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Chapter 11

Distribution Strategy: Physical Distribution
Objectives
After successfully completing this chapter, students should be able to:
11.1 explain the concept of a channel of distribution and how it applies to the banking
business (sec 11.2),
11.2 explain some ways in which the intangibility, inseparability, ariability, and
perishability of banking serices affect their distribution (sec 11.2.2)
11.! discuss seen physical channels of distribution for banking serices (sec 11.!)
11." describe the kinds of information that should be obtained in ealuating a
prospectie site for a new branch (sec 11.!.1.2)
11.# proide examples of intermediaries in the distribution of banking serices (sec
11.")
Key Concepts
• $hannels of distribution are the intermediaries that moe the products from the
producer to the ultimate user.
• %ecause serices are intangible, their distribution cannot be handled in this way.
$hannels of distribution in a serice industry are any means of increasing the
aailability or conenience of the serice that also increases its use or the
reenues from its use.
• &he deliery of banking serices can ary greatly form customer to customer and
location to location. &his characteristic of serices is called ariability.
• 'erices are perishable (cannot be stored), so traditional intermediaries cannot be
used to distribute them. (oweer, serices are made more aailable through
automated tellers, telephone, computer, and debit and credit cards.
• &he principal channel of distribution for a bank)s serices is the bank location.
'ite location inoles research to estimate the economic iability of the area in
order to support the branch or bank application that must be submitted to banking
regulators.
Topical Outline
11.1 *ntroduction
11.2 +arketing $hannels
11.2.1 ,istribution in a serice industry
11.2.1.1 An example from the $ommunication *ndustry
11.2.2 $hallenges to the distribution of bank serices
11.2.2.1 *ntangibility
11.2.2.2 *nseparability
11.2.2.! -ariability
11.2.2." .erishability
11.2.2.# $lient /elationships
11.! .hysical channels of distribution for bank serices
11.!.1 &he branch network
11.!.1.1 'ite location decisions
11.!.1.2 0actors in location selection
11.!.1.! +erging as an expansion strategy
11.!.1." &he decision to close a branch
11.!.2 +aking banking serices accessible to disabled
11.!.! %eyond brick and mortar
11.!.!.1 &elephones and call centers
11.!.!.2 Automated teller machines
11.!.!.! Automated loan machines
11.!.!." &he personal computer
11.!.!.# .lastic cards
11.!.!.1 -irtual branches and automated ideo banking
11." *ntermediaries in the %anking *ndustry
11.# 'ummary