From: VMS Contract in A Dictionary of Business and Management ” Danielle Smyth is the author and marketer of content from upstate New York. For nearly 10 years, she has been writing on business topics. She owns her own Content Marketing Agency Wordsmyth Creative Content Marketing (www.wordsmythcontent.com) and works with a number of small businesses to develop B2B content for their websites, social accounts and marketing materials. In addition to this content, she has written commercial articles for sites such as Sweet Frivolity, Alliance Worldwide Investigative Group, Bloom Co and Spent. As Tom Egelhoff wrote in an online article entitled “How to Use Vertical Marketing Systems,” a VMS can offer advantages and disadvantages to small businesses. “The main advantage of VMS is that your company can control all the elements of the manufacture and sale of a product. In this way, you are able to see the entire image, anticipate problems, make changes when they become necessary and thus increase your efficiency. Participation in all stages of distribution, however, can make it difficult for a small entrepreneur to keep an overview of what happened. In addition, the arrangement may fail if the personalities who manage the different areas do not go well together. This contractual distribution system works to direct advertising at all levels – production, transportation, wholesale trade and distribution – so that the benefits for each participating company are cumulative. This contractual system helps businesses take advantage of economies of scale and increases the reach of consumers at all levels through common information and knowledge of the market segment.
The contract vertical marketing system establishes an agreement between the marketing levels associated with a given product. Companies that work through franchising use this approach to take advantage of the overall marketing of the brand in a way that helps each site. This is one of the advantages of the stores. With this strategy, every step of the marketing chain can lead the effort. The choice is usually to know which company has the internal knowledge and experience to effectively manage the marketing experience. Finally, a contractual distribution system can lead to such an agreement, in which the most experienced company in the fields of marketing is at the forefront of the activity. In many cases, the production company has expertise in the technical aspects of manufacturing, but does not necessarily have strength in marketing and distribution. In cases where the company moves to vertical marketing, it may try to acquire distribution channels and channels to control marketing efforts.