In the business world, companies build their sales strategies around a focus on a particular “market”, or group of potential consumers. These markets can be either vertical or horizontal, depending on the service or product offered by each brand.
Vertical markets focus on a specific niche, sector, or industry. Companies who target vertical markets are attuned to the specialist needs of their target audience, as well as the trends and patterns in the wider marketplace. Here’s everything you need to know about vertical markets.
Vertical markets are made up of companies offering specific groups and services to meet the needs of a certain industry or niche audience. In a vertical market, similar products, and compatible services are often developed and promoted to a designated set of customers.
The global business landscape provides a multitude of opportunities for all kinds of organizations. Vertical market providers concentrate on making their solution the best possible offering for a sub-section of people from a unique sector. For instance, a company in the healthcare industry might focus on “hospitals” as their chosen vertical market.
Depending on the business, vertical markets can be either broad or extremely refined. For instance, the “technology” landscape is a vertical in itself. However, companies can also choose to focus specifically on certain groups within the technology field. This is how we get vertical markets for software, hardware, artificial intelligence and so on.
While vertical markets are excellent for giving companies a specific audience to concentrate on when building relationships, they can have a higher barrier to entry for new companies.
Before we dive into some vertical market examples, it’s worth getting a better understanding of how they work. Fundamentally, there are three types of vertical markets, defined by the unique distribution channels they choose to generate profits. Distribution channels are the organizations and partners involved in moving a product or service from a producer to a customer.
The three core types of vertical markets include:
Notably, regulatory compliance requirements can also influence how certain vertical markets work. For instance, the healthcare landscape is a highly regulated industry, in which companies and providers need to meet with certain requirements or risk fines.
To fully understand how vertical markets work, it can be helpful to get an insight into the opposing option: the horizontal market. Horizontal markets are more diversified than vertical markets. Their products and services meet with the needs of more than one industry or customer base.
For instance, a company selling bottled water doesn’t have one specific market to sell in. A horizontal market could focus on a specific industry or a range of different sectors with a multitude of customers. For instance, while a vertical market business might focus entirely on software for small businesses, a horizontal market company could create applications for a range of industries.
Horizontal marketing does provide companies with a broader target audience to work with than a vertical market, but it comes with its own challenges. Marketers need to find a way to connect emotionally with a wide range of different customers at the same time.
Promotional and branding strategies are often easier for companies in vertical markets, because they can develop a deep understanding of their target audience, and create campaigns accordingly.
All kinds of markets can have their unique benefits and disadvantages to consider for different company leaders. Brands that operate in a vertical market often have an excellent opportunity to position themselves as credible thought leaders in their industry. Because they focus on a specific area, they’re seen as more knowledgeable in a certain space.
Vertical markets benefit from:
On the other hand, vertical markets do struggle with a limited customer base, and potentially limited revenue in some cases. As a result, it’s important for companies to research each vertical market carefully before committing to an audience.
One of the best ways to understand how vertical markets work is to look at some vertical markets examples. There are plenty of options to consider, including:
Retailers can also focus on vertical markets. For instance, a B2B company selling machinery may concentrate on only selling machines specifically relevant to the automobile manufacturing space.
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