Vertical vs Horizontal Marketing System: Difference and Comparison

Marketing strategies are an essential part of the growth of any business. And although it looks like an easy deal, it has many factors to consider. One has to make these strategies keep a lot of factors in mind, such as the type of business, target audience, budget, etc.

Marketing strategies are of two kinds, i.e., Vertical and Horizontal systems. Both of these systems have a very different way of approach. However, they give the same results.

Key Takeaways

1. In a vertical marketing system, producers, wholesalers, and retailers work together as a single unit to satisfy customer needs.
2. In a horizontal marketing system, companies at the same distribution channel level, such as competing retailers, form alliances to increase their marketing power.
3. A vertical marketing system can increase efficiency and reduce costs, while a horizontal marketing system can lead to increased market share and customer loyalty.

Vertical Marketing System vs. Horizontal Marketing System

Vertical marketing systems work together to improve efficiency and reduce costs by eliminating intermediaries. A horizontal marketing system is a distribution channel in which companies work together to meet the end consumer’s needs, bypassing traditional wholesalers and retailers.

A vertical marketing system is a type of marketing strategy where a team of people operates the businesses in the same industry. It generally comprises three components, i.e., manufacturer, wholesaler, and retailer. These three components work together to earn a significant profit.

A horizontal Marketing System is a marketing strategy where different businesses work on the same level. These various businesses join hands to produce the maximum profit. The horizontal system focuses on a greater audience.

Comparison Table

Parameters of Comparison	Vertical Marketing System	Horizontal Marketing System
Definition	A vertical marketing system is a marketing strategy that operates businesses in the same industry.	A horizontal Marketing System is a strategy where all businesses work on the same level.
Components	Includes three components, i.e., manufacturer, wholesaler, and retailer.	It has either one of these components.
Audience	Vertical System focuses on a small audience.	Horizontal System focuses on a larger audience.
Competition	Compete among each other.	Do not compete with each other.
Examples	banking, real estate, hospitals, etc.	One example of the horizontal system is Johnson & Johnson and Google.

What is Vertical Marketing System?

Marketing strategies play a crucial part in the growth of any business. Hence, it should be made to keep many factors in mind, such as the type of business, target audience, budget, etc. One such type is a vertical marketing system.

A vertical marketing system is a marketing strategy where a team of people operates in the same industry. It generally comprises three components, i.e., the manufacturer, the wholesaler, and the retailer.

These three components work together to earn a significant profit. And due to working together, these people establish good contact.

A vertical marketing system is divided into three types:-

the first is the Corporate Vertical Marketing System. In this vertical system, only one person from the distribution team manages production, management, and distribution. It means that all the other members work under this particular member.

The second type is the Contractual Vertical Marketing system. In this type, all the team members work individually and earn a personal profit. And the third type is the Administered Vertical Marketing System.

This system distributes all the tasks and activities based on power and size. It means that the most potent member earns the highest profit.

What is Horizontal Marketing System?

Another type of marketing strategy is the Horizontal Marketing System which has a different approach. A horizontal Marketing System is a marketing strategy where a team of other businesses works on the same level.

According to this system, these various businesses join hands to produce the maximum profit out of their businesses. The Horizontal Marketing System has gained a lot of popularity these days.

This strategy is mostly taken up by businesses that lack resources, so they combine with other big companies. After which both of them work together to earn a profit.

The Horizontal Marketing System generally focuses on a broad audience. In this system, businesses do not consider strategies to compete with each other. It orders to maximize its profits. These businesses combine all the resources such as production, distribution, etc.

One example of this system is Johnson & Johnson and Google, two separate businesses that have joined hands for a robotic-assisted surgical program.

Difference Between Vertical Marketing System and Horizontal Marketing System

1.  Vertical Marketing System tends to operate the businesses in the same industry, whereas the Horizontal Marketing System operates the businesses at the same level.
2.  Vertical System includes three components, i.e., manufacturer, wholesaler, and retailer, whereas the Horizontal Marketing System has one of these components.
3.  The vertical System focuses on a small audience, while the Horizontal System focuses on a broader audience.
4. The horizontal System does not support strategies to compete with one another; in contrast, the Vertical System has a small demographic due to which it competes among each other.
5. Examples of Vertical systems are banking, real estate, hospitals, etc. One example of the horizontal system is Johnson & Johnson and Google. These two separate businesses have joined hands for a robotic-assisted surgical program.

References

1. https://www.ingentaconnect.com/content/mcb/007/1989/00000023/00000007/art00004
2. https://journals.sagepub.com/doi/abs/10.1177/0276146714550314