Chapter 2

Role of Marketing Intermediaries

Learning Objectives
Understand the role of marketing intermediaries
Know the functions of marketing intermediaries in
electronic environment
Understand the role of marketing intermediaries in
physical product industries
Learn the strategic role of marketing intermediaries in
value chain perspective

Introduction
The very purpose of marketing is to satisfy human
needs by delivering products to buyers when and where
they want them and at a reasonable cost.
A key element in this statement of marketing is delivery.
All marketing efforts do not contain any value unless
products are placed in the hands of those who need
them.
Marketing intermediaries are exclusively responsible for
the performance of this critical function of delivery of
products to customer.

Marketing channel members perform

a number of key functions:
1. They gather information about potential and current
customers, competitors, and other actors and forces in
the marketing environment.
2. They develop and disseminate persuasive
communications to stimulate purchasing.
3. They reach agreements on price and other terms so that
transfer of ownership or possession can be affected.
4. They place orders with manufacturers.
5. They acquire the funds to finance inventories at different
levels in the marketing channel.
6. They assume risks connected with carrying out channel
work.
7. They provide for the successive storage and movement
of physical products.
8. They provide for buyers payment of their bills through
banks and other financial institutions.

LOGISTICS FUNCTIONS
Breaking Bulk:
Manufacturer
Manufacturer
(Products
(Productsin
inbulk
bulk
Quantity)
Quantity)

Marketing
Marketing
Intermediary
Intermediary

Consumer
Consumer//Retailer
Retailer
(Products
(Productsin
inSmall
Small
Quantity)
Quantity)

Accumulating Bulk:
Producer-1
Producer-1
(Product
(ProductininXXQuantity)
Quantity)
Producer-2
Producer-2
(Product
(ProductininYYQuantity)
Quantity)
Producer-3
Producer-3
(Product
(ProductininZZQuantity)
Quantity)

Marketing
Marketing
Intermediary
Intermediary

Consumer
Consumer
(Product
(ProductininX+Y+Z
X+Y+Z
Quantity)
Quantity)

Creating Assortments:

Manufacturer-1
Manufacturer-1
(Product-X)
(Product-X)

Manufacturer-2
Manufacturer-2
(Product-Y)
(Product-Y)

Manufacturer-3
Manufacturer-3
(Product-Z)
(Product-Z)

Customer-A
Customer-A
(Product-X&Y)
(Product-X&Y)

Marketing
Marketing
Intermediary
Intermediary

Customer-B
Customer-B
(Product-Y&
(Product-Y&Z)
Z)

Customer-C
Customer-C
(Product-X,Y&
(Product-X,Y&Z)
Z)

Transaction Efficiency:

W
R

R
R

Number of transactions needed

for all Manufacturers (M) to
transact all Retailers (R )
= Number of Manufacturers
Number of Retailers
=4
4 = 16 Transactions

Number of transactions needed

for all Manufacturers to transact
all Retailers
= Number of Manufacturers +
Number of Retailers
= 4+4 = 8 transactions

COMMUNICATION FUNCTIONS
Information provided to Supplier
Information provided to Consumer
# Consumer Profile
# Upgraded product configuration &
features
- Expectation, taste and preference # Comparative analysis of alternative
- Reaction towards competitors
# Products and brands
action and reaction
# Mechanism to maximize value for money
- Reaction in the stock-out situation # Dynamic pricing policy
- Brand loyalty and reasons for
# Promotion schemes
brand switching
# DIWA policy
# Product performance
# Payment policy
# Promotion policy effectiveness
# Support and care policy
# Pricing policy effectiveness
# Product availability
# DIWA policy effectiveness
# Order fulfillment and replenishment
schedule
# Present stock level and
# Settlement of defective delivery
requirement
# Expected Next requirements
# Payment schedule
# Defective delivery (if any) and
reverse logistics schedule

FACILITATING FUNCTIONS
Augmented Services: It include
# Local brand building,
# Push-efforts for generation of additional sales volume,
# Market coverage,
# Prominent display and most pleasant purchase environment,
# DIWA, and
# Trust building.
Credit Services
Risk Taking

Strategic Role of Marketing Intermediaries in

Value Chain Perspectives
Porters Model
Technology Development (Product & Process R&D)

Supporting
Activities

Human Resource Management

Accounting and Finance
Corporate administration and infrastructure

After sales Service

Marketing and Sales

Management

VALUE/
Margin
Order Processing &
Out-bound logistics

Manufacturing
/Operations

In-bound Logistics

Procurement

Primary Activities

Value Chain Model is all about Long Term Competitive

Advantage in the eyes of Consumers either by
1. Cost Advantage
2. Benefits Advantage
Efficient Distribution Management facilitates in this
endeavor as both out-bound logistics and channel fall
under primary activities Zone of the Value Chain.
Nowadays, major value addition is made by distribution as
product, price and promotion no more bring sustainable
competitive advantage in most of the cases.
Walters (2002), customer value criterion is an attribute (or
characteristics) of a product or service considered by a
purchaser to be a primary reason for selecting a specific
product (or service) because it enhances the value of the
purchasers output or improves their lifestyle.

It is much wider and dynamic than the basis economic

utility characteristics of form, ownership, time, and so
on. It includes features like
Security
Convenience
Performance
Economy
Aesthetics
Emotional

: Warranties, price guarantees

: Reduced preparation and search
times, availability
: Consistency and reliability,
enhancement of customers own
market and time advantages
: Relative price advantage,
upgradation, value for money
: Design leadership
: Pleasant purchase experience

Logistics Dimension of Competitive Advantage

Relative Value/Differential
Advantage
#
#
#
#
#
#

Service
Leader

Tailored services
Distribution channel strategy
Reliability
Responsiveness
Information
Flexibility

Commodity
Market

Cost &
Service
Leader
Cost
Leader

Relative Cost/Productivity
Advantage
#
#
#
#
#

Capacity utilization
Asset turn
Integration
Low inventory
Low waste

Product
Differentiation

Value
Proposition

Augmented Benefits
# Extended Warranty
# Buy-back/Trade-in
# Financing
# On-spot Breakdown Service
Basic Benefits
Powerful Engine
Wide Tires
Music System
Back Space

Core Benefits (SUV)

Transportation

Value Adding Role of Marketing Intermediaries

Logistical Value Addition
1. Breaking Bulk
2. Accumulation
3. Assortment
4. Systematic Settlement of Exchange
5. Timely, Intact movement & Delivery of Products
6. Availability & Proper Storage of Products
7. Order Processing & Fulfillment
8. Economies of Scale in Physical Distribution of
Products

Marketing Value Addition

1. Market Coverage & Penetration
2. Facilitating Buyers in Information Search
3. Supporting Buyers in their Purchase Decision
4. Product Holding & Risk-sharing
5. Local Brand Building
6. Prominent Display
7. Pleasant Purchase Environment
8. Local Credit (if any)
9. Push Effort to generate Sales Volume
10.Trust Building
11. Information sharing with firms about
# Product Performance
# Market Knowledge
# Changing Consumer Tastes and Preferences
# Dynamic Price Effectiveness
# Competitors Actions and Reactions
# Effectiveness of Current Promotional Strategy

Role of Marketing Intermediaries in e-Environment

1. Product Flow

Improvement

2. Title/Ownership Flow

Replacement

3. Negotiation Flow

Replacement

4. Information Flow

Replacement

5. Promotion Flow

Replacement

6. Risk Flow

Improvement

7. Payment Flow

Improvement

8.Service Flow

Improvement

Thank You