Channel Intermediaries Functions | Importance of Marketing Intermediaries
What are Channel Intermediaries?
Goods distribution happens through distribution channels. The channel intermediaries are the partner companies or individuals within these distribution channels who make the product available for consumption or end-user.
The purpose of channel intermediaries is to move products to the final consumers. Some of the intermediaries provide logistical support, storage, packaging and take the product’s title or ownership from the producer. This means that they can set the price and control the final method of sale. This would be an example of a retailer.
There are four main types of intermediaries: wholesalers, agents, distributors, brokers, and retailers.
A retailer is a channel intermediary that sells mainly to consumers, that what is called B2C as in business to consumers.
They buy goods from manufacturers and resell them to businesses, government agencies, and other wholesalers or retailers.
Merchant wholesalers receive and take title to goods, stools them in their warehouse, and later ships them.
Merchant wholesalers are likely to go direct to the souls, as in the producers or manufacturers of products. They tend to buy in bulk, so they’ll purchase large or most quantities in their warehouse and break it down into smaller, more manageable quantities to sell to retailers.
For example, imagine Dairy Wholesaler.
They would go to various farms and by hundreds and thousands of leaders of milk every day. They would then reduce this to maybe ah 1000 liters of milk and sell it to retailers like Coles and Woolworths.
Agents and brokers
The third group of people is agents and brokers. They are wholesaling intermediaries who facilitate the sale of our product to end-users by representing the retailers, wholesalers, or manufacturers.
The difference between merchant wholesalers and agents and brokers is that agents and brokers do not take title to goods. In contrast, merchant wholesalers do take title to goods, which basically means agents and brokers at no point does a product that they’re selling belonged to them.
They’re just helping the producer sell the product to the end consumer or even to other retailers.
Where is the merchant wholesaler going to buy the stock themselves and then redistribute the stock, most likely in smaller quantities to other retailers interested in stocking the products?
Merchant wholesalers get a massive discount because they’re buying in substantial quantities, and the process of breaking it down into smaller quantities are smaller units. That’s where they end up making their money, whereas agents and brokers will get a percentage of the sale that takes place.
Channel Functions Performed by Intermediaries
There are three main channel functions performed by intermediaries that we’re looking at, and these are broken down into further sub-functions.
Transactional Function of Intermediaries
This could be contacting, promoting, negotiating as well as risk-taking. Every business deal is a risk. Think about the thousands or even tens of thousands of products that any retailer sells.
For example, Coles Woolley’s JB Hi-Fi and Harvey Norman have so many different products, and each of those products is a bit of a risk.
For the retailers, the transactional function they’re performing is contacting and promoting these products, negotiating deals with the producers, and taking a risk on each of the items; what happens if they don’t sell
Logistical Function / Role of intermediaries in logistics
This could be physical distribution, storing, and sorting. Think about the hundreds of stores across Australia or even thousands of stools across the world.
Each of these tools would be buying in some larger quantities and then storing it in their warehouse or even inside their actual stool, but also breaking it down into smaller units or smaller groups for customers to buy.
For example, Harvey Norman or Good guys might have 1000 TV per store, but for the individual consumer, we just want to buy one TV, maybe two, but most likely only one.
Facilitating Functions of Intermediaries
Facilitation function researching and financing for any product to be available at any store. There is some decent amount of research conducted to work out, like answering a question; Will this product be viable? Would our particular customers be interested in purchasing this product?
This also means financing. A lot of time, when business deals are done, there may be an initial deposit with a 30 /60 day or even 120-day credit period, depending on how they negotiated it.
However, quite often, especially when you’re working with manufacturers, retailers, or distributors, you may give them an upfront payment to secure the deal.
For example, I will pay you 50% now and then 50% at delivery. This could be the difference between staying in business or being in financial trouble for smaller businesses or manufacturing businesses.
Channels for Consumer Products
Every time a product goes through an intermediary, the price jumps up because of the functions that an intermediary performs.
For example, a direct channel from producer to consumer, typically, there are good discounts to be had here because we’re buying it directly from the source. Traditionally, farmers’ markets are supposed to be kind of low prices. There are fantastic for fruits and vegetables.
Retailer Channel of Distribution
The next one is a retailer channel, so this is where the producer sells to the retailer, then the retailer sells it to the consumer.
Wholesaler Channel of Distribution
Producer sell to wholesaler and wholesaler will buy in bulk like huge quantities. They’ll break it down further for retailers, and then retailers will break it down to individual units that we will buy.
For example, petrol. Petrol is produced by, Let’s say, companies like Kuwait Oil Company or Aramco, which is three oil company in Saudi Arabia. They will sell the crude oil to companies like BP who will refine it, then sell it to retailers like United or through their own BP service stations who’ll eventually sell it to the consumer.
Every time it goes through someone’s hand, or every time an intermediary gets involved, the product’s price jumps up.
Agent and Broker Channel of Distribution
Producers who sell to agents and brokers who may find unique wholesalers interested in the product will then sell it to retailers and eventually ask consumers.
Look at Sriracha Sauce, it is so, so expensive. The reason for it is that this product is more of a specialty product, so people are looking for it. However, it doesn’t sell in huge quantities, say, compared to Heinz ketchup as a result of which the producer would have approached agents of brokers, or they would have sold out the producer to tell, Hey, we could open up new markets for you in foreign countries.
They would have gone to trade shows and events where they would have met other wholesalers and product tested it or displayed the product to them.
The wholesalers would have gone interested and started stalking the product and then promoted that to retainers. Eventually, a retailer like Coles and Woolley’s would promote the product to consumers, and every step of the way, the price of the product goes up because someone had to work for it.
Online Channel of Distribution
The longer the channel, the more expensive the product is; that is why when you look at the online world and go direct to consumers online, There is an element of trust, however.
If you’re walking to any physical store that you already have a preexisting relationship with, you’re more likely to trust a product even though you have never used it or experience it yourself because you trust the retailer.
Importance of Marketing Intermediaries
Marketing Intermediaries Meaning
Independent companies that assist in marketing activities and the smooth flow of goods and services from manufacturer/producers to the consumer is called marketing intermediaries. Marketing intermediaries do the product promotion through marketing channels that build brand awareness, establish consumer relationship, and ultimately increase brand loyalty. How these intermediaries implement the marketing and promotion activities determine the failure or success of a product.
Marketing intermediaries include wholesalers, agents, and even retailers; They also perform other functions like distribution, logistics like storage, and repackaging the products. Intermediaries are also called Product Middlemen.