Marketing Intermediaries Definition, Types, Examples, and More
Producing a good product is the most crucial business requirement, but mastering the distribution channel to bring the product to the end-user is equally important. In which, the distribution intermediary plays a key role for the seller (the producer) and the buyer (the consumer). Thanks to the relationships, experience and ability to access the market, intermediaries have solved the difficult distribution problem that many businesses face.
In the past, when the economy was not open to the public like now, it was conceived that intermediaries are only costly and time-consuming. The fact shows that the intermediaries in the distribution channel play an important role for both sellers and buyers. Thanks to the contact relationships, experience, specialization, etc, the intermediaries bring manufacturers many benefits. Especially the marketing intermediaries.
Businesses need to analyze the characteristics and performance of intermediaries to develop the appropriate policies to establish and maintain positive relationships. Enterprises also react necessary and promptly to change and adapt product distribution policies to changes in the intermediaries’ operations.
In today’s article, I will introduce to you The importance and definition of Marketing Intermediaries. Let’s dive in!
What is a marketing intermediary?
Marketing channel or distribution channel is a group of organizations and individuals who depend on each other to participate in bringing products to consumers. In this process, there will often be a third party’s appearance to assist the delivery of the product to the consumer called a distribution intermediary.
Marketing intermediaries (also known as Distribution intermediaries) are one or many organizations and individuals, acting as a bridge between manufacturers and consumers in product distribution. Marketing intermediaries are business establishments that support businesses in promoting, selling, and delivering business to consumers. They include Product distribution intermediaries, distribution support establishments, marketing service establishments, financial intermediaries. In fact, a distributor can be a retailer, wholesaler, agents, and brokers.
There are many reasons producers turn over part of the sales work to marketing go-betweens. This transfer also means relinquishing some control over how and to whom the pharmaceutical product is sold. However, selling their products through intermediaries gives manufacturers many advantages. Thanks to contact relationships, specialization experience, and scale of operations, the distribution intermediaries will benefit the producer more than the producers undertake the distribution of their own products. The appearance of intermediaries reduces the transactions in the exchange on a social scale.
Enterprises need to analyze the characteristics and performance of the intermediaries to have appropriate policies to establish and maintain positive relationships. At the same time, the company may also have the necessary responses to adjust, change product distribution policy to match with anges in the intermediaries’ activities.
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Advantages and disadvantages of marketing intermediaries
1. Advantages of using marketing intermediaries
Unlike before, it is conceived that intermediaries are only costly and time-consuming. In fact, the intermediaries in the marketing channel play an important role in helping both sellers and buyers. Thanks to the contact relationships, experience, specialization, etc, the intermediaries bring the producer many benefits. Those are:
Reduce distribution costs for manufacturers: If manufacturers organize their own distribution network, they incur large costs due to lack of specialization, due to the small scale. By using marketing intermediaries, manufacturers focus resources on the main stages of the value chain of products.
Increase the reach of customers for manufacturers while reducing the contact for manufacturers and customers: Thanks to the distribution network, manufacturers can reach many customers everywhere. Customers also only need to contact a distributor to buy a variety of products from different manufacturers. In contrast, manufacturers only need to contact one distributor to sell products to many customers.
Share the risk with the manufacturer: In the case of off-sale purchase with a distributor, the trading middlemen share the risk of price fluctuations with the manufacturer. Therefore, manufacturers can quickly recover capital to re-invest in the next production cycle.
Helping supply and demand meet: Sometimes, the seller does not know where the buyer is and vice versa. At that time, the intermediary distributor was the bridge to help supply and demand meet.
Increasing competitiveness for manufacturers: When using intermediaries in the distribution channel, by saving costs, increasing the accessibility of customers, and reducing risks, manufacturers improve their competitiveness.
Rapid reinvestment: When buying and selling off, the distribution intermediaries will indirectly share the risks of goods with manufacturers. At that time, manufacturing enterprises do not have to worry too much about output products and have the capital to turn around production and re-invest in the next cycle.
2. Disadvantages of using marketing intermediaries
It is a fact that nowadays on the market that manufacturers often consider intermediaries as parasites rather than properties. The disadvantages of using a middleman stem from the fear of business owners. Such fears and lack of managerial skills or lack of resources to balance and manage the intermediaries are detrimental to businesses when using the intermediaries. Those fears include:
- Fear of losing the deciding role
- Fear of losing contact with customers
- Fear of losing customer ownership
- Fear of opportunistic behavior
- Fear of inadequate communication
- Fear that the goals of the intermediary will conflict with the manufacturer’s goals
- Fear that an intermediary will extract instead of adding value
- Fear of poor market management
Such fears can come true if the manufacturer does not manage the middleman. Sometimes this fear arises not only from the seller but also from an intermediary. These fears often undermine the working relationship between producers and middlemen and cause them to ineffectively use each other’s resources and maximize the marketing mix’s potential.
