Marketing is aimed at raising brand awareness in order to bring attention to a company’s products and services and ultimately prompting sales. In order for marketing to work, a business needs to decide which demographic is in their target audience. In a vertical market, the target audience is less broad than a horizontal market, and is a specialized sector of the economy that focuses on a specific industry and caters to its niche. The vertical market hones its marketing towards that niche and works interconnectedly with companies that are also focused on a particular niche, product, or service. A vertical market is so specialized that it has its own set of business practices and companies that want to join a vertical market network may find it challenging as the standards are high.
More about Vertical Markets
Horizontal markets as previously noted cater to a broader audience, but vertical markets work to attract a certain group of customers. In a vertical market, companies are solely focused on products and services that are similar and related to each other. These goods are usually in demand by a niche group of customers. An example of this would be people who only buy organic groceries. There are several organic chain grocery stores that are in a vertical market. They want to attract this specific set of customers for their products and services. Businesses in a vertical market typically sell products that are of higher quality and standard. These companies do not allow just any organic company to come on board. Vertical market companies want to ensure the products and practices of the business fall into a particular niche and follow particular business practices. This high barrier of entry into a vertical market makes it more difficult for any specialized business to jump in with both feet. Instead, there is a type of vetting protocol.
Marks of a Vertical Market
To specify the characteristics that make up a vertical market, the following list explains each of the facets of vertical market traits:
● Specific Industry– Vertical markets do not work across multiple industries, but instead focus on speciality industries such as beauty, health, organic foods, etc. Naturally, companies who work in a vertical market are very well equipped with the information and processes that generate success in business.
● Niche Market– Because a Vertical Market is specialized, it seeks to provide goods and services to consumers with specific demands and needs. These vertical market companies are required to have very strong relationships and efforts of engagement with their customers in order to understand their target audience and provide for their specific needs. This narrow audience is well studied and researched. Vertical market businesses are experts in their field.
● Strong Customer Base– The consumers in a vertical market, are loyal customers and usually able to spend more money on these highly specialized niche products. Vertical market customers are consistently sticking to their brand and coming back for more, forming brand loyalty within this niche customer base.
● Specific Industry– Vertical markets do not work across multiple industries, but instead focus on speciality industries such as beauty, health, organic foods, etc. Naturally, companies who work in a vertical market are very well equipped with the information and processes that generate success in business.
● Niche Market– Because a Vertical Market is specialized, it seeks to provide goods and services to consumers with specific demands and needs. These vertical market companies are required to have very strong relationships and efforts of engagement with their customers in order to understand their target audience and provide for their specific needs. This narrow audience is well studied and researched. Vertical market businesses are experts in their field.
● Strong Customer Base– The consumers in a vertical market, are loyal customers and usually able to spend more money on these highly specialized niche products. Vertical market customers are consistently sticking to their brand and coming back for more, forming brand loyalty within this niche customer base.
Vertical Market Examples
As previously distinguished, horizontal markets serve a broader consumer base while a vertical market caters to a specific set of customers. Walmart and Amazon are great examples of a horizontal market. They sell products across hundreds of industries such as furniture, makeup, school supplies, groceries, and more. Many new startups can get their foot in the door in these types of horizontal markets. In contrast, a vertical market is highly specialized and only sells a specific set of items that are interrelated. Etsy is an example of a vertical market because it only sells homemade products. Whole Foods is a vertical market grocery store because they only sell food products that are considered healthy or organic. Uber and AirBnb are also examples of successful businesses in the vertical market.
Vertical Market Advantages
There are many benefits to participating as a business in a vertical market which include:
● Cost–effective Campaigns– A business in the vertical market may have to spend less on marketing efforts because their target audience is so narrow. Not that they may not cross to other audiences at times, but because their target base is highly specific and very well understood, the campaigning efforts do not have to be as extensive as those in a broader market. The loyalty of niche customers also gives businesses a sense of security. The way companies are so knowledgeable in a vertical market increases their efficiency which always tends to reduce costs because their operations become so streamlined and consistent.
● Less Competition– Because vertical markets present a higher barrier to entry, there is less competition in the vertical market field. This enables business in the vertical market to be more profitable and secure because they are not trying to beat out the others.
● New Ideas– In a vertical market there is more room for innovation and the introduction of new ideas and practices in businesses, products, and services. Vertical market businesses have more financial stability to invest in research and development. This helps them beat out the competition and stay on top.
● Higher Profit– A vertical market business may bring in more earnings because the products are usually specialty products that the loyal customer base is willing to pay more on purchasing. Companies feel more confident in charging higher prices because they know their strong consumer base will continue coming back and paying what it takes to get their niche products.
● Less Competition– Because vertical markets present a higher barrier to entry, there is less competition in the vertical market field. This enables business in the vertical market to be more profitable and secure because they are not trying to beat out the others.
● New Ideas– In a vertical market there is more room for innovation and the introduction of new ideas and practices in businesses, products, and services. Vertical market businesses have more financial stability to invest in research and development. This helps them beat out the competition and stay on top.
● Higher Profit– A vertical market business may bring in more earnings because the products are usually specialty products that the loyal customer base is willing to pay more on purchasing. Companies feel more confident in charging higher prices because they know their strong consumer base will continue coming back and paying what it takes to get their niche products.
