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What Is A Vertical Market?
Posted By: Maria on 12/22/2004 11:35 AM (CST) 139 Points
Hello!
I'm trying to understand the difference between the horizontal and the vertical market and the way to divide them.

Thanks in advance!
Maria

Posted by: davidr Member Response
12/22/2004 11:40 AM (CST)
Take software as an example. Horizontal software would be useful in any type of business (think word processing, spreadsheets, etc.) Vertical software would address the unique requirements of a certain type of business (thin of software in a hospital that checks people in, tracks medication, etc.). Beware overusing the term vertical when you really mean "target market". I hear people refer to "vertical markets" of Mac users, Citrix MetaFrame users, etc. Those are target markets, not verticals.
 
Posted by: Peter (henna gaijin) Member Response
12/22/2004 12:11 PM (CST)
The terms can also be used in terms of expansion.

Horizontal expansion is adding greater sales into new products. For example, if a company sells carbonated soft drinks, a horizontal expansion would be to start selling fruit juices.

Vertical expansion is when you add to your capabilities related to current products. If the carbonated soft drinks company originally just sold their products through stores, but now has started making machines which would sell their product, this would be a vertical expansion.
 
Posted by: Wiglaf Accepted Answer
12/22/2004 12:11 PM (CST)
I second to DavidR's answer.

Verticals are focused on single industries, or along a whole supply chain focused on producing a single product.

Horizontals are focused on solving a like problem within several industries.

In some cases, if a horizontal market is identified, the attack strategy will consist of creating sales teams that are focused on separate verticals to make up the overall horizontal market.
 
Posted by: mcherif* Member Response
12/23/2004 3:10 AM (CST)
Hi Maria,

Building on what Peter & Wiglaf have said, I would add that each of these strategies has its own strengths & weaknesses, and that both of them imply losing focus, which is not ideal if you want to be a leader on your market:

Horizontal expansion:
Benefits: if the current market is saturated or if your company is already the leader, it is a way to grow sales by competing in another category.
If your company can’t compete head on with the leader, it’s a way to attack another sub-market where the potential for gaining leadership is higher.
Risks: diverting resources from your core market and losing focus, which will definitely prevent you from becoming number 1, even in the second market by the way…
This is one of the reasons why financial analysts systematically underrate big conglomerates that are active in many product categories.
Vertical expansion:
Benefits (among others): taking back the margins your suppliers or distributors were making, ensuring availability of top quality components instead of depending on suppliers, ensuring high distribution levels…
Risks: again, losing focus on your core business: the know how of a supplier or a distributor is quite different from a manufacturer’s, rarely can a company excel in such different areas. There are also risks of conflicting interests, for ex. the logic of a distributor would be to distribute your competitor’s products, whereas from a manufacturer point of view you might want to limit this distribution.

Hope that helps,

Merry X-mas

Mehdi
 
Posted by: AndrewS Member Response
12/23/2004 4:33 AM (CST)
These are your vertical markets as defined by SIC92 (Standard Industry Classification 1992) and their sub headings:

http://www.nbcc.co.uk/sic/sic92idx.htm

I hope this helps clarify vertical markets for you, and their 'official' segmentation.

Good Luck
 
Posted by: Maria Author Response
12/23/2004 6:40 AM (CST)
Thanks to all of you and :

VERY MERRY CHRISTMAS, dear marketeer colleagues!!!


My best wishes to all of you for professional and personal success!

Maria
 


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