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Vertical Marketing vs Horizontal Marketing Which is right for you

Written by: Jay Lipe

Article Overview: 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 Marketing vs Horizontal Marketing Which is right for you

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/

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