Types of marketing intermediaries
Currently, on the market, there are the following types of distribution intermediaries:
Wholesaler: Is the intermediary to buy products, goods of the manufacturer and then sell to other go-betweens or industrial customers. This type of intermediary is not sold to consumers but will mainly focus on selling to retailers and other businesses.
Retailers: They are the units that buy products from the manufacturer or wholesaler then sell it to the end-user. These are the people who best understand the needs and wants of their customers. They have a rich and diversified store system, ensuring goods’ availability to create the best conditions for buyers.
Distributor: Distributors work like wholesalers in the sense that they act as an intermediary between the producer and the retailer. However, distributors are very actively involved in the promotion of the manufacturer’s products, and selling products to retailers and wholesalers. Their job is not merely to bring the product from the manufacturer to the retailer, but also to find new market opportunities and ways to extend its brand.
Agents and Brokers: Those who are in charge of finding and attracting distribution units. They can be found anywhere in the flow of distribution (in partnership with manufacturers or wholesalers).
Also, based on the characteristics, as well as the role of the distribution intermediaries, there are usually the following forms:
Trading intermediaries: Intermediaries such as wholesalers, retailers spend money to buy goods and then resell for profit
Intermediaries: Intermediaries such as brokers, manufacturers’ representatives, sales agents are looking for customers, negotiating on behalf of the manufacturer to negotiate terms of sale.
Supporting intermediaries: transportation companies, warehouses, banks, support advertising for manufacturers in the production process.
Marketing intermediaries importance for business
Marketing intermediaries play a very important role in business. The functions of intermediaries can be mentioned as:
Middlemen buy very large quantities of goods directly from the producer. By buying in bulk, these intermediaries can be guaranteed significantly lower prices.
2. Warehouse and Transportation
Once the middlemen buy a large number of goods, they need to get them to a place where the consumer can buy them and sell them. This is a complicated and costly process. Therefore, intermediary companies often own a large warehouse system and transport vehicles, thereby helping manufacturers save a lot of costs.
3. Sorting and packaging
The middlemen usually buy a very large quantity of a commodity and then break it down into smaller lots. The process of bulk breaking into smaller batches will involve sorting and assembling of goods. Products will be classified according to their properties suitable for sale to customers.
4. Share the risk
The marketing agents own the goods they buy. That means the wholesaler finances the purchases and bears the cost of inventory until they are sold. Because this is a huge expense, it motivates wholesalers to be precise and efficient in their buying, stocking, and shipping processes. In addition, the wholesaler also bears the risk of the products until they are delivered. If the goods are damaged in transit and not sold, the wholesaler will have to return the goods and costs.
Usually, marketing intermediaries will participate in promoting the products they distribute. Marketing intermediaries can advertise their products in the ways they desire.
Marketing intermediaries have very good ability or expertise to manage the entire distribution process. Since usually, the marketing intermediaries will operate on a large scale to reduce the cost of products to focus on creating efficiency for their retail channel partners, it is difficult to replicate on the scale.
Examples of marketing intermediaries to learn
Here are some examples of common marketing intermediaries in business:
Sales partners: Partners sell your products in a way that you control. Examples are the cosmetics stores that are licensed to trade in the cosmetics that your company produces
Retail: Retailers are places to sell your products for which you have no control over how they operate and do business.
E-Commerce: Those who sell goods through e-commerce platforms.
Markets: A venue where buyers and sellers are connected for a fee.
Promotional Partner: These are distribution intermediaries that help you improve the number of potential customers.
Parallel Import: A marketing intermediary consisting of entities that are not officially recognized by the producer’s partner. Parallel import is the importation of a manufacturing company without the company’s approval.
Financial intermediaries: The entity that helps sellers and buyers conduct financial transactions will usually be banks.
Consumer Collective: An organization that helps drive consumer purchasing power.
Cooperatives: Cooperatives promote the operating and marketing resources of small and midsize companies
Valued Added-Reseller: Organizations that buy your product or service and then add value to it before reselling are called Valued Added-Reseller.
Wholesales: Wholesales are the people who buy your goods in bulk and then sell them to retailers.
Trading House: An organization that helps manufacturers to sell their products to foreign markets.
Agents and Brokers: These are representatives of both sellers and buyers.
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Marketing intermediaries are an essential link for products to reach consumers and provide more support to manufacturers to reduce costs and reduce risks.
However, it requires enterprises to have appropriate policies and management methods for this department to operate effectively. Applying distribution system management software is a solution that many businesses use to control the market better, monitor each distributor’s sales situation, retail point, and make a business strategy reasonable.
Above is a summary of The definition and importance of Marketing Intermediaries. I hope you can use the full knowledge to choose for yourself and your company a reasonable form of an intermediary to help save costs and improve profits.