Tag: Marketing Mix

There are many bases on which advertising may be classified. It may be categorized according to media, type of products, type of appeals and so on. There is no streamlined methodology to differentiate different kinds of advertising.

Advertisements are a good way for a company to increase awareness of its name, phone number, and or brands.

Since the advent of the early form of advertising, advertising communication objectives have diversified considerably, and different forms of advertising can be identified while using the same media.

1. Display Ads

This includes digital and newspaper advertising. Digital ads are the updated version of newspaper advertising; it’s the same concept but in 21st-century form. It means buying ad space on sites that are of interest to your target demographic. You can create text ads, which essentially look just like traditional print media ads, the floating banner above the site’s contact and even wallpaper with your product or service on the site background.

The major difference between display ads and the ads you find in newspapers is the use of search engine optimization techniques to reach your target audiences more effectively when they search for you. These types of advertisements are typically also Pay Per Click, which means you bid on keywords most associated with your service or products and pay for your results to be at the top of the search engine search. The another one is Cost Per Thousand, which means to pay a flat rate to show up in search results 1,000 times.

2. Social Media Ads

Pinterest, Instagram, Facebook and pretty much all social media sites offer relatively inexpensive advertising. Paid social media ads are the kind of advertisement that focuses on reaching your target audience with how much you pay adjusted to how many see it and engage with it. Organic social media ads are the kind of advertisement that generates lots of word-of-mouth. Say you post something to your business Facebook page that offers a free product if followers click Like and tag a friend — that is the type of advertisement that is free to post and makes people aware of what you have to offer.

3. Newspapers and Magazines

These kinds of advertisements are traditional yet no less effective. Combining this type of advertisement between local, statewide and national print media is a great marketing campaign strategy. Plenty of people still reach for their morning newspaper or love to settle down with a hard copy of a magazine. Also, most print media now has a digital presence and can combine these types of advertisements with its virtual version.

4. Outdoor Advertising

Now that billboards have gone digital it’s a huge way to make an effective statement. Transit ads are another kind of advertisement that falls under the outdoors umbrella — feature your product or service on buses, taxis, bike messenger services and pedicabs. Promoting this way gives you excellent brand recognition as these types of advertisements are seen everywhere daily and make your offering hard to forget.

5. Radio and Podcasts

Verbal promotion is a type of advertisement that can be repeated often as part of radio or podcast shows. You can have a traditional type of ad recorded to be played or there is also the chance of sponsorship. Narrow down the types of podcasts your target audience subscribes to or the station they most listen to for creating the kind of advertisement customers like and remember.

6. Direct Mail and Personal Sales

Direct mail, or the art of sending a compelling sales letter by snail mail to your target audience, can offer a healthy return on investment for small businesses. The starting point is to identify your target market, then send an enticing offer out to all of those prospects. Measuring the responses helps you to see which type of customers are responding to this format, so you can use even more precision targeting with your next mail shot.

In a similar vein, direct or personal sales is still a big area of advertising, especially for small businesses. A good salesperson can use his or her skills to persuade a customer to buy a product. If the salesperson is especially effective, the customer will continue to spread the word about your product through recommendations and referrals.

7. Video Ads

This type of advertisement engages with your target customers on a digital level. Create a short video and post it on your social media or pay to have it run on sites like YouTube, Hulu and blogs. A video ad can be created by experts from an agency or even done by your in-house team — even if that team is comprised of just yourself.

8. Product Placement

This kind of advertisement is seen more and more. If you pay for a podcast host to mention using your product or pay a television show to feature a character talking about or using your service, that is product placement. You can also talk to popular YouTube channel hosts about this type of advertisement.

9. Event Marketing

Paying to sponsor a sports team or a charity benefit falls under event marketing. These types of advertisements mean a large cross-section of people hear your brand name and associate it with that event. Many companies also look to conventions for this sort of niche advertisement.

