When it comes to different marketing systems of commerce, the common ones that come to our minds are horizontal and vertical marketing systems. The former is modern whereas the latter is the traditional approach to reach the target customers. Recently, the horizontal marketing system has become highly popular in the market and especially in the e-commerce segment. Why? You may ask. Is your mind hovering with questions like- What is a horizontal marketing system? How is it different from its vertical counterpart? Which is better? Etc. If yes, then don’t worry. In this written piece you will get a complete breakdown of the Horizontal Marketing System.
Definition & Concept of Horizontal Marketing System
Let’s begin with the definition!
A horizontal marketing system refers to “a collaborative arrangement where multiple companies or entities at the same level of the supply chain work together to meet the needs of a target market.” It is entirely different from the traditional vertical marketing system where manufacturers, wholesalers, and retailers operate independently. The horizontal marketing system encourages cooperation and integration among similar entities. The focus is on delivering a seamless and unified experience to the customer. Still, sounds complicated? Let me explain the concept through a realistic example.
Imagine a scenario where you own a music company in a remote area where the internet connection is below average. You want to increase your audience in the local area. And that too without directly jumping into digital marketing methods. You see a cafe nearby and collaborate with that cafe through an exclusive partnership. Here, the goals are clear i.e. to increase the consumer base. So, as per the deal, whenever a customer enters that cafe, he/she will be able to download the music of your company using that cafe’s high-speed Wi-Fi. If the customers like your music and new albums, they will continue to come to the cafe to listen to your songs.
As a result, the listener base of your company increases. Simultaneously, the customer base of that cafe also increases. Look, this is a win-win situation for both parties! This is what you call a horizontal marketing system.
Well, to your surprise this is not a completely imaginary example. A similar scenario occurred in the year 2007; when Apple collaborated with Starbucks to promote its music from iTunes. At that time Wi-Fi and smartphones were not as common as in today’s world. In that exclusive partnership, Starbucks let the customer wirelessly browse and download music from iTunes on their iPod, iPhone, or Mac. This, in turn, increased the customer base of Starbucks. So, both parties benefited from this partnership.
Thus, you can say that when two different vertical marketing systems collaborate to achieve a common goal, it becomes a horizontal marketing system. Like in the above example the goal of both parties (Apple and Starbucks) was to increase the consumer base.
How Does the Horizontal Marketing System Work?
The horizontal marketing system functions on the principle of shared resources, expertise, and customer insights. It is a distribution system wherein two or more firms join hands to combine their efforts through a common strategy. To maximize their profits and reach their goals. Companies within the same industry or niche form partnerships or alliances to pool their strengths and create a comprehensive solution for customers. By sharing information and resources, they can optimize their operations, reduce costs, enhance product offerings, and provide a superior customer experience.
Examples of Horizontal Marketing Systems
Let’s explore some of the famous examples of horizontal marketing systems around the world.
Apart from the famous horizontal marketing system of Apple and Starbucks, there are many other examples too. Such as-
The European aerospace corporation- Airbus is a prime example of a horizontal marketing system. It collaborates with multiple suppliers, engineering companies, and technology firms to design, develop, and manufacture aircraft. By leveraging the expertise of different entities, Airbus can deliver cutting-edge products to the market efficiently.
It is the world’s largest e-commerce company and operates on a horizontal marketing system. It allows third-party sellers to join its platform and sell their products alongside Amazon’s inventory. This collaboration not only expands the product offerings available to customers but also enables smaller businesses to reach a broader customer base by leveraging Amazon’s extensive infrastructure and customer trust.
3. Marriott International
Marriott, a leading hospitality brand, operates on a horizontal marketing system by franchising its hotel brands to independent owners. This allows Marriott to expand its presence globally while benefiting from the local expertise and resources of its franchisees.
The ride-hailing platform exemplifies a horizontal marketing system in the transportation industry. Uber partners with independent drivers who own their vehicles, creating a network of on-demand transportation services. By connecting drivers with passengers through their mobile app, Uber provides a seamless and convenient ride-hailing experience while leveraging the resources and capabilities of individual drivers.
This global sports apparel and footwear brand collaborates with various athletes, sports teams, and celebrities to market and endorse their products. By forming partnerships with high-profile individuals and sports organizations, Nike leverages their influence and expertise to promote its brand and connect with its target audience effectively. This horizontal marketing approach allows Nike to tap into the passion and loyalty associated with sports and athletes.
6. Visa and MasterCard
These are well-known examples of horizontal marketing systems in the payment industry. These two major credit card companies provide payment processing services to a wide range of banks, financial institutions, and merchants worldwide. By collaborating with various entities within the financial ecosystem, Visa and MasterCard have created a seamless payment network that enables customers to make transactions across different businesses and locations.
Examples from India
It is India’s largest e-commerce marketplace that operates on a horizontal marketing system by partnering with numerous sellers and vendors. This collaboration enables Flipkart to offer a wide range of products to its customers while leveraging the strengths and capabilities of its partners.
This hospitality chain operates on a horizontal marketing system by partnering with independent hotel owners and small-budget accommodations. OYO provides standardized services, technology solutions, and marketing support to its partner hotels, enabling them to reach a wider customer base. This collaboration allows OYO to rapidly expand its presence and offer a consistent customer experience across various locations.
