Decision on use of channels/intermediaries is part of organizing the delivery system. Here, the service marketer should first decide whether he should use intermediaries at all or should reach out to the customers directly. There are actually two aspects to be considered in this decision:
(i) Does the service lend for marketing through intermediaries?
(ii) Whether in the given context, intermediaries will be able to provide the service more effectively and economically than the principal?
Many services do not lend for marketing through intermediaries. It will be better if the service delivery in such cases is kept as a maker-user direct affair. Where intermediaries are found to be relevant, the service marketer has to proceed with the choice of the intermediaries. Often, agent intermediaries such as brokers and commission agents match the service situation better than typical dealers or retailers of the distributive trade. For example, services like hotels and airlines are amenable for using marketing intermediaries. They choose travel agents / tour operators as intermediaries. The crucial question is whether the intermediaries are equipped to handle the service. In any case, marketing channels will be short in service business of the inseparability factor. Short channels suit services as they ensure better control over service quality.
Franchising can be answer to the distribution problem in service marketing. Franchising seems to work particularly well in services like hotels, restaurants, car rentals, fast-foods outlets, beauty parlors, computer education, travel agencies, office services, packers and movers, couriers and business centers. International hotel chains such as Holiday Inn, Sheraton, Ritz-Carlton and inter-Continental have expanded worldwide using franchising. Franchising gives cost advantage and flexibility to the principal in reaching out to his target consumers.
In case a service provider finally chooses a distribution arrangement involving multiple locations, he has to ensure consistent delivery of the service at each of the locations. In particular, he has to ensure that his personnel are properly trained to handle the service. He has to offset the inseparability factor.
Discussing the unique characteristics of services, we had earlier mentioned that channels play a different role in service marketing compared to product marketing. In the case of physical products, one main function which distribution channels perform is stock holding. In a service situation, this situation, this function id totally absent as service cannot be stored. Though in both cases, the channels facilitate the exchange between the principals and consumers, the exchange takes place in a different manner in services. Here, the channels facilitate the exchange by being part of service production performance.
The perish ability of services is the main factor that creates a problem in pricing in services. In services, the fluctuations in demand cannot be met through inventory. Hence, variation in price depending on time /season of demand/consumption becomes the natural strategy. Hotels offering lower tariffs in off-season and telephone service providers offering lower tariffs for after peak hour calls are examples of how service marketers can offset the perishable characteristic of services through a pricing strategy.
Intangibility is the other feature that leads to a problem in pricing in services. The higher the intangibility the greater is the problem. In services such as dry cleaning, the tangible component is higher and the service provided is homogeneous. So, they can be priced almost in the same way as physical products are priced. In contrast, in services like legal assistance and management consultancy, the intangibility is very high. This explains why in such services, quite, the price is settled through negotiation between the provider and the user. Another important aspect is that in services, price can be used for communicating quality and value. Though in products too this can be done, in services, of their intangibility, consumers readily associate quality with price.