Define contractual VMS?
A Vertical Marketing System (VMS) can refer to cooperation between multiple levels of a distribution channel. It comprises the primary distribution channel partners, including the producer, the wholesaler, and the retailer, who serve the customer’s needs.
A contractual vertical marketing system can refer to a channel system formed by individual firms operating as different channel players by integrating their operations on a contractual basis. This system helps each of its players in achieving economies of scale by combining their operations.
In the contractual VMS, every player in the distribution channel works independently and integrate their activities on a contractual basis. It helps them to earn more profits than is earned when working in isolation. The most common form of contractual VMS is franchising.
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