Three Types of Vertical Marketing Systems


A vertical marketing system is a form of cooperation between multiple levels of a distribution channel. The members work together to promote efficiency and economies of scale in the way products are promoted to customers, credit is provided to customers, and products are inspected and delivered to customers.

Members of a Vertical Marketing System

  • The three components of a vertical marketing system are the producer, the wholesaler and the retailer. The producer is the manufacturer that actually physically makes a product. The wholesaler purchases products from the producer and manages the distribution to retailers. Retailers in turn mark up the price and sell products to consumers.


  • A corporate vertical marketing system involves the ownership of all levels of the production or distribution chain by a single company. An example of a corporate vertical marketing system would be a company such as Apple sells through its own retail stores the products it designs and manufactures.


  • A contractual vertical marketing system involves a formal agreement between the various levels of the distribution or production channel to coordinate the overall process. Franchising is a common form of a contractual vertical marketing system.


  • An administered vertical marketing system is one in which one member of the production and distribution chain -- due to its sheer size -- is dominant and organizes the nature of the vertical marketing system informally. An example of this type of system could include a large retailer such as Wal-Mart establishing standards for makers of smaller products, such as a generic type of laundry detergent.

Related Searches


  • Photo Credit killerbayer/iStock/Getty Images
Promoted By Zergnet


You May Also Like

  • What Is Vertical Consolidation?

    Vertical consolidation within an industry occurs when the companies in that sector are acquiring greater control over their supply chain, either by...

  • What Is a Horizontal Market?

    A horizontal market is a market so diversified that its products and/or services are broad enough to meet the needs of multiple...

  • Horizontal & Vertical Marketing Conflicts

    In marketing, vertical conflict is conflict that occurs between organizations that work together to provide the same product to the consumer. For...

  • Advantages & Disadvantages of Horizontal Integration

    Horizontal integration refers to expansion of business at the same point in the supply chain. This strategy is adopted when companies have...

  • What Is Multichannel Marketing?

    To encourage customers to buy your products or services, you must create marketing channels. These channels use advertising and promotion to engage...

  • Types of Retail Marketing

    There are many great avenues to explore when you begin to plan your marketing campaign. Marketing is a must for any business...

  • Marketing Strategies Examples

    Marketing is one of the greatest sales tools available for start-up and existing businesses today. It is, in its simplest form, all...

Related Searches

Check It Out

Are You Really Getting A Deal From Discount Stores?

Is DIY in your DNA? Become part of our maker community.
Submit Your Work!