A vertical distribution system is essentially when distributors, manufacturers and retail merchants work with each other in close cooperation to fulfill their clients’ demands. It enables one business to have greater control over the whole process of selling and making a product. This kind of system also enables the companies to grow at a faster rate than their counterparts. This article discusses a vertical distribution system that uses distribution networks, point of sale systems, merchandising and packaging.
Distribution Channel Orientation
Your distribution channel can be vertical or horizontal depending on your requirements. Horizontal marketing systems work together by allowing distributors to communicate directly with their clients. A great method to communicate with prospective clients is through content creation, which depends heavily on guest posting services to drive traffic. The goods are distributed between various vendors who will earn profit through their transaction with the client. Vertical marketing systems allow the distributors to work directly with the client while maintaining good relationships with other vendors.
In a vertical marketing system, one company becomes the distributor for another. In the case of wholesaling, a company becomes a middleman that brings together wholesalers, manufacturers and retailers. The manufacturer delivers the goods to the wholesaler while the retailer sells them to the end user. Corporate vertical marketing system can be very simple in that it requires the production of the goods to be done primarily by the wholesaler/manufacturer. They are the ones who make the final sales to the end user.
Another type of vertical marketing system involves the creation of marketing channels. The creation of marketing channels refers to the system by which you can market and promote your products effectively in multiple outlets. These outlets could be physical stores, online stores, telemarketing, radio and TV commercials, selective distribution channels, etc. Through proper use of these marketing channels, a company can increase the number of purchases made from their clientele.
Producers
Vertical marketing systems often involve two types of producers. One type of producer will be the primary producer while the other is the subcontractor. In vertical marketing systems, the primary producer will produce the bulk of the goods at first and then pass the production to the subcontractor/subcontractor. The subcontractor produces the goods at a lower rate than the primary producer. This is a great way to cut costs since the prices are shared between two producers who contribute to the quality of the goods produced. By doing this, retailers have the option of lowering their prices and still generate the same amount of income.
Disadvantages To Consider
One of the disadvantages of vertical marketing systems is that if a company’s primary producer is too small to produce quality products, then the products produced may also be low in quality. One example of this is Chinese manufacturers producing goods that are not of good quality. Another drawback is that there is no true end-to-end customer service because one company will handle all of the details including orders, product returns, and customer service. It is imperative that all aspects of the business be run efficiently because if one company is experiencing issues, another company could become impacted. Customers should also be given accurate information regarding the process they are receiving when purchasing from one company and delivery times should always be accurate.
Summary
There are both advantages and disadvantages to vertical and horizontal marketing systems. Most business owners prefer the vertical marketing systems because they do not have the limitations associated with horizontal systems. They can quickly and easily keep up with changes in the marketplace without having to wait for information to be processed by more than one company. They can do this using a variety of platforms, including email, mobile devices, social media sites, and websites. If one website is experiencing problems, it is very easy to find out what is going on at another website.
While retailers can use these vertical marketing systems, they should be careful not to focus all of their attention on just one supplier or manufacturer. In order to get the best price and the best quality, many wholesalers will discount items that are low in demand. In order to make money, producers and wholesalers must find other buyers of their products. The producers may then pass the savings on to the retailers. When both wholesalers and producers work together, a strong vertical marketing strategy can prove very beneficial for both parties.