The purpose of a vertical marketing system is to:
Multiple Choice
A limit the number of retail outlets served and sales region.
B maximize the number of wholesalers with which a supplier can trade.
C achieve channel economies and maximum marketing impact.
D eliminate wholesaler channel members and have producers go directly to consumers.
D dissuade retailers from dealing with other manufacturers or wholesalers.
The correct answer and explanation is :
The correct answer is C: achieve channel economies and maximum marketing impact.
Explanation:
A Vertical Marketing System (VMS) is a type of distribution channel structure where the different levels of the marketing channel (such as producers, wholesalers, and retailers) work together as a unified system. In this system, one channel member (whether it’s a manufacturer, wholesaler, or retailer) has some level of control over the others, aiming to optimize the flow of products from production to consumer.
The primary purpose of a VMS is to achieve channel economies and create maximum marketing impact. This is accomplished through coordinated efforts, eliminating inefficiencies, and maximizing the effectiveness of marketing strategies. In a traditional distribution system, the various members (producers, wholesalers, and retailers) often work independently, which can lead to conflicts, delays, and higher costs due to the lack of coordination. In contrast, a VMS fosters cooperation, reducing conflicts and increasing efficiency.
There are three common types of Vertical Marketing Systems:
- Corporate VMS: A single company owns multiple levels of the distribution channel, such as a manufacturer also owning retail outlets.
- Contractual VMS: Members at different levels of the distribution channel work together based on agreements or contracts (for example, franchising).
- Administered VMS: One dominant channel member (often the manufacturer) has the power to coordinate and control the activities of other members, though they are not necessarily owned by that member.
Why the other choices are incorrect:
- A: Limiting the number of retail outlets or sales regions is not the focus of a VMS. Instead, the goal is to ensure that the marketing system operates efficiently, with all members working towards common objectives.
- B: Maximizing the number of wholesalers is not the purpose of a VMS. The focus is on reducing inefficiencies within the system and coordinating the flow of products.
- D (1st): Eliminating wholesalers and direct sales to consumers is not a characteristic of a VMS. Instead, a VMS may involve wholesalers and retailers, but in a more coordinated and efficient manner.
- D (2nd): A VMS does not aim to dissuade retailers from dealing with other manufacturers or wholesalers, but rather to encourage cooperative efforts within the channel.
In summary, the key goal of a Vertical Marketing System is to streamline the distribution process, reduce inefficiencies, and maximize marketing efforts through coordination and control, making option C the correct answer.