Intermediaries

8 Key excerpts on "Intermediaries"

• 

  eBook - ePub

  Tourism, Transport and Travel Management

  • M.R. Dileep(Author)
  • 2019(Publication Date)
  • Routledge

    (Publisher)

  Business is all about transactions, which denotes that if the transaction or exchange of a “product of value” for money does not take place, the very purpose of undertaking a business may not be accomplished. When a firm produces a product, it has to be transacted and eventually consumed by the final consumer. Some producers can sell directly to the consumer whereas others need to have someone in between them to facilitate that function. The producer’s responsibility does not end at producing the product; the product has to be transacted, as the return comes from the sale of the product. Enabling a cost-effective sale of the product is equally important. Making the product available at the convenience of the consumer is a crucial responsibility of the producer or the supplier. In many cases, it is not easy for the producer of the product to ensure smooth and efficient sales due to a range of factors, such as the presence of the consumer in a faraway place, or not owning and operating retail outlets. This gives scope for an intermediary, which accomplishes such tasks with ease and efficiency.

  A distribution system may involve Intermediaries as well. An intermediary is simply a third party who stands in between two parties and negotiates or facilitates a deal to take place between those parties. In business, it mainly concerns the distribution and transaction and sale of the products that are produced by the principals. Therefore, it denotes an agency or an individual that performs a range of functions, all of which are mainly aimed at ensuring the smooth and efficient distribution, transaction and/or selling of the products and services that are produced by the principals/manufacturers to the final consumers. Intermediary functions are not restricted to distribution and sales, and in certain cases the functions continue even after the sale (after-sales service). For a physical product, an intermediary may be involve in “managing inventory, physical delivery, analysis of services, enabling firms to offer just about everything a buyer wants, from availability, speed of delivery, reliable supply, range of choice in assortment, and so on” (Baines et al., 2008). Usually a distribution channel makes possible the physical flow of products, ownership flow, information flow, payment flow and promotion flow. An efficient channel enables the linking of a producer with buyers, and undertakes marketing communication and sales. Moreover, it can influence the firm’s pricing strategy and affect product strategy through branding policies, willingness to stock and customize offerings, install, maintain, offer credit, etc. Distribution is all about the “downstream” section of the supply chain. The players involved in it are called marketing channel partners.

  9.2 Distribution channels

  Channels of distribution involve a number of Intermediaries through which the producer makes available the products to the user or the final consumer. Distribution channel members can help with information and market intelligence gathering, engage in persuasive marketing communication, ensuring customer interaction, matching of consumer needs and modifying the product as per needs, negotiate price and other terms, organize the storing and physical distribution of the products, and finance as part of distribution activities and risk taking with regard to distribution and sales. Intermediaries also help in breaking large deliveries from principals into smaller units and sorting them into diverse items for selling by retailers. They also offer convenient locations for accessing the products. Retailers ensure the selling of products in time. Intermediaries also provide specialist services during and after the sale. Moreover, through Intermediaries the ownership of the product is passed on to the final consumers. Traditionally, the distribution mechanism consisting of Intermediaries and retailers could add value in the whole process of distribution, transaction and consumption.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  eMarketing

  Digital Marketing Strategy

  • Raymond Frost, Alexa K. Fox, Terry Daugherty(Authors)
  • 2022(Publication Date)
  • Routledge

    (Publisher)

  A distribution channel is a group of interdependent firms that work together to transfer product and information from the supplier to the consumer. The transfer may be either direct or through a number of Intermediaries that perform certain marketing functions in the channel between suppliers and customers. By specializing, Intermediaries are able to perform functions more efficiently than a supplier could.

  Channel Intermediaries include wholesalers, retailers, brokers, and agents. The length of a distribution channel refers to the number of Intermediaries between the supplier and the consumer. The shortest distribution channel has no Intermediaries; the producer deals directly with customers. Indirect channels include one or more Intermediaries. Disintermediation describes the process of eliminating traditional Intermediaries. Eliminating Intermediaries can potentially reduce costs, but functions must be performed by someone. Although the internet was expected to lead to disintermediation and lower prices, new Intermediaries are emerging instead.

