Pros and cons of the buy-side model
Marketing refers to the process of management in which there are exchanges brought in an economy that help in the satisfaction of the wants and needs of organizations and individuals. On the other hand, a model refers to a real representation that has been stylized, and it is easy to deal handle and explore for a purpose that is specific to reality. Therefore, market models refer to a particular social organization existing between the sellers and buyers (Kumar, Sharma, and Gupta. 2017). Market models comprise three main models, namely, sell-side, the marketplace, and buy-side.
Pros and cons of the buy-side model
the buy-side model involves the transactions done to procure resources required from the organization’s suppliers. This model uses communication technology to support the supply chain upstream from the procurement area to logistics inbound. For instance, shell chemical developed an example of a buy-side model. Before they created this model, Shell Company was in danger of its customers running out of essential chemicals, which would lead to loss of revenues. Through this model, the shell managed its customer’s inventory through the data they received from their customers concerning their demand and usage of chemicals. The buy-side model buys and enjoys more significant security portions with funds or money in the financial market. The buy-side model plays roles that include managing the cash for their clients, performing research in houses on investment opportunities, recruiting capital to firm and finding investors, and making investment decisions (Fang, Hope, Huang, and Moldovan. 2020).
Pros of the buy-sell model
The first advantage of a buy-side model is that it minimizes the demand for storage of many inventories. According to an article by Avery Walts: she argues that if businesses do not handle activities within their stocks, or in worse situations, track it within the spreadsheets which have been outdated and within the data entry, the other pieces like the fulfillment of an order, do not fall into place. With the buy-side model, it allows the organization to have a platform where the organization can manage its inventory based on the customer’s response to the demand and order of the organization’s products. Secondly, the buy-side model provides quick product availability when the customers require it. This is because the customers can place their orders through the platform. Using technology in this model offers another importance: it reduces the cost of transaction and data entry as the organization does not need to file so many inventories in their store.
The model of buy-side also reduces the process of ordering a product from the organization. With this communication platform, a customer can place their orders easily without necessarily moving to the organization. Another advantage of the buy-side model is that it has a structure for reporting, which is customized (Pels and Sheth, 2017). The system has played a vital role in helping in reconciliation and reporting amongst the invoices and purchases. In many organizations, they tend to push out reconciliation and reporting, which leads to significant losses. The buy-sell model has helped eliminate the use of the paper piece and turn, and it has also reduced the cost of administration as they do not need to hire many people to deal with inventories. The use of technology has also helped in the reduction of errors as well as improving the service quality. Aided by the technology buy-sell model allows for the configuration of products. The buy-sell model has also facilitated high productivity in employees who deal with selling and buying products using technology; therefore, productivity.
Drawbacks of buy-side model
One of the drawbacks of the buy-side model is that it does not support complex products as it will be hard for customers to make their orders through the platform. This model does not endorse advertisements after producing a product; it is launched to the podium to place their charges if they are interested in the work. The buy-side model has limited access, as not all suppliers have an electronic catalog for marketing its products. Also, it is disadvantageous as the costs for management of content operation is supplied to enable the model to operate, which increases the value of production within a firm. In the buy-side model, sometimes the suppliers may provide low-quality product data and, therefore, becomes a problem as the problem may face a lack of market. It later translates into a dead stock hence leading to a loss. The buy-side model must be a coordination of the exchange format, which must be achieved by the supplier and the procurer.
Sell-side model of marketing
The sell-side model involves transactions that are involved in product selling to an organization’s customer. It not only consists of selling CDs and books online, but it also markets services via technology using various techniques, for instance, Amazon company, portals like yahoo, and online services of banks and many others (Rybinski, 2020). In a sell-side, an analyst helps clients make the right decisions concerning their investment, which helps in stimulating selling and buying financial instruments.
The sell-side analyst, despite catalyzing the process of selling and buying, the research that he provides is also vital for it helps the client to be in the market for a longer time. In the financial market, the sell-side deals with selling, promoting and creating trade securities to the general public. Some of the roles played by the sell-side model include; provision of liquidity for securities listed, help clients in making decisions depending on the positions they are in, winning new business, and advising on acquisitions and mergers.
Advantages of the sell-side model
One point of view in favor of the sell-side model is that it allows complex products’ configuration. For instance, it offers complex services like online banking services, which cannot be provided by the marketing’s buy-side model. It does not incur any capital outlays in the ordering system as it receives orders from the buy-side firms, and it then splits the orders into small orders, and they are then sent directly to other firms or exchange.
