Learn about the concept of vertical marketing and the advantages of a vertical marketing system. Explore the three types of vertical marketing systems and how they can benefit businesses. Discover the importance of communication between sales and marketing teams and find related articles on web traffic sources, sales and marketing alignment, digital marketing ROI, and simplifying business processes. Plus, explore the features and options available through LiveAgent.
The video discusses the importance of digital marketing in today's business landscape. It emphasizes the need for businesses to have a strong online presence and utilize social media and email marketing to connect with customers. The video also touches on the benefits of search engine optimization (SEO) and the impact of mobile marketing. Overall, it highlights the key strategies for successful digital marketing.
Imagine that 3 different companies: company A - a manufacturer, company B - a wholesaler,
and company C - a retailer make many purchases with each other.
However, the logistics work between A and B companies is performed by another company,
and the logistics work between B and C companies is performed by another company.
In this case, the service quality and prices of those logistics companies are different.
Later, these 3 companies - A, B, C decide to systematically cooperate.
So, if they cooperated with 2 logistics companies before, now they start working with only one
logistics company. In such a case, the orders received by that logistics company doubles, and
that company naturally starts offering services to the mentioned companies at lower price.
From these short examples of 3 companies, we saw that the systematic cooperation of
those companies had a positive effect on their costs and reduced the cost of the final product.
This in itself means a more profitable result. That is, as a result of these collaborations, they
can become more competitive by reducing the price of the final product they present on the market.
In our previous videos, we have talked about some topics related to marketing and marketing.
Marketing performs a number of important functions such as introducing and selling the product to the
buyer. Today's topic is also related to marketing. In simple terms, marketing is a tool to deliver
the product to the user. The paths through which the product is produced until it reaches
the consumer are called marketing channels. For example, the manufacturer of a product,
the company that sells it wholesale, and finally the company that retails to the consumer are all
considered part of this marketing channel. Those marketing channels mainly come in two
forms: traditional or horizontal and vertical marketing systems.
The main topic of today's video is the vertical marketing system. Simply put, a vertical marketing
system is when companies that produce products in the same market work together to deliver the
product to the buyer. The components of this system are the manufacturer, distributor and
retailer of the product. The manufacturer produces the product, the distributor buys the product
from the manufacturer and distributes it to the retailers, and finally the retailers transfer the
product to the consumer. All three companies work together to maximize their profits. I should also
note that the term distributor, which I used earlier, and which you will hear frequently
throughout the video, refers to companies that engage in the wholesale sale of products.
It should also be noted that there are three types of vertical marketing system.
The first of these is the corporate vertical marketing system. In this vertical marketing
system, one participant of the marketing channel controls the whole process himself. That is, the
process of product production, market distribution and retail sale is managed by just one center.
For example, let's take a look at "ZARA", which has made its owner a billionaire and is one of
the most famous clothing brands in the world. This $14.7 billion company uses a corporate vertical
marketing system. There are approximately 3,000 ZARA stores around the world. The products sold
in these stores are first designed in the center in Spain, and then the production process begins.
The products produced are still distributed by "ZARA" to its official stores. In the end, those
products are delivered to the buyer through ZARA's own stores. As you can see, all processes are
managed by a center. This makes ZARA a suitable example of a corporate vertical marketing system.
Another vertical marketing system is the contractual system. In this system, which
is called a contractual vertical marketing system, each of the companies involved in the production,
distribution and retail sales manage themselves separately. But all three try to increase their
income by acting together according to the agreement between them. Franchise companies
work under this type of vertical marketing system. If I explain franchising in the shortest way, I
can say that franchising is a license, rights and information about the working mechanism of this
business given by one business party to another party to establish this business elsewhere. For
example, the Hilton hotel, which has branches in many countries, is an example of franchising.
If you want to open a Hilton hotel, you can get a license by paying $75,000. In addition, if the
number of rooms in the hotel you open is more than 250, you must pay $400 for each additional room.
After that, you make certain monthly payments based on the contract you signed.
The remaining amount after these and other expenses is your income. If you want to
learn more about franchising, you can watch the video we prepared earlier on this topic.
The last vertical marketing system is an administered system.
In this system, one of the three given sides controls the common ring. The reason why the
management of the entire circulation is on one side is that that side is bigger and stronger.
When you think of a powerful party taking over, you might think that the manufacturer or
distributor will always have a say. But retailers can also take control of the system. For example,
a retail center like Walmart can easily influence the other two parties and control turnover.
We got acquainted with the vertical marketing system and its three types.
So what are the advantages of using this system?
First of all, using a vertical marketing system makes the business more efficient. Because when
using the mentioned system, you can control every process from production to sale to the consumer.
This, in turn, helps you to easily identify problems and quickly find a way out.
On the other hand, when using a vertical marketing system, parties can join forces. For example,
normally two different companies transport the product from the manufacturer to the distributor
and the other from the distributor to the retail outlets. But when using the vertical system,
the parties can reduce their costs to a certain extent by agreeing with a transport company.
In today's video, we tried to provide as much information as possible about the vertical
marketing system, which is one of the most important parts of marketing. Does your company
use a vertical marketing system? If so, what type is used: Corporate? Contractual? Or administered?
Don't forget to share your thoughts with us in the comment section. Thank you for your attention!
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