August 12, 2009
What Is A Vertical?
The standard advice to software vendors is “go vertical”. It can mean the difference between success and failure. However, how you define your vertical markets can make a big difference.
Too many vendors define their markets relative to how they think, not relative to how the target customers think. The only way to understand how the target customers think is to ask them. Then select your definition of verticals to balance effectiveness with efficiency.
What does industry verticals mean?
A vertical segment describes related industries, such as a supply chain, while a horizontal segment describes unrelated industries which share a common characteristic, such as “retail”.
What is vertical marketing?
Vertical marketing is product and promotion efforts targeted at specific industries. Many benefits are derived from vertical marketing. These include messages that are better received, credibility, marketing budgets that go farther, less competition, etc. A common mistake is the failure to understand the verticals you choose to target. The definition of a vertical is not what the vendor thinks; it is what the prospects think.
Definition of a Vertical:
A vertical solutions provider (VSP) is a company that focuses on delivering industry-specific application hosting services to customers in a specific vertical market such as manufacturing, health care, retailing, or financial service. A VSP is a type of application service provider (ASP that enables a company in a particular vertical market to take advantage of Internet technologies and applications without having to acquire the know-how and other resources on its own. For example, a retailer could hire a VSP to configure and administer its shopping cart, inventory management and credit-card processing applications on a continuing basis, saving the company the need to hire, train, and pay its own administrators.
Companies seeking VSP services may be independent dot-coms or other start-ups or they may be companies that are launching an e-commerce branch of their existing business.
Vendors often define vertical markets as groups of customers who provide development and marketing efficiencies, for example, a set of customers having the same product needs are often defined as a vertical. A good example is the market for manufacturing software. That market is usually subdivided into process and discrete. While this is meaningful from a product function point of view, it may not be very meaningful relative to marketing.
Vertical Marketing Motivation:
Note: Use Vertical Marketing to Grow Your Customer Base
The benefits of vertical marketing are immense. For example, vertical marketing can open new doors to where there may be less competition. Brand recognition is easier to establish in a specific industry. Members of a specific industry give more credibility to their peers, making references, case studies, and media opportunities more powerful. Trade publications are interested in industry specific stories that target the magazines’ focus. Numerous opportunities exist by targeting traditional marketing methods at specific industries. On the revenue side, customers are often willing to pay a little more for an industry specific program supported by people with industry specific experience.
Vertical Market Solutions:
The products that are designed to meet the specific needs of a particular industry; for example: insurance, restaurants, churches, contractors, and government situations. Examples of well-known vertical market solutions are Shelby Systems for Churches, Blackbaud for fund raising, Squirrel Systems for restaurants, Timberline for estimating and job costing, Yardi for property management, and American Fundware for government.