10. Email Marketing

A kind of advertisement that is focused on your existing customers, email marketing involves them signing up for promotional sales or newsletters focused on your brand. Email marketing is an updated customer loyalty promotion and works very well when you treat customers as insiders with VIP knowledge.

There are as many ways to utilize types of advertising as there are kinds of advertising. By diversifying your approaches in both traditional and digital worlds as well as focusing on your core target market while getting the word out about your brand to the people at large, you can grow by leaps and bounds.

Advertising is a means of communication with the users of a product or service. Advertisements are messages paid for by those who send them and are intended to inform or influence people who receive them, as defined by the Advertising Association of the UK.

Advertising is always present, though people may not be aware of it. In today’s world, advertising uses every possible media to get its message through. It does this via television, print (newspapers, magazines, journals etc), radio, press, internet, direct selling, hoardings, mailers, contests, sponsorships, posters, clothes, events, colours, sounds, visuals and even people (endorsements).

The advertising industry is made of companies that advertise, agencies that create the advertisements, media that carries the ads, and a host of people like copy editors, visualizers, brand managers, researchers, creative heads and designers who take it the last mile to the customer or receiver. A company that needs to advertise itself and/or its products hires an advertising agency. The company briefs the agency on the brand, its imagery, the ideals and values behind it, the target segments and so on. The agencies convert the ideas and concepts to create the visuals, text, layouts and themes to communicate with the user. After approval from the client, the ads go on air, as per the bookings done by the agency’s media buying unit.

Functions of Advertising

Advertising has become an essential marketing activity in the modern era of large-scale production and severe competition in the market.

It performs the following functions:

(i) Promotion of Sales

Advertising promotes the sale of goods and services by informing and persuading the people to buy them. A good advertising campaign helps in winning customers and generating revenues.

(ii) Introduction of New Products

Advertising helps in the introduction of new products in the market. A business enterprise can introduce itself and its products to the public through advertising. Advertising enables quick publicity in the market.

(iii) Support to Production System

Advertising facilitates large-scale production. The business firm knows that it will be able to sell on a large-scale with the help of advertising. Mass production will reduce the cost of production per unit by making possible the economical use of various factors of production.

(iv) Increasing Standard of Living

Advertising educates the people about the products and their uses. It is advertising which has helped people in adopting new ways of life and giving up old habits. It has contributed a lot towards the betterment of the standard of living of the society.

(v) Public Image

Advertising builds up the reputation of the advertiser. Advertising enables a business firm to communicate its achievements and its efforts to satisfy the customers’ needs to the public. This increases the goodwill and reputation of the firm.

(vi) Support to Media

Advertising sustains press. Advertising provides an important source of revenue to the publishers of newspapers and magazines and the producers of T.V. programmes.

6 MAIN CRITICISMS AGAINST ADVERTISING

(i) Increased Price of The Product

Advertising increases the cost of the product as the expenses on it form the part of the total cost of the product. The increased prices are borne by the consumers. But it cannot be denied that advertising leads to large scale production which considerably reduces the total and per unit cost of production. The consumer may pay less rather than higher.

(ii) Multiplication of Needs

Advertising creates artificial demand for the product and induces people to buy those products which are not needed by them. On account of its repetition, it allures and creates a desire in the minds of the people to possess an article not required by them.

(iii) Deceptive

Sometimes advertising is used as an instrument of cheating. In order to impress upon the people false statements are given with regard to different virtues of a product. Fraudulent means and deceptive practice are resorted to by various traders in order to sell their products. All these things adversely affect the public confidence in the advertising.

(iv) It Leads to Monopoly

Advertising sometimes leads to monopoly in a particular brand of a product. By investing large sums in advertising of his brand, a big producer eliminates small producers of the same product from the market and creates brand monopoly. This leads to exploitation of consumers.

But in reality this argument does not hold good. The monopoly powers are temporarily acquired by the manufacturers as they face strong competition by the rival producers of the same product. In the words of Marry Hepner “advertisement stimulates competition. It often enables the small businessmen to compete with large concerns as well as to start new business”.

