Why Are Marketing Intermediaries Used?

B. Why Are Marketing Intermediaries Used?
Why do producers give some of the selling job to intermediaries? After all, doing so means giving
up some control over how and to whom the products are sold. The use of intermediaries results
from their greater efficiency in making goods available to target markets. Through their contacts,
experience, specialization, and scale of operation, intermediaries usually offer the firm more than it
can achieve on its own.
Figure shows how using intermediaries can provide economies. Figure A shows three
manufacturers, each using direct marketing to reach three customers. This system requires nine
different contacts. Figure B shows the three manufacturers working through one distributor, who
contacts the three customers. This system requires only six contacts. In this way, intermediaries
reduce the amount of work that must be done by both producers and consumers.
From the economic system's point of view, the role of marketing intermediaries is to transform the
assortments of products made by producers into the assortments wanted by consumers. Producers
make narrow assortments of products in large quantities, but consumers want broad assortments
of products in small quantities. In the distribution channels, intermediaries buy large quantities
from many producers and break them down into the smaller quantities and broader assortments
wanted by consumers. Thus, intermediaries play an important role in matching supply and
demand.
The concept of distribution channels is not limited to the distribution of tangible products.
Producers of services and ideas also face the problem of making their output available to target
markets. In the private sector, retail stores, hotels, banks, and other service providers take great
care to make their services conveniently available to target customers. In the public sector, service
organizations and agencies develop "educational distribution systems" and "health care delivery
systems" for reaching sometimes widely dispersed populations. Hospitals must be located to serve
various patient populations, and schools must be located close to the children who need to be
taught. Communities must locate their fire stations to provide rapid response to fires and polling
stations must be placed where people can vote conveniently.