With the economy at a downturn, companies throughout many industries are finding it difficult to maintain the same profits that they experienced in the mid 2000’s; that is, before the subprime mortgage crisis. During tough economic times, rivalry between companies heavily increases; this means, companies need to work especially hard to remain competitive and visible in consumers’ eyes. In our Marketing textbook, Armstrong and Kotler reinforce the importance of developing channels. A very powerful way of working together to combine financial, production and marketing resources to accomplish more than any one company could alone is called horizontal marketing system.
Companies often join together to market an existing product, or create a new distribution venture to market a new product because they lack tangible and intangible resources, physical and capital resources, and an established brand name in order to reach customers effectively for ultimately a successful joint effort. A great example of horizontal marketing systems that I found is how Apple and Starbucks announced music partnership in 2007. The purpose of this partnership was to allow Starbucks customers to wirelessly browse, search for, preview, buy, and download music from iTunes Music Store onto their iPod touch, iPhone, or PC or Mac running iTunes. Apple’s leadership in digital music together with the unique Starbucks experience synergized a partnership to offer customers a world class digital music experience.
Apple benefits from this partnership with higher iTunes sales because Starbucks has a lot of loyal customers that take the time to visit, relax and enjoy the unique Starbucks experience. When Apple first introduced its iTunes music store, it hoped to sell one million songs in six months, but to its surprise, Apple sold over one million songs within the first six days of its iTunes music store opening. With such loyal online music consumers, Starbucks benefit’s 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 gain something of greater, than otherwise would be possible if they somehow attempted this strategy independently.
MKT 301 Section E