In marketing, vertical conflict is conflict that occurs between organizations that work together to provide the same product to the consumer. For example, a business selling potatoes might have a conflict with a supermarket that sells the potatoes. A horizontal conflict is one that occurs between two enterprises that might work together, either directly or indirectly. For example, a bookstore might have a coffee shop owned by a different business operating in the bookstore.
Goals That Conflict
With the coffee and bookstore example, both businesses can run into a conflict based on the decisions of one of the stores. For example, the bookstore might complain when the coffee store opens up a second coffee store nearby, with a nicer decor and lower coffee prices, which could attract customers away from the bookstore. The different enterprises have goals that conflict.
Limited Shelf Space
In vertical marketing, when a company wants a retailer to carry a product, that retailer might be hesitant because the retailer can carry only so many products and carrying the wrong products can make the retailer unsuccessful. Also, different retailers have different clients who might prefer one type of product over another. The company selling the products to the retailer must convince the retailer that the products will be profitable.
With contractual vertical marketing systems, independent firms form relationships and work together to increase their marketability. For example, a graphic design firm and a copywriting team might work together to offer sales letter writing services to other clients. However, they might run into conflicts when arguing over who has creative control over which aspects of the project and how much each agency is compensated.
Marketing channels, either vertical or horizontal, sometimes have one business that has the financial resources needed to dominate in a conflict with other businesses. For example, the sole manufacturer of a popular product might have considerable sway over the retailers who sell the product. However, the dominant business usually cares about the other business' self-interest, since the dominant business often depends on the other businesses in the channel.
When businesses engage in horizontal marketing, they usually have different products or services that they specialize in. When businesses specialize in the same products and services, they can steal customers away from each other, which can lead to conflict. Some businesses form marketing channels specifically to avoid conflict. Instead of competing with each other, two businesses might form different niches, then direct customers to and from each other. Eliminating conflict makes the businesses more efficient, since they do not have to spend as many resources competing with each other. However, if one business completely dominates a particular niche, that business has a monopoly, which can cause the company to have less of an incentive to offer lower prices and improve products, hurting consumers as a result.