Businesses often struggle with marketing strategies. While most people presume marketing is an easy concept, the approach has to be suited for the specific business and the target market. There are various approaches that can be incorporated in a bid to attract the right consumer hence maximizing on profits. These include horizontal and vertical marketing systems. Although both are marketing systems, the approach to the market is different.
What is Vertical Marketing System?
This is a marketing system that aims to attract and reach businesses operating in the same industry. The three components of the vertical marketing system include the manufacturer, wholesaler and the retailer whereby the role of the wholesaler is to purchase the products from the producer and distribute to the retailer. These three work together with the intention of profit maximization. For instance, a water pumps manufacturer sells the goods to water pumps contractors as well as installers.
The vertical marketing system is divided into:
- Corporate vertical marketing system- This is a system whereby one member of the distribution chain manages all the elements of production and distribution, hence owning all the members.
- Contractual vertical marketing system marketing- Common in franchising, this is a system whereby every member works independently, integrating activities on a contractual basis. Profits are hence earned while working in isolation.
- Administered vertical marketing system- Activities are influenced by the power and size of the members. The powerful member hence dominates activities of the others.
What is Horizontal Marketing Systems?
This is a marketing system whereby businesses which are at the same level join together to gain economies of scale. The businesses combine resources such as marketing, distribution, production and even human resource in a bid to maximize their profits. With increased market competition, this marketing system has in the recent past gained popularity.
Horizontal marketing system can be a collaboration between manufacturers, wholesalers, and retailers. Examples of companies engaging in horizontal marketing system are Johnson & Johnson and Google whereby the two have joined hands with the intention of creating a robotic-assisted surgical platform. An advantage of the horizontal marketing system is that it focuses on broader audiences as opposed to specific niches. It is also time-saving as less time is spent on creating content, as it is not personalized.
Similarities between Vertical and Horizontal Marketing System
- Both offer great platforms for companies to thrive and grow
Differences between Vertical and Horizontal Marketing System
Definition
Vertical marketing system refers to a marketing system that aims to attract and reach businesses operating in the same industry.
On the other hand, horizontal marketing system refers to a marketing system whereby businesses which are at the same level join together to gain economies of scale.
Players
Players in vertical marketing system include manufacturers, wholesalers, and the retailers whereby the three works together with the intention of profit maximization. On the other hand, players in horizontal marketing system can either be manufacturers, wholesalers and retailers.
Demographic
While businesses using vertical marketing system seek to appeal to a specific demographic, businesses using horizontal marketing system appeal to a wide demographic that is not specific.
Partnership opportunities
Vertical marketing systems do not provide a partnership environment. On the other hand, horizontal marketing systems provide more opportunities for partnerships.
Vertical vs. Horizontal Marketing System: Comparison Table
Summary between Vertical and Horizontal Marketing System
Vertical marketing system refers to a marketing system that aims to attract and reach businesses operating in the same industry and seeks to appeal to a specific demographic. On the other hand, horizontal marketing system refers to a marketing system whereby a business which is at the same level join together to gain economies of scale and seeks to appeal to a wide demographic that is not specific.