Finance:Horizontal marketing system

A horizontal marketing system is a distribution channel arrangement whereby two or more organizations at the same level join together for marketing purposes to capitalize on a new opportunity. For example: a bank and a supermarket agree to have the bank’s ATMs located at the supermarket’s locations; two manufacturers combining to achieve economies of scale otherwise not possible with each acting alone to meet the needs and demands of a very large retailer; or two wholesalers joining together to serve a particular region at a certain time of year.

According to businessdictionary.com, a horizontal marketing system is a merger of firms on the same level in order to pursue marketing opportunities. The firms combine their resources, such as production capabilities and distribution, in order to maximize their earnings potential.

An example is Apple and Starbucks, who announced a music partnership in 2007. The purpose of this partnership was to allow Starbucks' customers to wirelessly browse, search, preview, buy, and download music from iTunes Store onto their iPod touch, iPhone, or PC or Mac running iTunes. Apple’s leadership in digital music, together with the unique Starbucks experience, created a partnership that offered customers a world class digital music experience.

Apple benefits from this partnership with higher iTunes sales as Starbucks has a vast and loyal customer base. When Apple first introduced its iTunes Store, it had hoped to sell one million songs in six months, but to its surprise, sold over one million songs within the first six days of launching. With such loyal online music consumers, Starbucks benefits from higher sales, increase in market share, and stronger customer loyalty. This example demonstrates how two companies can join forces to follow a new market opportunity. This opportunity allowed Starbucks and Apple to both achieve greater results than otherwise would have been possible if they somehow attempted this strategy independently.