Most consumers give little thought to how raw materials become finished goods, or the role that marketing intermediaries play in that process. However, all goods, whether used in business or by consumers, have been transformed from basic raw materials into their finished form, size, unit and function.
Marketing intermediaries have emerged as a result of specialization and mechanization. When a single individual or family lived on farms and were largely responsible for most of their own needs, there was little need for intermediaries. Sheep provided wool which was spun into thread and woven into fabric. Local woods provided raw materials for furniture and even houses. With the rise of mechanization, however, it became possible for larger and larger quantities of raw material to be harvested¨cotton, for example¨that was then sent to a different location to be processed and then to another location to be made into clothing which was then sold through stores back to the people who might have originally harvested the cotton. This is a simple illustration of how mechanization and economies of scale brought forth the need for intermediaries ("Marketing Channels" 4).
Marketing needs intermediaries because it is no longer possible for a single person¨or company¨to perform all of the functions required to transform raw materials into finished goods. While some companies engage in vertical marketing and vertical integration, which addresses some of the issues that intermediaries typically address, specialization and economies of scale typically make it more efficient for all participants to use the intermediary approach.
This is because intermediaries create exchange efficiency. For example, consider a large industrial chicken farm. The farm produces eggs as well as whole chickens. Without intermediaries, the millions of eggs produced each year would have to reach consumers while still fresh and in quantities¨a dozen or less¨...