Marketing Intermediaries in Creating Add Value in Distribution and Logistics - Essay Example

?Running Header: How Marketing Intermediaries Add Value “How Marketing Intermediaries Create Value in Distribution and Logistics” Name Introduction: Marketing intermediaries are third parties with no direct involvement in the product process. They assist the producer and sellers to interact and transact. The transactions that are done through marketing intermediaries are also known as indirect transaction but they carry great value for both producers and sellers. As a result, the trend of using marketing intermediaries is increasing and we see great number of companies using marketing intermediaries. The list of companies that include marketing intermediaries are Coca Cola, Apple, Nokia, Samsung, PEPSI Cola, Nestle, Unilever, Proctor and Gamble, and many other giant are also present on this illustrious list of the giant FMCGs. (Daft, 1994) Marketing Channels: Marketing is all about selling right goods to the right customers at right place at the right price. Selling products to the consumers is quite a complex process and the days are well past when it was considered that everything will sell and there was no need for any marketing effort. Therefore, a good marketer does not only create demand for products, but tries to tell consumers where the product is available or where they can purchase the product. Marketing Channel is a way that makes the products available to the consumers. It has been debated widely by the marketing management experts that if the product is not available easily to the consumers, regardless of the good quality, they will find other ways or products to meet their needs. This increases the importance of marketing channels and intermediaries fourfold. Hence, a company that does not use effective marketing channels or marketing intermediaries will lose business and will eventually have to go out of the market or suffer heavy losses. Therefore shrewd investment in innovating marketing channels with wider reach is something that markets are working upon. It can be concluded from the above discussion that marketing channels and intermediaries are really important for any business and they do not only create value for the business, but they are also important in the success or failure of a business. (Marketing Crossing, 2011) There have been very innovative ways which FMCGs and retail companies are using these days to create value for their products. For example, Wal-Mart is using the services to Fedex to maintain inventory for them. This has saved Wal-Mart from the hassle of maintaining their shelves and as a result they do not need to hire people for this job. Fedex being a large company can do this job better than Wal-mart and due to its large network the cost of doing this for Fedex is very low. Hence we can see that using new and innovative marketing channels can help businesses a lot and save their time and effort which is translated into efficiency and lower prices for the consumers. Functions of Intermediaries: There are a variety of functions that marketing intermediaries perform. These include transactional, logistical and facilitation functions. The most important function for the any business is the transactional function. This involves adding value to the existing products of the business. It involves using the intermediaries’ resources and creating marketing linkage with the consumers. Marketing intermediaries provide transaction function by providing storage facilities and use of modern-age computer systems to provide better services to the current and prospective customers of a business. Transactional function also helps manufacture the buyer-seller relationship which is useful for the customers and sellers in the long run. The second function of the intermediaries is the physical distribution of the goods or logistical assistance. This is also an important function of the marketing intermediaries. It involves sorting and storing supplies and providing them to the consumers when they need it. There can be several logistical links extending to the customers ranging from directly delivery to introducing a middle men or selling through a retailer. There may also be other different channels through which the products are dispatched to the consumers. The last and probably the most important function of the marketing intermediaries is the facilitation function. This involves intermediaries supporting the manufacturer. It involves the intermediaries’ investment in storing capabilities and logistical operations. If the right investment is not made in the storage capabilities and logistical operations then the flow of products to the consumers and markets will get affected. This will hamper the forecasting for supply chain management and this will open loopholes for errors and there are chances that bullwhip effect will hit the business. This can be very dangerous as this will affect the entire marketing chain and may cause some heavy losses to the business as well as to the marketing intermediaries. (Kotler and Keller, 2004) How Marketing Intermediaries add Value: All of the functions provided by the marketing intermediaries carry great value. If these functions are not provided by a marketing intermediary then the businesses will have to invest into these functions on their own. This will require both time and effort. Also it will require burden on financial resources of a company (Feldman, 2004). Similarly, these functions are specialist functions and the manufacturer will have to compromise on the quality of these functions if there are no marketing intermediaries to assist him in these important auxiliary functions. Market intermediaries also create values by merchandising and placing the product at the strategic locations. They sometimes also use special merchandising techniques such as OCDs or out of category displays to attract the buyers to make purchases. Similarly, marketing intermediaries also serve the useful purpose of making the product widely available. Had there been no marketing intermediaries then the product’s marketing and distribution channel would diminish. Hence marketing intermediaries enhance the size of consumer disposition funnel. CDF of consumer disposition funnel is an important marketing theory. This theory suggests that the larger number of people who would see the product or came to know of its awareness, the larger will be the number of purchases of the product. This theory makes marketing intermediaries a very important element of marketing channel and without them no business can earn large