Final answer:
A contractual vertical marketing system is a cooperative arrangement where members at different levels of the supply chain form contractual agreements to work together. By establishing contractual agreements, members can coordinate their activities and achieve common goals.
Step-by-step explanation:
A contractual vertical marketing system is a type of marketing system where members at different levels of the supply chain, such as manufacturers, wholesalers, and retailers, form contractual agreements to work together cooperatively. In this system, the members are bound by legal contracts that define their roles, responsibilities, and the terms of their cooperation.
For example, let's say there is a shoe manufacturer, a shoe retailer, and a shoe distributor. The manufacturer and the retailer may enter into a contract that specifies the terms of their relationship, such as the quantity of shoes to be supplied, the price at which the retailer will purchase the shoes, and any promotional activities the manufacturer will undertake to support the retailer's sales. Similarly, the retailer and the distributor may enter into a contract that outlines their working relationship.
By establishing contractual agreements, members in a contractual vertical marketing system can coordinate their activities, minimize conflicts, and achieve common goals. This type of system allows for greater control and coordination of the entire supply chain, resulting in improved efficiency and effectiveness.