A marketing intermediary is an individual or organization that helps facilitate the distribution process of goods and services from the manufacturer to the customer. It acts as a bridge between the two parties, ensuring that products are delivered to people who need them efficiently and cost-effectively.
Many marketing intermediaries exist, including distributors, wholesalers, brokers, agents, retailers, etc. Each of these has different roles and responsibilities within the distribution channel.
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What are Marketing Intermediaries?
Marketing intermediaries, or mediators, are independent companies facilitating the movement of goods and services from manufacturers to end-users. They use wholesalers, agents, retailers, physical distribution companies, marketing services agencies, financial institutions, etc., to bridge the gap between producers and consumers.
Manufacturers rely on marketing intermediaries to help them understand consumer needs and preferences, promote their products more effectively, distribute them efficiently, and identify new growth markets. Marketing intermediaries are also crucial for the logistics and transportation of goods.
Key Takeaways
- Marketing intermediates facilitate the delivery of goods from manufacturers to end consumers by liaising between the two.
- Brokers, agents, wholesalers, distributors, and retailers are examples of intermediates, each of which plays a particular role in the distribution process.
- Despite possible drawbacks such as communication issues and increased expenses, intermediaries provide advantages such as efficient distribution, enhanced reach, and improved sales performance.
- E-commerce has impacted the conventional middleman model, yet intermediaries can help companies with logistics, supply chain management, and customer support.
- Properly selecting and managing marketing intermediaries can considerably improve a company’s market presence and profitability.
Why are Marketing Intermediaries Important?
It is always tempting for any organization to skip the middleman and serve directly to the end customer, especially today, where e-commerce is at its pinnacle of success. This increases the company’s profit margins and gives customers the best deals they may have yet to find when approached via marketing or other intermediaries.
However, it would be a lot of work regarding the company’s logistics and supply chain management. If 500 such people decide to approach the company directly to buy a single product in a month, then it would mean that the company would have to have 500 different shipments to 500 different locations. In addition, there are 500 different customer interactions and after-sales support, which may include product returns, exchange inquiries, and other similar matters.
This also adds to multiple transaction modes for the organization because 500 people will pay through 500 different channels. This would increase the supplementary costs of the organization, including the logistics and supply chain costs. Not to mention that in many businesses, multiple people would be required to coordinate. In such cases, it is easier to have a Marketing intermediary.
Types of Marketing Intermediary
1. Brokers and Marketing Agents
Both terms are synonymous with each other because of their rules. This is true, especially in real estate deals, where both are similar to any client. There could be many differences between them, but as a whole, they are considered the same. Marketing Intermediaries are usually permanent, while brokers are temporary.
Apart from this significant difference, the role of both intermediaries is the same. Both are paid a commission for every sale and are not responsible for the products sold. They are concerned only with facilitating the transaction.
Apart from real estate, brokers and agents are also common in the travel industry and are commonly used in international trade. When companies cannot approach the customers directly and require a specific human interaction to close the transaction, they approach agents or brokers.
Their deals with companies are usually for a selected and predefined time or for a chosen number of products to be sold to the customer. For example, a deal would be for three houses in the case of a real estate agent or for three passengers in the case of a travel agent.
2. Wholesalers and Resellers
Wholesalers are the intermediaries who buy products from the manufacturer in a large volume and then resell them to other small businesses, usually retailers. Some wholesalers have multiple products to be sold to different retailers, while others specialize in only a single product or a category.
The pharmaceutical industry commonly has many wholesalers and retailers. They usually buy the drugs in bulk from pharma companies and then supply them to individual pharmacies and hospital pharmacies on a requirement basis. Some wholesalers sell directly to the customers.
Since they buy in bulk, the prices offered to them are minimal. They can sell goods to retailers at an increased rate, including their margin.
The Wholesalers and resellers are further divided into three parts
- Merchant wholesalers: These are distributors or jobbers owned and operated independently. They have very little or no ownership of the goods. Merchant wholesalers are of two types: limited-service and full-service merchant wholesalers.
- Full-service Merchant Wholesalers: Full-service wholesalers are preferred for more substantial volumes. They perform a broad range of services for their customers, such as operating warehouses, having an extensive stock inventory, supplying credit lines to different customers and salespeople, and delivering goods to customers. While a variety of merchandise is present with general line wholesalers, specialty wholesalers are the ones who have to deal with only a limited line of products.
- Limited Service Merchant Wholesalers: These are the ones who offer very few services to their suppliers and customers. These exist only to reduce the cost of service. There are many limited-service wholesalers present in many industries.
As far as the fast-selling merchandise line is concerned, it is handled by cash and carry department stores. On the other hand, some retailers only manage cash businesses and are not concerned with delivering goods.
3. Distributors
Distributors are also known as functional wholesalers. These distribution intermediaries are not the ones who buy any product from the producers, but they are the ones who are involved in increasing or facilitating the transaction between the retailer and the manufacturer.
They work on similar designs of brokers and agents and are usually hired for a limited time or job. They are paid a commission for every transaction from the manufacturer. Sometimes, they also demand transaction fees from retailers as well.