  Three broad types of value-added functions performed in the channel are transactional, logistical, and facilitating functions. Transactional functions refer to making contact with buyers, using marketing communication strategies to raise awareness of products, matching product to buyer needs, negotiating price, and processing transactions. Logistical functions include physical distribution such as transportation and storing inventory and aggregating product; digital marketers often outsource these to third-party logistics providers. Facilitating functions include providing marketing research about buyers and providing financing. The last mile problem is the added expense of delivering small quantities to individual homes or businesses.

  The distribution channel is a unified system of interdependent organizations working together to build value as products proceed through the channel from producer to consumer. This perspective recognizes that channels are stronger when they compete in a unified way with other channels. Supply chain management is the coordination of flow of material (e.g., physical product), information (e.g., demand forecast), and financial (e.g., credit terms). Marketers measure the success of their distribution strategies and tactics through a number of important performance metrics.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Fundamentals and Practice of Marketing

  • Adrian Mackay, John Wilmshurst(Authors)
  • 2012(Publication Date)
  • Routledge

    (Publisher)

  Figure 15.1 .

  The figure shows the five main variations that are possible. Avon Cosmetics and Encyclopaedia Britannica were classic examples of companies selling direct to the consumer, but the Internet has opened up a channel for many more companies to sell direct to consumers. Many goods and services, from heavy machinery and raw materials to nuts and bolts and stationery, are also sold direct to industrial users. But consumers still purchase a high proportion of goods such as groceries and services (such as travel) from resellers.

  Figure 15.1 Some alternative routes to the customer

  15.2.2 The ‘Intermediaries’ Function

  Operating the channels of distribution are the ‘Intermediaries’, sometimes called ‘middlemen’ – independent businesses standing between the producer and the household consumer or industrial user.

  The first group – brokers, factors or agents – differ from the others in that they normally arrange sales transactions but do not take title to the goods. But there is widely differing usage of the various terms.

  Retailers are people whose main business is to sell direct to the ultimate private user. In some cases (e.g. cars, TVs, domestic appliances) they may also carry out servicing and maintenance after the sale, although increasingly with electrical goods this is a quite separate function.

  Wholesalers are concerned with selling to others (mainly retailers) who are buying in order to resell or to those who are buying for business use (i.e. not for personal consumption).

  There is some overlap of function. Some retailers may sell on occasions a large quantity (at discount) to a company for business use – the wholesale function. Wholesalers may also do some retailing. It was at one time usual, for example, for British builders’ merchants to have a ‘trade’ (for purchase by builders and decorators) and a ‘retail’ counter (for purchases by individuals for their personal use). More recently many of them have become ‘cash and carry’ suppliers to the trade and do-it-yourself shops for householders (see Section 15.3

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Economics and Management of Competitive Strategy

  • Daniel F Spulber(Author)
  • 2009(Publication Date)
  • WSPC

    (Publisher)

  Retailers also provide centralized marketplaces for their suppliers. Manufacturers and wholesalers transact directly with the retailer, not the retailer's customers. Retail chains generally increase efficiency by centralizing purchasing at headquarters and centralizing deliveries for many goods at local or regional warehouses. Wholesalers also provide dealer services to retailers and manufacturers by buying and selling products, transferring goods, and centralizing exchange.

  Manufacturers also act as dealers by providing a central selling place for customers (whether wholesalers, retailers, or final customers). A failure to understand this can be quite costly. IBM relied on others to market its personal computers. The company finally responded to faltering sales in personal computers by offering a toll-free number for customer orders, something that had already been successful for rivals such as Dell and Compaq. Manufacturers also provide central marketplaces for their suppliers of parts, equipment, and other services.

