Channel Explained: Vertical market sales strategyDate: Apr 08, 2009
The right vertical market sales strategy can help IT solutions providers increase business and improve the services they offer to customers.
In this Channel Explained video, Senior Technology Writer Stephen J. Bigelow offers tips for developing a strong vertical market strategy. Learn the benefits of vertical market sales and find out how the right strategy can increase profitability. Bigelow also discusses the challenges that face solutions providers as they move into vertical markets.
Read the full transcript from this video below:
Channel Explained: Vertical market sales strategy
Hi. I’m Steve Bigelow, senior technology writer with TechTarget’s Data Center and Virtualization Media Group. I’m here today to talk a little bit about vertical markets.
Why are vertical markets important to the channel? The traditional approach to the market is horizontal; it’s the Best Buy scenario: You know what you want, you walk into a store, you buy it, you take it home, you set it up and you make it work. That works very well if you know the technologies that you need and how to operate them. For a lot of vertical markets, that’s just not the case. What the vertical market allows a VAR to do is to really specialize: focus on the client, focus on their industry and be able to deliver a more complete solution that adds a lot of value for the client that they might not otherwise be able to do by themselves. In a horizontal approach, you’re just some VAR; a client can go to you, they can buy what they need and there’s no way to distinguish yourself from your competition. By specializing in a particular vertical, you develop a much stronger relationship with your client, and it’s a much more recurring relationship that can really benefit your business in the long run.
Consider a medical professional, like a dentist. A dentist knows what application he needs to run in his business to operate his day-to-day practice. He can easily go out, buy servers, buy clients, buy software, buy cabling and go through the gyrations of setting up his own system and making it work. That’s not their mainline of business; their mainline is the practice of medicine. As a VAR your ability to specialize in that vertical and bring your expertise to that practitioner and offer them a more turnkey solution is far more valuable than simply selling products.
How does the channel sell to and profit in the vertical market? They key aspect there is understanding; you need to not just know the products, it goes far beyond that. You need to understand the industry. You need to understand the terminology. You need to understand the practices. You need to understand the regulations and the compliance needs. You need to understand the goals and objectives of the clients that you’re working with in order to bring a solution to them.
Service is another important part of that equation of being successful. It’s not just a matter of sales; the goal is to become a trusted advisor to your client, someone that your client will reach out to when they have a business need, which is really what this is all about, and give you an opportunity, in many cases, to provide them with a solution to their business need. Winning new deals is always important; you’re always looking for the new sale, but you have to go beyond the sale and penetrate each account more thoroughly: Provide a broader range of services, a broader range of answers to your client’s problem. We can refer back to our earlier example of the dentist. A general VAR might be able to go into a medical office and set up a client/server infrastructure, but they would have no understanding of the line-of-business applications that practitioner relies upon, and that limits your ability to make money. If you’re not handling everything, you’re just leaving money on the table for your competitors.
The ability to be that trusted advisor also bears a lot of fruit in the future, in terms of referrals and subsequent sales, because that client is going to reach out to you again and again as their business needs change. Clients talk; within the same vertical, people know each other. Word-of-mouth advertising is a very powerful benefit to your marketing efforts; that’s certainly another plus for you. As you specialize in a given vertical and you make successful projects, you do have an opportunity to gain a lot of practice. That insight, that practice, allows you to execute each job faster and faster, and that efficiency adds to your profit level.
There are some challenges and limitations in the vertical marketplace. One of the biggest things to consider are changes that take place. No market, no vertical, is static; technologies are revolving, requirements are revolving, and you as a VAR specializing in a vertical really do need to be on top of what’s going on. It’s not just knowing the new products that you can sell. It’s knowing the new regulations. It’s knowing the new practices. It’s knowing the new techniques that your dentist or doctor clients use on a regular basis, and it gives you insights that you can really bring back to that client to help them better meet their business goals.
The other challenge to be aware of is cause and effect. When you do make a change to your client’s environment, it often has an impact on their workflow, their supply chain. You’re going to need to be very careful in the vertical market that when you work with a client, that it doesn't adversely affect their ability to work with their suppliers, their vendors, and disrupt their operations accidentally. You also need to be sensitive to the fact that relationships with your client are dynamic things; they’re living, breathing entities, just like dealing with any other people. Relationships grow and change. What you’re going to find, eventually, is a client will have different needs and a client may eventually grow to a point where they don’t need you anymore. They may actually decide to go to a horizontal buying strategy and use their own internal talent instead of referring to you. That’s something that you need to be sensitive to and aware of in the vertical in order to stay up and make the most of your business opportunities.
Vertical markets are also changing. What is very important today is cost justification for the client. A client wants to know not just how much money they’re spending, but they want to know how much they’re getting in return. If I spend X, I’m going to make Y, or I’m going to save Y at some point in the future. That’s always been an important consideration; clients have always wanted to know that. With the difficult economic situation that we face today, the clients that you do sit down and talk with are probably going to be far more interested in the value proposition that your solution will bring to them. Being able to justify the value proposition is a place where VARs can shine, and in some cases that will win the deal for you or not.
Finally, you need to be very concerned with the evolution of the vertical markets themselves: Vertical markets are constantly evolving. They’re constantly changing. They’re constantly maturing. They’re breaking up; they’re subdividing into finer and finer threads of business activities. For example, once upon a time, we may have dealt with only the educational vertical. Today, that will break down oftentimes into the K-12 vertical or the college vertical. Even the K-12 vertical may break down into elementary, middle and high school verticals; each with their own similar but different specific needs. You as a VAR specializing in a vertical will need to make a decision: Do you want to broaden your scope or grow your organization to accommodate some of those other verticals as they break out? Or do you want to continue to focus and work specifically with a particular niche that you can really shine in? It’s an important business decision, and a lot of VARs have to make it from time to time.
That’s my nutshell view of the vertical market. I want to thank you all for watching. My name is Stephen Bigelow, senior features writer with TechTarget’s Data Center and Virtualization Media Group. You can learn more about the vertical market at www.SearchSystemsChannel.com.