Marketing channel intermediaries and the internet

MARKETING CHANNEL INTERMEDIARIES AND THE INTERNET

Q1: Will traditional marketing intermediaries survive the ‘age’ of disintermediation? If so why, and if not why?

The internet has had the impact of revolutionising the structure of markets with the spread of e-commerce and the ease of information search beings its main characteristics. It has made it easier for customers to directly interact with manufacturers hence raising the argument that marketing intermediaries can be eliminated in order to reduce operation costs and facilitate competitive pricing (Sarkar, Butler and Steinfield, 1995). This apparent shift in mentality is reinforced with the thought that since the internet transforms the market structure; intermediaries can no longer survive in their traditional form. This report takes the position that in spite of these changes, a significant proportion of traditional intermediaries are likely to survive. This is because their roles remain too strategic for them to be completely eliminated.

Elimination of operation costs as the main argument behind support for eliminating intermediaries is simplistic. In the real sense, the traditional marketing intermediaries have been playing a very strategic role in promoting market efficiency. Their main roles can be summarised as: matching buyers and sellers; facilitation of transactions; and promoting institutional infrastructure (Giaglis, Klein and O’Keefe, 2002). In aiding the matching of buyers and sellers, they facilitate information search and aid in price discovery where they use information at their disposal to determine the appropriate pricing of products. Their role in aiding transactions includes transporting products bought to the customers, facilitating payments, and helping the buyers overcome trust issues by eliminating unscrupulous traders (Erdem, 2013). These functions are strategic and cannot be eliminated simply because of the emergence of the internet. The internet only transforms a portion of trade as the traditional market structure continues to exist to a significant extent. Nevertheless, as the influence of the internet grows, it is crucial that the marketing intermediaries transform their functional and strategic approach to match the changes in the market structure.

References – Q1

Erdem, S., Moving From Intermediaries To Apomediaries: A Study Of The Ongoing Changes In Marketing Channels. The Review of Business Information Systems 17(1), pp. 37-42

Giaglis, G.M., Klein, S., O’Keefe, R.O., 2002. The role of intermediaries in electronic marketplaces: developing a contingency model. Information Systems Journal 12, pp. 231-246

Sarkar, M.B., Butler, B., Steinfield, C., 1995. Intermediaries and cybermediaries: a continuing role for mediating players in the electronic marketplace, Journal of Computer Mediated Communications. (Online) Available at: http://www.eicstes.org/EICSTES_PDF/PAPERS/The%20Role%20of%20Intermediaries%20in%20Electronic%20Marketplaces%20%28Giaglis%29.pdf

Q2: What does the future hold for marketing channel intermediaries? How might they survive?

The internet’s role in transforming the structure of the market makes it necessary for intermediaries to re-emerge in different forms. Even though the internet facilitates information search, intermediaries can still make the search easier by gathering related products into a single pool hence facilitating comparison. They can also act as a ‘one-stop-shop’ where customers find everything that they are searching for (Duan, 2010). E-commerce tends to raise trust issues and the intermediaries play the role of indicating to buyers which sellers can be trusted. This is because the internet introduces an element of anonymity that makes it easy for conmen and unethical businesspersons to operate (Chung, Chatterjee and Sengupta, 2012). Online payment systems are also facilitated by intermediaries where established payment infrastructure is exploited to sell products on behalf of the manufacturers and funds remitted periodically. In terms of their role in infrastructure development, the intermediaries are in a good position to understand the market through their interaction with numerous buyers and sellers (Luo and Donthu, 2007). They use this information to create a framework through which market operations can be structured hence forming a basis for the creation of a legal regime to facilitate market efficiency.

From the arguments advanced above, the presence of the internet may make it necessary for the market intermediaries to change their strategic and functional approaches. It, however, doesn’t facilitate their elimination. This is because they serve purposes that go beyond the logics of pricing and operation costs. They facilitate transactions, make information search easier, and help eliminate unscrupulous online traders. Marketing intermediaries therefore continue to important players in the market in the digital era. 

References – Q2

Chung, C., Chatterjee, S.C., Sengupta, S., 2012. Manufacturers' reliance on channel intermediaries: value drivers in the presence of a direct web channel. Industrial marketing management 41(1), pp. 40-53

Duan, W., 2010. Analyzing the impact of intermediaries in electronic markets: an empirical investigation of online consumer-to-consumer (C2C) auctions. Electronic Markets 20(2), pp. 85-93

Luo, X., Donthu, N., 2007. The role of cyber-intermediaries: a framework based on transaction cost analysis, agency, relationship marketing and social exchange theories. The Journal of Business & Industrial Marketing 22(7), pp. 452-458