VMS Defination VMS stands for Vertical Marketing System.

In this concept, all the significant members of the product supply chain, i.e. the producer, the wholesaler and the retailer work in unity to satisfy customer demand in a more profitable and cost beneficial manner. Usually, the channel members are dispersed and each one tries to maximizes his profit at the expense of the other and ultimately this results in either of the following-

a. Poor quality product reaching the customer b. Unsatisfactory service system c. Passing the incremental costs to consumer

Example- HLL, GE or P&G can obtain strong cooperation from resellers regarding displays, shelf space, promotions and price policies.

Vertical marketing systems can take several forms which can beCorporate VMS one member of the distribution channel owns the other members but each continues to perform a separate task. Administered VMS One member of the channel is large and powerful enough to coordinate the activities of the other members without an ownership stake. Contractual VMS Independent firms are joined together by contract for their mutual benefit. An example can be a retailer cooperative or a franchise organization.

Administered VMS: Administered vertical marketing strategies are channel leaders that have enough money and resources to control the direction of the channel. They have more control then any other channel member. Example: would be Microsoft. Administered VMS-Joining producers, wholesalers, and retailers in the production and distribution of products. There are three major types of vertical marketing systems, and each uses different means for setting up leadership and power in the system.

Administered VMS Channel members are independent with a high level of inter organizational management by informal coordination. Agree to adopt uniform accounting policies etc., and promotional activities. One Channel member dominates, has a channel leader. Examples: Wal Mart Toys R Us Kelloggs Pepsi Coke GE P&G McKesson Corp JC Penney Campbell

Channel Leader-Effectiveness of channel hinges on channel leadership. Leader must possess channel power. Power can come in the following forms: Reward--provide financial benefits Expert--be the expert compared with other members Referent--strongly identify with leader Coercive--punish members