(v) Harmful For the Society

Sometimes advertisements are un-ethical and objectionable. Most often, these carry indecent language and virtually nude photographs in order to attract the customers. This adversely affects the social values.

(vi) Wastage of Precious National Resources

A serious drawback levied against the advertisement is that it destroys the utility of certain products before their normal life. The latest and improved model of a product leads to the elimination of old ones. For instance, in the U.S.A., people like to possess the latest models of cars and discarding the old ones which are still in useable conditions. This leads to wastage of national resources.

Objective of Advertising

1. To introduce a new product by creating interest for it among the prospective customers.
2. To support personal selling programme. Advertising may be used to open customers’ doors for salesmen.
3. To reach people inaccessible to salesmen.
4. To enter a new market or attract a new group of customers.
5. To fight competition in the market and to increase the sales.
6. To enhance the goodwill of the enterprise by promising better quality products and services.

Significance of Advertising

Advertising helps in spreading information about the advertising firm, its products, qualities and place of availability of its products and so on. It helps to create a non-personal link between the advertiser and the receivers of the message.

The significance of advertising has increased in the modern era of large scale production and tough competition in the market. Advertising is needed not only to the manufacturers and traders but also to the customers and the society. The benefits of advertising to different parties are discussed in the following paragraphs.

Benefits to Manufacturers and Traders

It pays to advertise. Advertising has become indispensable for the manufacturers and distributors because of the following advantages:

(i) Advertising helps in introducing new products. A business enterprise can introduce itself and its products to the public through advertising.

(ii) Advertising develops new taste among the public and stimulates them to purchase the new product through effective communication.

(iii) Advertising assists to increase the sale of existing products by entering into new markets and attracting new customers.

(iv) Advertising helps in creating steady demand of the products. For instance, a drink may be advertised during summer as a product necessary to fight tiredness caused by heat and during winter as an essential thing to resist cold.

(v) Advertising helps in meeting the forces of competition in the market. If a product is not advertised continuously, the competitors may snatch its market through increased advertisements. Therefore, in certain cases, advertising is necessary to remain in the market.

(vi) Advertising is used to increase the goodwill of the firm by promising improved quality to the customers.

(vii) Advertising increases the morale of the employees of the firm. The salesmen feel happier because their task becomes easier if the product is advertised and known to the public.

(viii) Advertising facilitates mass production of goods which enables the manufacturer to achieve lower cost per unit of product. Distribution costs are also lowered when the manufacturer sells the product directly to the customers. Advertising also facilitates distribution of the product through the retailers who are encouraged to deal in the advertised products.

Benefits to Customers

(i) Advertising helps the customers to know about the existence of various products and their prices. They can choose from the various products to satisfy their wants. Thus, they cannot be exploited by the sellers.

(ii) Advertising educates the people about new products and their diverse uses.

(iii) Advertising increases the utility of existing products for many people adding to the amount of satisfaction which they are already enjoying.

(iv) Advertising induces the manufacturers to improve the quality of their products through research and development. This ensures supply of better quality products to the customers.

Benefits to Society

(i) Advertising provides employment to persons engaged in writing, designing and issuing advertisements, and also those who act as models. Increased employment brings additional income with the people which stimulate more demand. Employment is further generated to meet the increased demand.

(ii) Advertising promotes the standard of living of the people by increasing the variety and quality in consumption as a result of sustained research and development activities by the manufacturers.

(iii) Advertising educates the people about the various uses of different products and this increases their knowledge. Advertising also helps in finding customers in the international market which is essential for earning foreign exchange.

(iv) Advertising sustains the press, and other media. It provides an important source of income to the press, radio and television network. The customers are also benefitted because they get newspapers and magazines at cheaper rates. The publishers of newspapers and magazines are benefitted because of increased circulation of their publications. Lastly, advertising also encourages commercial art.

The Promotion Mix refers to the blend of several promotional tools used by the business to create, maintain and increase the demand for goods and services.

