Contractual vertical marketing system

What is Contractual Vertical Marketing System?

Contractual Vertical Marketing System (CVMS) is a type of distribution channel that involves an agreement between two or more companies in different levels of the distribution channel. This agreement is established to achieve economies of scale and to increase their market power. It is also commonly known as a vertical marketing system.

Types of Contractual Vertical Marketing Systems

There are three main types of CVMSs:

  • Corporate VMS – This is when a manufacturer owns multiple levels of the distribution channel. This is the most common type of VMS.
  • Administered VMS – This is when a manufacturer controls the activities of the different levels of the distribution channel, but does not own them. This is usually achieved through contracts and agreements.
  • Franchise VMS – This is when a manufacturer grants a franchise to a wholesaler or retailer to sell their products. This is usually done through a contract or agreement.

Benefits of Contractual Vertical Marketing Systems

CVMSs offer many advantages to companies, such as:

  • They allow companies to control the distribution process and ensure that their products are reaching the right customers.
  • They provide economies of scale and can reduce costs by pooling resources.
  • They can increase market power and allow companies to expand into new markets.
  • They can increase efficiency by reducing paperwork and administrative tasks.

Conclusion

Contractual vertical marketing systems can be a great way for companies to increase their market power and reduce costs. They allow companies to control the distribution process and ensure that their products are reaching the right customers. For more information on Contractual Vertical Marketing Systems, please visit the following links: