Disintermediation

Module 06: Written Assignment – Disintermediation

Principles of Marketing

        Disintermediation is the elimination of intermediaries from a marketing channel. Simply put, disintermediation is the elimination of the middle man. The advantages are obvious: eliminating the middleman makes goods cheaper, services faster and gives the consumer more control over production. The cost advantages come in if there are agents, brokers or other middleman between the producer and the consumer each one adds to the price of the goods. Traditionally, this has been explained away as paying for a provided service. Sometimes this was true--for example the middleman might transport the goods. As the agents increased and services decreased consumers began to look for alternatives. The Internet is what brought consumer and producer together. When the consumer could directly see the producer's catalog and order online, disintermediation took off in a big way. Fewer middlemen means fewer price hikes between producer and consumer and more savings for the consumer. Once the first few producers started marketing online, others soon followed.

        Eliminating the middleman not only eliminated the middleman's price hikes, it eliminated the middleman's handling time. This is not only true for the shipping time from producer to consumer, it is true for the time to place an order. If order placement goes through several agents between consumer and producer it definitely takes more time than it does for the consumer to order online. When something goes wrong like a product is out of stock or discontinued, the communications and reordering can become prohibitively time-consuming. Much of this delay can be caused by the necessity for each middleman to print his catalog and update his database. Disintermediation brings a transparency to the process that speeds things up.