Vertical marketing systems can be incredibly beneficial for all parties involved, whether this is the customer, wholesaler, producer, or retailer.
This is because of the vertical marketing system as all producers, wholesalers, and retailers have the same goal in mind and therefore work together to achieve such accomplishments.
They help grow margins, reduce lead times, and typically share control of all channeling aspects.
A vertical marketing system is when businesses control all production levels, marketing, development, and distribution. The ultimate goal of expanding to all these areas is to massively increase margins as you’re in control of the markup. A good example is that Apple designs manufactures, and sells its own phone through its stores.
At first, a vertical marketing system can seem confusing, but it’s a much simpler process than you think.
If you think about these big corporate brands such as Apple, it makes perfect sense for them to be involved in all the significant stages, from designing the product all the way through to selling it.
This way, you can control the pricing, limit the stock to increase value, boost customer satisfaction and brand awareness.
In this article, we will go deeper into how a vertical marketing system works and why it’s such an attractive business model for companies.
What’s the Aim of a Vertical Marketing System?
Before we go into detail about what benefits businesses can receive from a vertical marketing system, I thought it would be better to discuss the overall aim of this type of strategy.
It’s more than worth examining as you’ll get a better understanding of why industry leaders love this marketing system.
The whole aim behind a vertical marketing system, also known as VMS, is to connect distribution channels with businesses.
This is, so they’re able to communicate with their target audience.
These types of connections are generally held by rather large corporate companies that can afford to be involved in all development, marketing, and distribution of the product.
Having control or ownership of these crucial business “cogs” make it’s easier to manage significant aspects of a product, such as its costs.
Within vertical marketing, there are three different types of systems:
- Corporate system – This is when a single person in the distribution channel owns the rest. For example, this business may outsource certain corporate features such as marketing teams, distributors, warehouse support, and branding strategist.
- Contractual system – This is where everyone you collaborate or work with holds their own independence and operates as separate companies. Through this type of VMS means that the campaign planners you hire are individual but will still be a part of a mutual relationship that’ll benefit the company. For example, because you’re a separate company, you’ll reach out to a wholesaler or a producer who will provide you with a license to sell their products.
- Administered System – If a company were to use this type of format with a vertical marketing system, it relies on a sole company to have a solid term of sales and marketing strategy. For example, people purchase your products, and you control how much they sell them for or how they package them, etc.
This type of system can be a marketing strategy for companies that are ready to grow their profits and begin to distribute their products or services through other business partners.
Take this for an example.
You’ll use a VMS when your business creates parts for companies that sell cars.
To be successful at this, you’ll use a vertical marketing team of distributors to deliver the goods to other companies based on your niche.
Benefits of a Vertical Marketing System
As you’re able to grasp from the above, a vertical marketing system can benefit a company in many ways.
To see a break down of these benefits, read below:
Business growth and improved distribution – Companies that successfully apply a vertical marketing strategy can take full advantage of a VMS system. It’ll be able to help distribute their products in a broader perspective and grow in popularity within their niche. Being able to grow into a more extensive distribution chain will result in you being less restricted by a targeted area, and instead, you’ll have a much bigger audience that you’re able to sell to.
Superior marketing – Because you’ll be branching out to these new exciting business opportunities, you’ll meet, employ or hire individuals that are experts within the industry. Combining these industry specialists will give you a better understanding of your trade, and they’ll be able to work together to create better marketing materials. This is because they’ll all have a clear and unique understanding of the customer’s needs, and by joining these forces, your marketing efforts will be more superior and better than your competitors.
Brand awareness – Due to the quality of your marketing materials dramatically increasing will result in better brand awareness. This is because industry experts will have better knowledge on how your target audience reacts depending on the campaign you’re running. However, not just this, but due to the increased levels of distributors. Your target audience will also grow as your products or services are shown on a bigger scale.
Develop innovative ideas – With this type of strategy, you’ll mainly focus on how you’re able to understand your customers within your niche better. Because of the more populated amount of industry specialists, this shouldn’t be an issue as every party involved is aware of what customers expect from your industry. More often than not, companies that use a vertical marketing system deliver some of the most pioneering ideas, take Apple for example.
All in all, a vertical marketing system aims towards connecting your brand with a larger audience due to having more areas of control within your business.
This type of system will often rely heavily on expanding over to the business’s production and distribution side to ensure you have a greater chance of generating revenue.
However, other times, a VMS strategy is just about finding those vital businesses that are able to help you with your progress.
For instance, outsourcing a marketing team, developer, etc. But this all depends on the overall goals of your vertical marketing campaign.
In terms of a horizontal marketing system, a vertical campaign is much harder to achieve success with.
Because with a vertical marketing system, you’re trying to laser target audiences while making them grow, whereas a horizontal campaign is simply to get as many people to recognize your brand.
However, if you can successfully implement a VMS, you can expect to see highly rewarding profits.
Before diving into this type of system, make sure you plan well to ensure it’s the right step for your business.
Explore other options and gather data to guarantee this is the best possible investment for you.
It’ll take time and a lot of planning, but your business will experience a high level of success if executed correctly.
If you are interested in some tools that can help you accomplish Vertical Marketing please check out our post on 101 Social Content Tools we are sure you will find tools to make this process easier.