  Communication Costs

  Intermediaries reduce communication costs for buyers and sellers by establishing networks. Imagine a situation in which many buyers and sellers had to contact each other directly. Not only would they encounter search costs, but the costs of exchanging information often would be significant. Consider again the grocery store. Imagine if customers had to contact all the manufacturers and distributors that supply the store to obtain price and product information. By establishing a network of suppliers and providing the products to customers, the grocery store takes on many of these transaction costs, performing the task more efficiently than individual customers could ever do. The store provides price and product information through its advertising and store displays. The store interacts with each of its suppliers on behalf of its many customers.

  Figure 11.4: Intermediary firms reduce the transaction costs of direct buyer-seller contacts with hub-and-spoke contacts.

  Intermediaries provide network economies by replacing the transaction costs of direct buyer-seller contacts with hub-and-spoke contacts (see Figure 11.4

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  No Small Change

  Why Financial Services Needs A New Kind of Marketing

  • Anthony Thomson, Lucian Camp(Authors)
  • 2018(Publication Date)
  • Wiley

    (Publisher)

  The first question about intermediated markets is why they're structured in this way at all. On the face of it, the intermediary is just an unnecessary complication, a link in the value chain that could perfectly well be dispensed with. Why don't more product providers deal more directly with their customers?

  Apart from the fact that some indeed do, the principal answer to this question is one of those sweeping over-generalisations: on the whole, Intermediaries have established their position in the value chain on the basis of their ability to add value to both the other parties involved. End-customers perceive that Intermediaries help them find a way through the complexities and technicalities of confusing and worrying market sectors. And product providers rely on them to help them find customers, and then sell their products to them. In a sales-focused industry, they've been the best salespeople.

  As we said back in the first couple of chapters, the industry's enthusiasm for selling largely explains its lack of enthusiasm for marketing. Sales and marketing can and indeed should work seamlessly together, but more often than not they're seen as alternatives. When it comes down to it, for many product providers it's a choice between business models: do you spend the available margin on motivating salespeople (that is, more often than not, Intermediaries) to sell, or on encouraging customers to buy?

  As a result, it seems to us that the industry's reliance on sales-oriented intermediation has largely acted as a brake on marketing, at least as far as end consumers are concerned. But as we shall go on to discuss in this chapter, we think that intermediation is changing – both in itself and in the relationships between Intermediaries and manufacturers – and that as a result of these changes we're evolving into a very different kind of intermediation that is much less sales-driven, and where marketing to end consumers, both on the part of manufacturers and indeed on the part of Intermediaries themselves, has a much greater role to play.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Essentials of Tourism

  • Chris Cooper(Author)
  • 2020(Publication Date)
  • SAGE Publications Ltd

    (Publisher)

  It is important to recognise the importance of Intermediaries and intermediation in the tourism distribution channel. Intermediaries include tour operators who bundle together two or more elements of supply (say an airline seat and accommodation) and sell it to the public. Suppliers and tour operators are known as ‘principals’. Because it is not practical for a principal to have a sales office in every city in the world, they use a second type of intermediary to access the market – travel agents. Agents are found in the high street and in cyberspace and are paid commission for sales. According to Fyall and Wanhill (2008), the roles played by Intermediaries in the distribution channel include:

  • Making markets by matching buyers and sellers;
  • Transferring risk owned by a supplier, such as a hotel, to a tour operator who purchases their hotel bedstock in bulk;
  • Reducing marketing costs for the principal by finding buyers and communicating with the marketplace;
  • Passing on knowledge and price advantage;
  • Acting as a one-stop shop for many products for the consumer;
  • Acting as a cheaper source of products because Intermediaries can negotiate and purchase in bulk and pass on the savings; and
  • Helping improve the competitiveness of destinations that leverage from the intermediary’s extensive marketing network – there is a danger here, however, as destinations can become overly dependent upon, say, tour operators to deliver tourists and so lose control of their own markets, as has been the case for some Mediterranean islands.