They use different distribution channels for their services, such as direct sales, internet/online sales, telemarketing, and other marketing intermediaries. Marketing intermediaries are the ones who help sell products or services on behalf of the manufacturer to different customers. They can be individuals or organizations providing services, like advertising agencies, wholesalers, or brokers.
4. Retailers
The retailer is the final link between the customer and the organization. The customer can go directly to the retailer and purchase it from his store. Retailers are in the format of shopping malls, stores, carry out the lights, and e-commerce websites. Retail intermediaries buy directly from the producer and skip many intermediaries to increase their profit margin.
Retailers stock the products in bulk and pay them back as a commission. This usually happens in bookstores. Any intermediate party that does not manufacture the product but buys it from the manufacturing company and sells it to the customer can be termed a retailer. The best example is the online e-commerce giant Amazon, which sells millions of products to customers by purchasing them directly from the manufacturer.
Retailers are present in different formats. Examples are
- Store retailers – These stores have multiple products under the same roof, and specialty stores have a single product type under one roof. It is considered as a narrow line of products. Florists and opticians are a few examples of specialty retailers.
- Departmental stores – Carry a wide variety of merchandise than other stores. Departmental stores may hold home furnishing, clothing, or household goods, which are divided into stores based on the gender or age of the customer.
- Supermarkets have huge facilities with profit margins and high sales volume. They have everything for the regular customer, including groceries, clothing, meat, baked goods, and everything a customer will require daily. Some retailers also sell alcohol products, but it is only allowed in some countries.
- The discount store is another retailer concerned with selling products at a discount.
E-commerce is a growing and accessible format that has emerged these days. It is trendy with customers because of its convenience and low prices.
Marketing intermediaries are essential for business
1. Purchases
Intermediaries facilitate volume purchases, sourcing large amounts of products directly from the producers. This bulk purchasing method allows them to get these products at substantially lower prices.
2. Warehouse and Transportation
After procuring large amounts of commodities, intermediaries focus on efficiently transporting and storing these products. This can be a difficult and costly activity that necessitates considerable infrastructure; thus, intermediaries usually maintain sophisticated warehouse and transportation networks, relieving manufacturers of additional costs.
3. Packaging and arrangement
Intermediaries also handle the partitioning and packaging of commodities, converting big consignments into saleable units for end users. This role entails structuring and rearrangement based on product features, making it suitable for market deployment.
4. Risk Assumption
Intermediaries take on enormous risks by becoming the owners of the things they purchase. This responsibility binds them to reimburse inventory costs until the final sale. Such a significant financial commitment drives them to be precise and efficient in purchasing, stocking, and shipping operations. Furthermore, they are responsible for the product’s integrity until it is properly delivered.
5. Marketing
Intermediaries often help with product promotion activities. They can market the things they sell in their style and through appropriate channels.
6. Effective Distribution Channel Management
The relevance of intermediaries extends to their ability to manage the entire distribution chain process. They operate on a vast scale to reduce product costs and promote efficiency among their retail partners. Replicating this size on its own would be relatively easy and inexpensive.
Value of intermediaries
Intermediaries add enormous value to the supply chain by expediting interactions between supply chain agents, simplifying the product discovery process for consumers, and ensuring that the product reaches the appropriate consumer at the right time.
They are essential in facilitating negotiations, improving product recognition, increasing sales, and lowering distribution costs by actively participating in product marketing throughout the supply chain.
Consider intermediaries the linchpin of distribution systems, working tirelessly to connect items and buyers. Because of their marketing expertise, they have power over product placement in stores.
As a result, using intermediaries is frequently less expensive than enterprises attempting to manage all distribution operations independently.
Types of Marketing Channels
1. Direct Sales from Manufacturer to Consumer: Products are sold directly from the manufacturer to the buyer, eliminating the need for intermediaries. This strategy can result in significant consumer savings and larger profit margins for the producer.
For example, a local artisan selling handmade jewelry at a craft market or an independent software developer selling their apps directly online are examples of this channel.
2. Manufacturer to Retailer to Consumer: Manufacturers develop and sell things to retailers, who then sell them to customers. This channel is ideal for things customers want to see or try before purchasing.
Examples include electronics businesses selling their own products through electronics retail stores or a coffee roasting company giving beans to cafés so buyers can sample the product before buying a bag to take home.
3. Manufacturer-to-Wholesaler-to-Consumer: This channel works well for bulk purchases or when the wholesaler can provide a considerable price advantage. For example, a paper mill generates enormous quantities of paper that is subsequently sold to businesses and schools via wholesale distributors or a large-scale food processing company supplying packaged items to wholesale clubs where members can purchase at a reduced price.
4. Manufacturer to Agent to Wholesaler to Retailer to Customer: Some items require multiple intermediaries to reach the market quickly or over an extensive distribution network. A cosmetic firm, for example, may use agents to distribute their products throughout multiple regions promptly.
The agent’s function is critical in ensuring that the items are available at local beauty wholesalers, who supply beauty salons and stores, ultimately reaching the consumer.
