AN ANALYSIS ON MIDDLEMEN IN MARKETING - SELLING

By: V S RANGARAJAN Posted on: 2008-02-27 ** Print Article ** ** Copy Article ** - Category Feed

Article Summary: The functions involved in running a business venture could broadly be classified into the following four functions (viz ) Production, Finance, Marketing and Human Relationship Management

AN ANALYSIS ON MIDDLEMEN IN MARKETING / SELLING


I ) INTRODUCTION

The functions involved in running a business venture could broadly be classified into the following four functions (viz ) Production, Finance, Marketing and Human Relationship
Management

The function of marketing plays a very important role in the company because only through that function revenue to the company is achieved

The aim of the company while marketing its production takes all efforts to provide Time utility ( provide the goods the time the customer wants ), Place utility ( provide the goods the place they want the product ), Possession utility ( permission given along with the sale to use the product he wants ) and Form utility ( provide the goods in the form required by the customer for easy usage ) To achieve this the company adopts direct marketing employing its own employees or middlemen

The extent to which the Marketing function has to be performed depends on the company objectives, product, market, marketing arrangements environment in which the company exists, etc

The marketing strategy to a great extent depends on the above mentioned factors and following are some of the arrangements being practiced in the industry to mrket its production

1) Selling through Merchant middlemen to Consumer markets
2) Selling directly Government market
3) Selling through Agent middlemen to Industrial market
4) Selling through Agent middlemen Institutional market
5) Selling to Export market
6) Sub contractors to Job providers
7) Direct exports
8) In direct exports
9) Captive consumption
10) Market Tie up arrangement with Original Equipment Manufacturer market
11) Market Tie up arrangement with Replacement market
12) Ancillary units supply of components to the Parent companies
13) and other marketing arrangements

Companies market its production using one or more of the above arrangements

The present trend is companies are showing interest to tap the end users market directly using the technology developments taken place in computers, automatic vending machines, service providers, etc

II) MARKETING / SELLING

Marketing is an activity of identifying the market needs and satisfying them by providing the product using the marketing tools 4P’s ( Product, Price, Promotion and Place ) in the given environment with the idea of making profit

Selling is an activity which supplies the product to the market to make profit

Marketing activity of the company is more of generalized nature oriented towards developing the market of the company by means of achieving overall satisfaction level of all the customers in the process of selling ( Strategic Planning, Implementation of the Plans, Controlling aspects, etc using the 4P’s )

In Selling activity the company is focusing towards an individual customer ( ie ) Salesman takes all the efforts to sell a product to a customer ( order canvassing, delivering the goods, receiving the payments, obtaining the feed back from the customer to ensure future orders, etc )

Selling activity is a part of Marketing activity. It is a sub activity of the main activity, Marketing.

Companies which are operating at small level engage only in selling activity. The Marketing activity may not have much relevance for small level operations.

As the size of the organization and its operation level goes up both the Marketing activity and Selling activity increases and vice versa

But the selling activity will have to exist in any company irrespective of size of the company whether small or large

Without performing the Selling activity no company can survive. Even in running a Small Scale company the Manager has to perform more of selling activity with less or no Marketing activity to sell the production

Hence we can consider the Marketing activity as the Selling activity when the company is involved in Direct Marketing of its production, as the B to C activity ( Business to Consumer activity ) and as the same when the company is involved in Indirect marketing of its production, as the B to B activity ( Business to Business activity )

III) TYPES OF TRANSFER IN MARKETING / SELLING

While performing the function of marketing / selling the following five transfers takes place

1) Communication transfer
2) Goods transfer
3) Money transfer
4) Title transfer
5) Feed back communication transfer


The companies will have two set of strategies

1) for handling the transfers while performing the marketing function
2) and the second for handling the transfers while performing the function of selling

The scope and nature of the job involved varies with the kind of function performed by the company either marketing or selling or both

Transfers in Marketing ( nature / scope of work )

When companies do the marketing activity to market its production the five transfers mentioned above takes place between the Company and the Resellers of the product (particularly when the company is engaged in B to B business )

The company according to the Resellers requirement decides on the strategy for the marketing activity. As mentioned earlier marketing activity involves planning and controlling strategy after taking into consideration on the external environment, the type of market the company wants to tap ( Export, Government, Institutional, Consumer and Industrial ), etc

Communication transfer from the company to the Reseller like company’s objectives, marketing policies, proposed strategies, Advertising ( creating awareness, interest, desire and action ), Publicity, Public relation activities, etc

