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Vol. 3 issue #360 July 29, 2012



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What Are Vertical Marketing Systems?

By Thom Rigsby   

Vertical marketing systems have been around for quite a while. In their simplest form, they are a collective marketing activity participated in by the entire supply chain.

Just as there are a number of stages involved in the life of a product, as it starts with raw material and ends at final product in the hand of customers, so to there are stages in the marketing lifecycle of a product. At all these stages, a number of stake holders are involved and they all play a part in the process. With each stakeholder come different interests in selling a final product.

If manufacturers only expressed interest in selling their product to wholesalers, who would blame them? Wholesalers are their end customers after all. And if the wholesalers only invested time and capital into selling to retailers... same rules, right?


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 A Vertical marketing system is the one where all these parties work in close collaboration forming a single distribution network and facilitate the flow of products from the manufacturer to the end user. In a vertical system, each member of the supply chain has an interest in driving sales at all levels of the chain. In this way overall demand for the product is increased, and everyone benefits.

There are different types of this collaboration network that we call a vertical marketing system and all of them have their own advantages.


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 First type of vertical marketing system is the corporate one where one member of the network is the owner of all others and it is a jointly owned distribution channel. This is typically found in very large corporations where subsidiary companies are involved in the production, distribution, or retail sale of a product or product line.

The second type of vertical marketing system is known as administrative vertical marketing system where one of the stake holders in the chain is so powerful and large that he can dictate others and make them work according to his choice. WalMart is an excellent example of this system. By their shear size they are able to dictate terms, delivery, even price!


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A final example of vertical marketing system is known as contractual VMS and it is based on a mutual contact signed by a number of different independent firms where they work together for mutual benefits. In this system, the benefit is derived through the contractual obligation of each party rather than through increased sales or distribution, however, increased sales or distribution could occur as a side effect.

Even with a wide variety of types, there are numerous advantages to engaging in a vertical marketing system, most beneficial of course is increased sales at all levels of the value chain.


J.T. Rigsby is a confirmed Internet junkie, serial entrepreneur, and blogger.

He is the principle author at jtrigsby.com where you can find many more articles and videos on business, marketing, and life.

Article Source: http://EzineArticles.com/?expert=Thom_Rigsby  


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