A Definitive Guide on Vertical Marketing System and How To Use It

What is a vertical marketing system?

A Vertical Marketing System (VMS) is a way businesses organize their marketing efforts within a supply chain, often with one company controlling multiple levels of the process, to make things run more smoothly. 

With VMS, the manufacturer, wholesaler, and retailer can work together rather than separately, which makes the process more efficient and cost-effective while also improving communication. If your business is looking to improve its marketing, distribution, and overall product management, VMS may be right for you.

Different types of vertical marketing systems

There are three main types of vertical marketing systems: corporate, contractual, and administered. Each works slightly differently to organize the relationship between manufacturers, wholesalers, and retailers. Let’s examine each type in more detail.

Corporate system

A corporate vertical marketing system occurs when a single company owns and controls multiple levels of the supply chain. This means that the business operates both the production and distribution processes, helping to reduce costs and ensure smooth operation. Since one company controls everything, it can maintain better control over branding, marketing, and product quality. 

Contractual system

In a contractual system, different levels of the supply chain work together through formal agreements or contracts. This means that while manufacturers, wholesalers, and retailers operate independently, they agree to follow certain rules and guidelines to make sure their cooperation is smooth. With a contractual vertical marketing system, businesses can benefit from the coordination of the supply chain, while also maintaining their own control over operations. 

Administered system

An administered vertical marketing system is when the supply chain is coordinated by one dominant member who has the power to influence the activities of other levels. In this type of system, all the members remain independent from each other, but the dominant member exerts control through its power, such as by setting pricing standards or providing marketing support. Administered vertical marketing systems rely on the influence of its dominant member to ensure the system runs smoothly, even without the need for contracts.

Vertical vs. horizontal marketing systems

Just as there’s a vertical marketing system, there’s also a horizontal one – as the name suggests! 

Unlike the vertical system, there is no clear hierarchy when it comes to horizontal marketing systems – it entails two or more companies that are at the same level of the supply chain working together to share resources. The two companies, for example, two manufacturers, join forces to reach more customers or expand their market, rather than one company handling everything. This is common in the fashion industry where two clothing brands team up to create a new collection together. This system helps businesses grow by combining strengths and resources without giving up their independence.

There are a few key differences between VMS and HMS. 

The benefits of using a vertical marketing system

So, what makes a VMS worth using? Let’s check out a few key benefits of using a VMS to enhance your business operations. 

Better efficiency

This is something we’ve touched upon already when comparing VMS to HMS. 

One of the main reasons to try arranging your business as a VMS is better efficiency thanks to the fact that all major parts of the supply chain – manufacturing, wholesaling, and retailing – work together. With no middle entities involved, it usually means fewer delays and mistakes, smoother communication and the ability to respond to changes more quickly. In simpler terms, products just move faster from stage to stage, saving you time and money.

More effective sales messaging and branding

A VMS can also enable you to create more effective sales messaging and branding. All parts of the supply chain are closely connected, so companies can ensure that their brand message is consistent across every step, from production to retail. This unity makes it easier for the brand to clearly communicate its vision and message to the customer. With a VMS, businesses can align their marketing strategies more effectively, creating a better customer experience and building stronger brand recognition.

Stronger communication

Vertical marketing systems ensure stronger communication not only to the customers but also throughout the supply chain. Since the whole supply chain is working together, information flows more easily and quickly. This enables businesses to address issues faster, coordinate promotions better, and keep everyone on the same page. In turn, stronger communication improves efficiency as there are fewer mistakes, and fosters a more unified approach to meeting the needs of customers.

More resources

When different parts of the supply chain are working together, they’re able to pool together resources – this can include money, tech, or knowledge. This also means that they can invest in areas like marketing, technology, or product development. This makes it easier for every part of a VMS to succeed.

Develop new ideas

Since a VMS encourages collaboration across the supply chain, it can help businesses develop new ideas. When manufacturers, wholesalers, and retailers work together, they can share insights, spot trends, and create innovative solutions. This improves products and ensures customer needs are met.

The potential drawbacks to be aware of

Now you’re familiar with the benefits of a VMS, there are a few potential disadvantages to consider. Businesses should be aware of challenges when implementing a VMS, especially when it comes to flexibility, cost, and dependency on other parts of the supply chain.

