<p>Servitization is increasingly adopted across industries as it enables firms to meet diverse customer needs, reduce resource usage through pooling, and create new revenue streams. This paper examines a dealer’s optimal choice among pure sales, pure servitization, and hybrid models in a decentralized channel. We analyze how these choices affect pricing, manufacturer profit, total channel profit, and social welfare. We find that pure servitization is unprofitable for the dealer, and the hybrid model is viable only under low production cost and high pooling strength. Although the hybrid model raises retail prices and exacerbates double marginalization in the sales segment, it improves total channel profit. It often reduces manufacturer profit and lowers consumer surplus yet enhances social welfare in most cases. These findings provide valuable insights for dealers considering servitization in decentralized channels and offer guidance on how servitization adoption influences channel interactions and helps balance dealer profitability with overall channel performance.</p>