Why should service firms use intermediaries?


a)      Specializations: In services, the offer is produced and consumed in one place, and it is mostly intangible, the question of distribution problems is not very acute-, the-service transaction itself and its quality is the main issue. In the production and distribution of services, the wide variety found in the Specializations in the case of goods is absent. Service firms have a different kind of dilemma: own its outlets or get the distribution done through franchisees’. Most major decision, are one-time decisions unlike in goods distribution. Only services like retailing that have higher tangibility content will face the same complexity in distribution as faced by goods manufacturer.


b)      Customer Utility: Customers require choices in their preferences and this was offered to them by retailers through varieties & assortments. This way, the customers could compare the merchandise and choose the best buy according to their judgment. The intangibility of services might have reduced the scope of consumers to compare the offer features, but nevertheless encouraged enquiries and clarifications from at the distribution outlet.


c)      Complexity: When any business – be it goods or services – is small, it is easier to manage it. This includes the complete marketing mix as well as the environment’ But as any business grows, so does its complexity. To facilitate the exchanges of goods and services there arose an urgent requirement of complex systems for each type of goods and delivering them to the consumers.


d)     Distance: With the strategic decision of a firm to extend its geographical reach for its goods and services, there developed a gap between the producer and the end-user. This could only be filled by middlemen and intermediaries. SOTC/Kuoni, the innovative package tour company is a classic example in services. Mumbai based, it yearned for a wider customer base and took the help of intermediaries to achieve its goal. Thus Frequent Travels, a travel agency was initially roped in to be its representative in Madhya Pradesh. But SOTC went on to have its own outlet at indore, catering to its package tours. 1CICI Home Finance Company takes the help of Mumbai based, Unique Finance and Maximus Finance, amongst others to do its marketing.

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