Vertical and horizontal marketing

vertical and horizontal marketing system

1. VERTICAL AND HORIZONTAL MARKETING SYSTEM Submitted by : Deepak Kumar MBA - 1 st Sem

2. Distribution channels Distribution channels are intermediaries used by the producers to bring their products to the market. For example :- sells its car to customer through dealer . So , Here dealer act as intermediate between producer and customer .

3. WHY ?? Intermediaries bring greater efficiency in making goods available to target markets. In other words, they matches the supply with the demand. Most important benefit of using intermediaries is that they provide economies. They reduce the amount of work that must be done by both producers and consumers.

4. Number of Channel Levels : a direct marketing channel ; Has no intermediary levels. Here, the producer sells directly to consumers For e.g. sells its products door to door or through home parties.

5. An indirect marketing channel ; contains 1 (retailer) ,2 (wholesaler + retailer) or 3 (wholesaler + jobber + retailer) intermediary levels.

6. Channel Behavior All channel firms should work together to be successful. Each channel member is dependent on others. a Ford dealer (retailer) depends on the Ford Motor Company to design cars that meet consumer needs. cont.....

7. In turn, Ford depends on the dealer to attract consumers, persuade them to buy Ford cars, and service cars after the sale. The Ford dealer also depends on the other dealers to create a good overall reputation for the entire distribution channel.

8. Conflicts … Although channel members are dependent on one another, they often concentrate on their short-term benefits. Channel conflict occurs when disagreement among channel members on goals and roles .

9. H orizontal conflict ; occurs among firms at the same level of the channel. In other words, one dealer may complain about the other. Vertical conflict ; occurs among different levels of the same channel. In other words, the producer may complain about its dealers or vise versa. Eg : Between wholesaler and Retailer .

10. So there are conflicts at all levels …… To eradicate conflicts , Modern channel management has evolved to develop vertical marketing systems (VMS)

11. Vertical Marketing Systems Vertical Marketing Systems (VMS) consists of producers, wholesalers, and retailers acting as a unified system - that seek to maximize profits for whole channel. Here, one channel members- owns the others, has contracts with them or use so much power that they all cooperate. Such systems occur to control channel behavior and manage channel conflict.

12. A conventional marketing channel versus a vertical marketing system

13. Types of Vertical Marketing Systems

14. Corporate VMS Combines successive stages of production and distribution under single ownership. Breweries and petrol stations are examples.

15. Contractual VMS Independent firms join contractually at different levels to create efficiencies and economies . 3 types : Wholesaler-sponsored voluntary chains of independent retailers organised to compete against large organisations. Eg : Coca-Cola bottler is a manufacturer-sponsored wholesaler. Retailer co-operatives Franchisee

16. retailer cooperatives ; are contractual marketing systems in which ; retailers organize a new or jointly owned business to carry on wholesaling and possibly production. Eg ; Indian Coffee House , Mother Dairy , Karnataka Milk Federation (KMF).

17. franchise organizations ; are contractual marketing systems in which a channel member, called a franchiser, links several stages in the production-distribution process. There are three forms of franchisees; manufacturer-sponsored retailer franchisee system e.g. Ford licenses dealers to sell its cars. The dealers are independent business people who got sponsered by manufacturer. manufacturer-sponsored wholesaler franchisee system e.g. Coca-Cola licenses bottlers (wholesalers) in various markets who buy Coca-Cola syrup concentrate and then carbonate, bottle and sell the finished product to retailers in local markets.

18. service-firm-sponsored retailer franchisee system in which a service firm licenses the retailers to bring its service to consumers. Example;

19. Administered VMS One member of the channel is large and powerful enough to coordinate the activities of the other members without an ownership stake. Examples ;

20. Vertical Advantages… High operating Efficiency . Each layers has clearly defined functions and responsibilities. Closely monitor and control .

21. Horizontal Marketing Systems Hor izontal marketing systems is a channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. The major benefit is that companies combine their capital, production capabilities, marketing resources and therefore accomplish more.

22. E.g. Coca-Cola and Nestle formed a joint venture to market ready-to-drink coffee and tea worldwide.

23. Horizontal Advantages Greater satisfaction due to greater freedom and autonomy . Provides streamline due to absence of multiple structured layers .

24. THANK YOU