Final answer:
A formal agreement in a contractual vertical marketing system aims to coordinate the distribution process, enabling efficiency and control in the supply chain, often resulting in a standardized customer experience.
Step-by-step explanation:
In a contractual vertical marketing system, the purpose of a formal agreement between the levels is primarily to coordinate the distribution process. This type of system involves legally independent businesses at different levels of the market engaging in a contract that defines their working relationship. The goal of the agreement is to streamline operations, enhance efficiency, and improve the overall effectiveness of the distribution channel. Such agreements often encompass franchise operations, wherein the franchisee agrees to adhere to specific operational methods and standards of the franchisor in exchange for the right to sell its products or services.
The integration provided by a vertical marketing system allows for control over the supply chain, which can result in increased profitability and more consistent product quality and service delivery. This system is evident in numerous industries including fast food chains, where franchises like McDonald's have used it to create a standardized and predictable experience for customers across various locations.