A horizontal marketing system is a distribution channel arrangement whereby two or more

organizations at the same level join together for marketing purposes to capitalize on a new opportunity.
For example: a bank and a supermarket agree to have the banks ATMs located at the supermarkets
locations, two manufacturers combining to achieve economies of scale, otherwise not possible with each
acting alone, in meeting the needs and demands of a very large retailer, or two wholesalers joining
together to serve a particular region at a certain time of year.
[1]

According to businessdictionary.com, Horizontal Marketing System is a merger of firms on the same level
in order to pursue marketing opportunities. The firms combine their resources such as production
capabilities and distribution in order to maximize their earnings potential.
[2]

A real time example is of Apple and Starbucks announced music partnership in 2007. The purpose of this
partnership was to allow Starbucks customers to wirelessly browse, search for, preview, buy, and
download music from iTunes Music Store onto their iPod touch, iPhone, or PC or Mac running iTunes.
Apples leadership in digital music together with the unique Starbucks experience synergized a
partnership to offer customers a world class digital music experience.
Apple benefits from this partnership with higher iTunes sales because Starbucks has a lot of loyal
customers that take the time to visit, relax and enjoy the unique Starbucks experience. When Apple first
introduced its iTunes music store, it hoped to sell one million songs in six months, but to its surprise,
Apple sold over one million songs within the first six days of its iTunes music store opening. With such
loyal online music consumers, Starbucks benefits from higher sales, increase in market share, and
stronger customer loyalty. This example demonstrates how two companies can join forces to follow a new
market opportunity. This opportunity allowed Starbucks and Apple to both gain something of greater, than
otherwise would be possible if they somehow attempted this strategy independently

Vertical Or Horizontal Marketing?


(Article first published in Dec '09. It has been modified slightly to suit its publication on our site)












The majority of marketing carried out across the world is 'horizontal' in nature. This means that it
tries to address the needs of a broad range of potential customers, whether they are domestic or
business. However, some companies often choose a more 'vertical' marketing approach. Vertical
marketing is another way of saying 'industry-specific' marketing, whereby you pick an industry and
market your product or service to potential customers within it.

Vertical Marketing is similar in nature to 'targeting', which is a method for segmenting your potential
customer-base and then promoting those features that most suits their needs. However, targeting is
used more typically in a Business to Consumer environment, whereas vertical marketing is a
Business to Business approach.

Give Me Some Examples!

Imagine you manufacture printers and you are launching a new model that does everything. In this
case you could:


1. Run an ad in a newspaper outlining its top highlights - This is horizontal marketing.
2. Run an ad in a photographic magazine highlighting the fact that it produces the very best quality photo
prints - This is target-based marketing.
3. Run an ad in a women's magazine that talks about the benefits and says that it's available in pink - Still
target-based marketing.
4. Run an ad in a solicitors' magazine that talks about the speed of the print, how cheap the cartridges are
and how the print is guaranteed for 2,000 years - This is vertical marketing.

Why Choose Vertical Marketing?

In some cases a product/service only applies to a particular market; there would be no point
advertising a hospital theatre cleaning service in The Times! However in other cases a decision can
be made to specifically target an industry at a time. For instance if you created a factory clocking
system, you might target all meat production facilities first and then target computer manufacturing
companies, then target cleaning companies, etc.

The reason for this is that generally, the costs of marketing to a vertical sector is a great deal lower
than going broad and you are able to focus your advertising and print materials on a core message
that suits that industry. In terms of the numbers, I call this the "Selective Pyramid", whereby your
broad customer base is at the bottom and the vertical customers are at the top. By the time you get
to the top block of the pyramid, you will have reduced your target pool of customers to a fraction of
the potential total, but your ad will have something to say to almost every single one! Couple this
with the reduced advertising costs and then run the same ad (with different text perhaps) in a
different vertical market and your pool of customers starts to get bigger and bigger.

The end result should be that although you might end up spending the same amount in marketing,
your cost per acquisition is significantly lower, which means more revenue from your spend!

In summary, some companies will use a vertical marketing approach after they have run their
horizontal campaign to squeeze out extra sales, while in others they will run it instead of a horizontal
approach. The decision you take depends on your business, products/services and goals.