• Lack of flexibility. Since one company controls multiple stages of the supply chain, it can be harder to adapt quickly to changes in the market or customer needs.
• High initial investment. If you’re just getting started with a VMS, you need to be aware that it often requires significant upfront investment. For example, this might include buying other businesses in the supply chain of developing new infrastructure.
• Dependence on other players. For a VMS to be effective, every part of the chain needs to function smoothly. The entire system can suffer if there are issues such as delays or quality problems arise with a supplier or distributor.
• Limited market reach. A vertical marketing system focuses on specific customers and uses a limited number of intermediaries to distribute products. While this can make operations efficient, it also means the business might struggle to reach all potential customers, especially in new regions or countries. If the chosen market becomes less popular or too crowded, the company may find it hard to grow or adapt.

How to start your own vertical marketing strategy

If you’re interested in getting started with a VMS, follow our step-by-step guide below. 

1. Determine your target audience

As with any type of marketing, it’s important to know exactly who your ideal customers are. In a competitive environment, understanding who your target audience is gives you an edge by helping you focus on the people or businesses most likely to need your product.

Ask yourself: who will benefit from the products I’m offering? What makes my product stand out? Where can I find my customers? 

Take time to research your audience – this means considering factors such as their age, location, income, interests, or business needs. If your business already has customers, ask them for feedback to learn what they like about your product. Curious to learn more? Check out our guide on the best survey tools to use. 

2. Develop content strategy

Content is not a one-time effort – this means you have to deliver consistent messaging across all platforms, whether it’s email newsletters, blog posts, or social media updates. 

When thinking about consistency, the tone and style of your messages also matter, not just when and how often you send your campaigns. This is another instance where understanding your target audience is crucial – for example, if you know your audience spends most of their time on LinkedIn, tailor your content to this particular platform. 

One more thing to remember is that despite recent DEI rollbacks by major companies with Amazon, Walmart, Boeing, Ford and McDonald’s among them, inclusivity still matters. So, when developing your content strategy for your VMS, spend some time thinking about how you can apply the principles of inclusive marketing. 

3. Increase your visibility

You may have a perfect marketing strategy ready to go, but it’s meaningless if your audience doesn’t know you exist. Your first step should be optimizing your online presence – make sure your website is easy to find and user-friendly, and don’t forget to use search engine optimization (SEO) to improve your rankings. 

Everyone is on social media these days, and your brand should probably be too, even if it is a “serious” one. Consider having a presence on platforms your target audience’s choice and engage with them via helpful content. You can also run ads and promotions on your brand’s social media accounts, enlisting the help of influencers wherever relevant.

Don’t overlook offline events either. Even in the digital world, attending industry events and trade shows can help you bolster your brand’s visibility and help you make contacts within your industry.

4. Draw your audience’s attention

Now that your audience is aware of your brand, it’s time to grab (and hold!) their attention. Your first step here should be creating compelling headlines and messages that pique their curiosity right off the bat. Whether it’s a blog post, social media ad, or video, the first few seconds are critical in making an impression. 

They often say that a picture is worth a thousand words, and that’s especially true for visual content. Pictures, infographics, or short, engaging videos can communicate your message quickly and effectively. If you’re using email to communicate with your audience, make sure you’re using email templates to build visually striking emails in no time. Personalization also plays a key role here – make your messaging feel tailored to each client by addressing their specific needs and preferences.

This is also where a strong call to action (CTA) comes in. Once you’ve grabbed your audience’s attention, be sure to tell them what to do—for example, buy your product, attend an event, or sign up for a newsletter. 

5. Define key problems and work around them

Every strategy has challenges, so start by identifying where things aren’t working. Is your content not engaging enough? Are there delays in your supply chain? 

To answer these questions, perform market research, collect feedback from current customers, as we’ve mentioned, and follow industry-related discussions on social media. Analyzing your clients’ customer journey can also help you define key issues.

Once you’ve identified your issues, focus on finding practical solutions. For example, if your content isn’t performing well, try to experiment with new formats.

6. Measure the results

Now that your vertical marketing strategy is in place, you need to be able to understand what works and what doesn’t. Different online analytical tools allow you to track key metrics, such as Google Analytics for website traffic, HubSpot for customer engagement or Salesforce for sales growth. The good news is that if you’re using an email service provider such as Selzy, you’ll be able to link it to these platforms.

Don’t be afraid to change your approach if something isn’t working perfectly or delivering results. Reviewing your progress regularly will help you stay on track and continue to improve.

This article was first published in May 2023 and updated in January 2025 to make it more relevant and comprehensive.