If you’re selling any type of product, you will most likely have to work with a marketing intermediary at some point.

Let’s explore what is a marketing intermediary and how to use them in your strategy.

Key Takeaways

  • Marketing Intermediaries Bridge Gaps: They facilitate the distribution of goods from producers to consumers, specializing in logistics, sales, and market expansion.
  • Benefits Include Efficiency and Expertise: Intermediaries expand market reach, allow producers to focus on innovation, and provide risk sharing and customer convenience.
  • Challenges Involve Costs and Control: Using intermediaries can increase costs, reduce control over product marketing, and potentially dilute brand strategy.

What is a Marketing Intermediary?

A marketing intermediary is an entity that acts as a middleman between producers and consumers, facilitating the distribution and sale of goods and services from suppliers all the way down to the customer.

Depending on your distribution strategy, you may have to work with one or more of these intermediaries:

Distributors

Distributors buy products from suppliers with the goal of reselling the items to retailers at a higher price.

Besides pitching products to retailers, distributors also handle other tasks for their clients including restocking inventory, creating displays, and training the retailers’ staff on new products.

Most distributors only cover a specific geographic region, so if you want to launch nationally, you may need to hire multiple distributors to cover the entire country.

Distributors don’t just sit back and wait for the orders to come in. Instead, they take a proactive approach by going out into the market to introduce your product to different retailers within their territory.

Whereas wholesalers usually only work with larger retailers, distributors work with retailers of all sizes.

Wholesalers

There is a lot of confusion over the difference between wholesalers and distributors, and many people use these terms interchangeably, although they are not the same.

Both types of intermediaries purchase products from suppliers in order to resell them to retailers, but wholesalers are only concerned with making the sale.

These intermediaries do not provide the after-sale service that distributors do.

Wholesalers often sell competing products, while distributors do not. For example, distributors would only work with Coke or Pepsi, while wholesalers would work with both.

As a result, wholesalers do not form as close of a bond with their suppliers because they are not as dedicated to selling only their brand.

Agents

Unlike distributors and wholesalers, agents, or product brokers, do not actually purchase products from the suppliers.

Instead, they work on commission or take a percentage of the sales price, so they are rewarded based on how many units they sell to retailers.

Although agents are usually well-connected and able to introduce suppliers to new retailers, they do not perform other services such as merchandising and after-sale customer service.

If you want more of a full-service marketing intermediary, an agent may not be the right choice for you.

Retailers

Retailers are often the final step before the end user in the supply chain.

Brands can choose to hire their own sales team to pitch to and service retailers or work with one of the other marketing intermediaries who can handle these activities on their behalf.

Whether you sell directly to retailers or not depends on the size of your company.

Dealing with retailers can be time-consuming, so it may distract you from other areas of business that need your attention. If you are able to work with an agent, distributor, or wholesaler, this is usually recommended.

Why Are Marketing Intermediaries Important?

Marketing intermediaries are critical in your strategy for several reasons:

  1. Efficiency in Distribution: They bridge the gap between the producers of goods and services and their end users, making the distribution process more efficient. By doing so, they help in reducing the distance goods have to travel from producer to consumer.
  2. Expertise and Specialization: Intermediaries often specialize in certain tasks like transportation, storage, and sales, bringing expertise that manufacturers may not possess. This specialization can lead to more effective and efficient marketing and distribution.
  3. Scaling Production: They enable producers to focus on their core activities like production and innovation, by taking care of the distribution and marketing. This division of labor allows for economies of scale in production.
  4. Market Expansion: Intermediaries help in expanding the market for products by reaching different geographical areas and tapping into new customer segments that producers alone might not be able to reach effectively.
  5. Customer Convenience: They often make products more accessible to consumers, providing convenience in terms of location, timing, and assortment of products.
  6. Risk Sharing: They share the risk involved in distributing the products, such as holding inventory, dealing with non-sales, and managing credit issues.
  7. Feedback Loop: Marketing intermediaries often provide valuable feedback from the market and consumers to the producers, which can be crucial for product improvement and innovation.

In essence, marketing intermediaries play a vital role in the smooth functioning of the supply chain, contributing significantly to the overall efficiency and effectiveness of the market system.

The Limitations of Marketing Intermediaries

While intermediaries play a crucial role in the distribution and marketing of products, there are several disadvantges associated with their use:

  1. Increased Costs: Intermediaries add extra layers in the distribution chain, which can lead to increased costs for the end consumer due to markups at each stage of the distribution process.
  2. Loss of Control: Producers may have less control over how their products are marketed and sold when intermediaries are involved. This can lead to potential misalignment with the producer’s brand image and marketing strategy.
  3. Reduced Profit Margins for Producers: Since intermediaries need to make a profit, this can reduce the margins that producers receive on their products.
  4. Potential for Conflict: There can be conflicts of interest between producers and intermediaries, particularly if intermediaries handle competing products or prioritize certain products over others.
  5. Dependency: Relying heavily on intermediaries can lead to dependency, which can be risky if the intermediary faces financial difficulties or changes their business strategy.
  6. Information Distortion: As information passes through intermediaries, there is potential for distortion, leading to miscommunication between the producer and the end consumer.
  7. Slower Response to Market Changes: The presence of intermediaries can sometimes slow down the response time to market changes, as the coordination and communication process is more complex.
  8. Barrier to Direct Customer Relationships: Intermediaries can act as a barrier between producers and consumers, hindering the ability of producers to develop direct relationships and gather firsthand customer feedback.
  9. Risk of Channel Conflict: There can be a conflict between different channels, especially if a producer adopts a multi-channel approach, where different intermediaries compete for the same customers.
  10. Difficulty in Implementing Changes: Making changes in product offerings, prices, or marketing strategies can be more challenging and time-consuming when intermediaries are involved, as it requires coordination and agreement across the distribution chain.

In summary, while intermediaries can provide significant benefits in terms of efficiency and market reach, they also introduce challenges related to cost, control, dependency, and flexibility, which need to be carefully managed by producers.

Final Thoughts

As you can see, using a marketing intermediary comes with its own advantages and limitations. The idea is to leverage the best ones and maximize the efficiency of your distribution channel.

Now we would like to know:

Which types of marketing intermediaries have you worked with? What was your experience with each? Share your stories in the comments below!