When creating a marketing campaign, employing a mix of both vertical marketing and horizontal
marketing will best serve your organization. Utilizing both marketing systems will reach a wider
range of customers and generate more profits.
A vertical market is often called a niche market. This is because a vertical market is composed of a
vendor who supplies a product or service to a customer who exists within the same industry. One
example of a vertical market would be wholesalers of car parts who sell their products to automobile
manufacturers. In this instance, the vendors are the wholesalers and the customer is the automobile
manufacturer; together they make up a specific vertical market or a niche market. A horizontal
market differs from a vertical market in that it is not industry-specific. Vendors in a horizontal
market sell their products or services to customers in a number of different industries.
Using the example of car part manufacturers, lets examine a company that manufactures tires. Tires
can be sold direct to automobile manufacturers, and they can also be sold to retailers who will then
sell those tires to the public. We will also assume that the tire manufacturer sells tires that can be
used in motorcycles, bikes and heavy machinery. If the tire manufacturer employed vertical
marketing to target automobile manufacturers, but neglected to market horizontally to the makers of
motorcycles, bikes and heavy machinery not to mention neglecting the general public for retail
sales it would miss an enormous segment of the market that uses its product.




Now that we have determined that a marketing campaign should target both vertical and horizontal
markets, we need to decide how our marketing campaign will reach potential customers. Different
media outlets are available for us to use, but just as we market both horizontally and vertically, its
best if we employ a combination of different media rather than focusing on just one type.
There are three types of media to capitalize on when creating a marketing strategy. They are owned
media, paid media and earned media. Owned media refers media outlets that you own such as a
website. Paid media refers to media you pay for like television and radio advertising. Earned media
often comes as a result of your paid media campaign, and is essentially attention that is garnered
through various social networks. You can generally consider your campaign successful if you capture
a lot of earned media since it means that people are taking note of you and your product or service.
Marketing is a complex process. Deciding how to market and who to market to are key when creating
your marketing strategy. A successful campaign is one that targets the appropriate audience through
both vertical and horizontal marketing, and it also capitalizes on a wide range of media outlets to
spread the word about your product or service.


1. Vertical and Horizontal Marketing SystemPresented by:Priya Soni Free
Powerpoint TemplatesE-mail: priyasoni.9189@gmail.com Page 1
2. Vertical Marketing system 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. Vertical marketing systems can take several forms : Corporate
VMS Administered VMS Contractual VMS Free Powerpoint Templates
Page 2
3. Vertical Marketing system Free Powerpoint Templates Page 3
4. Advantages of VMS Eliminate competition and conflict A centralized
management has direct control over all aspects of the business Provide
clear lines of authority and a tight span of control as a company can control
all of the elements of producing and selling a product, which can lead to
high operating efficiency. Free Powerpoint Templates Page 4
5. Disadvantages of VMS Employees at the bottom of a vertical structure
may feel less valued than those higher up in the chain. It can also take a
great deal of time for top management decisions to filter down through
multiple layers, reducing the organizations ability to react quickly to a
rapidly changing business climate. Because of the centralized control of
power, weak leadership at the top can hamper the effectiveness of the
entire organization. Free Powerpoint Templates Page 5
6. Horizontal Marketing system Horizontal Marketing System is a merger of
firms on the same level in order to pursue marketing opportunities. By
working together, companies can combine their capital, production
capabilities, or marketing resources to accomplish more than any one
company could alone. Companies might join forces with competitors or
non-competitors. They might work with each other on a temporary or
permanent basis, or they may create a separate company. Free
Powerpoint Templates Page 6
7. Horizontal Marketing system Free Powerpoint Templates Page 7
8. Advantages of HMS Employees may attain greater satisfaction in
ahorizontal structure due to greater freedom andautonomy.The use of
cross-function teams can also lead to highlevels of cooperation throughout
the organization.The heavy emphasis on innovation can lead to
betterideas that keep the organization ahead of thecompetition.The
absence of multiple structural layers providesstreamlined communication
and reporting processes,making the organization more flexible and
adaptableto change. Free Powerpoint Templates Page 8
9. Disadvantages of HMS The decentralized structure could lead to a
"loose ship," as the team and project leaders have high levels of
responsibility for achieving results but little real authority over their team
members. A resulting lack of control can lead to finger- pointing when
things go awry, which can hinder productivity. Organizations attempting to
convert from a vertical to a horizontal structure can face challenges, as
management needs to adjust to a less authoritarian and a more peer-like
relationship with subordinates. Free Powerpoint Templates Page 9
10. Free Powerpoint Templates Page 10

