Marketing Intermediaries - Essay Example

The three basic functions performed by marketing intermediaries are transactional, logistical, and facilitating. The transactional function involves adding value to the distribution channel by bringing in the intermediary resources to establish market linkages and customer contacts (Sharma, 2011). Companies that are able to increase their network of customer realize that achievement by increasing their customer retention. The customer retention rate of a company is a very important marketing metric due to the fact that based on the 80/20 rule 80% of a firm’s sales are achieved by 20% of their customers. Logistics refers to the physical distribution of the goods sold by a company. A firm that has gained a competitive advantage due to its superior logistics is the retail giant Wal-Mart. The production of a company is divided into smaller shipments to be distributed among the different clients of a company. On many occasions the logistics of a company involve storing the goods of the firm in a warehouse facility which serves the purpose of a distribution center. “The facility function includes financially supporting the marketing chain by investing in storage facilities” (Sharma, 2011). One of the advantages of using intermediaries is that it expands the market reach of a company. Sharma, A. (2011). Why Use Intermediaries in Marketing? Retrieved May 18, 2011 from http://www.marketingcrossing.com/article/220071/Why-Use-Intermediaries-in-Marketing/ 2. The article Getting the Most out of Retail Loyalty Programs starts the discussion by stating that customers are disloyal by nature (Johnson, 2005). I believe this is very true because as soon as a customer is given a better buying option that provides greater value and utility the customer will switch brands. A way for companies to differentiate themselves in order to achieve higher customer retention is by offering better customer service. Many customers are willing to visit different stores in the same category goods or services. For example people that eat at Burger King are usually McDonald’s customers as well. I believe that companies can drive purchases without offering price incentives. Price is not the only variable that affects the purchasing decision of customers. People can become loyal to a brand due to the superior quality that the company offers. An example of company in the auto industry that differentiates itself based on superior quality and performance is BMW. Another variable that can help a company attract customers is by offering greater value. An example of greater value could be a fast food company offering unlimited soft drinks with the purchase of a combo of food. Taco Bell is a fast food firm that offers unlimited drinks in the majority of their establishments. Rewards programs that offer purchasing incentives is a great way to achieve greater customer loyalty. Burger King offers a loyalty program called BK incentives that give the customers a 5% credit towards the purchase of food items. Johnson, C. (2005). Getting the Most Out of Retail Loyalty Programs. Forrester Research. 3. A good way to ensure that intermediaries comply with the standards and protocols of an organization is by auditing them on a regular basis. It is important for companies to document the work of intermediaries. If an intermediary does not comply with the quality, timeliness, and ethical standards of your firm these business partners must be removed and their services must be terminated at once. Take for example the case of Nike Corporation and the sweatshop scandal the company was involved in. The matrix company could have prevented the formation of sweetshops if they had properly audited their supply chain network. 4. I agree with you that companies that do not a have a solid network of intermediaries are at a competitive disadvantage because intermediaries allow products to reach more customers in numerous marketplaces. Companies that have operations internationally depend a lot on the ability of the intermediaries located in foreign locations to distribute the product across a marketplace that the matrix company knows little about. I also liked your comment that if the intermediary has a high-end store your product will receive the same image as the other products sold in the store which can help the company achieve higher margins by selling the product at a higher price point. 5. An important factor that must be consider prior to penetrating a marketplace is whether the country has the proper infrastructure in place to support business activity. For example the Sub Saharan region of Africa has a lot places where there is no running water or electricity. It is hard to attract foreign investors if the basic infrastructure is not available. An important factor to consider prior to penetrating a foreign market is the educational attainment of the population. If a company needs specific human capital needs that requires a college educated workforce the firm cannot establish a business in a region that has a high illiteracy rate among its population. A third factor to consider prior to entering a new marketplace is culture. The political condition of a country is also a very important factor to consider. Countries that have corrupt political systems are not good countries to penetrate.The culture of a country determine if a certain product has a good chance of achieving market acceptance. A company in the fast food industry such as Burger King or McDonalds would not have success in India due to the fact that the cow is a sacred animal. International marketing benefits domestic markets because customers are given a wider variety of product selection. 6. Performing market research to determine the level of competition in a specific foreign location is very important. Countries that have a lower level of competition are more attractive investment options. Companies that are able to develop an infant industry in a foreign location have the advantage of facing limited competition. Companies that are able to penetrate several locations are able to build bigger customer bases. Companies that obtain more customers are able to generate higher revenues. International marketing can be used to improve the reputation of company in new marketplaces. One of the most attractive locations for investors right now is the emerging economy of China. 7. I agree with you that a lot of companies do not have the resources to carry out direct marketing. Despite this constraint there are always ways to achieve direct marketing without investing a lot of resources. The cheapest way to achieve direct marketing is to create a website that sells the company’s product. Creating a professional website with the capabilities of selling online can be implementing by investing only a few thousand dollars. In order to achieve higher sales levels small businesses have to use intermediaries in order to get the product into the marketplace. When a company that does not have experience doing business oversees wants to expand internationally the best way to achieve that goal is to use intermediaries. 8. You are correct in your assumption that the place variable is essential for business activity to occur. A business may have an excellent product to offer, but if that business has a location that is not adequate the company will fail to achieve the desired sales projections. I once went into a store in a rural area that sold some tremendous pieces of furniture. They were stylish and very inexpensive. I asked the owner about how well the business was doing and he told me he was barely surviving because his customer traffic was slow. Relocation to the city would have been a good alternative for that business owner because the location of the business was poor. Read More