What is Vertical Marketing System?
Vertical marketing system (VMS) is a cooperative network made up of manufacturers, wholesalers and retailers, which join together to share resources and combine their efforts to create a more efficient distribution channel. It is a type of channel arrangement where all members of the supply chain work together to achieve greater efficiency and economies of scale.
Benefits of Vertical Marketing System
Vertical marketing systems offer many advantages for the companies involved, including:
- Reduced costs for all parties in the supply chain
- Increased sales and profits for all members of the supply chain
- Improved customer service by providing a single point of contact for customers
- Improved product selection and availability
- Greater efficiency in distribution and marketing
- Improved coordination of activities between members of the supply chain
Examples of Vertical Marketing Systems
One of the most common examples of a vertical marketing system is a franchise. In a franchise, a manufacturer or wholesaler contracts with an independent retailer to operate a store or outlet that sells its products. The franchise owner has the right to use the manufacturing company’s name, logo and other branding materials, as well as access to its products. Other examples of vertical marketing systems include corporate chains, cooperatives and voluntary chains. Corporate chains involve a parent company that owns and operates all of its own stores. Cooperatives involve independent retailers that join together to purchase goods from wholesalers or manufacturers. Voluntary chains are established when retailers join together to promote their products or services.
Conclusion
Vertical marketing systems offer a number of advantages for all parties involved, including reduced costs, increased sales and profits, improved customer service, improved product selection and availability, and improved coordination of activities between members of the supply chain. Examples of vertical marketing systems include franchises, corporate chains, cooperatives and voluntary chains.