Know-How Exchange : Strategy

Dear Hans

The modern usage of Vertical and Horizontal Marketing are intrinsically the same as the classical definition, but are inclusive of modern media.

A vertical market can be two things, though by definition, one should be sub-grouped as an affinity market. In industry, the vertical markets are those where there is a common interest, often exploited by the advertising media. Trade Magazines fit well into this category with “What’s New in Industry” addressing manufacturing as a sector, “Process and Control” addressing the narrower vertical of process automation and “The Potato” (I’m not joking – the Editor used to be an ex Squadron Leader who could drink any marketing manager under the mess room table) addresses everything you can do with a potato. “Potato Grower” on the other hand looks at the agricultural end of the business.

What I call so-called verticals have become de-facto vertical markets by definition, so a piece of software might be developed for the vertical market of Lawyers, or Accountants or Estate Agents or Dentists. Even an application for a more generic piece of software such as a spreadsheet will allow it to develop niche markets which are vertical in nature. Come up with a macro to unwind wonky derivative positions and your vertical market would be inept or corrupt merchant bank traders!

The affinity type of vertical is where the product is marketed to people who tend to do the same thing and who can influence each other, such as nurses and teachers. A vertical marketing application to these two groups would be selling thermometers and exercise books, but an affinity marketing exercise would include holidays, cosmetics and gym club subscriptions (Because market research has shown that most of the said population is interested in these things.)

Horizontal Markets or Horizontal Marketing is found where you take little or no notice of what people do for a living. Everyone needs spreadsheets, so you sell them to all types of business. Expensive spreadsheet solutions such as “n” dimensional pivot tables like Tableau Software will only appeal to companies which do advanced statistical analysis and visualisation, but as they could be in any manufacturing or service sector, this is still a horizontal market. The buyers occupy a niche in it!

Likewise, My CRM and Sales Forecasting solutions will find a use with any company, but to get the best out of the sales forecasting aspects, they really need about 10 people to be involved in selling, from the front desk, to the sales team, marketing team and directors. I therefore have to identify companies with a turnover of around 5M and at least 25 employees across all vertical niches. Vertical niches in horizontal markets are also useful and often defined by past success in that area. The most common horizontal market delineators are turnover, employees or where they are located.

If I really want to impress a client, I will seek to understand his own vertical market and the specific needs of forecasting and CRM within it. I can do this for all High-tech and Industrial businesses, but I havn’t got the foggiest why a solicitor wants to use my CRM system until I ask him, so I do not actively market to them. If they want to buy from me, I ask the relevant questions and gain the knowledge I need at my own time and expense.

The two terms are often combined either inclusively or exclusively, i.e. a product can appeal only to a particular vertical sector or application sector in a given horizontal market or it can appeal to either a particular application which a company is engaged in or any company which meets other specific demographics. For example SMS text messaging from a CRM system is a tough one, because it is useful to anyone who has a list of contacts with mobile phone numbers in their database records. Verticals in this would be Automobile Service, Dentists, Alternative Health Types, Lenders, and Nurseries and so on. There is no single vertical and the horizontal is defined by a need to mass communicate by text.

If you want to define that horizontal market more closely, it turns out to be “Companies which perceive the value of spending £500 per relevant employee to empower them to send out timely SMS Text Messages.” Try finding that target group through demographics – many have tried, few succeeded, yet the need remains.

Hope that this doesn’t confuse you too much!!


Steve Alker

SalesVision and Unimax

Whoops! I missed the B2B and B2C comparisons. A vertical market in B2C is more complex because marketers have muddied the waters by interchanging the terms.

In B2C marketers are always looking for identifiable segmentation such that they don’t waste their marketing spend on people who are unlikely to buy their products. So for instance, the non-glossy “Hobo-Weekly” would be a rotten place to advertise underarm deodorant, but a great place to advertise a hostel. Vogue won’t score heavily on the marketing calendar for Fly Fishing Rod Makers, but thanks to Madonna, might attract the expensive gun-makers like Purdy.

B2C Marketing tends to be horizontally segmented and then segmented by interest. Horizontal bands are usually the Socio-Economic data of ABC/123 and so on, defining firstly the professional class and secondly the income group of the media’s viewers or readers. Flogging Sun Seeker powerboats to a magazine with a broadly BC/3 readership won’t be very successful!

Vertical markets in B2C are really interests and hobbies, so there you have Photography, Cars, Fishing (There’s one successful magazine called “Totally Carp”, so someone has a sense of humour) Advertisers are drawn to these journals because they appeal to the people who buy the things they make. A spin off from this is to rent the mailing list of a B2C magazine for direct mail. This can often work in unusual ways, such as mailing up-market estate agents details to a magazine with an A/1 circulation such as “Private Jet”

That said, most B2C stuff is segmented on economic demographics and further by geographical demographics. The vertical nature of B2C is self defining – if the stuff you sell is in the title of the publication, then maybe your advert should be there!

Steve

PS One of my favourite magazines is “Horse and Hound” but I don’t hunt! My daughter (13) however owns a pony and does. So ironically, you could place an advert for “Novel Neural Statistical Software” in “Horse and Hound” and I’d read it. I’d not be the only one either as it is widely read by Merchant Bankers who would like to hunt but will probably never get an invitation to do so!

Hans:

Great response from Steve Alker. Truly one of the great marketing minds in the UK.

Steve has given a very complete answer, I just thought I'd add something I found through a web search, from www.SearchCIO.com:

"A vertical market is a particular industry or group of enterprises in which similar products or services are developed and marketed using similar methods (and to whom goods and services can be sold). Broad examples of vertical markets are: insurance, real estate, banking, heavy manufacturing, retail, transportation, hospitals, and government.

Vertical market software is software aimed at a particular vertical market and can be contrasted with horizontal market software (such as word processors and spreadsheet programs) that can be used in a cross-section of industries."

So, vertical marketing is marketing into a vertical market niche.

Here is a useful whitepaper on the subject.

Hope that helps.

ChrisB