Definition: A Horizontal Marketing System is a distribution channel arrangement between two or more organizations on the same level (but unrelated market) to join and get the benefits of each other’s expertise and economies of scale.
This strategy helps save money, time, and effort and earns them profit, and increases brand awareness.
Horizontal marketing is more common in small to medium-sized industries that lack funding and resources. So, they partner with others to compensate for their shortcomings. These days, the horizontal marketing system is gaining a lot of momentum due to fierce competition and new entrants’ desire to capture market share.
Example of Horizontal Marketing
A famous example of this strategy is the partnership between Apple and Starbucks.
Apple exclusively allowed Starbucks’ Wi-Fi users to download songs from the iTunes store when they launched iTunes. Apple sold over one million songs through this partnership within the first six days of the launch, and Starbucks was a major contributor.
The collaboration can be between two manufacturers to optimize resources and gain advanced skills, between wholesalers to cover larger areas at a cheaper cost, and between retailers to benefit from economies of scale.
Another example of a horizontal marketing system is the merger between Facebook and Instagram. This merger gave Instagram and Facebook a wider audience to market and sell their services.
Horizontal Marketing Methodologies
Organizations can have different methodologies to realize the horizontal marketing benefits.
- They can join and develop a new product and sell to a wider audience.
- They can cross-promote each other’s products.
- They can help each other to improve their projects.
- They can use each other’s distribution network to deliver goods or services.
Advantages of Horizontal Marketing
- Greater market share
- Benefits of economies of scale
- Cost reduction in operations
- Brand recognition
- More sales opportunities
Summary
Horizontal marketing systems are common these days. Here, two or more companies join to take advantage of market opportunities. Organizations can collaborate or merge together, and combine resources to form a big entity and grow.