Vertical Market: Definition & Examples

Instructor: Sean Kennedy

Sean has 8 years experience as a supervisor and has an MBA with a concentration in marketing.

A vertical market focuses on a single industry. In this lesson, we will discuss what a vertical market is and look at some examples of operating in a vertical market.

Vertical Market Explained

It may be a little difficult to determine what market you exactly fit into when you create a unique product. You may discover that you actually fall into the category of a vertical market, which is a market that focuses products or services on a particular industry. When a company operates in a vertical market, they offer a niche product to a business. For instance, a company that develops hard hats will develop their product around construction workers because they will target that specific industry.

There is less competition in a vertical market than a horizontal market because there are fewer competitors offering the same product. A horizontal market is a market where a product meets a specific need for a wide range of consumers. Companies often have more control over how they want to market and price their products because of the lack of competition in a vertical market. Companies can charge higher prices because of the limited competition.

In addition, distributors in a vertical market have knowledge in the field to help provide and suggest the best tools for a business. Operating in a vertical market allows a distributor to know more about the technology and terminology of the industry as well as how companies in the market operate and what they need to perform more efficiently.

Vertical Market Examples

Example 1: The Importance of Tailored Software

Imagine you own a law firm called The Law Firm of The Smith Brothers. You decide you want to find software to help with booking clients, storing contact information, and saving confidential files. It would be important for you to find a company that specializes in software for your particular industry. It is beneficial to find niche software because it will fit the needs of your business. You finally find a company that offers the software you are looking for. Once you put the software into action, you notice there are some issues with booking clients. It's a good thing the distributor knows the ins and outs of the industry--you can get the answers you need quickly and use the software properly.

Example 2: Operating in Construction

Let's go back to the example of the hard hats. Imagine the producers who make the hard hats are trying to figure out who their target market is. While anyone could technically wear a hard hat, it would make more sense for the producers to focus their marketing efforts on construction companies. The reason for them narrowing in on a single industry is because construction companies will have to continue to repurchase hard hats as they get used and will have an overall better return on investment.

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