What on earth is a “vertical” anyway?

For those who have never really known (or perhaps even cared!), here are some “formal” definitions: Vertical Market  and Horizontal Market 

So what?

Well let’s start by saying that in the main, marketing is largely common sense. Clearly it makes sense to offer your product or service to people who have a need or an interest in it as opposed to asking everyone just in case (although this approach is still widely championed by the few).

It makes it a lot easier for your sales people too if the group they’re selling to have similar problems – ideally solved by your product or service. Of course as a business if you can sell to a niche you can dominate , you can name your price and maintain your  margin…at least that’s the plan.

The converse is trying to sell to everyone, not controlling the price in the market, having to discount, eroding your margin…going bust slowly. It’s happening more and more in B2B and organisations are starting to realise that a “volume” sales and marketing strategy  is simply not going to cut it as this hyper-competitive marketplace evolves.

So in an attempt to address the challenge organisations often elect to “go vertical”. I.e. to pick a smaller group or an industry and focus on that instead. That works (if you do it well) a bit.

The problem is that too often organisations think that “going vertical” means simply re-organising the account teams and creating P&L responsibility for the person running each one. I.e. You now run “Automotive” and you have a target of £5OM – good luck.

Of course addressing a specific market requires a good deal more than a re-org of the sales team and targets. If you want what you’re doing to work, you may need to do a little more than add “Automotive” to the top of all your standard brochures or product literature. To be successful in a vertical market to you need first to understand it well enough to know if you have a proposition that actually makes any kind of sense in the space. You need also to understand if that proposition is in any way unique, or interesting, or valid or competitive…and if you can really deliver it. So it’s not a case of simply taking your existing proposition, sticking a new label on it, hiring a salesman from that “vertical” and off you go. That way lies doom…usually about 9-12 months later when you realise it’s never going to work out.

Of course you may also have to accept that life is just not that straightforward.

More often than not, the world will not organise itself in an orderly fashion around the neat names you had in mind for the new teams.

You may find, if you do just a little research, that what you have actually doesn’t fit “a vertical” but more likely a small group of companies with similar issues…

So for example, an innovative hedge fund may have more in common with an online gambling company than a retail bank (thank you Paul Bevan). Sounds obvious? Yep, but a hedge fund would sit in the traditional “Financial Services” vertical and you’d be unlikely to find  an online gaming site in the same place (!).

The other common error is making your vertical so large it may as well be horizontal. So Financial Services covers…Retail Banking, Investment Banking, Hedge Funds, Funds (generally), how many types of insurance are there? Pensions, investments etc.

Do you think that the conversation you have and the proposition you make to a Retail Bank is the same as you’d make to and Insurance broker? Do you think they think they consider themselves to be part of a huge and undefined market with the same issues and challenges?

That doesn’t mean that getting your proposition nailed and in front of people who instantly understand its value is hard, or complex or costly. In fact it’s the complete reverse (remember marketing is really just organised common sense!) . The key is not to be fooled into thinking that the job’s done, once the teams all sit under a nice neat heading.  That way lies doom, all your competitors and another year of fighting your way to your number.