Many businesses struggle with formulating effective marketing strategies in today’s business environment. While most organizational leaders believe that marketing is an easy concept, the approach must be best suited for a specific business and the target market. Enterprises can integrate numerous marketing approaches to help them achieve their objectives, such as meeting the ever-changing consumer demands and increasing their profit margins. These marketing systems include vertical and horizontal.
Vertical Marketing System
A vertical marketing system is an approach that aims to attract and reach businesses operating within the same industry. As such, businesses that have adopted the vertical marketing system seek to appeal to a given niche demographic, particularly those within the same industry (Govoni, 2004b). The vertical marketing system has three major components, manufacturers, wholesalers, and retailers working together in the same industry. In this system, wholesalers buy products from the manufacturers and distribute them to retailers. Additionally, the three parties work together to maximize their profits and improve the industry they are associated with. An example of the vertical marketing system is when a water pump manufacturer sells its products to other parties, such as water pump contractors and installers. Another example is when a solar panel technology manufacturer distributes its products to solar panel contractors and installers. In the vertical marketing system, manufacturers distribute their products to businesses that compete against each other in the same industry.
The vertical marketing system is categorized into three: corporate, contractual, and administered marketing systems. In the corporate vertical marketing system, all production and distribution elements are managed by a specific firm. For instance, a business may pay marketing teams, distributors, branding strategists, and retailers to stock and support its product. While various firms work together in a contractual vertical marketing system, every business maintains its independence and operates as an individual entity. Businesses work together on a contractual basis. For instance, a manufacturer may work with campaign strategists to promote the brand within the industry on a contractual basis; however, each entity maintains independence in its operations. In the administered vertical system, business operations are influenced by a particular firm’s power and size. Therefore, a powerful and large-scale firm controls the business activities of other entities. For instance, a firm that has adopted the administered vertical system could urge other entities that sell its products on what prices they use or how to package the organization’s products.
Horizontal Marketing System
The horizontal marketing system plays an essential role amongst various entities including manufacturers, wholesalers, and retailers. The horizontal marketing system has gained popularity in the past few years due to stiff competition experienced in today’s business environment. Many businesses have adopted this marketing system to maintain a good position in the global market and generate high profits. A horizontal marketing system involves two or more firms that are not within the same industry coming together to create various products to increase their profitability (Govoni, 2004a). Firms that fear making huge losses and look forward to surviving in a competitive business environment largely rely on the horizontal marketing system. Therefore, these firms form mergers or joint ventures with other enterprises to overcome the mentioned limitations. In this marketing system, numerous parties, including manufacturers, wholesalers, and retailers, can collaborate. The mentioned parties can collaborate to achieve various objectives. For instance, two or more manufacturers can work together to utilize scarce resources optimally. Two or more wholesalers may collaborate to cover a wider area of product distribution. Furthermore, two or more retailers can collaborate to distribute various products within a particular region or area.
Numerous firms have adopted the horizontal marketing system to help them achieve their objectives, such as maximizing their profit margins. Some of the firms that have adopted this marketing system include Nike and Apple. Nike partnered with Apple Inc. to make footwear that will be connected with an iPod. The iPod will play music while displaying information about time and the calories burned. Johnson & Johnson, a healthcare organization, is also working together with Google to develop a computer-assisted surgical platform to help improve the firm’s healthcare services.
Businesses can adopt horizontal and vertical marketing systems to achieve their objectives in the short and long terms. Businesses that have adopted a vertical marketing system use it to target other organizations within the same industry. For instance, a solar technology manufacturer can target other entities within the same industry, such as solar contractors and installers. The vertical marketing system if further divided into three groups including contractual, corporate, and administered marketing systems. On the other hand, in a horizontal marketing system, two or more businesses come together to achieve particular objectives. A horizontal marketing system is largely relied on by companies that fear making huge losses in the market due to lack of various resources including capital and skilled human resource personnel. An example of this approach is the partnership between Nike and Apple. The partnership’s objective is to create footwear that can be connected with iPods that can play music and display information about exercise duration and the number of calories burnt.
Govoni, N. (2004a). Horizontal marketing system. In Dictionary of marketing communications (pp. 92-92). Thousand Oaks, CA: SAGE Publications, Inc. doi: 10.4135/9781452229669.n1535
Govoni, N. (2004b). Vertical marketing system (VMS). In Dictionary of marketing communications (pp. 234-235). Thousand Oaks, CA: SAGE Publications, Inc. https://doi.org/10.4135/9781452229669.n3895