Tag: intermediaries

Imagine walking into a corner store and finding Coca-Cola readily available, then visiting an upscale boutique where only select luxury watches are displayed behind glass cases. This stark contrast illustrates the critical discussion on number of intermediaries in marketing. A startup beverage company faces this exact dilemma: should they follow Coca-Cola’s intensive distribution model, placing products everywhere possible, or adopt a selective approach like premium brands? This distribution strategy decision directly impacts brand perception, market penetration, and profitability. Understanding intermediary selection in marketing channels becomes crucial as companies navigate between maximum availability and exclusive positioning, ultimately determining their market success and brand identity in competitive landscapes.

Types of Distribution Strategies Based on Number of Intermediaries

Intensive Distribution Strategy for Maximum Market Reach

Producers of convenience products and common raw materials typically seek intensive distribution a strategy whereby they stock their products in as many outlets as possible.

Exclusive Distribution and Premium Brand Positioning

Exclusive distribution is crucial for luxury cars like Rolls-Royce and Lexus, as well as high-end fashion brands such as Giorgio Armani and Christian Dior. By focusing on exclusivity, manufacturers secure dealer support and control over prices, promotions, and services. This strategy creates a captivating brand image that attracts customers and justifies high prices.

Selective Distribution in Marketing Channels

Selective distribution involves using some, but not all, intermediaries willing to carry a company’s products. For instance, many electronics and small appliance brands, such as Philips-Whirlpool, Braun, Electrolux, and Hoover, strategically utilize dealer networks and selected large retailers for distribution.

The discourse on intermediaries in marketing revolves around three distribution strategies. Firstly, intensive distribution maximizes outlet coverage for convenience products, ensuring accessibility. In contrast, selective distribution uses a limited number of intermediaries for electronics, effectively balancing availability and brand integrity. Lastly, exclusive distribution confines luxury brands to select outlets, thereby enhancing prestige and control, while also facilitating premium pricing.

Intermediaries are independent organizations that will carry out a number of activities. Merchants, which include wholesalers and retailers, buy, take title to and resell the firm’s goods, whereas brokers and agents do not buy or carry the producer’s products, but help to sell these to customers by negotiating prices and sales terms and conditions on the supplier’s behalf.

Wholesalers

Wholesalers render important services to producers and resellers. Wholesalers’ sales forces help manufacturers reach any small customers at a low cost. The wholesaler has more contacts and is often more trusted by the buyer than the distant manufacturer. Wholesalers can select items and build assortments needed by their customers, thereby saving the consumers a considerable amount of work.

Types of Wholesalers

Full Service

Full-service wholesalers provide a full set of services, such as carrying stock, using a sales force, offering credit, making deliveries and providing technical advice and management assistance. They are either wholesale merchants or industrial distributors. Wholesale merchants sell mostly to retailers.

Limited Service

Wholesalers perform a limited number of functions and offer fewer services to their suppliers and customers. There are several types of limited-service wholesaler.

cash and carry

wholesalers have a limited line of fast moving goods, such as groceries, toys, household goods, clothes, electrical supplies, office supplies and building materials. They sell to small retailers and industrial firms for cash and normally do not deliver.

truck jobbers

Perform a selling and delivery function. They carry a limited line of goods (such as milk, bread or snack foods) that they sell for cash as they make their rounds of supermarkets, small groceries, hospitals, restaurants, factory cafeterias and hotels.

Cooperatives

producers’ co-operatives, owned by farmer-members, who assemble farm produce to sell in local markets.

Retailers

Retail stores come in all shapes and sizes, and new retail types keep emerging. Generally, they can be distinguished by the amount of service they offer, the product line and relative price emphasis.

Types of Retailers

Self Service Retailers

Self-service retailers cater for customers who are willing to perform their own ‘locate-compare-select’ process to save money. Today, self service is the basis of all discount operations and is typically used by sellers of grocery and convenience goods (e.g. supermarkets) and nationally branded, fast moving shopping goods (e.g. discount stores).

Limited Service Retailers

Limited-service retailers, such as department stores, provide more sales assistance because they carry more shopping goods about which customers need information. They also offer additional services such as credit and merchandise return not usually offered by low-service stores.

Specialty Stores

A retail store that curries a narrows product line with a deep assortment ‘within that line.

Departmental Stores

A retail organization that carries a wide variety of product lines – typically clothing, home furnishings and household goods; each line is operated as a separate department managed by specialist buyers or merchandiser.

Variety Stores

Self-service store that specializes in a wide range of merchandise. It offers a wider range than specialist stores, but a narrower variety than department stores.

Convenience Store

A small store located near a residential area that is open long hours seven days a week and limited line of high turnover convenience goods.

Super markets

Large, low-cost, low margin, high-volume, self-service stores that carry a wide variety of food, laundry and household products.

Discount Stores

A retail institution that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume.

Hyper Markets

Huge stores that combine supermarket, discount and warehouse retailing; in addition to food, they carry furniture, appliances, clothing and many other products.

Brokers

A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation.

Agent

A wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions, and does not take title to goods.