Goods transfer from the company to the Resellers premises ( bulk transportation in corrugated boxes, logistics, supply chain management decisions, etc ) based on location, quantum of purchase, etc

Money transfer from the Reseller to the company through bank ( through letter of credit, bank guarantee, etc ) based on Trader’s discount, credit facility etc by adopting standardized procedure

Title transfer from the company to the Reseller (Performa invoice / invoice with the Tax implications ) power of attorney sale, penalty clause, etc by adopting standardized procedure

Feedback communication from the Reseller to the company and solutions there on in handling rejects, unsold goods, Market research, etc by adopting standardized procedure

Transfers in Selling

When companies do the selling activity to sell its production to a particular customer ( more focused towards that particular customer ) the five transfers mentioned above takes place between the Company and the customer of the product (particularly when the company is engaged in B to C business ) and hence the scope and the nature of activity differs from the more generalized strategy adopted while marketing

The company representative according to the customers requirement decides on the strategy for the selling activity. As mentioned earlier selling activity involves strategy / tactics to perform the activity efficiently and effectively after taking into consideration on the customer’s background / purchase behavior, credit worthiness, situation etc

The five transfers convey a narrowed scope of activity compared to the activities performed during the marketing activity which are discussed below

Communication transfer takes place from the company representative to the customer ( providing all the information about the product and its features to educate, motivate and facilitate purchase by the customer )

Goods transfer takes place from the company representative to the customer ( small packet ) which is handed over to the customer by hand delivery

Money transfer takes place from the customer to the company ( through credit cards, cash etc )

Title transfer takes place from the company to the customer ( invoice )

Feed back communication from the customer to the company representative ( through follow up action )

Companies have the option of either selling Directly to the customer or can use Middlemen in selling to the customer

Companies utilize Middlemen to carry out the activities of marketing / selling and also for transporting the goods to the buyer’s place

The difference between the marketing / selling middlemen and the marketing / selling distribution channel

The Marketing / Selling middlemen are the people who provides service to the company in all the areas of marketing activity in facilitating the company to sell its production

Whereas the middlemen engaged in the physical distribution of the product along with the title are the middlemen of the Distribution channel


IV) METHODS OF MARKETING / SELLING

Direct marketing / Indirect marketing

Companies have two ways of marketing its production ( viz ) Direct Marketing and Indirect Marketing

Direct Marketing

When the companies market their production employing its own employees for all the activities of marketing ( viz ) Marketing Research, Sales forecasting and Budgeting, Sales Planning, Advertising, Selling, Distribution, etc the company is said to follow the method of Direct marketing. Companies have the option of outsourcing the services of Service providers ( one type of Marketing middlemen ) Market Research consultants, Advertising agents, transporters and others on fixed rate basis to remain as the Direct marketers

Indirect Marketing

When the company uses Marketing middlemen and Marketing distribution channel on performance linked payments to market its production then it is said that the company is following the Indirect method of marketing using Merchant middlemen and Agent middlemen ( example wholesalers and retailers )

Direct Selling / Indirect Selling

Companies have two ways of selling its production ( viz ) Direct Selling and Indirect Selling

Direct Selling

When the companies sell its production employing its own employees for all the activities of selling ( viz ) order canvassing / accepting, goods delivery, payment collection, obtaining feed back from the customer etc the company is said to follow the method of Direct selling. Companies have the option of outsourcing the services of Selling middlemen (ie )Service providers ( one type of Selling middlemen ), an indirect stake holders of the company example credit appraisers, transporters, courier service and others on fixed rate basis to remain as the Direct marketers. The Direct sellers of the product will not have the necessity of establishing the Selling Distribution channel because the quantity purchased by the customer will be small which could be handed over by the company representative while selling

Indirect Selling

When the company uses Selling middlemen on the basis of payments against their contribution to the company in selling its production, direct stake holders of the company, then it is said that the company is following the Indirect method of marketing using Merchant middlemen and Agent middlemen ( example wholesalers and retailers )


V) MIDDLEMEN IN MARKETING / SELLING

Middlemen in Marketing

There are three types of Marketing middlemen available for the companies who facilitates easy and economical way of marketing its production

1) Merchant middlemen ( Wholesalers, Retailers and others )
2) Agent middlemen ( Guarantors, Buying Agents, Selling Agents, Merchandisers and others )
3) Service providers who provides services for Marketing strategy and control ( Advertising companies, Auditors, Consultants and others )

