VERTICAL MARKETING

SYSTEM

BY ASWIN C.M
S2 MBA
VERTICAL MARKETING
 A vertical marketing system is the type of cooperation between the members of a
distribution channel
 It includes a producer, wholesaler, and retailer collaborating to deliver customers
the necessary product and aims at achieving better efficiency and economies of
scale.
 In conventional marketing system, the producer, wholesaler and the retailer
worked separately with the intention to maximize their profits even at the expense
of one another.
 This led to the unending conflicts between the channel partners resulting in less
profits for the business as a whole
TYPES OF VERTICAL MARKETING SYSTEM
 CORPORATE VMS : In a corporate VMS, all the elements of the distribution
channel are streamlined under the ownership of a single business.
 ADMINISTERED VMS : In an administered VMS, one member of the
distribution channel has the ability to control the activities of the other members
of the distribution channel.
 CONTRACTUAL VMS : A contractual VMS comes to fruition when several
independent businesses join forces and sign a contract to leverage economies of
scale thus enabling them to get ‘better deals’ — that is competitive prices.
ADVANTAGE OF VRETICAL MARKETING
 In a vertical marketing system, manufacturers, wholesalers, and retailers
participate together in the production and distribution process
 In this system, producers, wholesalers, and retailers cooperate to reach the
business objective and gain increased profits for all parties involved
 This cooperation allows businesses to control all aspects of a company, helps
solve problems, and boosts efficiency
 Vertical marketing systems can be used by different types of businesses. Whether
it’s a small firm or an enterprise, the system helps create a strong bond with
suppliers, distributors, and retailers
DISADVANTAGE OF VERTICAL MARKETING
 OVERWHELM: Keeping track of all stages of distribution can cause a small
business owner to feel overwhelmed
 TEAM PROBLEMS: We have different personalities on the team and if these
people don’t work and support each other, than you’re project is doomed to fail.
 BAD FOR SMALL FIRMS: Small firms can’t manage all that is required to keep
the clubbed entity perfectly functional. They also might face issues and
competition but they can’t employ this marketing strategy to overcome them
EXAMPLE OF VERTICAL MARKETING SYSTEM
 Let’s take Zara, for example. The brand has complete control over all activities of
the supply chain. This prevents the company from having any conflicts. Zara
owns all stores, so they follow the same marketing strategy. Complete integration
of all activities removes reasons for conflict between channels and stimulates the
maximum efficiency of each of them.
 To put it simply, a vertical marketing system is an alternative to a traditional
marketing system. It ensures the cooperation between few companies to meet the
needs of customers, gain more profits, and reduce costs.
 Applications of Vertical Marketing Systems
 LARGE FIRMS: it is easy for large firms to acquire the smaller and middle-level
firms into wholesaling or retailing. This enables them to keep track and make
things simpler. It also chucks away the competition found at the lower channels of
the market.
 FIRMS WITH EFFICIENT MANPOWER: there are those intermediary firms that
are neither too big nor too small. They may have efficient manpower who adorns
excellent communication skills. Based on these, the firm can engage in one or the
other type of vertical marketing system.
 CONCLUSION
 Thus the vertical marketing system could be a great tool for owners with a vision
and the ability to do so. One must have a proper idea of this strategy and get into
the contract only after the clarification of certain things. One must realize and
have the right vision to unleash the benefits of this interesting marketing tool. This
could prove to be quite beneficial in the days to come with fierce competition all
around.
THNAK YOU….