Cesar claims he found a definite way to save money, "Buy direct from the manufacturer. Any time intermediaries get involved, you'll pay a higher price. After all, every intermediary involved in the marketing process must charge enough to earn a profit." What do you make of Cesar's claim?
A) It is entirely correct. Intermediaries must charge a high enough price for the activities they perform to earn a profit, so using intermediaries must result in a higher price.
B) It is impractical, because in most markets the distribution process is so complex that it is impossible to determine who the actual producer really is.
C) It is not valid in many cases. Intermediaries do add costs to products, but they also create value by performing marketing functions efficiently. In many cases the value they create more than offsets the costs they add.
D) It is never true. Markets that make use of intermediaries can always provide goods at lower cost than those that rely on direct distribution.

Question

Quizplus · Accepted Answer

Cesar may be right in some cases. Some producers successfully sell directly to their final customers. However, in many cases the use of intermediaries still has advantages. If a channel of distribution has no intermediaries, producers and consumers must complete all of the marketing functions themselves, and they are usually less efficient at performing them than intermediaries. Thus, although intermediaries add costs, they also create value by efficiently performing important marketing functions. In many cases the value they create more than offsets the costs they add.

Cesar Claims He Found a Definite Way to Save Money