Horizontal marketing system

Horizontal marketing system relates to situation in which two or more companies acting in different market niches combine their resources to work together in marketing their products. Some examples are banks which cooperate with insurance companies or mobile carrier and mobile phone manufacturer, who prepare common marketing campaign to sell products of both companies. In this system different companies try to cooperate to get bigger profit, or they are working together because it is not possible for the to work alone without other company which for example produce an important part which is needed to produce a good product. Now, at present time, companies need to work especially hard to remain competitive and visible in consumers eyes.

This type of marketing system allows to:

• reduce cost - cooperating with other company helps to negotiate better prices of materials or any components which are needed in production process
• better utilize resources - using knowledge and solutions of our partner provide us to create better product and help us to avoid mistakes and problems
• avoid waste - there is possibility that our partner will use materials to product different goods and it help to reduce costs
• attain better profits from selling combined products/services of both companies, for example mobile carrier and mobile phone manufacturer.
• economies of scale is also very important in horizontal marketing system. It helps us to produce more in a lower price. Economies of scale refer to reduced costs per unit that arise from increased total output of a product (A. Stolle and others 2014).
• Synergy - probably the most important part of horizontal marketing system. It is a situation when the combined actions give a better results than the same actions but done single. In a simple way, that means that 2+2=5 or even more and this is the key to a successful marketing actions (J. R. Larson 2010).

Examples of companies using horizontal marketing system

• Apple and Starbucks

Apple and Starbucks in 2007 announced music partnership. The purpose of this partnership was to allow Starbucks customers to wirelessly browse, search for, preview, buy, and download music from iTunes Music Store onto their iPod touch, iPhone, or PC or Mac running iTunes. Apple benefits were higher iTunes sales because of Starbucks loyal customers. And in other way Starbucks benefits were higher sales, increase in market share, and stronger customer loyalty.

• Smallholder producers in Zambia's maize belt

The report "Maize Market Coordination in Zambia: An Analysis of the Incentives and Obstacle to Improved Vertical and Horizontal Marketing Arrangements" made by J. Chamberlin and other authors shows that in a districts where more producers cooperate there are better benefits of their work, because for example in a group they can negotiate a better sales prices than trying to do it alone (J. Chamberlin and others 2014, s 30-32).

These 2 cases shows that companies can cooperate in a different areas and in most cases it works really good and improve both sides.

Advantages of Horizontal marketing system

A horizontal marketing system is beneficial for companies as it combines the resources of two or more firms working in different market niches, providing them with the ability to develop a stronger and more comprehensive product offering. Its advantages include:

• Increased market coverage as the two companies can market their products to each other’s customers, thus expanding the reach of both.
• Cost savings as the two companies can share costs of marketing, advertising and promotion.
• Increased product development opportunities as the two companies can cooperate in product innovation, offering products tailored to customer needs.
• Increased customer loyalty as the two companies can develop a relationship with customers that goes beyond the product itself.
• Increased competitive advantage as the two companies can take advantage of each other’s strengths and weaknesses to develop a competitive edge in the market.

Limitations of Horizontal marketing system

Horizontal marketing system has several limitations:

• Compatibility: Both companies must be compatible in terms of products and services, as well as in terms of marketing strategies. If the goals and approaches of each company are too different, successful cooperation may be impossible.
• Responsibility: As two companies are involved in the system, it is difficult to determine who is responsible for certain decisions or results.
• Risk: Companies must be aware of the potential risks and must be ready to face them. They should also be prepared to handle any potential losses.
• Cost: The cost of such cooperation is usually higher than the cost of individual strategies, as two companies must agree on the budget and distribution of resources.
• Communication: Maintaining effective communication between two companies is essential for successful cooperation and can be very challenging.

Other approaches related to Horizontal marketing system

A Horizontal marketing system is when two or more companies come together and use their resources to promote and market their respective products. Other approaches related to Horizontal Marketing System include:

• Strategic Alliances: Companies with similar products or services join forces to market and promote their products as a combined entity. This can also include joint ventures, where two or more companies come together to form a new company.
• Co-Branding: Companies combine their products and services to create a single product offering. This can include a combination of a physical product and service, such as a laptop and internet service, or two services, such as a credit card and a loyalty program.
• Distribution Networks: Companies collaborate to distribute products and services through each other’s distribution networks. This can include a physical distribution network, such as a retail store, or a digital distribution network, such as an online retailer.

In summary, Horizontal marketing systems involve companies collaborating to market and promote their products, either through strategic alliances, co-branding, or distribution networks.

Horizontal marketing system — recommended articles

Indirect sales — Reintermediation — Imitator strategy — Lateral integration — Horizontal diversification strategy — Cross marketing — Conglomerate diversification — Vertical diversification strategy — Global marketing strategy

References

• Chamberlin, J., & Sitko, N. J., & Kuteya, A., & Lubungu, M., & Tembo, S. (2014). Maize Market Coordination in Zambia: An Analysis of the Incentives and Obstacle to Improved Vertical and Horizontal Marketing Arrangements. Indaba Agricultural Policy Research Institute (IAPRI)
• Koplyay, T., & Lloyd, D., & Jazouli, A., & Mitchell, B. (2015).The strategic marketing function in dynamic markets Polish journal of management studies.
• Kumar, M. (2001). Marketing and Distribution Channels in Bancassurance. CEO Summit of banks and insurance companies of Asia Pacific countries.
• Larson, J. R. (2010). In search of synergy in small group performance Psychology Press.
• Stolle, A., & Schmidt, R., & Jacob, K. (2014). Scale-up of organic reactions in ball mills: Process intensification with regard to energy efficiency and economy of scale. Faraday Discussions
• von Friedrichs Grängsjö, Y., & Gummesson, E. (2006). Hotel networks and social capital in destination marketing. International Journal of Service Industry Management, 17(1), 58-75.

Author: Piotr Budz