The first two Marketing middlemen mentioned are Direct stakeholders of the company ( they are paid on commission basis and their revenue is linked to their performance contributing to company’s performance) and the third middlemen is the Indirect stakeholder of the company ( where they are paid on the fixed rate basis and their revenue is not linked to their contribution to company’s performance )

Companies instead of engaging themselves in executing the activities goes for outsourcing using the services of Service providers

Hence the Service providers are also considered as Marketing middlemen

Middlemen in Selling

There are three types of Selling middlemen available for the companies who facilitates easy and economical way of selling its production

1) Merchant middlemen ( Stockiest example Amway’s )
2) Agent middlemen ( order canvassing agent, payment collection agent and others )
3) Service providers ( Courier service, transporters and others )

The first two Selling middlemen mentioned are Direct stakeholders of the company ( they are paid on commission basis and their revenue is linked to their performance contributing to company’s performance) and the third middlemen is the Indirect stakeholder of the company ( where they are paid on the fixed rate basis and their revenue is not linked to their contribution to company’s performance )

Companies instead of engaging themselves in executing the activities goes for outsourcing using the services of Service providers

Hence the Service providers are also considered as Selling middlemen

V) DISTRIBUTION CHANNEL IN MARKETING / SELLING

Distribution channel of delivery of goods is the way in which the physical goods along with the title moves from the factory to the customer point. ( From the Factory to the wholesalers to the retailers to the consumers )

Distribution channel could be split into two halves.

Marketing Distribution channel

The first half of the distribution channel is the Marketing Distribution channel and it explains the way in which the physical goods along with the title moves from the factory to the Reseller point

Here the buyers are the bulk buyers and the number of them for the company are also countable. Strategy decisions engaging standard practices will help to establish and manage distribution net work

Hence this term is more relevant in B to B business.

Selling Distribution channel

The second half of the distribution channel is the Selling distribution channel explains the way the physical goods along with the title moves from the Reseller to the customer. This channel is the final stage level of the channel

The channel of distribution level is said to be zero level for the companies engaged in Direct selling because the goods are delivered by the company directly to the customers

Hence this term is more relevant in B to C business

VI) PRESENT TREND IN DIRECT SELLING USING SRVICE PROVIDERS – A MARKETING MIDDLEMEN

Companies are interested in selling directly to customers toavail the following advantages

1) eliminate middlemen commission
2) to have direct contact with the customers
3) to utilize the strengths of the company, etc

Different methods in direct selling

1) E – MARKETING
2) PERSONAL SELLING
3) AUTOMATIC VENDING MACHINES
4) SHOW ROOM SALES
5) EXHIBITION SALES


E – MARKETING

Order canvassing through web site (Service provider / Selling middlemen )
Delivery of goods using courier service operators( Service provider / Selling middlemen )
Receiving the payment through bank credit cards( Service provider / Selling middlemen )
Feedback information electronic media ( Service provider / Selling middlemen )

PERSONAL SELLING

Order canvassing through company salesmen
Delivery of goods using delivery boys ( Service provider / Selling middlemen )
Receiving the payment through bank credit cards / bill collection agent ( Agent middlemen / Selling middlemen )
Feedback information BPO ( Service provider / Selling middlemen )

AUTOMATIC VENDING MACHINES

Order canvassing / accepting through machine
Delivery of goods using machine ( maintenance of machines using service provider )
Receiving the payment through machine
Feedback information electronic media ( Service provider / Selling middlemen )

SHOW ROOM SALES

Order canvassing through company employee
Delivery of goods using company transportation / Transporters
Receiving the payments through bank cards ( service provider )
Feedback information directly from the customers

EXHIBITION SALES - ORDER BOOKING STALLS

Order canvassing through company representatives
Delivery of goods using company transportation / Transporters
Receiving the payments through bank cards ( service provider )
Feedback information directly from the customers

VII) CONCLUSION

The companies are trying to split the activities involved in Marketing into many small activities and conduct Cost Benefit Analysis to evaluate between executing those activities by themselves or outsourcing / performing using middlemen

With the mushroom growth of Services sector companies have shown interest to opt for out sourcing than either performing themselves or utilizing the middlemen paid on commission

But in countries like India with poor literacy rate, particularly the very poor computer literacy the marketers will find very difficult to market their production directly

Article Source: http://www.upublish.info

About the Author:
V S RANGARAJAN
educational ulification btech, mba, mphil, ( p h d ) experience industrial consultancy 18 years industry 3 years teaching years

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