It is a leading online travel agency in India and operates on a horizontal marketing system by collaborating with airlines, hotels, and other travel service providers. MakeMyTrip’s platform allows customers to search, compare, and book flights, hotels, holiday packages, and other travel-related services. By partnering with multiple service providers, it offers a one-stop solution for travelers, providing them with a seamless booking experience.
It is an online grocery delivery platform. BigBasket operates on a horizontal marketing system by partnering with local grocery stores, farmers, and suppliers. BigBasket offers a wide range of groceries, fresh produce, and household essentials through its website and app. By collaborating with various suppliers, BigBasket provides customers with a convenient way to order groceries and have them delivered to their doorstep.
It is a leading digital payment platform in India and follows a horizontal marketing system by partnering with retailers, e-commerce platforms, utility service providers, and other businesses. Paytm’s platform allows users to make digital payments, recharge mobile phones, pay bills, and shop online. By collaborating with multiple businesses, Paytm creates a comprehensive ecosystem that offers convenience and seamless digital transactions to its users.
It is a prominent ride-hailing platform in India. Ola follows a horizontal marketing system by onboarding independent drivers and car owners as its partners. By bringing them into its network, Ola can expand its service coverage and cater to a larger customer base.
How to Develop a Horizontal Marketing Strategy?
To develop a horizontal marketing strategy, businesses should consider the following steps:
1. Identify Potential Partners
First of all, identify companies or entities within your industry that share a similar target market or complementary offerings. Look for opportunities to collaborate and leverage each other’s strengths.
2. Define Common Goals
Establish shared objectives and goals that align with the needs of the target market. Ensure that all partners are committed to delivering value and a seamless customer experience.
3. Create a Framework
Develop a framework or agreement that outlines the roles, responsibilities, and expectations of each partner. Clearly define how resources, information, and profits will be shared.
4. Share Information and Resources
Foster open communication channels and establish processes for sharing information, market insights, and resources. This collaborative approach will enable partners to make informed decisions and adapt quickly to market changes.
5. Build Trust and Relationships
Cultivate strong relationships with your partners based on trust, transparency, and mutual respect. Regularly communicate, collaborate, and evaluate the performance of the horizontal marketing system.
Horizontal Marketing System vs. Vertical Marketing System
Let’s look at some of the key differences between a horizontal and vertical marketing system
|Aspect||Horizontal Marketing System||Vertical Marketing System|
|Structure||Collaboration among entities at the same level of the supply chain||Independent operations of manufacturers, wholesalers, and retailers|
|Focus||A customer-centric approach, seamless experience||Efficiency and cost reduction through economies of scale|
|Resource Sharing||Shared resources, information, and expertise||Controlled resources and assets within the supply chain|
|Decision-Making||Consensus-based decision-making among partners||Hierarchical decision-making, top-down approach|
|Coordination||Close coordination and communication among partners||Clear division of roles and responsibilities|
|Relationships||Emphasis on long-term relationships, trust, and mutual benefits||Transactional relationships based on contracts|
|Control||Shared control and decision-making among partners||Centralized control and authority|
|Flexibility||Flexible and adaptable to market changes||Rigidity and adherence to established processes|
|Examples||Airbnb, Visa and Mastercard, Flipkart, Amazon||Procter & Gamble, Unilever, Walmart|
Advantages & Disadvantages of Horizontal Marketing System
Just like a coin has two faces, Horizontal Marketing System has its strength and weakness too. You will get to know them in the following paragraphs.
- Enhanced Market Coverage: Horizontal marketing systems allow you to extend your market reach by collaborating with partners who have complementary offerings or expertise. This leads to increased customer exposure and potential sales.
- Resource Optimization: By pooling resources and sharing costs, companies in a horizontal marketing system can optimize their expenses to scale the revenue. Also, it reduces operational costs because it allows you to allocate resources more efficiently.
- Improved Customer Experience: Collaboration enables the creation of comprehensive solutions that address customer needs more effectively. By seamlessly integrating different products or services, businesses can provide a superior customer experience. Just like e-commerce services like Amazon or Flipkart.
- Coordination Challenges: Coordinating activities like decision-making, and maintaining alignment among multiple partners is quite challenging in the horizontal marketing system. Certain hindrances like different priorities, communication issues, or conflicting strategies disrupt the effectiveness of a horizontal marketing system.
- Risk of Dependence: Relying heavily on partners for resources or expertise may lead to dependency. If your partner fails to deliver the task from his side or faces any financial difficulties. Then it severely impacts the entire collaborative business system.
- Potential for Conflicts: Disagreements over profit-sharing, decision-making, or resource allocation can arise within a horizontal marketing system. This factor leads to conflict among the partners.
Now, it is time to wrap up! The rise of the horizontal marketing system in recent years reflects the changing dynamics of the business landscape. Through collaboration, shared resources, and a customer-centric approach, companies can create a seamless and comprehensive experience for customers. By understanding the concept, examples, and differences between horizontal and vertical marketing systems, you can make informed decisions about adopting a horizontal marketing approach. While challenges exist, the advantages of enhanced market coverage, resource optimization, and improved customer experience make the horizontal marketing system a compelling option for businesses looking to thrive in the modern marketplace.