Not everyone is your customer; we know it sounds brutal but it is just the utter truth!

Not all firms need to attract the entirety of the market to be successful. The sooner you realize this, the better!

You need to put your best foot forward in deciding who your customers truly are and what markets cater to them. This way, you can create a comprehensive plan to grab their attention and subsequently their market.

See, sometimes the product itself determines the market it will thrive in, but sometimes the firm needs to pull the trigger. And at those times, you need to take into consideration the two market types: Vertical & Horizontal.

One is just as important as the other for the operations of a smoothly running business ecosystem.

Employees discussing business verticals

Simply put, business verticals or vertical markets are those firms that cater to one discrete industry and all its customers from top to bottom. Whereas, a horizontal market cuts across a series of vertical markets.

In this blog, we’ll be digging a little deeper into what business verticals are and how they shape the industry that we know of.

So let’s begin from the basics:

 

What Are Business Verticals? (Definition)

Each business needs to discover a market that they believe they can serve in the most optimum manner possible. That is, finding your niche is of coveted importance.

When any business prizes itself at providing exclusively for a specific industry or demographic, they are called business verticals or vertical markets.

These “verticals” are businesses that aim at targeting specific audience needs and providing specialized services for the same.

Some characteristics of business verticals are:

  • Business verticals don’t traverse within various industries.
  • They set out with a mission to amplify their position in a single, particular market.

Some broad examples of business verticals include insurance, banking, hospitals, retail, real estate, government, and more. Verticals can also be subcategorized into narrower niche markets.

Now obviously, if there is a vertical market, there is bound to be a horizontal one too.

So yes, although a far cry from vertical markets, horizontal markets are also just as equally vital and formative as vertical markets. Let’s try and deduce the difference between the two!

Read more: Market Requirements Document (MRD): What is it & How to Create it?

Difference Between Horizontal & Vertical Markets

A business vertical is all about scaling only within an already existing market whereas a horizontal market will allow a business to diversify itself and be omnipresent in multiple industries at a given time.

That means a business that sells in a varied number of industries is a part of horizontal markets.

Horizontal markets will try to maximize their outreach to each and every type of audience whereas vertical markets aim at a targeted consumer base.

Employees analysing business vertical research reports

Also, horizontal markets are the more basic of the two markets as they host a varying range of customers without further concerns about the industry they fall into while the vertical market is quite the opposite.

How about we grasp this better with an example?

A company like Whole Foods that only caters to its consumers’ needs for organic supplies will be considered as a business vertical.

Whereas, a big box company like Walmart is an example of a horizontal market because it accommodates itself in a diverse range of business activities.

Another excellent example of a horizontal market in the SaaS industry would be Bit.ai, a rich and highly interactive document collaboration platform that caters to a variety of different industries with their documentation needs.

With the help of its foolproof, engaging, and adaptable features like real-time collaboration, it surely captivates every user despite what industry they are in.

Back to the topic of business verticals, let’s take a look at how operating in a vertical market can prove beneficial for your firm:

 

Benefits Of Business Verticals

Business verticals, when implemented in the right business and in the right manner can create long-standing and resounding results. Some benefits of business verticals are:

  • It takes a village to understand the intricacies of business and by narrowing down a certain niche, business verticals become more able at assessing and serving the needs of their consumers.
  • They enable better outreach from campaigns as they are directed at specifically targeted audiences.
  • Developing strategies is easier as they have a narrower customer base and thus, they can leverage their position.
  • With increased knowledge of an industry, a firm can be better prepared for external stimuli like changing economic issues, new market trends, variations in in-laws, etc.
  • As verticals target specific industries, there is very little competition in newly-developing niches which helps to generate sales and attain higher market positions.
  • From a consumer’s perspective, a business vertical offers a simplified solution to the particular needs of the customer and strives to offer them the best resolution possible.

Just like the many advantages, business verticals can also be a cause of concern when not planned or thought-out correctly, whereas sometimes external factors do the deed and leave behind severe problems.

Read more: Business Documents: Definition, Types, Benefits & Steps to Create Them!

 

Disadvantages Of Business Verticals

Let’s explore some of the drawbacks of business verticals:

  • Distinct markets, although one of the biggest pros of vertical markets, also turns out to be a major con. Small markets bring in a smaller clientele, thus limiting exposure and loss of potential earnings.
  • There’s also plausibility to the idea that when a firm increases its pricing policies owing to its leading market position, it tends to shun out a major chunk of its prospective customers from its already compact audience.

A business vertical report

  • Along with all this comes the added risk factor, businesses tend to fall and downsize with changing trends, and other factors, this condenses an already concise and niche market.
  • Vertical markets need to be assessed accurately enough to be able to understand if a business can survive in the specified niche or not, and a market as intricate as vertical won’t make it any easier on you.

To understand business verticals better, let’s glance through some examples…

 

Some Examples Of Business Verticals:

  1. Many pet-related brands and stores like ‘PetSmart’ cater to niche markets of your pet’s grooming and health needs. They exclusively provide pet-related products in their stores and are a great example of business verticals.
  2. Up & coming makeup and beauty brands that have specifically started targeting skin types of people of color also fall under the category of vertical markets.
  3. Consider a bank that specializes in home loans, it would also be a vertical market as only the potential home-owners who are looking for homes would revert to such a bank. That means the bank offers its services to a particular group of people in a specific industry; real estate.
  4. Online institutions that offer educational courses also fall under this category of business verticals as they cover every course imaginable to a certain audience and fully make do of their niche; the educational industry.
  5. A vegan restaurant serving only vegan food provides for only people who adopt a certain style of lifestyle namely veganism and thus places itself in a distinct market type.
  6. Software customized and created specifically for a certain company’s needs and its management also falls under the umbrella of vertical markets.

 

Conclusion

The type of market plays a very pivotal role in where your business will land. One wrong selection of the type of market could be detrimental to your business.

While horizontal markets seem like a lucrative situation, trust us, the wrong business in the wrong market, is just a catastrophe, waiting to hit.

That’s why knowing which type of market is the most suited for your company is the baseline for the inception of a good business.

This choice will help you make better decisions in a variety of spheres and will aid you in creating a sound business plan that will stand the test of time.

Now, before we wrap things up, let’s revisit the important things to remember while deciding if a vertical market is a right choice for your business.

  • Choose the right market.
  • Have a comprehensive understanding of your niche.
  • Be clear about your target audience.
  • Analyze market value.
  • Don’t put all your eggs in one basket: put into effect different strategies to maximize your positioning in the market, rather than just waiting out on a single strategy.

Operating in a vertical market is definitely a high-risk, high reward situation. You never know when there’ll be a paradigm shift and what consequences it will bear.

Knowing who your core group of customers are and how you can appeal to them, will help you survive in the long run.

Now that you know all that you need to know about business verticals and the other types of markets, decide your market type, your target audience, and devise a sure-fire plan.

Whatever you choose, good luck!

Further reads:

Contingency Plan: What, Why, and How to Create it?

Porter’s Five Forces Analysis to Outwit your Competition!

Go-To-Market Strategy Guide for Businesses

What is SWOT Analysis: The Complete Guide