Basics of Marketing - Kotler Philip

Channels in the service sector

The concept of distribution channels implies the distribution of not only physical goods. Producers of services and ideas also face the problem of making their offers accessible to target audiences. To do this, they create "knowledge dissemination systems", "health systems", etc. To reach a widely dispersed audience, they need to think about both the nature and location of their representations.

Hospitals must be located geographically in such a way that all residents of the region have the opportunity to receive full medical care. Schools must be built near the places of residence of children who need to study. Fire brigades should be dispersed in such a way that firemen can quickly reach the fires of possible fires. The polling stations must be located in such places that they can be reached and voted without wasting time, effort and money. In many states, there is a problem of choosing a place to host branches of campuses for the living generation of highly educated people. In cities it is necessary to build children's playgrounds and properly place them. Many overpopulated countries need to build family planning centers that would disseminate information about methods of birth control3.

Service companies must create their own distribution systems that are appropriate to the characteristics of their products. An example of such an enterprise is the Delta Airlines, which is described in Box 29. Distribution channels are also used in the marketing of "personalities". Until 1940, professional comedians could come into contact with the audience through seven channels: variety shows, special performances, nightclubs, radio, movies, carnivals, theaters. In the 50's the variety show disappeared, but a new powerful channel appeared - television. Politicians should also seek financially viable channels for distributing their appeals to voters - the media, rallies, talks over a cup of coffee at lunchtime.

For the channels usually characterized by the advance of the goods. But you can talk about the channels back. Zikmund and Stantop write:

Recycling of solid waste has become a major environmental problem. And although their re-use from a technical point of view - it is quite feasible, the problem arises when organizing the movement of materials through the distribution channel in the opposite direction, when organizing the marketing of garbage through the channel of "reverse". The current channels of the "reverse" are primitive, and the financial incentives associated with this occupation are insufficient. The consumer needs to be motivated to change the role, to turn into a producer, into an initiator that gives a push to the distribution process in the opposite direction4.

The authors call a number of intermediaries, who can play a role in the channels of the "reverse". These are: 1) the producer's reception points, 2) public groups for the "Days of cleanliness", 3) traditional intermediaries, such as brokers for the sale of soft drinks, 4) garbage collection specialists, 5) recycling centers, 6) Modern "junk", 7) brokers for garbage trade for processing, 8) centralized warehouses - enterprises for processing waste.

Box 29. Delta Airlines builds a schedule of flights based on the "hub and spoke" principle

For many years, Delta is the world's most financially successful airline. Constantly the leadership of the firm is facilitated by several factors, including her ability to develop long-term plans of activity and to follow them unswervingly, as well as excellent relations with her own employees. However, the main guarantee for the success of the company is probably the innovative system for distributing its goods - route flights.

The system, which is the basis for scheduling the Delta flight, is known as the "hub and spoke" principle. "Hub" is the center of the system, in Atlanta, Georgia, where the company headquarters is located, and "spokes" - air routes from Atlanta to a number of cities in the country. The flight schedule is structured in such a way that all short-haul flights from these cities converge in Atlanta at about the same time. Flight planes arrive at the central point and depart from it by groups. Ten times a day at the airport of Atlanta make a landing with a break in a few minutes for thirty or more aircraft Delta. And after a while something happens that the employees of the Delta call a "big breakdown", when from Atlanta almost simultaneously sends on all routes another group of thirty or more aircraft.

The operation of the system is coordinated in such a way that passengers who need to make a transplant in Atlanta arrive when the flights they are interested in are just getting ready for departure. For passengers, the "hub and spoke" system means convenient connection of flights and the cost of a minimum time for a transfer. For the airline, the system means that for flights with transfers the passengers are most likely to use the Delta aircraft, rather than the flights of other companies. The analysis of sales for six months showed that almost 90% of the transit passengers who arrived in Atlanta by Delta planes continue the flight, having relocated to other Delta flights.

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

However, in general, the system used by Delta is working. Centralization of the service system helps maintain a high level of sales. Most other airlines also successfully apply today the principle of "hub and spokes". But the real master of the use of this system is still the airline "Delta".