  Intermediaries: Tour operators

  The nature of the tourism product as a fragmented set of services has created an important role for tour operators, bridging elements of supply with the consumer. Effectively, tour operators bundle together two or more elements of supply and sell them for a single price. They make contracts in bulk with hotels, airlines and ground transport companies and assemble them into ‘inclusive tours’ communicated to the market through print brochures or the Internet. Tour operators therefore act as ‘wholesalers’, as they are known in North America, passing on the savings to the traveller that they have made by contracting in bulk. Their core product is the inclusive tour, assembled by the operator, easy to purchase, competitively priced and distributed traditionally through travel agents but increasingly via the Internet.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Global Business

  Positioning Ventures Ahead

  • Michael R. Czinkota, Ilkka A. Ronkainen(Authors)
  • 2010(Publication Date)
  • Routledge

    (Publisher)

  Communication is perhaps more important in international channel design than it is in domestic channels because of the potential for problems caused by distance and language differences. Distance can be social, cultural, technological, time, and geographic, but effective communication can help overcome any issues or confusion caused by the different types of distance. Good communication will help communicate goals to distributors, solve conflicts, and market products. Remember, though, that this two-way process does not involve dictating to Intermediaries. It helps to be clear on channel members’ needs and goals too. Design a channel and choose Intermediaries that guarantee good information flow. Facilitate this with personal visits, personnel exchanges, or distributor advisory councils with members from all channel participants. Also consider offering rewards for good communications, so that Intermediaries do not have to fear that the messenger will be shot.

  SELECTING Intermediaries

  With channel design complete, it is time to select Intermediaries that will help achieve the company’s global marketing goals. Start with two basic decisions.

  The first involves deciding whether to work with a distributor or an agent. A distributor will purchase the product, which makes it more independent than an agent. Distributors usually organize along product lines and provide companies with complete marketing services. Agents are paid, on the other hand, on a commission basis and they do not usually physically handle the goods. This arrangement gives the manufacturer the control to make sure that the customer gets the most recent or appropriate version of the product. Doing so, in turn, helps build a quality reputation. The type of relationship selected has business implications that include how easy or hard it is to terminate the agreement.

  The second decision is whether to use direct exporting, indirect exporting, or integrated distribution. With direct exporting , companies sell products abroad either directly to the global customer or by finding a local representative who will carry the product. Indirect exporting

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  E-marketing

  • Raymond Frost, Alexa K. Fox, Judy Strauss(Authors)
  • 2018(Publication Date)
  • Routledge

    (Publisher)

  A customer’s experience in gaining access to the product often colors his or her satisfaction with the product, brand image, and brand loyalty. This often results in online product reviews and social media conversation about the brand.

  The structure of the distribution channel can either make or impede possible opportunities for marketing on the internet. If the transaction is automated, the consumer could save money. Conversely, a consumer who purchases online must perform the search function personally that is normally performed by retailers—if you’ve ever searched for the lowest cost flight at online travel agents, you’ll realize the additional time spent versus simply calling a brick-and-mortar agent. Four major elements combine to form a company’s channel structure, and all affect internet marketing strategy as shown in the sections that follow:

  1. types of online channel Intermediaries
  2. length of the online channel
  3. functions performed by members of the channel
  4. physical and informational systems that link the channel members and provide for coordination and management of their collective effort to deliver the product or service.

  Online Channel Intermediaries

  A good way to understand online Intermediaries is according to their business models. Many e-business models have new names, but how many of them are really new? On closer inspection, most e-business models turn out to be variations on existing marketing concepts, but technology makes them more effective or efficient. For some digital products, such as software or music, the entire distribution channel may be internet based. When a consumer buys software online, the supplier often delivers it over the internet to the buyer’s computer. In most cases, however, only some of the firms in the channel are wholly or partially Web enabled. For example, nondigital products such as flowers and wine may be purchased online but must be delivered via truck. Nonetheless, the exact location of that shipment can be tracked using a Web-based interface (the informational role of distribution). Exhibit 11.1

  Sign up to read

  Learn more about book