A vertical marketing system ( VMS ) is one in which the main members of a distribution channel —producer, wholesaler, and retailer—work together as a unified group in order to meet consumer needs. In a corporate VMS , one member of the distribution channel owns the other members.
A marketing system is a set of procedures and practices that allows companies, including corporations, to market their products and services. The marketing system defines how the company accomplishes its marketing tasks, including advertising, promotion and sales.
There are three different types of vertical marketing systems : a corporate system , a contractual system , and an administered system . Let’s take a look at how each system could be beneficial to a business.
Contractual Vertical Marketing This system allows companies to benefit from economies of scale and marketing reach. These relationships are a popular form of vertical marketing . Franchising , retail sponsored and wholesale sponsored are forms of a contractual vertical marketing system .
A vertical market is one in which all of your customers are in one particular industry, regardless of where in the food chain they are. A horizontal market is one in which all of your customers use your product to do the same thing, regardless of what industry they are in.
A horizontal conflict refers to a disagreement among two or more channel members at the same level. For example, suppose a toy manufacturer has deals with two wholesalers, each contracted to sell products to retailers in different regions.
While members of a conventional distribution channel seek to maximize their own profits, members of a vertical marketing system all cooperate because either one member owns the others, one has contracts with the others, or one wields more power than the others.
When professionals talk about industries , they are referring to a broad group of companies that operate in the same general space. An industry vertical , however, is more specific and describes a group of companies that focus on a shared niche or specialized market spanning multiple industries .
The three types of vertical marketing systems are contractual, corporate and Administered.
Broad examples of vertical markets are insurance, real estate, banking, heavy manufacturing, retail, transportation, hospitals and government.
A vertical market is a market encompassing a group of companies and customers that are all interconnected around a specific niche. Companies in a vertical market are attuned to that market’s specialized needs and generally do not serve a broader market . They may also have high barriers to entry for new companies.
What are the four steps to designing marketing channels in their correct order? Analyzing consumer needs, setting channel objectives , identifying major channel alternatives, and evaluating the alternatives.
The process of selling directly to the end buyer without any intermediary is called direct marketing channel . The internet and new media are perfect for direct marketing . For example the business model followed by low cost airlines where the customers book the tickets directly over the internet.
The purpose of a vertical marketing system is to dictate how all of the crucial cogs in your company should work together to earn ownership of a specific vertical market .
Multichannel marketing refers to the practice of interacting with customers using a combination of indirect and direct communication channels – websites, retail stores, mail order catalogs, direct mail, email, mobile, etc. –