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How do you define vertical and horizontal marketing?
Vertical marketing is a term used to define
a company's approach towards targeting that focuses on specific
industries. For example, a software vendor might say "We
concentrate on the following vertical markets: wood component
manufacturers and thermoformed plastic manufacturers."
Vertical markets are most often identified using the Standard
Industrial Classification (SIC) system. When renting a list
for a direct mail campaign, the list broker typically will
create a list comprised of companies who have similar SIC
codes—and therefore are in the same industry.
To learn more about vertical marketing using SIC codes, visit
www.osha.gov/oshstats/sicser.html
One example of vertical software is MSA Herp.
MSA Herp is herpetology software, which catalogs the eating
and mating habits of snakes and lizards. Vertical markets
for this product are pet stores, zoos and state parks. One
benefit to targeting a specific audience like this is that
it’s easier to establish brand recognition for your
product.
Horizontal marketing is when you single
out a target audience that shares other characteristics, yet
can be found in all industries. Common ways to horizontally
market are by company size, by geography or by job title.
For example, you could horizontally market to IT department
heads found in companies nationwide. Here you’re less
interested in what industries these companies are in, and
more interested in the job function. You can afford to do
this kind of marketing when your software product has a broader
application and it’s less dependent on the vagaries
of certain industries.
As an example, a client of mine supplies Add/Move/Change telecommunications
services to Fortune 500 companies. This company typically
calls on IT department heads. In this horizontal market (IT
department heads at Fortune 500 companies), my client doesn’t
really care if the prospect manufactures cereal, provides
tax services or distributes musical instruments. As long as
the prospect satisfies the conditions of size (Fortune 500)
and job function (IT department heads), they’re a prospect.
How can a small business identify and reach targets
in its vertical and/or horizontal markets?
One way to reach prospects in either vertical or horizontal
markets is to follow their feet and eyeballs. Once you know
which events their feet travel to (i.e. trade shows, conferences,
special events), or which media their eyeballs travel across
(i.e. websites, e-mail newsletters, forums, portals, trade
publications). Where your buyers’ feet and eyeballs
end up is where you should be marketing.
Let’s take an example. If your company makes software
for coin laundries, then you’d want to consider the
Coin Laundry Association’s national
and regional trade shows. Here, you’d run into coin
laundry owners and increase your chances for a sale.
If however, you primary target is a horizontal one like
Management Accountants, you’d be better served focusing
your attention on the Institute of Management Accountants
and its trade shows and conferences. There you’d mingle
with many management accountants—from a variety of industries.
Prospects in a vertical industry will read publications
and visit websites whose content is tailored to their specific
industry (i.e. National Petroleum Magazine or Retail Baking
Today). If your software product is industry-specific, advertising
or public relations efforts that target these publications
could make good strategic sense.
If however your market is more horizontal, say Chief Information
Officers, then a more horizontal publication like CIO Magazine
and its website www.cio.com
would make better sense.
What are the advantages to horizontal or vertical
marketing?
Either of these methods forces a company to focus. By targeting
vertically or horizontally, you’ll be challenged to
find vehicles that appeal to this audience, and then speak
their language.
In addition, users are frequently willing to pay a little
more for an industry specific program, so a business may be
able to charge higher prices.
Users also tend to listen to their peers, and recommendations
or endorsements for your, let’s say, vertical software
product will spread faster by concentrating on a vertical
segment.
How should media and marketing opportunities be evaluated
in vertical and horizontal markets?
Start with some down and dirty research
How do you identify the paths your prospect’s feet and
eyeballs take? Ask them. If you are an existing business with
current customers, call 10 of them and ask them these three
questions over the telephone:
- How did you first hear about our company?
- Where do you typically learn about software products
like ours?
- What’s the best source of information about software
products?
In the movie All the President’s Men, the heroes were
counseled by Deep Throat to “Follow the money”.
Here I would counsel you to “Follow the information”.
Find the highest concentration of prospects
Just about every marketing vehicle from trade shows to publications
compile data on their audience. From this data you can determine
the total numbers of prospects who use this medium, plus you
can learn some basic demographics about them.
Call or email the organization responsible for a particular
vehicle. For examples, trade shows are typically run by an
exposition service company, and magazines or newspapers are
run by publishers. Tell them you’re interested in receiving
an exhibitor’s packet or media kit. Once you receive
it (or find the section on their website) , you’ll find
a wealth of information who their audience is.
Using this data, you can then compare each vehicle and see
which ones may generate the highest ROI for your marketing
efforts. Notice I said MAY. There are no guarantees in marketing,
you have to test, test, and then test again until you get
the results you want.
To start you on your journey for vertical marketing opportunities,
visit http://www.globalsoftwaresolutions.net/
Author Bio
Jay Lipe, aka the “Plan Man”, is the CEO of
Emerge
Marketing; a firm that helps growing companies improve
their marketing. He is the author of the book The
Marketing Toolkit for Growing Businesses (Chammerson
Press) which is available at major bookstores and online
at www.amazon.com.
He is also a sought after speaker and seminar leader, and
can be reached at (612) 824-4833 or lipe@emergemarketing.com
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