

Channels are usually characterized by moving the product forward. But we can talk about reverse channels. Sikmund and Stantop write:

A major environmental problem has been the recycling of solid waste. And although their reuse from a technical point of view is quite feasible, the problem arises when organizing the movement of materials along the distribution channel in the opposite direction, when organizing the marketing of garbage through the "reverse path" channel. The current channels of the "reverse" are primitive, and the financial incentives associated with this activity are insufficient. The consumer needs to be motivated to change roles, to become a producer, an initiator, giving impetus to the distribution process in the opposite direction4.

The authors name a number of intermediaries that can play a role in the “reverse” channels. These are: 1) the manufacturer’s collection points, 2) community groups for the “Days of Cleanliness”, 3) traditional intermediaries, such as soft drink trade intermediaries, 4) garbage collection specialists, 5) waste recycling centers, 6) modern “junk workers”, 7) brokers for the sale of garbage for recycling, 8) centralized warehouses - waste processing enterprises.

Box 29. Delta Airlines builds a flight schedule based on the “hub and spoke” principle

For many years, Delta has been the most financially successful airline in the world. Constantly, several factors contribute to the leadership of the company, including its ability to develop long-term business plans and strictly follow them, as well as excellent relations with its own employees. However, the key to the success of the company is probably the innovative distribution system of its goods - route flights.

The system underlying Delta's flight schedule is known as the “hub and spoke” principle. The “hub” is the center of the system, in Atlanta, Georgia, where the company’s headquarters are located, and the “spokes” are air routes from Atlanta to a number of cities in the country. The flight schedule is designed in such a way that all short-range flights from these cities converge in Atlanta at about the same time. Flight aircraft arrive at the central point and depart from it in groups. Ten times a day, at Atlanta Airport, they land with a gap of thirty minutes or more of Delta airplanes. And after a while, what happens is what Delta employees call “great acceleration,” when another group of thirty or more planes leaves almost all the routes from Atlanta.

The work of the system is coordinated in such a way that passengers who need to make a transfer in Atlanta arrive there when the flights of interest to them are just preparing for departure. For passengers, the “hub and spoke” system means a convenient connection of flights and the expenditure of minimum time for a transfer. For an airline, the system means that for flights with transfers, passengers are most likely to use Delta airplanes rather than flights from other companies. An analysis of sales for six months showed that almost 90% of transit passengers arriving in Atlanta with Delta airplanes continue to fly, transferring to other Delta flights.

Nevertheless, the use of such a system is fraught with a number of potential problems. As flights are coordinated among themselves, bad weather in Atlanta can cause massive delays in flights throughout the system. Another unpleasant moment is the delay in the arrival of flights to Atlanta. Delayed departures in anticipation of late flights also cause a wave of delays throughout the system.

However, in general, the system used by Delta works. Centralizing the service system helps maintain a high level of sales. Most other airlines are also successfully applying the “hub and spoke” principle today. But the Delta airline remains the true master of using this system.