What is Vertical Marketing System?

Vertical Marketing System (VMS) is a collaboration between various distribution channel levels (manufacturers, wholesalers, retailers, etc.) that focuses on providing customers with goods and services. Vertical Marketing System focuses on increasing efficiency and economies to scale. In a vertical marketing system, producers have to rely on intermediaries to make their products and services available to customers. Although a vertical marketing system allows all the intermediaries to have some control over the distribution process, it can lead to conflicts. For example, Zara holds all of its stores and makes all the stores follow the same marketing strategy. Conflicts between channels get removed because there is an effective integration of all the activities.

Key takeaways from Vertical Marketing System:

• It is a collaborative marketing strategy to ensure economies of scale, improvement of profits, smooth operations, etc. but also, includes some risk factors and can lead to conflict of interest.
• There are various types of vertical marketing systems like Corporate VMS, Administrated VMS, and Contractual VMS.
• Vertical Marketing System involves inputs from all the intermediaries of the distribution channel.

Every product and service needs a proper path to reach customers from producers. Mainly, intermediaries help the product reach the customers. As more and more entities get introduced in the distribution channel, there arises a need to have a proper plan which needs to be followed. Vertical Marketing System is an important marketing strategy that involves the collaboration of all the entities of the distribution channel to focus on the efficiency of the distribution channel along with economies of scale.