The fourth element of the 4 P’s of Marketing Mix is the promotion; that focuses on creating the awareness and persuading the customers to initiate the purchase. The several tools that facilitate the promotion objective of a firm are collectively known as the Promotion Mix.

Gary Armstrong defines promotion mix as, “A company’s promotional mix includes advertising, personal selling, sales promotion, public relations, direct marketing. It also includes product design, shape, package, colour, label etc., as all these communicate something to buyer.”

Philip Kotler opines, “A company’s total marketing communication mix also called promotion mix consists of specific blends of advertising, personal selling, sales promotion, public relations and direct marketing tools that the company use to pursue its advertising and marketing objectives.”

Promotion is a process of communication involving information, persuasion, and influence. It includes all types of personal or impersonal communication by a producer with prospective customers as well as middlemen in the distribution network.

The purpose of promotion is to inform, persuade and influence the prospective customers. Personal selling, advertising, public relations, sales promotion and direct marketing are widely used to inform the people about the availability of products and create among them the desire to buy the products.

Promotion is a form of corporate communication that uses various methods to reach a targeted audience with a certain message in order to achieve specific organizational objectives. Nearly all organizations, whether for-profit or not-for-profit, in all types of industries, must engage in some form of promotion.

Such efforts may range from multinational firms spending large sums on securing high-profile celebrities to serve as corporate spokespersons to the owner of a one-person enterprise passing out business cards at a meeting of local business persons.

Promotion is communication from a marketers to the prospective buyers in the market. It tries to instil into buyer’s minds images (through advertising, personal selling, sales promotion and publicity) that make them buy the product.

The Promotion Mix is the integration of Advertising, Personal Selling, Sales Promotion, Public Relations and Direct Marketing. The marketers need to view the following questions in order to have a balanced blend of these promotional tools.

• What is the most effective way to inform the customers?
• Which marketing methods to be used?
• To whom the promotion efforts be directed?

Objectives of Promotion Mix

Promotion can be used for number of reasons for ex: Promotional activity can increase sales, raise awareness or concerns about particular issues develop a brand image or alter public opinion.

The possible objectives for promotion mix may include the following:

1. Build Awareness

New products and new companies are often unknown to a market, which means initial promotional efforts must focus on establishing an identity. In this situation the marketer must focus promotion to effectively reach customer and tell the market who they are and what they have to offer.

2. Create Interest

Moving a customer from awareness of a product to making a purchase can present a significant challenge. Consumer buying behaviour depends on the type of customer so the customer must first recognize they have a need before they actively start to consider a purchase.

The focus on creating messages that convince customers that a need exists has been the hallmark of marketing for a long time with promotional appeals targeted at basic human characteristics such as emotions, fears, humor, sex etc.

3. Provide Information

Some promotions are designed to assist customers in the search stage of the purchasing process. In some cases, such as when a product is so novel it creates a new category of product and has few competitors the information is simply intended to explain what the product is and may not mention any competitors.

In other situations where the product competes in an existing market, informational promotion may be used to help with a product positing strategy.

4. Stimulate Demand

The right promotion can drive customers to make a purchase. In the case of products that a customer has not previously purchased or has not purchased in a long time, the promotional efforts may be directed at getting the customer to try the product.

This is often seen on the internet where software companies allow for free demonstrations or even free downloadable trials of their products. For customer base products, promotion can encourage customers to increase their purchasing by providing a reason to purchase products sooner or purchase in greater quantities than they normally do.

5. Reinforce the Brand

Once a purchase is made a marketer can use promotion to build a strong relationship that can lead to the purchaser becoming a loyal customer. For instance, many retail stores now ask for a customer’s email address so that follow-up emails containing additional product information or even an incentive to purchase other products from the retailer can be sent in order to strengthen the customer marketer relationship.

Elements of promotional mix are also called as tools, means, or components. Basically, there are five elements involved in promotional mix. Some authors have considered more elements, too. However, we will consider five elements as shown in Figure 1.

