DISTRIBUTIVE NETWORK RELATIONS

Learning Objectives:

To understand the availability

of various delivery channels
and marketing strategies
deployed by each one of them.

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• 12.1 Introduction
• The distribution network is the face of the financial
intermediary and probably the most visible aspect of the
marketing efforts. Often they are the buyer’s only point
of contact to avail financial services. Distribution
channels help in the place aspect of the marketing mix.
• The Investopedia defines a distribution channel as “The
chain of businesses or intermediaries through which a
good or service passes until it reaches the end
consumer”. A distribution channel can include
wholesalers, retailers, distributors and even the
internet. Channels are broken into direct and indirect
forms, with a "direct" channel allowing the consumer to
buy the good from the manufacturer and an "indirect"
channel allowing the consumer to buy the good from a
wholesaler. Direct channels are considered "shorter"
than indirect" ones.

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• 12.2 What is the need for a distribution

channel?
• The primary goal of the marketing plan is to get
people to buy your products or services. The
Sales and Distribution part of the marketing plan
details how this is going to happen.
• Stern and Ansary define a distribution channel
as a “ Set of interdependent organizations
involved in the process of making a product or
service available for use or consumption”.
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• 12.3 The role of a sales person in a distributive network

• The basic objective of an organization selling its own
product or a third party product is to sell it at a profit. Profit
can be sustained with customer satisfaction and loyalty.
Hence a sales person has to build the distribution network
loyalty, be it a part of a stimulated distributive network to
put in efforts for generating customer delight or to
establish an efficient after sales service. A sales person
should be clear about what is expected of the channel and
from himself in terms of the service that it provides to the
customers. Companies can achieve greater differentiation if
their sales persons can adhere to the high levels of channel
objectives.

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• 12.4 Distribution channel objectives:

• Every organization has to finalize a set of channel objectives and the
activities that need to be performed with a certain level of efficiency and
effectiveness before organizing the channel activities. Infrastructure and
market related constraints should be carefully studied before finalizing the
set of channel objectives.
• The basic objectives of a distribution channel can be stated as follows:
• To reach out to maximum consumers
• To multiply this reach and to provide efficiency to the marketing process
• To facilitate smooth flow and create time, place and possession utilities.
• To provide scales of economies and operations
• To provide specialization

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• 12.5 How to stimulate delivery channels in financial services?

• A customer is offered a wide array of channels and given a choice to
select the optimum channel mix for maximum satisfaction. Some
financial intermediaries invest crores of rupees on the branch layout, e-
galleries, remote electronic channels and even extension counters at
corporate office complexes. These channels are supposed to be used for
massive cross selling and upselling of both banking and Para banking
products and services.
• Many sales persons are motivated enough to provide an extra push for
cross selling and upselling the various products and services. These
feelings race to inadequacies in sales persons presentations and hence
the basic objective of using the ready infrastructure for cross selling and
upselling is defeated.
• Let us understand how to market the usefulness and availability of
various delivery channels available in the current era of financial
services.

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• Branch:
• Branch is the direct channel that conceptualizes the
contractual relationship with the customer. With the
Know Your Customer (KYC) norms implemented by almost
all organized financial markets, the customer has to visit
the branch for establishing his proof of identity and
address. Inspite of tremendous developments in
technology, research has proved that a customer still
prefers to enhance his banking experience by visiting a
branch.
• Hence the marketing design should put its heart and soul
in designing the branch layout and ambience to make the
experience of various types of customers right from the
young till the old, a pleasant one.
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• ATMs
• Banks are obliged to provide free service to their
customers for withdrawing cash , balance enquiries
over the counter or through their own ATMs.
However the cost of providing such services over the
counters is 3-5 times more expensive than that
through ATM. Thus diversion of branch traffic to ATMs
effectively results into saving transaction costs which
otherwise could have been incurred across the
counters. An ATM is a full version of a mini bank
allowing all transaction for depositing and
withdrawing funds.

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• A Point of Sale (POS) terminal : is a portable electronic

device that enables the processing of debit and credit card
payments for products and services purchased at retail
outlets. POS terminals help the customer to perform cash
less transaction. The POS terminals also help the card
holder to withdraw cash at designated merchant outlets.
In this case the bank pays charges which are split amongst
the card-issuing bank, the bank that owns the POS
terminal and the Shared Payment Network Company. New
private sector banks account for over 70% of the POS
network in our country. Inspite of the tremendous ease in
performing cash less transactions, customers are still not
ready to make use of POS terminals for doing routine
financial transactions.

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• Mobile banking is the latest and the most convenient delivery

channel which can be used even in the unbanked, under banked
and rural location. Statistics on mobile banking say that India has
a larger number of mobile phones than the savings accounts
which means lots of potential for converting mobile phone users
into bank customers. Mobile banking offers various facilities to
the customers like option to pay utility bills, option to transfer
funds to any customer or between different accounts, facility for
setting alerts for different transactions, facility for shopping and
paying though the mobile, user friendly easy operations enabled
by installing a small app provided by the bank and facility for using
banking facility from anywhere including the rural places. The
mobile banking channel is highly cost effective delivery channel
model for the banks as compared to ATMs.

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• Banking through digital channels became more popular first with

the introduction of internet banking. With the increasing use of
online banking channels banks have changed their sales and
marketing efforts from the broad based brand and the branch
focused campaigns to more effective digital marketing. In spite of
the paradigm shift in banking only a small portion of banks (20-
25%) are at high levels of maturity to deploy digital marketing for
generating profits. One of the weakest areas of the banks is the
real time integration of all its channels for first getting a single
customer view and then shooting the right information for
decision making of the customer. Some of the banks do use high
end analytics but still the customer relationship managed has not
yet blossomed into comparison to the real depth and usefulness
of the analytics.

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• Sales through tie ups are also an emerging sales channel.

This channel is focused more on bulk sales by entering
into contractual relations with builders of real estate
property, educational institutions, car manufacturers,
corporates for providing personal loans to employees etc.
Special concessions like the waiver of the processing fees,
documentation charges, and competitive interest rates are
offered to woo customers for taking spot decisions. The
entire process of purchase, bank documentation,
insurance, delivery happens under one roof. The financer
gets a bulk portfolio and the customers benefits for spot
decisions. A lot of efforts are put in advertising such
events before conducting such tie up programs.

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• With this we complete our session on

chapter 12 ‘DISTRIBUTIVE NETWORK
RELATIONS’.

Next we move to chapter 12

‘Evaluating Marketing Cost’

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