Marketing systems


Vertical Marketing System (VMS)

Often one finds that the manufacturer, wholesalers and retailers are locked up in an unproductive conflict. This is because each of them conventionally acts as independent business units pursuing a profit goal even though, at times, it may work against others. In this conventional distribution structure each tries to control the other but in reality neither of them have any substantial control over the other members. Vertical Marketing System holds the promise to overcome such unproductive conflicts. In this system, all the three act as a part of a unified system. Either one of them owns the other or franchises them or has so much power that they all cooperate. Vertical marketing systems achieve economies of scale through their size, bargaining power and the elimination of duplicated services. VMS is relatively a new concept in Indian market and not many examples are visible.

Vertical marketing systems are of three types, namely corporate, administered and contractual.

1. Corporate Vertical Marketing Systems:

In the corporate marketing vertical systems, the successive stages from production to distribution are under single ownership of any of the channel members. Vertical integration is achieved through forward or backward integration i.e. example Bata and Carona.

2. Administered VMS

Unlike the corporate VMS, administered seeks to control the successive stages from production to distribution not through ownership but through the size and power of one of the channel members. Brand leaders or firms that are market leaders are able to obtain trade cooperation Firms like Hindustan Lever, Godrej and the like are able to get shelf space and promotional support and also support for price policies from the trade mainly because their brands are market leaders.

3. Contractual VMS

This consists of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain larger economies of scale and or sales. Impact than they could achieve alone. Some of these are wholesaler sponsored voluntary chains like the ones in the vegetable and food market, retailer sponsored like Big Bazar in Mumbai (retail chain spread in Mumbai and some Indian metros) and franchises like Parle (Export) franchising a firm to produce and market its range of soft drinks in different areas.

This form of VMS has a great future as synergies are possible The Parle Exports i.e. soft drinks can be attribute to its strong franchise network in the country and overseas.

Horizontal Marketing System

Another contemporary system that challenges is the horizontal marketing system. This reflects the readiness or willingness of two or more non-related companies to put together resources to exploit an emerging market opportunity. One of the interesting examples of this is the tie-up between TVS-Whirlpool and Onida to market washing machines in the initial stages. The former manufactures washing machines in collaboration with the leading American firm Whirlpool and Onida advertises and sell them through its distribution channel. In doing so both are able to take advantage of the emerging opportunity in the Indian market. Adler calls this form of marketing a – symbiotic marketing

This form of marketing holds a tremendous potential and many such arrangements are and will occur in future.

Multi channel Marketing System

No single system can produce the desired results. Indian market has grown dramatically with the emergence of middle class, working couples etc, with not only in metros but all across the country. No single distribution can meet this opportunity alone. Even if it does the cost of distribution will become highly prohibitive and the growth of the multi channel marketing system. Here, the firms uses two or more channels to reach one or more market segments, the example is L&T standard switchgear product. It also has a dealers’ network who also sell to the same segments. Both, the company sales force and dealers depend on each other to successfully fight competition. Or, if the dealer finds that a large and an important prospect has objections that are technical in nature and he cannot answer them, he gets the company’s sales engineers to do the job.

The above systems mentioned are flexible to suit a particular product and the marketer can adopt any system that is more suitable and beneficial to their product. One or the other systems are selected and followed by the firms depending upon the necessity.