1. Advertising

Advertising is defined as any paid form of non-personal presentation and promotion of ideas, goods, and services by an identified sponsor. It is a way of mass communication. It is the most popular and widely practiced tool of market promotion. Major part of promotional budget is consumed for advertising alone. Various advertising media – television, radio, newspapers, magazines, outdoor means and so forth – are used for advertising the product.

Characteristics of advertising are as follow:

(i) Adverting is non-personal or mass communication. Personal contact is not possible.

(ii) It is a paid form of communication.

(iii) It is a one-way communication.

(iv) Identifiable entity/sponsor-company or person gives advertising.

(v) It is costly option to promote the sales.

(vi) It can be reproduced frequently as per need.

(vii) Per contact cost is the lowest.

(viii) Various audio-visual, print, and outdoor media can be used for advertising purpose.

(ix) It is a widely used and highly popular tool of market promotion.

2. Sales Promotion

Sales promotion covers those marketing activities other than advertising, publicity, and personal selling that stimulate consumer purchasing and dealer effectiveness. Sales promotion mainly involves short-term and non-routine incentives, offered to dealers as well consumers. The popular methods used for sales promotion are demonstration, trade show, exhibition, exchange offer, seasonal discount, free service, gifts, contests, etc.

Characteristics of sales promotion are as follows:

(i) The primary purpose of sales promotion is to induce customers for immediate buying or dealer effectiveness or both.

(ii) Excessive use of sale promotion may affect sales and reputation of a company adversely.

(iii) It is taken as supplementary to advertising and personal selling efforts.

(iv) It involves all the promotional efforts other than advertising, personal selling, and publicity.

(v) It consists of short-term incentives, schemes, or plans offered to buyers, salesmen, and/ or dealers.

(vi) It involves non-routine selling efforts.

3. Personal Selling

Personal selling includes face-to-face personal communication and presentation with prospects (potential and actual customers) for the purpose of selling the products. It involves personal conversation and presentation of products with customers. It is considered as a highly effective and costly tool of market promotion.

Characteristics of personal have been listed below:

(i) Personal selling is an oral, face-to-face, and personal presentation with consumers.

(ii) Basic purpose is to promote products or increase sales.

(iii) It involves two-way communication.

(iv) Immediate feedback can be measured.

(v) It is an ability of salesmen to persuade or influence buyers.

(vi) It is more flexible way of market communication.

(vii) Per contact cost is higher than advertising.

(viii) It involves teaching, educating, and assisting people to buy.

4. Publicity

Publicity is also a way of mass communication. It is not a paid form of mass communication that involves getting favourable response of buyers by placing commercially significant news in mass media. William J. Stanton defines: “Publicity is any promotional communication regarding an organization and/or its products where the message is not paid for by the organization benefiting from it.”

It is the traditional form of public relations. Publicity is not paid for by the organization. Publicity comes from reporters, columnists, and journalists. It can be considered as a part of public relations. Publicity involves giving public speeches, giving interviews, conducting seminars, charitable donations, inauguration by film actor, cricketer, politician or popular personalities, stage show, etc., that attract mass media to publish the news about them.

Main characteristic of publicity include

(i) Publicity involves obtaining favourable presentation about company or company’s offers upon radio, television, or stage that is not paid for by the sponsor.

(ii) It is a non-paid form of market promotion. However, several indirect costs are involved in publicity.

(iii) It may include promotion of new product, pollution control efforts, special achievements of employees, publicizing new policies, etc., for increasing sales. It is primarily concerns with publishing or highlighting company’s activities and products. It is targeted to build company’s image.

(iv) Mostly, publicity can be carried via newspapers, magazines, radio or television.

(v) Company has no control over publicity in terms of message, time, frequency, information, and medium.

(vi) It has a high degree of credibility. Publicity message is more likely to be read and reacted by audience.

(vii) Publicity can be done at a much lower cost than advertising. Company needs to spend a little amount to get the event or activity publicized.

