Vertical Market Strategy

Instructor: Sean Kennedy

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

A vertical market strategy is for companies who are catering to a specific demographic. In this lesson, we will discuss what a vertical market strategy is, how to decide what needs to be improved, and how to market a product.

What is a Vertical Market Strategy?

When a company offers products to a specific industry or consumer, it is called a vertical market strategy. You may have also heard the term 'niche market', which describes the target of this strategy. When utilizing a vertical market strategy, companies are concentrating on creating a product or service for a particular type of consumer. The company's sole focus is on consumers and how they can make their lives easier through product innovation. When creating a niche product, it is essential to ensure the company knows the specific wants and needs of the consumer.

In the early 2000's, Segway Inc. was struggling to get the public on board with a need for their product. The two-wheeled transportation vehicle was developed to cater to people with a lot of money, but as time went on, the company discovered that this was not the ideal target market. Segway decided to make this product a niche product and introduce it to Chicago's police department to be used for police officers, realizing that many of the key features of the product would serve this population well. This is a good example of utilizing specific features of a product to attract a niche market. Not only were they able to sell the product to Chicago's police department, they were able to market it to police departments nationwide.

Decide What Needs To Be Improved

While a company may be marketing their product to a distributor, it is still essential to determine what their end customer wants to see improved. A vertical market strategy must focus solely on the consumer and how they can create a product for their particular needs. The consumer usually wants a problem fixed and/or a more efficient way to use a product.

POS Software

For example, if your company sells POS (point-of-service) software for restaurants, you may want to target older or smaller restaurants that may still be dealing with an old and slow system. The management and staff of a restaurant typically want a simple and fast way to input customer bills into their POS system. If their current system freezes often and credit card transactions are slow, the staff have to wait in line during busy times to use the POS. A vertical marketing strategy for a new, up-to-date software system would specifically target the felt needs of the restaurant owner in this situation and make sure to specifically market the features that show how fast the system works in comparison with their old system.

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