Are you curious about vertical and horizontal marketing and its impact on businesses? In this article, we will explore the concept of vertical marketing, and its types, provide examples, and delve deeper into its significance in today’s competitive market.
Vertical and Horizontal Marketing Systems pave the way for businesses to attract and reach businesses operating in the same industry or with other businesses at the same level to gain economies of scale. Manufacturers, wholesalers, and retailers do these marketing strategies for profit maximization.
Keep reading to understand the concept of Vertical and Horizontal Marketing, their pros and cons, differences, and goals.
Types of Vertical Marketing Strategies
Following are the three main types of vertical marketing strategies:
1. Corporate vertical marketing strategy
In corporate strategy, a single company takes responsibility for the entire production and distribution process. In other words, these entities are not dependent on any other company throughout the said processes. For instance, Zara stores adopt this strategy.
2. Contractual vertical marketing strategy
As the name suggests, the distribution channel is determined depending on certain contractual obligations. For example, Dominoes is one entity that franchises its channel to independent entities or persons through contracts.
3. Administered vertical marketing strategy
In this marketing strategy, one entity owns and exercises control over others, and there is no contractual relationship per se. However, the entity in the dominant position exercises a considerable amount of authority. For instance, P&G (Procter & Gamble) is an example of this type.
Pros and Cons of Vertical Marketing
Here are some of the pros and cons of this marketing strategy:
Pros
- It results in better efficiency due to the unity of direction.
- This strategy helps increase sales and customers.
- The available resources are used optimally.
Cons
- Restricted insight due to the involvement of the same persons and not encouraging fresh perspectives.
- A lack of proper coordination might backfire on the objectives of the strategy.
- Too much focus on efficiency might compromise product quality or service quality.
Difference between Vertical and Horizontal Marketing Systems
Following are some differences between Vertical and Horizontal Marketing Systems:
| Vertical Marketing System | Horizontal Marketing System |
|---|---|
| In this approach, businesses focus on achieving within the same industry. | In this approach, the competition exists on the same level where they aim to take the edge over economies of scale. |
| This method is resorted to when the target audience is in particular. | Here, a broader level of demography is focused on. |
| Three parties are involved: manufacturers, wholesalers, and retailers. | The parties involved in this type are manufacturers, distributors, and retailers. |
| Vertical Marketing systems are narrow and restrictive. | This relatively functions in a broader range. |
| The products or services provided are specific. | They include more diversity in what they offer. |
| They need more opportunities for collaborating. | It has a high scope for partnership opportunities. |
Steps to Start your Vertical Marketing Strategy
Now that we are aware of what Vertical Marketing is all about, let us explore how it can be done:
1. Plan- Primarily, write your thoughts and ideas on paper. Determine the size and type of your target customers.
2. Create a Strategy- After deciding on the plan and doing the required research work, the next step is to build a strategy to see how you would like to implement the plan.
3. Improve your Visibility- It is vital to constantly remind the customers of what you offer, which is more effective when using online and offline platforms.
4. Be flexible- Some things might go according to the plan or how you desire. Hence, it is essential to be open to resorting to another part or slightly deviating from it when it is not working out.
5. Evaluate- Tracking and comparing your performance with the standards you set during the previous stages is significant. Following this, you must be willing to take the necessary measures.
FAQs
What are examples of Vertical Marketing?
Ans: Examples of Verticle Marketing include the government, real estate, insurance, banking, transportation, retail, and hospitals.
What are the three types of Vertical Marketing systems?
Ans: The three types of Vertical Marketing systems are Contractual, Administered, and Corporate.
What is an example of a horizontal marketing system? A
Ans: For example, Facebook with Instagram and Apple with Starbucks come under the purview of a horizontal marketing system.
Whether Zara is a vertical marketing system?
Ans: The nature of how Zara’s production and distribution works are highly similar to that of the vertical marketing system.
What is the goal of Vertical Marketing?
Ans: Despite focusing on a concrete target customer base, it ensures that the determined audience is more aware and in closer contact than other strategies.
Conclusion
The application of ‘What is Vertical Marketing?’ may differ depending on how one adapts and implements it. Irrespective, on the face of it, it refers to focusing on a specific sub-group of the population. This strategy can take your brand to a different level if adequately planned and executed using all the insights mentioned in this article as the base.
See Also: What is a Focus Group in Marketing