(viii) Frequency or repetition of publicity in mass media depends upon its social significance or the values for news. Mostly, it appears only once.

5. Public Relations

The public relations is comprehensive term that includes maintaining constructive relations not only with customers, suppliers, and middlemen, but also with a large set of interested publics. Note that public relations include publicity, i.e., publicity is the part of public relations.

William Stanton defines:

“Public relations activities typically are designed to build or maintain a favourable image for an organisation and a favourable relationship with the organization’s various publics. These publics may be customers, stockholders, employees, unions, environmentalists, the government, and people in local community, or some other groups in society.” Thus, public relations include organization’s broad and overall communication efforts intended to influence various groups’ attitudes toward the organization. Some experts have stated that the public relations are an extension of publicity.

Main characteristic of publicity are as under:

(i) Public relations is a paid form of market promotion. Company has to incur expenses.

(ii) Public relations activities are designed to build and maintain a favourable image for an organization and a favourable relationship with the organization’s various publics.

(iii) It is an integral part of managerial function. Many companies operate a special department for the purpose, known as the public relations department.

(iv) It involves a number of interactions, such as contacting, inviting, informing, clarifying, responding, interpreting, dealing, transacting, and so forth.

(v) Public relations covers a number of publics – formal and informal groups. These publics may be customers, stockholders, employees, unions, environmentalists, the government, people of local community, or some other groups in society.

(vi) Public relations activities are undertaken continuously. It is a part of routine activities.

(vii) All the officials, from top level to supervisory level, perform public relations activities.

(viii) In relation to modern management practices, the public relations is treated as the profession.

Thus, there are five major elements or promotion mix. Each tool/element has its advantages, limitations, and applicability. Depending upon company’s internal and external situations, one or more tools are used. Mostly, company’s promotional programme involves more elements, each element supplements others.

Promotion is a type of communication between the buyer and the seller. The seller tries to persuade the buyer to purchase their goods or services through promotions. It helps in making the people aware of a product, service or a company. It also helps to improve the public image of a company. This method of marketing may also create interest in the minds of buyers and can also generate loyal customers.

Promotions in marketing are generally the fourth and final P of the marketing mix. This is because before promotions, the product, price and place (distribution) should be ready. Promotions in marketing generally use integrated marketing communication. Integrated marketing communication is the use of different media vehicles to get the message of the brand from the company to the consumer.

So, if you are a jewelry brand, you will use TV commercials and other ATL media to promote your own products. Whereas if you are a small time brand, you will use print media or Internet and Out of home media to promote your brand. Thus, depending on the segmentation, targeting and positioning you are planning, your promotions can be planned.

Methods of Promotion

1. Advertising

Advertising means to advertise a product, service or a company with the help of television, radio or social media. It helps in spreading awareness about the company, product or service. Advertising is communicated through various mass media, including traditional media such as newspapers, magazines, television, radio, outdoor advertising or direct mail; and new media such as search results, blogs, social media, websites or text messages.

2. Direct Marketing

Direct marketing is a form of advertising where organizations communicate directly to customers through a variety of media including cell phone text messaging, email, websites, online adverts, database marketing, fliers, catalog distribution, promotional letters and targeted television, newspaper and magazine advertisements as well as outdoor advertising. Among practitioners, it is also known as a direct response.

3. Sales Promotion

Sales promotion uses both media and non-media marketing communications for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability.

4. Personal Selling

The sale of a product depends on the selling of a product. Personal Selling is a method where companies send their agents to the consumer to sell the products personally. Here, the feedback is immediate and they also build a trust with the customer which is very important.

5. Public Relation

Public relation or PR is the practice of managing the spread of information between an individual or an organization (such as a business, government agency, or a nonprofit organization) and the public. A successful PR campaign can be really beneficial to the brand of the organization.

The effect of promotions in marketing is:

(a) Awareness

The first and foremost role of promotions in marketing is to create Awareness. Whenever a new product is launched, or a company introduces a new scheme, awareness needs to be created. Thus, companies use promotions in the marketing mix which are ATL and BTL to promote the product.

