Role of Middlemen
An effective way to begin selling is to use middlemen. A manufacturer often cannot afford to build a sales force nor does she or he have the expertise and the contacts that a regular chan-nel member has. A manufacturer's representative, for example, has likely been calling on a particular market for years. 1 le or she has built up a rapport with buyers, knows their needs and appreciates their problems. Persuading this agent to act on behalf of the new venture can be a decisive factor toward being successful and at a minimal cost. The usual commission is about 10 percent on invoice price to the customer (Figure 13.4).
Wholesalers and distributors command between 10 percent and 20 percent on invoice, depending on whether they carry inventories and have initiated the sale. For example, a producer might arrange a contact to supply a major retail chain with product to be supplied by local distributors. In this situation the commissions are lower, depending on volume and support services required.
On the other hand, the producer may engage in direct marketing by advertising on tele-vision or magazines and shipping product to the consumer by courier. In this scenario ini¬tial costs are considerable, but then too is the gross margin that is available to the producer.