Commerce has become increasingly complex over the years. Gone are the days when a consumer would buy a good directly from the producer. Now, the vast majority of the goods a person buys come to them after passing through multiple traders, or middlemen.

Marketing Intermediary Definition

Any individual or firm involved in transacting a product as it moves from the producer to the ultimate consumer is termed as a marketing intermediary, also known as a distribution intermediary. In other words, these entities assist the flow of products from producers to consumers.

Every subsequent intermediary buys the goods from the previous one, hence taking over possession. For its services, each distributor takes a commission or cut from each transaction it facilitates.

The commission includes service charges, transportation costs, storage fees, and other such expenses. As it passes from one intermediary to another, each party purchases a unit at one price point and sells it at a higher one, the monetary value of each unit increases.

Why are Marketing Intermediaries so Important?

Manufacturing goods worth buying is the most important step in trade, but not the only one. The marketing of products to reach customers is equally as important. Today, most producers wouldn’t be able to make any sales if it wasn’t for marketing intermediaries.

On the surface, involving a marketing intermediary only seems to complicate things and make goods more expensive. Why can’t a customer just buy goods directly from the producer rather than get the same product from a middleman at a higher price?

As we scratch the surface, you’ll discover that these intermediaries play a very important role in trade today. They not only make business more profitable for the producer but also provide greater benefit to the consumers by making it easier for them to source the products of their choice.

A distribution intermediary tends to do a better job at selling to more people because it possesses the required experience, specialization, reach and scale of operation that all producers don’t have.

The 4 Types of Marketing Intermediaries

There are four commonly known types of intermediaries, namely marketing agents, wholesalers, distributors, and retailers.

Marketing Agents

Marketing agents, sometimes also known as brokers, are private individuals or firms that facilitate the selling of a product. They usually act as marketers or representatives on behalf of the sellers and don’t actually own the product that is being sold.

The role of these agents can be better understood by observing the role of a real estate broker. Such intermediaries are paid a cut from the transaction, and they act only to connect the buyer to the seller.

Marketing agents are not only limited to the field of real estate. Their services are commonly used across the international trade scene, particularly in travel services. When companies cannot reach the desired customers directly, they employ a marketing agency to help them make sales.

Wholesalers

Wholesalers
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A wholesaler buys goods in bulk from the producer and then sells them to retailers in smaller quantities, but these quantities are still quite large for the individual consumers. The wholesale business works on the simple principle that bulk buying results in a lower per-unit cost. A wholesaler buys goods in bulk from a factory at cheaper rates and sells them to retailers at a higher one, the cost difference constitutes the wholesaler’s profit.

For instance, a wholesaler purchases 5000 units of a product from a producer at $1 each. A retailer only needs 500 pieces at a time, but they’ll purchase it at $1.25 per unit from the wholesaler.

Wholesalers are fully independent intermediaries purchasing and selling all kinds of products. They have no associations with particular companies. However, it’s up to the wholesaler to choose whether they deal in a wide range of products or focus on a specific niche.

A key point about wholesalers is that they buy in bulk and sell in bulk, only that their selling quantities are lesser than buying quantities. Rarely do wholesalers sell directly to end consumers unless they require an unusually large amount of goods.

Distributors

Distributors
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A distributor works much in the same way as a wholesaler. The only difference is that while a wholesaler does not have any association with producers, a distributor aims to promote and sell the goods from a specific producer only.

It could be said the distributor is a hybrid of a wholesaler and a marketing agent. That is, they’re hired to market a company’s products and are paid a commission for the sales they make. But their mode of operation is in bulk, just like a wholesaler.

Retailers

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The retailer is the last intermediary link in the supply chain that leads up to the consumer. These are the individuals or firms that customers go to buy products for day-to-day use. Retailers source large quantities of goods from wholesalers and sell them to customers in whatever quantity the average person buys a specific good.

Yet again, the sequence of increasing per-unit costs continues as the retailer sells each unit at a higher price to the customers. The retail business is all about advertising products to the wider population and making it easier for them to buy conveniently.

Examples of Marketing Intermediaries

We’ve defined the four types of marketing intermediaries, but let’s look at some examples of each of the four types for a better understanding of how each one works.

Marketing Agent

Have you ever visited a travel advisor? They advise you on the best places to travel on your trip but at the same time, they offer their services to handle your visa application and flight booking. While they do their job, they’re also acting as marketing agents for hotels and airlines

They make sales on the behalf of hotels and airlines to customers these companies cannot reach directly. The agent earns a fixed percentage for each successful transaction.

Wholesaler

Large-scale manufacturing companies cannot sell directly to consumers. They do not have the required infrastructure and scale of logistic operations to reach and deliver all their produce to thousands, if not millions, of customers. For instance, the pharmaceutical industry cannot function properly without wholesalers.

Wholesalers buy pharmaceutical drugs in bulk, for instance, 1000 cartons of medicine A. The average pharmacy or hospital doesn’t require such a large amount of a particular medicine, so they buy smaller amounts, say 3-4 cartons of a medicine every few months.

In this way, a wholesaler sells goods to different retail sellers at a higher price, but this makes things convenient for both the manufacturer and the purchaser. The manufacturer can’t afford to ship small quantities to so many different pharmacies and sellers around the world. Similarly, a retail medical store can source a particular medicine quickly from a wholesale dealer in required amounts.

Distributor

A manufacturing company and an individual or firm can enter a formal agreement that the latter will only promote and sell goods the company produces or endorses. It can be said that the distributor is hired by the company.

Take Gillette for instance. A distributor will only deal with Gillette’s products, store them and resell them forward, earning a commission or a transaction fee from each sale it makes.

Retailers

A supermarket, book store, pharmacy, or online shopping website, all are examples of retailers. Let’s take Walmart as an example.

It has a wide range of products at the same place for you to choose and purchase at your convenience. Walmart sources goods from wholesalers in large quantities and resells them to us at a higher price. Another great example of a retail intermediary is an online shopping store. Any shopping website that delivers directly to customers is an e-commerce retailer. They source their products in bulk from wholesalers, such as those found on Alibaba, and sell them at retail prices to the ultimate consumer. 

Bottom Line

Having marketing intermediaries in the supply chain has its advantages and disadvantages. Having a lot of middlemen involved does increase the cost of a product for the ultimate consumer, and some manufacturers feel disconnected from their consumers at the other end of the supply chain.

However, the benefits outweigh the drawbacks. Business is more profitable for manufacturers as they’re able to work at full capacity and make maximum sales with the help of intermediaries. The added cost for customers is afforded by the convenience produced by the retail system.

All in all, the concept of marketing intermediaries is crucial to the world economy today. Not only does it result in countless employment opportunities for the workforce, but it also enables economies to grow faster.