Definition

vertical market

Contributor(s): Spencer Smith

A vertical market is a particular industry or group of enterprises in which similar products or services are developed and marketed using similar methods (and to whom goods and services can be sold). Broad examples of vertical markets are insurance, real estate, banking, heavy manufacturing, retail, transportation, hospitals and government.

Characteristics of a vertical market

Customers in vertical markets have specialized needs and priorities. For example, law firms typically require software such as document management products tailored to their business processes. Additionally, law firms often have greater printing needs than other companies, making them a good candidate for managed printing services.

Specific regulatory compliance concerns also characterize vertical markets. Healthcare is one such highly regulated industry. Healthcare organizations must ensure they meet the requirements of legislation, including the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health Act, or else they risk fines -- sometimes hefty ones. Other regulated industries include financial services and retail.

Vertical markets can often be segmented into narrower subcategories or niche markets. In the hospitality vertical market, for instance, a vendor might target the subcategory of cruise ships.

Vertical market vs. horizontal market

Vertical market software and services are aimed at a particular vertical market, and they can be contrasted with horizontal market software and services that can be used in a cross-section of industries.

Horizontal and vertical markets compared
Descriptions and examples of vertical and horizontal markets

Vendors in a horizontal market target more than one industry and a broad swath of clientele that share a general need. In terms of software, horizontal market products could include office productivity applications and databases.

Vertical marketing strategy

In the context of the IT channel industry, channel companies such as value-added resellers and managed services providers often choose to specialize in one or more verticals.

To do so, channel companies look to gain experience and expertise in their targeted vertical market. This would include developing an understanding of that customer base's unique needs, business models and challenges, as well as the market's important trends and terminology.

Additionally, companies that target vertical markets tailor their marketing plans and IT solutions to suit their targeted customer base.

This was last updated in August 2017

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