(b) Brand building

The idiom “A brand is a promise” is one of the most commonly used ones in the world of marketing. However, a brand comprises both – The product as well as the marketing communications from the company to the customer. Thus brands like Apple and Coca cola are at the top of the brand equity table, because of their promotions and marketing communication efforts throughout the last few decades.

(c) Positioning

When you talk about premium cars, which is the product that comes in mind? Is it BMW, AUDI, FERRARI or any other? All these companies are trying to get the top positioning in your mind and similarly in other customers mind. The type of promotions from a company directly contribute to the positioning of the brand in the mind of the customer.

(d) Acceptance

A customer is more likely to accept a product, if he has heard the brand or the companies name. Thus, along with awareness, promotions also increase the acceptance of the product in the market. But, in some cases, how much ever promotions you do, if the product is not proper, the market will never accept the same. Thus, promotions in marketing has its own limitations.

(e) Targeting of customers

The promotions of a company help the company target their desired customer. For example – pepsi targets youngsters, Adidas targets healthy and sport loving people, so on and so forth. Thus, segmentation targeting and positioning can all be achieved with the right promotions.

(f) Brand recall

There are many objectives of promotions, one of the most common one being brand recall. Many brands over a time become so common in the market, that they might not need brand recall ads. On the other hand, sectors like pharmaceuticals, which have high competition and a line of generic products, regularly need to release promotions which promote the brand recall in the market. Thus, promotions in marketing can help the recall of your brand in the customers market, thereby promoting the sales and the brand equity of the product.

(g) Acquire new customers

The ultimate aim of promotions, or of any activity in marketing for that matter, is to attract new customers, convert them towards the company and gain better profit margins for the company. With ATL and BTL activities working simultaneously, and a proper marketing communication plan in place, it becomes easier for the company to acquire more customers.

Thus, there are many roles which are played by promotions in marketing. It is therefore no surprise, that many people are involved in promotions for the organization. In house marketing managers, executives, branding department, outsourced agencies are all involved in media buying and selling activities. These activities, on a whole, contribute to achieve the right promotions mix for the organization.

Unless customers are buying a product directly from the company that makes it, sales are always facilitated by one or more marketing intermediaries, also known as middlemen. Marketing intermediaries do much more than simply take a slice of the pie with each transaction. Not only do they give customers easier access to products, they can also streamline a manufacturer’s processes. Four types of traditional intermediaries include agents and brokers, wholesalers, distributors and retailers.

Types of Intermediaries:

• Wholesalers

Wholesalers typically are independently owned businesses that buy from manufacturers and take title to the goods. These intermediaries then resell the products to retailers or organizations. If they’re full-service wholesalers, they provide services such as storage, order processing and delivery, and they participate in promotional support. They generally handle products from several producers but specialize in particular products. Limited-service wholesalers offer few services and often serve as drop shippers where the retailer passes the customer’s order information to the wholesaler, who then packages the product and ships it directly to the customer.

• Retailers

Retailers work directly with the customer. These intermediaries work with wholesalers and distributors and often provide many different products manufactured by different producers all in one location. Customers can compare different brands and pick up items that are related but aren’t manufactured by the same producer, such as bread and butter. Purchasing bread or medications directly from a manufacturer or pharmaceutical company would be time-consuming and expensive for a customer. But buying these products from a local retail “middleman” is simple, quick and convenient.

• Distributors

Distributors are generally privately owned and operated companies, selected by manufacturers, that buy product for resale to retailers, similar to wholesalers. These intermediaries typically work with many businesses and cover a specific geographic area or market sector, performing several functions, including selling, delivery, extending credit and maintaining inventory. Although main roles of distributors include immediate access to goods and after-sales service, they typically specialize in a narrower product range to ensure better product knowledge and customer service.

