- Explain the role of service outputs in the distribution strategy
As with each element of the marketing mix, different segments of customers have different needs with regard to place, or distribution. Service outputs offer a way to focus on the unique needs of a target buyer and plan for those in the distribution strategy. Service outputs are the productive outputs of the marketing channel that consumers value and desire.
By identifying the service outputs for each segment of target buyers, the marketer can optimize the distribution strategy for each major segment. It is important to note that there are always trade-offs in the distribution strategy. A channel that provides a high level of customized service, such as a boutique store, will also usually add additional cost. A channel that provides goods in very large quantities with a lower level of service, such as Costco, will generally offer them at a lower cost. Either might be the “right” solution depending on the customer segment.
Common Service Outputs
When considering the goals of channel management in meeting customer needs, there are a few broad service outputs that channels can address. The service outputs are explained from the perspective of the target customer, by identifying needs or preferences that a target customer might have:
- Spacial convenience: Can I get the product at or near the location where I want it?
- Timing of availability: Do I need the product immediately or am I willing to wait?
- Quantity: Am I willing to buy in bulk or buy multiple items?
- Assortment and variety: Do I have a very particular need or a flexible need? Am I looking for one or many options?
- Service: Do I require assistance or support through the purchase process?
- Information: Do I need information to make a purchase, or do I enter the buying process having already made a decision?
Again, service outputs generally involve trade-offs. For example, few customers would ever say, “Timing of availability has no impact on my purchase decision,” but the timing of availability may be less important than the quantity or service needs. Customers generally have strong preferences in some areas and are more flexible in others.
Service Outputs in Practice
Imagine that a farmer is selling eggs and wants to meet the needs of her final consumers. Eggs are a fairly uniform product, a commodity, so most consumers are going to make decisions about which eggs they purchase based more on the distribution strategy than on a product or promotional strategy. Price is likely to be a factor, too.
Let’s consider how two different customers might weight the service outputs in two very different but simple egg-buying decisions.
|Service Output||Experience: I’m looking for a nice restaurant for brunch.||Service Output Level||Experience: I need eggs that I can cook for my family’s breakfast.||Service Output Level|
|Spatial Convenience||I’m willing to drive a little bit, especially to an interesting location with strong reviews.||Low||I want the most convenient location on my route where I can get in and out quickly.||High|
|Timing of Availability||I’m seeking an experience and am willing to spend some time to get it.||Low||I want the quickest purchase possible.||High|
|Quantity||I would like a nicely sized portion that seems like good value for the money.||Medium||I don’t use eggs in bulk but need enough to feed my family.||Medium|
|Assortment and Variety||I would like to have a nice selection of preparations, and I prefer organic farm-fresh eggs.||High||I just need a dozen eggs of any brand.||Low|
|Service||I want a full-service experience from the wait staff and chef.||High||I want a quick, efficient check-out, but I don’t require help selecting.||Low|
|Information||I would like to have information about my options, and to understand the opinions of others who have eaten at this restaurant.||High||I already know everything I need to make a purchase.||Low|
For the farmer, these different scenarios can inform the distribution strategy. If she is looking to command a higher price, then she may want to focus on a strategy of selling through restaurant suppliers or directly to restaurants as a retail channel. If she is looking to sell a larger quantity of eggs, then she likely needs to sell to a wholesaler who can get as many of her eggs as possible into the right supermarkets that are located in neighborhoods of many, many consumers seeking spatial convenience in the purchase process. Or, she might want to pursue both strategies but do this with an awareness that she is serving two different target buyers with very different needs.
By understanding the service outputs of buyer segments, marketers can better match distribution options to buyer needs and provide the right trade-offs to each buyer.
Check Your Understanding
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