Who are Agents and Brokers in Marketing? Roles & Marjor types

Agents and brokers are often confused with each other, but they play very different roles in the marketing world. Most marketing professionals agree that agents and brokers are the most valuable resource when it comes to marketing. In this blog post we'll examine what are they, what and how they work in the marketing world.

Who are agents and brokers and what are their roles?

Agents

Agents are middlemen. They do not deal with production; they are involved only in business between the merchants and other agents, or between a merchant and his customer. Agents mediate transactions - they sell, buy, contract or transport on behalf of others.

Brokers

Brokers work at the market place (stock exchange, for example). The main role of brokers is to bring producers and consumers together. They match supply with demand. In the marketing world we deal with brokers mostly when it comes to marketing research, advertising agencies, public relations etc.

Short history of agents and brokers

In ancient Egypt, Babylon and Rome agents were used very widely for marketing purposes.

Agents have played a major role in the development of commerce (production and distribution) since the 4th century BCE until the 1860s. In 1866, grain export agents from Liverpool refused to sign contracts with Russian landowners because they could not find enough buyers who wanted to buy an entire year's production at a time. By 1871, Baltic grain merchants had direct access to foreign markets through their own agents in Russia.

Agents were widespread in the USA in the 1940s and 1950s; but starting with the 1960s there was a major shift from trade in produce (farmers' goods) to trade in finished goods. Production contracted and commercialization increased; and there was a shift from power of the marketer to power of the consumer.

Nowadays, agents and brokers play a significant role in marketing by simplifying the market access process. They are important parts of the value chain for any company doing business internationally, as they help companies reduce costs, and thus increase revenue.

Major types of brokers

The world of brokers could be more complex than the one of agents. There are four types of brokers:

Manufacturers’ agents

Manufacturers’ agents are those who represent two or more manufacturers of complementary lines. Often used in such lines as apparel, furniture, and electrical goods. A manufacturer’s agent is hired by small manufacturers who cannot afford their own field sales forces and by large manufacturers who use agents to open new territories or cover territories that cannot support full-time salespeople.

Selling agents

Selling agents are those who have contractual authority to sell a manufacturer’s entire output. The selling agent serves as a sales department and has significant influence over prices, terms, and conditions of sale. They can be found in product areas such as textiles, industrial machinery and equipment, coal and coke, chemicals, and metals.

Purchasing agents

Purchasing agents are those who generally have a long-term relationship with buyers and make purchases for them, often receiving, inspecting, warehousing, and shipping the merchandise to buyers. Purchasing agents help clients obtain the best goods and prices available.

Commission merchants

Commission merchants are those who take physical possession of products and negotiate sales. They used most often in agricultural marketing by farmers who do not want to sell their own output. They take a truckload of commodities to a central market, sell it for the best price, deduct a commission and expenses, and remit the balance to the producers.

When does a business need to use agents and brokers in Marketing?

A business needs to use an agent or a broker when it does not have access to the market on his own. Agents and brokers are necessary for companies that want to enlarge their market share, open up new markets, enter export markets. There are different cases in which agents may be needed:

1) When there is no direct contact between producer and consumer. This is mostly the case in the following:

a) Trade-intensive industries and services for which economies of scale are essential;

b) Industries where costs of distribution are high relative to retailer margins; or

c) Industries with restricted access to final markets (e.g., real estate, financial services).

2) When economies of scale are not a determining factor.

3) When establishing direct contact with the final consumer is more difficult than doing it through an agent. This may be the case when one needs to establish brand presence, build credibility with consumers or overcome language barriers.

Things which the business should notice when using agents and borkers

A business should bear in mind certain things when using agents and brokers:

1. In some cases, it is not possible to manage an agent or broker. It happens when the agent's market share becomes too large. If this occurs, it might be necessary to establish sub-agencies which are managed by the agents and have a separate sales organization.

2. Agents and brokers usually demand a larger commission than direct selling, but they reduce costs by providing a more efficient distribution system for the manufacturer's products.

3. Businesses should be cautious when using individuals or companies as agents or brokers since some of them might misrepresent the firm's product line with shoddy merchandise, outdated models etc.

4. Businesses should be extremely cautious when dealing with agents or brokers who are not regulated and supervised by some authority. It might happen that such individuals do not have the required skills, experience and reputation to properly represent their clients' products.

5. Businesses should always consider the possibility of having their own sales force if they think that their relationship with their agent or broker might be jeopardized or if they think that the agent's market share is too large.

Conclusion

Agents and brokers are an integral part of a business's marketing strategy. Agents also provide better distribution systems which reduce manufacturing company overhead costs associated with direct selling themselves (costs like inventory management). Generally speaking if your business doesn't have access to markets on their own then you need to use agents/brokers who will represent your brand on behalf of the manufacturer’s interests. However, the business should know when and how to use agents & brokers properly.

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