A vertical marketing system (VMS) is one in which the main members of a
distribution channelproducer, wholesaler, and retailerwork together as a unified
group in order to meet consumer needs. In conventional marketing systems,
producers, wholesalers, and retailers are separate businesses that are all trying to
maximize their profits. When the effort of one channel member to maximize profits
comes at the expense of other members, conflicts can arise that reduce profits for the
entire channel. To address this problem, more and more companies are forming
vertical marketing systems.
Vertical marketing systems can take several forms. In a corporate VMS, one member
of the distribution channel owns the other members. Although they are owned jointly,
each company in the chain continues to perform a separate task. In an administered
VMS, one member of the channel is large and powerful enough to coordinate the
activities of the other members without an ownership stake. Finally, a contractual
VMS consists of independent firms joined together by contract for their mutual
benefit. One type of contractual VMS is a retailer cooperative, in which a group of
retailers buy from a jointly owned wholesaler. Another type of contractual VMS is a
franchise organization, in which a producer licenses a wholesaler to distribute its
products.
The concept behind vertical marketing systems is similar to vertical integration. In
vertical integration, a company expands its operations by assuming the activities of
the next link in the chain of distribution. For example, an auto parts supplier might
practice forward integration by purchasing a retail outlet to sell its products. Similarly,
the auto parts supplier might practice backward integration by purchasing a steel plant
to obtain the raw materials needed to manufacture its products. Vertical marketing
should not be confused with horizontal marketing, in which members at the same
level in a channel of distribution band together in strategic alliances or joint ventures
to exploit a new marketing opportunity.
As Tom Egelhoff wrote in an online article entitled "How to Use Vertical Marketing
Systems," a VMS can hold both advantages and disadvantages for small businesses.
"The main advantage of VMS is that your company can control all of the elements of
producing and selling a product. In this way, you are able to see the whole picture,
anticipate problems, make changes as they become necessary, and thus increase your
efficiency. However, being involved in all stages of distribution can make it difficult
for a small business owner to keep track of what is happening. In addition, the
arrangement can fail if the personalities managing of the different areas do not fit
together well."
For small business owners interested in forming a VMS, Egelhoff recommended
starting out by developing close relationships with suppliers and distributors. "What
suppliers or distributors would you buy if you had the money? These are the ones to
work with and form a strong relationship," he stated. "Vertical marketing can give
many companies a major advantage over their competitors."
A vertical marketing system, also called a VMS, is a business system in which suppliers in a product
chain work in a cooperative arrangement designed for all businesses to receive the maximum
benefit. Systems like these are in contrast with conventional marketing systems in which each
business in the supply chain is independent. Vertical systems are often used by businesses to lower
the cost of producing a product or to better control the production of the product.
This type of marketing system can be used by both small and large businesses. In the system, how
much of the supply chain is owned by one business entity is its level of vertical integration. For
example, if a writer owns the publishing company that prints his books and also owns the website
where the books are sold, she would have a high degree of vertical integration in her writing
business. When a writer uses vertical marketing to self-publish and sell a product, she will lose less
profit in commissions paid to printers, agents or booksellers.
Vertical marketing systems generally come in three forms. Corporate systems mean corporate
ownership and control of every business in the vertical supply chain. Contractual systems come
about when multiple business in the supply chain agree to operate cooperatively. An administered
system happens when some businesses in the supply chain are dependent on a dominant business
in the supply chain, so the dominant business usually dictates the decisions of the other businesses
in the chain.
Businesses often decide to use a vertical marketing system to reduce product costs or gain more
control over other parts of the product supply chain. An example of a company that could benefit
from gaining more control over supply chain might include a fast food chain that expands overseas
into a country with generally poor food-handling practices. To ensure food safety, the retailer might
buy and set up a bread-making factory or food-processing facility in the country rather than hiring a
wholesaler to make pre-prepared food for the business. Because the fast food company has more
control over its own facility, it can ensure that its food safety and production procedures are correctly
carried out.
One disadvantage to this type of system is that owning multiple businesses can be fairly
complicated. Large businesses with a built-in management structured for multiple operations can
usually handle the complications involved with running a vertical supply chain, but small
business owners can sometimes become overwhelmed by the commitments involved with
supervising many interoperating businesses. Running multiple businesses with too little
management power to provide adequate supervision can introduce production problems that may
end up worse than buying from an unconnected wholesaler.