A vertical marketing system is when a company owns the manufacturing, wholesale, and retail parts of selling a product. It has advantages, such as complete control over the process, but can also be overwhelming and inefficient. An example is an auto parts company that distributes parts from the manufacturing plant to retail stores.
A vertical marketing system occurs when the same company or business owns the manufacturing, wholesale and retail parts of selling a product. This type of marketing system, as is the case with any type of marketing system, has its advantages and disadvantages. The main advantage is the company’s overview of the entire marketing process. The main downside is that it might be too much of a responsibility for a company to shoulder.
An example of a vertical marketing system is an auto parts company. The company may buy or own the manufacturing facility that creates the part and the outlets that sell the parts. In this type of marketing system, the auto parts company would also be the wholesaler because it would distribute the auto parts from the manufacturing plant to the retail store shelves.
The main benefit of a vertical marketing system is that the business retains complete control over the process. Since the firm has complete control of the business, the firm also maintains a complete or comprehensive view of the marketing system from start to finish.
Controlling the entire process allows the company to identify any problems that are occurring or could arise at any time. Because the business has the big picture, it can avoid problems before they become problems or react quickly to problems when they occur. Overall, this allows the business to be much more efficient than if each of the processes were separate.
Being involved in a vertical marketing system, which means being involved in all aspects of the business, can also be the downfall or major drawback of the system. Being in charge and in complete control of every step of the vertical marketing system process can overwhelm the business.
In some cases, it creates an inefficiency. This is because the company ends up having to manage every aspect of the business without necessarily becoming the master or expert in one or more of the processes in the system. For example, a company may be really good at manufacturing auto parts, but they don’t understand and don’t know how to efficiently and effectively sell parts to retail customers. Instead, these types of businesses may need the wholesale company as a buffer to truly make the system work.
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