Distribution channel describes the groups of individuals and companies which are involved in directing the flow and sale of products and services from the provider to the eventual customer.
Direct channels involve the movement and sale of products directly between the provider and the customer as in the traditional branch network. Figure 5.1
In indirect channels products flow via intermediary or middlemen. Figure 5.2
Development of branch network:
Much of branch network expansion has been largely a consequence of evolutionary and unplanned growth (the prevailing competition).
As the importance of the personal market increased, so too did the need for numerous branches in convenient locations in order to attract relatively cheap retail deposits from individuals.
In case of mergers, many banks found they over branched in certain locations.
As a result of these changes, there has been a general trend towards the rationalization of branch network in terms of both the number of branches and their geographic spread. Three broad areas can be identified:
1- Unprofitable and/or redundant branches have been closed down.
2- Some branches have been relocated to new sites in response to trends in shopping behavior.
3- The functions and operations carried out by the remaining branches have been redistributed to accommodate closures and relocations.
The decision to close branches tends to be made on the basis of sales efficiency data, cost-to-income ratios and the relative percentage of accounts lost compared with those gained in a specific period.
However, an unprofitable branch may be retained purely for reasons of public relations, although it may be downgraded to cut cost. Because customers who are not directly affected by a branch closure may perceive a lack of stability in the institution and may even switch institutions as a result.
The branch must be in a customer catchments area in order to sustain business and profitability levels.
High street locations have not become only increasingly expensive but increasingly inconvenient for many customers who are shopping out of town.
Many frequently locations involve the closing down of a typically full-scale , town center branch and the opening up of a reduced service branch in the form of either a semi-automated outlet.
One of the associated problem of this kind of relocation is the cost of remained branch
Traditionally, bank branches were function-driven, transactional-processing, service outlets.
Technology has enabled costs to be cut in branches and economies of scale to be gained by removing processing and telephone enquiry functions from the branches to a centralized processing and enquiry center.
Old branch designs have been replaced by more open-plan layouts that have large glass frontages and more of a retail appearance about them.
Branch environments are multi-function facilities incorporating both selling and working activities, as well as providing an important vehicle for communication with customers.
Traditional branch lay-outs are no longer appropriate for modern bank objectives.
In order to remain competitive, branches needed to be reorganized and retail concepts have been adopted allowing the branch to maximize selling opportunities while at the same time minimizing operational and maintenance costs.
The concept of “atmosphere” that experienced through four of the five main sensory channels: visual, aural, olfactory, and tactile.
Figure 5.4 Traditional versus retail bank layouts
Table 5.2 A comparison of traditional and modern branch environment.
Increase in customer-to-staff space ratio
Traditional branches had up to 90 percent of their space devoted to staff and operations.
Many of the routine operations have been centralized, the space which they occupied in the branch can be used for other purposes.
This has left a positive effect on customer-to-customer relationships.
Redesign of customer space
Customer area within the branch has also been redesigned. The new design controls the flow and movement of customers in a similar way that a retail store would.
The banking hall has been separated into a reception area and personal banking areas.
Hard Zone: the high speed areas which deal with transactions such as cash withdrawals, cash deposits, balance enquiries and statements.
Soft Zone: Off-the shelf products such as credit cards, current accounts, and loan applications are provided in a separate area of the branch incorporating face-to-face contract.
More complex products such as mortgages and pensions are provided in a private part of the branch and offer a more personal approach.
Security and bandit screens
It is difficult to carry out a discussion, particularly of a confidential nature, through a glazed security screen, and almost impossible to develop the discussion into a sales interview.
Security measures can be:
Passive: devices include static bandit screens, time delay safes, reinforced doors, windows and counters, and continuous videoing.
Active: devices include alarms, sirens, rising screens and auto locking tills
Centralized design control
Decentralized branch design had its disadvantages, since redesigns were often carried out on an ad hoc basis, often with little attention to the total corporate image and with local or bank manager preferences in mind
There is now the recognition that all employees in the bank have some influence on the sale of the products and must, therefore, become more market oriented.
Team effort-Maximize the opportunity of cross selling.
Despite the benefits of sales training for branch personnel, there was initially some opposition , Page 140
In addition to the changes which have taken place at the micro (branch) level, changes have also occurred at the macro (network) level.
Figure 5.5 page 141, illustrates the network hierarchy. Each level of the hierarchy offers a different level of service.