profit. Logistics companies and marketing intermediaries employ specialist people to assist them with the distribution of goods. These people help these companies streamline the logistics and distribution operations hence resulting in reducing the distribution and logistics average cost. This average cost is translated into lower prices for consumers and hence consumers get more value from their purchase than if they were forced to buy a product in which no marketing intermediaries were involved. Logistic specialists are used in truck and cargo loading. They make sure that the highest possible number of carton and goods are placed in a container or a truck. This reduces the average cost per unit of good transported and hence gives a bigger margin to the producer and reduces the selling price for the consumers. Value Addition from Manufacturers’ Point of View: From the manufacturer’s or producer’s point of view, there are great advantages of marketing intermediaries. First of all it reduces the amount of work that has to be done by the producer or the manufacturer to make the product available to consumers. This means that fewer numbers of people needs to be hired by the producer and this significantly reduced the wage bill of the manufacturer and the producer earns higher rates of return on investment than if no marketing intermediaries were involved. All of this means that using marketing intermediaries is quite tempting for the producers and manufacturers of the product. Another important factor that makes the use of marketing intermediaries dearer to the producers and manufacturers is the time utility. With the involvement of specialist logistics and distribution companies involved, it takes lesser time for the producers to make their products available for sale. Since less time is involved in transporting and delivering the products the consumers, the producer can start selling the product quick. This gives them time utility and investments are covered more quickly than if no marketing intermediaries are involved. Yet another factor that increases the demand for marketing intermediaries is storage function. Storage is usually very expensive and it is very difficult to acquire warehouse and reducing logistics and transportation cost at the same time. However, marketing intermediaries make this impossible task possible. They not only provide storage services, but at the same time they reduce time and cost to the producer of delivering goods. Hence, producers who think that they cannot afford to put a burden on their financial resources or are facing financial constraints choose to use the services of marketing intermediaries for streamlining their finances and saving time and effort. (Mlahotra. 2008) There have been very innovative ways which FMCGs and retail companies are using these days to create value for their products. For example, Wal-Mart is using the services to Fedex to maintain inventory for them. This has saved Wal-Mart from the hassle of maintaining their shelves and as a result they do not need to hire people for this job. Fedex being a large company can do this job better than Wal-mart and due to its large network the cost of doing this for Fedex is very low. Hence we can see that using new and innovative marketing channels can help businesses a lot and save their time and effort which is translated into efficiency and lower prices for the consumers. Value Addition from Customers’ Perspective: Consumers on the other hand can enjoy the use of marketing intermediaries and their functions as well. Consumers get more value from their purchases due to lower cost and fast delivery of goods and services. For b2b buyers, it reduces the lead time between when the product is ordered and when the product is received. It is very important for large organizations as it reduces the hassle of storing goods and services as the products can get stolen from the warehouse and they can also stale. These are some of the losses that businesses use in their calculation of pricing a good. When these losses are reduced then the prices of goods for the consumers also come down and the demand for the product produced by the organization increases. The increased demand leads to higher profits and more revenue which can invested into other important functions such as R &D and manufacturing efficiency. Consumers also enjoy the use of innovative channels used by producers. For example, Dell uses the services of DHL to send their products to consumers. Similarly, if consumers want to claim warranty from Dell they can simply drop their products at DHL centers. This has great advantages for both consumers. Consumers find it very easy to drop their products at a convenient DHL center rather than going to the retail shop or Dell itself. It saves time and effort for consumers and provides them with ease. As a result of this partnership Dell has experienced growth and many consumers shifted their brands because they were getting more value from this innovative channel. Conclusion: It can be seen that the use of marketing intermediaries is important for both consumers and producer. Marketing intermediaries yield great benefits not just for the producers and manufacturers but also for the consumers, customers and user of the products and services. These benefits are so dear to both the producers and consumers that instead of transacting themselves they transact indirectly through a marketing intermediary. It saves them not just time and cost, but it also provides them value in terms of how well the money is spent and how well the effort is economized. Since economy of effort and resources have become very important in the modern world, therefore the demand of marketing intermediaries is exponentially increasing as more and more consumers demand that they transact through marketing intermediaries and enjoy wide availability of goods and services and enjoy fast delivery of goods in order to satisfy their needs and wants with a wider range of alternatives cost effectively and at the same time enjoy the auxiliary functions of quick service and better customer service. (Soloman, 2003) References: Armstrong, Gary and Kotler, Phillips. (2007).Principle of Marketing 12th Edition. Prentice Hall. Brandimarte, Paolo and Zotter, Guilio.(2007). Introduction to Distribution and Logistics. Wiley Daft, Richard. (1994), Management. The Dryden Publication Drucker, Peter. (1990). The Essentials of Management. Prentice Feldman, Robert. (2008). Essentials of Understanding Psychology. McGraw-Hill Gigalis, Georage, Klein, Stefan and O’Keefe, Martin. 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