Advantages of Marketing Intermediaries
1. Optimized Distribution
Marketing intermediaries help companies optimize their product distribution process. They act as a bridge between the company and the customer by helping flow goods from one place to another. This reduces transportation costs and time and helps increase efficiency and productivity.
2. Improved Sales Performance
Marketing channels appoint sales agents to sell products and services more effectively. They have good product knowledge and can explain it in detail to customers. This helps improve sales performance and customer loyalty towards the company.
3. Increased Reach
With the help of marketing intermediaries, companies can increase their reach and target potential customers that they previously could not reach independently. Grocery retailers provide a platform for companies to market their products and services, while distribution units ensure that the products reach the right customers.
4. Financial Benefits
Financial intermediaries help companies manage their finances more effectively by providing loans and other financial options. This helps increase cash flow, reduce debt, and improve overall profitability for the company.
Disadvantages of Marketing Intermediaries
1. Communication Challenges
Communication between the company and intermediaries can be challenging as multiple stakeholders are involved. This can lead to misunderstandings and delays in business transactions due to miscommunication.
2. Loss of Control
Marketing intermediaries have processes and procedures that may differ from those of the company. This may lead to a lack of control over the entire process, which can be caused by time and money constraints.
3. Additional Costs
Hiring marketing intermediaries involves additional costs, such as payments for their services, commissions, and expenses related to their work. This increases the overall cost of doing business and affects profitability margins.
Examples of Marketing Intermediaries
1. Sales partners: These people work with companies to promote their products and services. This includes sales representatives, retailers, brokers, middlemen, wholesalers, distributors, and other stakeholders.
2. Financial intermediaries: These include banks, credit unions, investment companies, and other financial service providers that help companies manage their finances more effectively.
3. Advertising agencies: Advertising agencies are responsible for creating campaigns to promote products and services. They often work with companies to develop effective marketing strategies.
4. Trading house: This intermediary connects companies to other entities in different countries. They provide market research and export/import services and help source materials, products, and services.
5. Cooperatives: Cooperatives are business organizations that represent a group of producers or suppliers. They help coordinate their activities to ensure maximum efficiency and profits.
6. Retailers: Retailers are responsible for selling products and services to consumers. This includes stores, online platforms, and other distribution channels.
Types of Intermediaries
Agents
- Insurance Brokers: These professionals liaise between individuals or businesses seeking insurance coverage and insurance companies that provide policies. They find adequate insurance solutions for their clients by analyzing their needs, negotiating terms, and assisting with the claims process as needed.
- Talent agents are essential in the entertainment and sports industries, representing actors, artists, athletes, and other talented individuals. They negotiate contracts and endorsement deals for their clients, ensuring they receive favorable terms and possibilities.
Wholesalers
- Food and Beverage Wholesalers: Companies such as Sysco and US Foods provide a wide range of items to restaurants, cafeterias, and specialized food stores, including fresh produce, frozen foods, and beverages.
- Pharmaceutical Wholesalers: Companies like McKesson and Cardinal Health sell medications, healthcare products, and medical supplies to pharmacies, hospitals, and clinics, playing an essential part in the healthcare supply chain.
Distributors
- Electronics Distributors: Companies like Ingram Micro and Tech Data specialize in distributing a wide range of electronic products, from computer components to software and mobile devices, and operate as essential connectors between producers, retailers, and end users.
- Beauty Product Distributors: Companies such as Ulta Beauty and Sephora distribute cosmetics, skincare, and fragrance products, meeting the needs of the beauty industry by offering a diverse range of products from numerous manufacturers.
Retailers
- E-commerce Stores: Online marketplaces such as Amazon and eBay allow customers to purchase various things, from electronics and clothing to food, without leaving their homes.
- Specialty Stores: Stores specializing in specific categories, such as Home Depot for home improvement and Lowe’s for garden supplies, offer specialized products and expertise in their respective fields.
Conclusion!
Marketing intermediaries can be a great way to increase a company’s reach and improve sales performance. However, it is essential to consider the potential drawbacks of working with them before making any decisions.
Companies should review their processes and operations carefully to ensure they get the best results from their marketing partners. With careful planning and effective management, companies can benefit significantly from working with marketing intermediaries.
Frequently Asked Questions about Intermediaries
1. Why are intermediaries important in marketing?
Intermediaries are essential because they assist businesses in marketing their products. They are external agents who help advertise, sell, and deliver products to customers.
2. What are the different sorts of intermediaries?
There are four major kinds:
- Agents and Brokers
- Wholesalers
- Distributors
- Retailers
3. What is the role of intermediaries in marketing?
Their primary responsibility is to assist a corporation in delivering its items to customers. They act as the link in the chain that transports things from the manufacturer to the final buyer, making it easier for customers to find and purchase these products.
4. What are the advantages and disadvantages of intermediaries?
Advantages:
- Easier access to products
- Storage of products
- Greater reach in the market
- Better relationships between buyers and sellers
Disadvantages:
- Less control over decisions
- Lower profits
- Risk of wrong information being spread
5. Why do companies use intermediaries?
Companies hire intermediaries to help them sell their products. This comprises promoting, selling, and distributing things to their intended destinations. Intermediaries operate as go-betweens, connecting the product and the customer.
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