Page 399 - Foundations of Marketing

366 Part 5 | Distribution Decisions

Figure 13.1 Efficiency in Exchanges Provided by an Intermediary

Producers Buyers

Producers Buyers

Intermediary

From Pride/Ferrell, Marketing 2014, 17E. 2014 Cengage Learning.

performing services and functions efficiently. As Figure 13.1 shows, when four buyers
seek products from four producers, 16 separate transactions are possible. If one intermedi-
ary serves both producers and buyers, the number of possible transactions is cut in half.
Intermediaries are specialists in facilitating exchanges. They provide valuable assistance
because of their access to and control over important resources used in the proper function-
ing of marketing channels.
Nevertheless, the press, consumers, public offi cials, and even other marketers freely criti-
cize intermediaries, especially wholesalers. Detractors accuse wholesalers of being ineffi cient
and adding to costs. Buyers often think that making the distribution channel as short as pos-
sible will decrease the price for products, but this is not the case.
Critics who suggest that eliminating wholesalers will lower prices for customers fail to
recognize that this would not eliminate the need for the services the wholesalers provide.
Although wholesalers can be eliminated, their functions cannot. Other channel members
would have to perform those functions, perhaps not as efficiently, and customers still would
have to pay for them. In addition, all producers would deal directly with retailers or cus-
tomers, meaning that every producer would have to keep voluminous records and hire
adequate personnel to deal with a multitude of customers. In the end, customers could end
up paying a great deal more for products because prices would reflect the costs of an inef-
ficient distribution channel. To mitigate criticisms, wholesalers should only perform the
marketing activities that are desired and they must strive to be as efficient and customer-
focused as possible.

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