vertical marketing system (VMS)

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A vertical marketing system (VMS) refers to a channel of distribution in which there is formal cooperation among members at the manufacturing, wholesaling, and retailing levels.

Unlike a conventional marketing system, where each channel member is an independent business that competes for their profits, the VMS channel members act as a unified system.

Example of vertical marketing system (VMS):

Vertical marketing systems are often composed of two forms, the corporate VMS and the contractual VMS.

In the corporate VMS model, a corporation in the distribution channel will own the other channels. Even though the companies are jointly owned by the corporation, the companies in the chain operate as separate entities.

A contractual VMS would include a franchise relationship between a franchise store and the corporate office or producer. The producer likenesses a wholesaler to distribute its products.

Three distribution channel marketing systems include:

  1. conventional marketing system
  2. vertical marketing system
  3. horizontal marketing system

Business examples of vertical marketing systems (VMS’s):

Sherwin-Williams is a paint producer. However, they not only produce the paint, but the company also has several thousand retail stores that sell their product.

Campbells Soup is considered an administrative VMS. Campbell Foods and other dominant brands can command high levels of cooperation from their resellers when it comes to in-store product displays, the amount of shelf space allotted for their products, promotions of the products, and price policies.

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