What Is A Business Vertical?

Business verticals are products or services provided or offered by a company to a targeted market or specified group of customers. These products are usually seen as a subset of the various activities of a business, which includes all the products and services offered by a company. There are horizontal and vertical markets in business.

Vertical markets focus on a narrower customer base, specifically targeting them with products and services, usually within a specific industry. A horizontal market deals with a much wider target audience across multiple industries because their products or services are more widely applicable to a range of customers and scenarios.

In today’s economy and rapidly changing marketplace, businesses must be effective and adaptable to conditions to ensure survival. Due to this, businesses are incorporating verticals as a method to focus and stay ahead of the competition in the marketplace by really focussing on a key customer base that they can market their products to within a particular niche market or one where specialised services are required. Read on to find out more.

What Are Business Verticals?

To define business verticals you must first start by defining vertical markets. These market areas are targeted by companies as a way to offer products or services to a specific industry or group of customers. For example, if your customer base as a clothing company is teenage girls, then your target market would be defined as a vertical one.

Business verticals are simply a way of describing the products and services you offer which has a narrow focus on a specific type of potential customers. To take advantage of vertical markets in the business world, you must understand your specific market trends and offer very specific goods and services to that market.

Whilst targeting a niche market or industry might be worrisome from a marketing standpoint, if you nail the needs of your customers, then you can make a real name for yourself and maximise your business profits, whilst standing apart from any competitors in the area.

Can You Have Multiple Verticals?

Some companies or businesses specialise their focus on just one business vertical, while others focus on multiple business verticals. For example, a company might maintain several business verticals for its services, consumer products, and industrial products. Companies maintain several business verticals in order to diversify its risks and revenues.

This is different to horizontal markets, which don’t have specific vertical sales they wish to make to specific customers. Companies who offer multiple specific products to multiple specific industries aren’t operating in a horizontal market. You simply have multiple verticals. An example of a horizontal market might be a vacuum manufacturing business. Every house needs a vacuum, so there isn’t really a specific type of customer that’s being targeted here.

Understanding the differences between several types of business market is critical for a number of reasons. It helps companies and businesses alike understand customers better, and develop strategies specialised in retaining them and improving customer-business relationships. Furthermore, breaking down the business into specialised segments can make it easier to focus on improving each while tracking progress and measuring results.

What Are The Differences Between Vertical And Horizontal Markets?

When it comes to market based businesses, there are two main types of markets considered: horizontal and vertical markets. Each type of market offers its own set of benefits and drawbacks. It’s important therefore that businesses understand the key differences between them before incorporating them into their marketing strategy.

Vertical Markets Overview

Vertical markets are markets in which businesses offer products to a specified segment or industry within the market. Therefore, verticals are usually smaller and specialised. Niche.

Vertical markets usually require a greater level of focus and expertise from businesses, which also means there’s reduced competition in this market, which can provide a competitive advantage from the business’s point of view. Rather than fighting bigger companies on more generic products and services, verticals allow a business to really focus on how they can outperform their competition and rise to the top.

Another advantage of vertical markets is the fact that vertical markets tend to be more stable compared to horizontal markets, as they are not victims to fluctuations in the economy due to reduced competition. If you offer something to a specific customer type, it’s likely they’ll continue to need/want that product regardless of economic performance.

Horizontal Markets Overview

On the other hand, horizontal markets are markets in which products provided by businesses can tend to a wide range of problems or customers, making horizontal markets less specialised and much larger than vertical markets.

Whilst you have access to a larger customer base here, the lack of a specific customer type can make marketing tactics more difficult, and can often lead to new businesses failing to grasp what the average customer is looking for.

Horizontal markets, however, offer space and potential for growth, but also tend to be very competitive, as businesses have to contend with larger numbers of other businesses or rivals. This means that horizontal markets can become victim to economic fluctuations, as consumers might attempt to reduce spending and cut costs during this period.

Advantages Of Business Verticals

Business verticals have become a popular market for businesses to operate and provide specialised products in. There are a number of advantages to this approach, including the freedom to focus on specific markets and improve relationships to increase efficiency.

• One of the main selling points of business verticals is the freedom to focus on a specific market. This advantage can be beneficial for businesses that provide products or services that are used by specific audiences, allowing them to really target their customers with laser-like precision.
• Businesses operating in a vertical can easily customise their sales effort and marketing target, which will lead to an increase in sales and revenues.
• Furthermore, business verticals can assist businesses in building better and stronger business-customer relationships. By understanding the specific needs of customers, businesses can customise the product and services they offer to meet these needs, making returning customers much more likely.
• Another important advantage of the business vertical for businesses is the potential for improved efficiency and revenue. When business adopts vertical markets, they can eliminate and reduce extravagant or duplicate costs and processes, which can lead to reduced costs and business growth.
• Business verticals can often simplify processes and increase automation which in return reduces production time and makes products available at the required time.

Overall, business verticals offer a specific range of advantages for the business that adopts it. They can help businesses in focusing on improving efficiency and cutting costs, building stronger customer-business relationships and focusing on specific markets, reducing extravagant processes.

Disadvantages Of Business Verticals

When it comes to business, loss is both inevitable and critical for success. This is especially true when companies or businesses decide to change their strategy and specialise in a specific industry or product line, also known as creating business verticals.

Although business verticals is an efficient strategy with advantages, there are also some potential setbacks that companies venturing into business verticals should be aware of.