There is no operation cost for maintaining the list of the current products in the sell-side model, and there is no application of prices. Subdividing the orders from buying sides and then sending them directly to other firms or exchange enables a short delivery time via direct input. Sell-side allows for the questioning of prices and availability of current products. It also reduces the cost of searching for products by the customers as it finds the products itself. It also helps lower the cost of production and commissions as it may be the manufacturer or a supplier, so it does not need to employ sellers who will demand commission. Another advantage of the sell-side model is that it can offer different prices and catalogs to other customers.
Disadvantages of sell-side model
One negative effect of the sell-side is that it does not allow an automatic comparison of products as the firms can only request current products. Also, the buyer has limited support for the procurement process. After placing their orders, the firm subdivides the demands and then sends the orders via direct input, limiting the buyer’s approval. It is also hard to use as the consumer customer uses an information system different for each provider. Also, the sell-side has an integration of procurement, which is limited to the customer’s information system of operation. Still, partners in the business must be large to prove that they can cater to the system’s infrastructural expenses, maintenance, and function. There exists a conflict between the existing structures of distribution, which becomes a problem to the buyers.
Marketplace model
marketplace model selects products that are to be sold in the marketplace and also where to purchase the products. Upon sourcing the products, then the marketplace procures chosen products from the seller. The products are uploaded on the website with a different entity name, which acts as a marketplace set-up. When the consumer wants to purchase a product, he places an order against the work, and then the marketplace receives an intimation. After receiving the intimation, the marketplace procures the product from the buyer, and it then delivers the product to the buyer with their invoices bearing their name. An example of this firm is vertical.
Pros of the marketplace model
One significant advantage of the marketplace is that it is simple as it reduces the search time for a product by the buyer; instead, it is the marketplace that does the searching of products. The marketplace has a wide choice of products, suppliers, and prices as they look for the products from different firms, and then they deliver to the buyers with new invoices bearing their name. It also bunds the demand and supply to achieve better conditions, and through this, they attract many buyers as many services are combined into one service package. Lastly, marketplace unified terms and conditions on all its products. The marketplace model is cheaper. Unlike the other online selling platforms, marketplace users include both buyers and sellers. In this case, therefore, the business satisfies the needs of both parties. Another benefit of the marketplace model is that the firm does not bear the majority risk. This is mainly because the organization is always out of logistics, warehousing, return policy, and delivery. Therefore the marketplace needs not to worry about the most issues sellers are worried about as their primary work is connecting potential buyers with sellers.
Market place also wins the most excellent product range. The market place has outdone the traditional models as most of them try to offer high-quality goods and conduct a successful transaction. The competition drawn by the competitors need not worry about the marketplace as for the firm; this provides a wide range of services and products which underpin demand. The marketplace also experiences interested monetization options as payment is through commission, membership fee, listing fee, freemium, listings featured, and Ads.
Cons of the marketplace model
On the contrary, the marketplace problems, one being that it is difficult to choose between horizontal and vertical marketplace. It is difficult for a firm to decide whether to operate on the same commodities or deal with many varieties of products. Secondly, the marketplace also faces a problem of poor purchase controls. At times, the marketplace may incur losses, especially where it fails to use the purchase order solutions, easy-to-use. Another disadvantage is that large companies tend to negotiate with manufacturers for better prices, affecting marketplaces ‘ prices.
The marketplace also has many disadvantages to the seller as they must abide by guidelines and rules which constrain their activities. Marketplaces rarely give preferential markets and often faces provide support to their best-selling partners, which leaves them to fend for themselves while they will have to share the revenue they get. There is a deficit of transparency in the corporate activities in the marketplace, and thus sellers only place their trust, hoping that everything is working well. Sellers usually experience delays even for months, while customers and marketplaces have already benefited from the transactions.
Conclusions
In conclusion, this paper analyzes the three marketing models and the pros and cons faced by online procurement platforms. Various findings appear from the evaluation and analysis of the disadvantages and advantages of marketing models. First, the buy-side model is the most advantageous for procuring or buying an organization (Eryigit. 2017). This is because it provides many advantages to the organizations buying but gives fewer benefits to the selling organizations. This solution is ideal for online procurement as the organization buying helps develop the system, and it has extensive power over its suppliers. Secondly, a sell-side model is the right solution for the organizations which are supplying products. This makes it an ideal solution as the organization providing helps develop the system, where there is the fragmentation of buyers, and the supplier bears a substantial power over the buyers.
References
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Fang, B., Hope, O. K., Huang, Z., & Moldovan, R. (2020). The effects of MiFID ii on sell-side analysts, buy-side analysts, and firms. Review of Accounting Studies, 1-48.
Kumar, V., Sharma, A., & Gupta, S. (2017). Accessing the influence of strategic marketing research on generating impact: moderating roles of models, journals, and estimation approaches. Journal of the Academy of Marketing Science, 45(2), 164-185.
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