Functions of Intermediaries
Channel intermediaries, whose main purpose is to deliver product from the manufacturers to the end users. The purpose of a channel intermediary is to move products to consumers, whether business or consumer. Some intermediaries take title, or ownership, of the product 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.
When Ninja Corp first decided to launch their product line, they had to determine which channel intermediaries they would need to effectively reach their target market. Remember that the overall marketing mix consists of the 4 Ps (which are product, promotion, price and physical distribution). This lesson discusses the P of physical distribution through the channel intermediaries.
There are four generally recognized broad groups of intermediaries: agents, wholesalers, distributors, and retailers.
Agents or brokers are individuals or companies that act as an extension of the manufacturing company. Their main job is to represent the producer to the final user in selling a product. Thus, while they do not own the product directly, they take possession of the product in the distribution process. They make their profits through fees or commissions.
Unlike agents, wholesalers take title to the goods and services that they are intermediaries for. They are independently owned, and they own the products that they sell. Wholesalers do not work with small numbers of product: they buy in bulk, and store the products in their own warehouses and storage places until it is time to resell them. Wholesalers rarely sell to the final user; rather, they sell the products to other intermediaries such as retailers, for a higher price than they paid. Thus, they do not operate on a commission system, as agents do.
Distributors function similarly to wholesalers in that they take ownership of the product, store it, and sell it off at a profit to retailers or other intermediaries. However, the key difference is that distributors ally themselves to complementary products. For example, distributors of Coca Cola will not distribute Pepsi products, and vice versa. In this way, they can maintain a closer relationship with their suppliers than wholesalers do.
Retailers come in a variety of shapes and sizes: from the corner grocery store, to large chains like Wal-Mart and Target. Whatever their size, retailers purchase products from market intermediaries and sell them directly to the end user for a profit.
Roles and responsibilities of Intermediaries
Intermediaries are the backbone of commerce and include suppliers of raw materials and components, transport, shipping and distribution companies, landlords and shop owners, online marketplaces, internet service providers, search engines and advertising networks, websites, credit card companies and even the popular social media sites.
Intermediaries, as the underlying infrastructure of all commerce have the inherent responsibility to restrict the abuse of their infrastructures for illicit trade. The greater the number of intermediaries and the more elaborate the supply chain, the more vulnerable the system is to infiltration and exploitation by counterfeiters. Experience shows that most intermediaries, when better informed about potential exploitation and the damage done by counterfeiting and piracy, demonstrate a willingness to secure their portion of the supply chain from abuse.
The three basic functions performed by an intermediary in the distribution channel are:
(1) Transactional: This function involves adding value to the distribution channel by bringing in the intermediary’s resources to establish market linkages and customer contacts. The intermediary either directly undertakes the marketing and sales function or helps to establish buyer-seller relationships by serving as a link between the manufacturer and the retailer.
(2) Logistical: This function involves the physical distribution of goods. It involves sorting and storing supplies at locations within the reach of the end customer. It also breaks up the bulk production of the manufacturer into smaller portions and may include the transportation of smaller shipments to intermediaries or retailers further down the channel of distribution.
(3) Facilitating: Although often confused with logistics, the facilitating functions of intermediaries supplement the entire marketing flow of the product and are separate from logistics. The facilitating functions include financially supporting the marketing chain by investing in storage capabilities. They may include facilitating sales by helping the consumer buy even when he or she does not have cash (through financing plans, purchase agreements, etc.).
Figure:- Function of Intermediaries