• One of the main disadvantages of business verticals is that it limits a company’s financial growth potential, flexibility and adaptability to changing times. For instance, if a business specialises in selling gadgets, difficulty arises when attempting to branch into other options, when the gadget business begins to reduce. This lack of stability will affect the business overall performance and it leaves you dependent on your niche industry’s economic performance over time.
• Another important disadvantage usually occurs when a company adopts more than one business vertical with each department focussing on its own independent tasks, this can make collaboration difficult and make it harder to share resources and knowledge across each department. This lack of cooperation can lead to reduction in efficiency and duplication of efforts. It may even lead to a competitive environment within the company rather than a collaborating environment.
• Looking from a financial perspective, business verticals can be a very risky strategy. For instance, if a company has set up different business verticals and is running as expected, each business vertical must meet its criteria to offset losses incurred in other verticals. Otherwise, it could lead to the downfall of the whole business.

Ultimately, it’s also advisable to remind companies that business verticals aren’t that easy to set or maintain. They require accurate and effective planning and execution, and as a business may still fail to improve in efficiency and profitability.

Therefore, all these factors need to be considered before companies can decide on whether to adopt the vertical market and specialise in any specific area or not.

Examples Of Business Verticals

Businesses are mostly offer services, goods/products, or information.

For instance, a service based business may offer hairdressing or plumbing, an information based business may offer marketing outreach services or accounting skills, and a product based business may offer car sales or merchandising.

Most of these businesses then fall into a specific “vertical” or market segment.

By understanding the concept of each category vertical, entrepreneurs can provide well tailored products and services for the targeted audience.

There are various business verticals, but some of the most common verticals include:

• agriculture
• automotive
• construction
• consumer goods,
• education,
• energy
• financial services
• healthcare
• hospitality
• manufacturing
• media
• retail
• tech
• transportation

Whilst the above are examples of broader markets, you can specialise your vertical as much as you like. Agriculture, for example, may be too wide, so instead you focus on pig farming, and then even more niche, a specific type of pig farming. This allows you to then target very specific markets.

Each of them being a vertical, has their own unique advantages and challenges. For instance, a consumer based business in the consumer industry, must constantly improve and adapt to stay relevant and keep up with the changes in consumer taste, while businesses based in the industries like the transportation industry have to deal with changes in agreements, consumer preferences and complex regulations over time.

Business Verticals In B2B

In the business-to-business category, verticals can be classified by industry, geographic region, and size of the company. For example, a software based company can have different business verticals or services for small business and enterprise customers.

A company that offers gadgets services may offer one vertical for Europe and another for the UK. Similarly, a company that offers office supplies may produce one vertical for North America and another for Europe. Whilst the products are similar across all the verticals, having specific ones allows you to target specific customers in each region.

Business vertical, as a term, can often be used interchangeably with “market segment” however, some experts deduce that verticals are more narrowly focused than segments as segments can be viewed as less focused and based on customers with similar needs or characteristics.

How To Know If A Business Vertical Is Right For You

When businesses intend to expand into new markets or focus on a certain business vertical, there’s no one-size-fits-all solution. The same applies to new businesses on the whole. Businesses will need to carefully analyse and consider whether the interested business vertical fits their company’s agenda.

Below are a few things to consider:

• First, research the volume of demand for the product or services the business intends to offer in the new market. If there’s no demand, or low level of demand, it’s unlikely for the business to generate significant revenue in the new market, regardless of pricing.
• Secondly, consider the competition. As a business vertical, there should be reduced competition, but if there’s already a few well established businesses offering the same services in the market, your business will need to have a unique and strong value proposition to attract customers. Essentially, what can your business offer that your competitors can’t, even in a saturated niche market.
• Finally, analyse whether the current business model is well suited to the new market of interest. For instance, if the business isn’t used to offering physical products, expanding to a market with increased or high shipping costs could reduce revenue and be challenging.

By carefully analysing these factors, businesses can decide whether the business vertical of interest is right for them.

How To Market Your Business When Entering A New Vertical

When it comes to marketing strategy and decisions, expanding to a new business vertical can be both an exciting and challenging problem. On one hand, there’s potential to tap into a whole new set of customers and improve revenue, while on the other hand, knowing where to start and how to increase your chances of success can be challenging.

The interesting part, is that, with a bit of planning and analysis of current business patterns, businesses can successfully market their products into a new vertical.

• It’s crucial to have an informed understanding of the needs and wants of the target market. This includes their problems and what they expect from a product.
• Before moving into a new business vertical, having an understanding of those questions and how your business intends to solve them, will get the business started on the right foot.
• Once you have an understanding of the needs of the target market, creating targeted content that relates to their needs and how your business plans to solve them should be the next step. This content could be in the form of social media posts, blog posts, video contents, or any medium to get the attention of the target audience – choose the medium that has the highest chance of being seen by your desired customers.
• Another key factor to keep in mind to ensure successful marketing in a new vertical, is building connections and relationships with key figures in the industry the business just expanded into.
• You can build relationships by participating in online forums, attending trade shows or even reaching out directly to key figures in your target market. By creating these relationships, your business can better their marketing strategy and outreach to the right audience.

Ultimately, with enough planning and effort, marketing in a new business vertical can be successful if done properly. By doing enough research and analysis to understand the problems of your target market and by building interpersonal relationships with key figures within the industry, you will get your business started on the right foot.

Final Thoughts

We hope this guide has shed light on business verticals and how to decide the right business vertical for your business. By specialising in one segment, businesses can reduce competition and improve customer services while increasing profits.

However, not all businesses are required to move to a new business vertical, as some are simply better suited to a wider target market due to the products they offer. For some companies, it’s more beneficial to have a horizontal market where they offer a more diverse range of products and services to a wider customer base. In the end, it depends on the business and what fits their business model best.

As a business considering either a vertical business model or any other type of business model, it’s important that accurate research and analysis is done to make sure the new business model and its audience fits your business properly. Reading today’s post is an excellent start.