Vertical market

A vertical market is any market where demand stems exclusively from a specific industry or
demographic, also known as a “niche” market. Companies that employ vertical marketing tactics
either create products intended for a specific type of consumer, or attempt to make existing
products appealing to those consumers. This is in contrast with horizontal marketing, which
attempts to appeal to as many different groups of people as possible. (See also Horizontal
Marketing)

When Segway, Inc. shifted its focus to the highly specialized niche of police departments, it took
an existing product (the Segway i180) and simply created marketing materials to highlight the
product's appeal to that niche. This allowed the company to concentrate its attention and
marketing budget on a specific goal, rather than diluting those resources by continuing to market
the product to a horizontal market that had little interest in buying.

Companies that make highly specialized products often use vertical marketing to appeal to their
narrow target demographics.
For example, consider that a company building medical lab equipment has almost no market
outside of the medical industry. It is highly ineffective for the company to advertise its
equipment to the general public, as most people do not have a reason or enough disposable
income to purchase medical lab equipment. Instead, the company would advertise in medical
industry magazines, on medical websites, and at medical conferences so the ads would reach
their target audience.
When Segway marketing to police departments, the company used vertical marketing strategies
to create a target demographic for a product that was struggling to appeal to a wider audience.
The company was not selling enough vehicles to justify the amount of money it was spending on
general advertising, so it approached the vertical market of police departments.
However, a company doesn't have to fail to capture a horizontal market to benefit from vertical
marketing. For instance, a software product called the Integrated Workplace Management
System is a general office tool that combines multiple, related computer programs into a single
interface. This is useful and appealing to many different industries, but several companies that
make IWMS tools pursue marketing campaigns aimed at specific industries. IBM has separate
marketing materials for their IWMS to appeal to clients in the diverse fields of real estate,
energy, and finance.

Vertical marketing is a customer-focused strategy. Whether the product is specialized to a

particular niche demographic or simply has an application that would appeal to a niche, it is vital
to understand the demographic's needs and desires.
If, for example, a company that makes power tools decided to start a vertical marketing
campaign to appeal to private contractors, the first step in the campaign would be to analyze
what private contractors value in the tools they use.
The company could look at buying trends to determine what tools are most in demand and what
specifications contractors seek in those tools. Contractors could also be surveyed to gather
original information about these and other relevant topics.
Research findings should guide the company's marketing strategy. At this stage, the power tool
company could begin writing advertising copy and customizing products to meet the needs of
contractors. If market research indicates that contractors tend to purchase tools in neutral colors
like black and gray, the company should paint their tools in neutral colors and feature those tools
in advertisements. Whatever the niche demographic says it wants out of the product, the
company should try to meet that desire and inform customers about any product changes.(See
also Product Marketing)