Horizontal Marketing System: Meaning, Types and Advantages

What is Horizontal Marketing System?

Horizontal Marketing System refers to collaboration or partnership among firms at the same level in the distribution channel to combine their resources, expertise, and market presence. The focus of an HMS is to expand market reach, pool resources, and enhance competitive advantage. Some examples of HMS are:

1. Co-branding Partnerships: When two or more companies collaborate to create a product or service that combines the strengths of each brand, it is known as a co-branding partnership. This allows them to reach a wider audience and leverage their respective expertise.
2. Joint Ventures: Companies form a new entity to pursue a specific business opportunity, sharing resources and risks. This allows them to combine their strengths and enter new markets.
3. Cross-Promotions: Companies collaborate on marketing campaigns or initiatives to promote their products or services together. This creates synergy and allows them to reach a broader audience.
4. Strategic Alliances: Companies form partnerships to pursue common goals, such as expanding into new markets or developing new products. They share resources, knowledge, and distribution channels to achieve mutual benefits.
5. Consortiums: Multiple companies in the same industry join forces to address common challenges or pursue shared opportunities. They collaborate on research, development, and marketing activities to achieve collective goals.

The specific structure and objectives of a Horizontal Marketing System depend on the companies involved and the industry in which they operate. Examples of companies following horizontal marketing system are McDonald’s and Sinopec, Google and Johnson & Johnson, Nestle and Coca-Cola, etc.

Types of Horizontal Marketing Systems

The three types of horizontal marketing systems are:

1. Multi-manufacturers:

It is a type of horizontal marketing system in which two or more producers or manufacturers come together with the basic aim to utilise scarce resources. In simple terms, the companies coming together offers a service, resource, or utility to each other, so that they can optimally utilise the available resources.

2. Multi-wholesalers:

In this type of horizontal marketing system, the basic objective of the companies collaborating is to cover a large distribution area and ensure that the products and services reach their customers residing in the farthest corners of the world. They try to do so by offering the customers different product options and eliminating competition.

3. Multi-retailers:

The last type of collaboration seen between two or more than two manufacturers is in retail. This type of horizontal marketing system allows companies to use economies of scale and complete bulk orders they have received in a specific area.

Let’s consider some examples to illustrate the Horizontal Marketing System:

1. Google and Johnsons & Johnsons collaborated for the development of efficient and affordable robots which can assist doctors and surgeons in routine surgical work.

2. Apple collaborated with Starbucks for connecting iTunes Music to their consumers while they have their coffee drinks. 

3. McDonald’s and Sinopec (China’s top gasoline retailer) partnered with the aim of opening restaurants at Sinopec’s gas stations.

4. Collaboration between BPCL and Coca-Cola for selling drinks in BPCL petrol stations.

Advantages of Horizontal Marketing System

Some of the advantages of a Horizontal Marketing System are as follows:

1. Cost Reduction: A horizontal marketing system helps businesses provide their customers with diverse offerings and operate on a large scale. It means that with the help of a horizontal marketing system, a company has to spend less on different marketing tools.

2. Brand Awareness Build-up: After the development of a new brand, a company finds it difficult to build trust and awareness among customers. A horizontal marketing system can help the business in building trust and creating awareness among the customers at a faster pace than a vertical marketing system. It is so because it becomes easier to reach out to new customers and build a brand name when a company teams up or collaborates with a company that is already dealing with the same background.

3. Unlimited Sales Opportunities: A horizontal marketing system helps businesses connect with a large demographics range. For example, Apple collaborated with Starbucks and Nike and reached out to different demographics with both. With Starbucks, the company appealed to coffee drinkers or MAC users. However, with Nike, Apple reached out to sports people, etc.  

4. Better Market Penetration: The horizontal marketing system helps in speeding up the process of market penetration.

5. Greater Market Share: By capitalising on the expertise of each company involved in the collaboration, this system helps in capturing a greater market share.