• Agents and Brokers

Agents and brokers sell products or product services for a commission, or a percentage of the sales price or product revenue. These intermediaries have legal authority to act on behalf of the manufacturer or producer. Agents and brokers never take title to the products they handle and perform fewer services than wholesalers and distributors. Their primary function is to bring buyers and sellers together. For example, real estate agents and insurance agents don’t own the items that are sold, but they receive a commission for putting buyers and sellers together. Manufacturers’ representatives that sell several non-competing products and arrange for their delivery to customers in a certain geographic region also are agent intermediaries.

Role of Intermediaries

• Purchasing

Wholesalers purchase very large quantities of goods directly from producers or from other wholesalers. By purchasing large quantities or volumes, wholesalers are able to secure significantly lower prices.

Imagine a situation in which a farmer grows a very large crop of potatoes. If he sells all of the potatoes to a single wholesaler, he will negotiate one price and make one sale. Because this is an efficient process that allows him to focus on farming (rather than searching for additional buyers), he will likely be willing to negotiate a lower price. Even more important, because the wholesaler has such strong buying power, the wholesaler is able to force a lower price on every farmer who is selling potatoes.

The same is true for almost all mass-produced goods. When a producer creates a large quantity of goods, it is most efficient to sell all of them to one wholesaler, rather than negotiating prices and making sales with many retailers or an even larger number of consumers. Also, the bigger the wholesaler is, the more likely it will have significant power to set attractive prices.

• Warehousing and Transportation

Once the wholesaler has purchased a mass quantity of goods, it needs to get them to a place where they can be purchased by consumers. This is a complex and expensive process. McLane Company operates eighty distribution centers around the country. Its distribution center in Northfield, Missouri, is 560,000 square feet big and is outfitted with a state-of-the art inventory tracking system that allows it to manage the diverse products that move through the center. It relies on its own vast trucking fleet to handle the transportation.

• Grading and Packaging

Wholesalers buy a very large quantity of goods and then break that quantity down into smaller lots. The process of breaking large quantities into smaller lots that will be resold is called bulk breaking. Often this includes physically sorting, grading, and assembling the goods. Returning to our potato example, the wholesaler would determine which potatoes are of a size and quality to sell individually and which are to be packaged for sale in five-pound bags.

• Risk Bearing

Wholesalers either take title to the goods they purchase, or they own the goods they purchase. There are two primary consequences of this, both of which are both very important to the distribution channel. First, it means that the wholesaler finances the purchase of the goods and carries the cost of the goods in inventory until they are sold. Because this is a tremendous expense, it drives wholesalers to be accurate and efficient in their purchasing, warehousing, and transportation processes.

Second, wholesalers also bear the risk for the products until they are delivered. If goods are damaged in transport and cannot be sold, then the wholesaler is left with the goods and the cost. If there is a significant change in the value of the products between the time of the purchase from the producer and the sale to the retailer, the wholesaler will absorb that profit or loss.

• Marketing

Often, the wholesaler will fill a role in the promotion of the products that it distributes. This might include creating displays for the wholesaler’s products and providing the display to retailers to increase sales. The wholesaler may advertise its products that are carried by many retailers.

Wholesalers also influence which products the retailer offers. For example, McLane Company was a winner of the 2016 Convenience Store News Category Captains, in recognition for its innovations in providing the right products to its customers. McLane created unique packaging and products featuring movie themes, college football themes, and other special occasion branding that were designed to appeal to impulse buyers. They also shifted the transportation and delivery strategy to get the right products in front of consumers at the time they were most likely to buy. Its convenience store customers are seeing sales growth, as is the wholesaler.

• Distribution

As distribution channels have evolved, some retailers, such as Walmart and Target, have grown so large that they have taken over aspects of the wholesale function. Still, it is unlikely that wholesalers will ever go away. Most retailers rely on wholesalers to fulfill the functions that we have discussed, and they simply do not have the capability or expertise to manage the full distribution process. Plus, many of the functions that wholesalers fill are performed most efficiently at scale. Wholesalers are able to focus on creating efficiencies for their retail channel partners that are very difficult to replicate on a small scale.