It rarely happens that customers directly buy from the company. In most of the cases, there are many intermediaries which are present between the company and the customer. These intermediate facilitators are known as marketing intermediaries or middlemen.
They are responsible for not only taking a commission in between the transaction, but they also provide easier access for the customer to the product, they can also streamline the production process of a company. The general understanding is that the more the number of intermediaries, the longer will be the process of reaching the product to the customer as well as it will also add to the cost of the product.
There are commonly four types of Marketing intermediaries which are brokers and agents, distributors, retailers, and wholesalers.
It is always tempting for any organisation to skip the middleman and serve directly to the end customer, especially in today’s age, where e-commerce is at its pinnacle of success. This not only increases the profit margins of the company but also gives the best deals to customers, which they may not have found when approached via an intermediary.
However, practically, it would be a lot of work in terms of logistics and supply chain management for the company. If 500 of such people decide to approach directly to the company 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. Add to it, 500 different customer interactions and after-sales support which may include product return, exchange inquiries, and other similar matters.
This also adds to multiple transaction modes for the organisation because 500 people will make a payment through 500 different channels. This would increase the supplementary costs of the organization, including the logistics cost and supply chain cost. Not to mention that there would be a requirement of multiple people to coordinate. In such cases, it is easier to have a Marketing intermediary.
Types of Marketing Intermediaries
1. Brokers and Agents
Both the terms are synonymous with each other because of their rules. This is true, especially in the case of real estate deals when both of them are similar to any client. There could be many differences in them, but as a whole, both of them are considered as the same. An Intermediary usually is permanent while brokers, on the other hand, are temporary.
Apart from this significant difference, the role of both intermediaries is the same. Both of them are paid a commission for every sale and are not responsible for the products that are 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 they require a specific human interaction to close the transaction, then they approach agents or brokers.
Their deals with companies are usually for a selected and predefined time or for a selected number of products to be sold to the customer. For example, a deal would be for three houses in case of a real estate agent or for three passengers in 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 to individual pharmacies, hospital pharmacies on requirement basis. Some wholesalers sell directly to the customers.
Since they buy in bulk, the prices that are offered to them are very minimal. They sell to retailers at an increased rate, which includes their margin as well.
The Wholesalers and resellers are further divided into 3 parts
- Merchant wholesalers – These are distributors or jobbers who are owned independently as well as operate 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 – When it comes to more substantial volumes, full-service wholesalers are the ones who are preferred. They perform a broad range of services for their customers like operating warehouses, having a big stock inventory, supplying credit line to different customers as well as to salespeople and delivery of goods to customers. While a variety of merchandise is present with general line wholesalers, on the other hand, specialty wholesalers are the ones who only 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 as well as to their customers. These exist only to reduce the cost of service. There are many limited-service wholesalers present in many industries.
As far as the line of fast selling merchandise is concerned, they are handled by cash and carry stores, on the other hand, sole retailers only manage cash business and are not concerned with delivering of goods.
Distributors are also known as functional wholesalers. Distributors 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 a limited job. They are paid a commission for every transaction from the manufacturer. Sometimes they also demand transaction fees from retailers as well.
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 also in the form of e-commerce websites. Retailers buy directly from the producer and skip many intermediaries to increase their profit margin.
Retailers stock the products in bulk and payback in the form of commission. This usually happens in the case of bookstores. Any intermediate party which does not manufacture the product but buys the product from the company and sells it to the customer can be termed as a retailer. The best example is the online e-commerce giant Amazon which sells millions of products to millions of customers by purchasing it directly from the manufacturer.
Retailers are present in different formats. Examples are
- Store retailers – Which have multiple products under the same roof, specialty stores that have a single type of product under one roof. It is considered as a narrow line of products. Florists, 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 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 every other thing that a customer will require daily. Some retailers also sell alcohol products, but it is not allowed in every country.
- The discount store is another type of retailer which is concerned with the selling of products on discount.
Ecommerce is a growing and accessible format that has emerged these days. It is very popular with the customers because of the convenience, and low prices offered on them.
Marketing intermediaries may have many disadvantages like added cost and increases department to manage but from an organizational point of view, having intermediaries is very convenient because managing a small number of intermediaries is more manageable than handling the entire customer base.