Explore the Strategy of Vertical Marketing
In the early 2000’s, Segway, Inc. experienced difficulty exciting the public about their product. The two-wheel personal transportation vehicle was seen a toy for the wealthy rather than a forward-thinking for the average person to move around. Leaders at Segway saw this challenge, and rather than doubling efforts and costs by marketing to all consumers, found a specific niche for their product.
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By the middle of 2006, the Chicago Police Department became one of Segway's biggest customers. The company introduced the i180 Police Model Segway, which had almost no special features that distinguished it from the civilian i180. Only the paint, in the black-and-white pattern common to most American police department vehicles, was customized for police use.
Segway's marketing materials for the i180 Police Model simply highlighted how the vehicle's standard features could be used for police-specific purposes. Advertisements mentioned the ability to mount sirens on the guard rail, and how the supply pouch is good for emergency equipment. The City of Chicago spent nearly $600,000 in five years outfitting its police departments with new Segways, and roughly 125 law enforcement agencies around the world followed suit.
Segway, Inc. solved the frustrating problem of having a product the average consumer didn't want by making it appealing to people in a very specific business sector. Rather than spreading their marketing efforts, they employed vertical marketing tactics to grow in one particular area.
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)
Economists group the entirety of all vertical markets in the United States into 13 categories. Any business interested in pursuing a vertical market niche should start by examining these general segments.
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.
While any niche group can be the target of vertical marketing, some industries receive the majority of the attention. As of 2010, a survey of U.S. marketing agencies found that they concentrated much of their attention on three niches.
U.S. marketing agencies with the following specialties
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.
The use of paper products has been declining steadily as more businesses and households use digital technology to go paperless. This has been a troubling trend for the likes of Appleton Papers, a company that relied on several corporate clients who used paper for straightforward needs such as document printing. Its business dwindling, Appleton Papers began searching for niche markets that would always need paper products.
The company's research led to the needs of the fabric softener market, a niche that couldn't go paperless. This led Appleton to Procter & Gamble, a company that uses a vast amount of paper for fabric softener, but also for many other household products. The shift in focus for Appleton Papers saved the company in an uncertain era.
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)
A vertical marketing campaign relies on professionals with a variety of skills. It requires a team consisting of researchers, writers, designers, and other specialties to create a campaign that is appealing on all levels. The following are just three examples of career paths that are involved in vertical marketing.
Source: Bureau of Labor Statistics
Products aimed at vertical markets need to have the look, specifications, and other details that appeal to their target demographics. A product designer is responsible for these details in everything from a product's key features, to its name and packaging. This is a highly creative career, but it also requires technical expertise.
A product designer should have a bachelor's degree in marketing, design, or engineering. It is helpful to have a background in manufacturing and proven experience in graphic and/or web design.
Understanding the target demographic is one of the most important parts of vertical marketing. A market researcher analyzes existing data and gathers new information about customer behavior and overall business trends to aid in the creation of an effective marketing strategy. This position requires high computer literacy, excellent attention to detail, and the ability to communicate well with a wide variety of people.
A market researcher should have a bachelor's degree in marketing, business, psychology, sociology, or communications. Experience in data-related fields like database management or data entry is useful, as is public-facing work in retail, service industry roles, or sales.
A vertically marketed product has features that appeal to the target demographic, but customers still need to be properly informed about those features. Copywriters create marketing materials like advertisements, white papers, and other informational pieces to highlight those features and make products sound ideal for the needs of the niche. This requires excellent written and verbal communication skills, as well as the ability to learn about products and customers quickly.
A copywriter should have a bachelor's degree in marketing, business, English, journalism, communications, or psychology. Previous experience in a writing-focused role is valuable and providing a portfolio of work samples with a resume is very important.
Those who are interested in learning more about how to use vertical marketing and other strategies should attend a marketing education program. Marketing is a rich, complex field that is always growing and changing. Acquiring a firm foundation in the core principles of the field is essential to long-term success as a marketing professional and a formal education is a fast, efficient way to learn.
Students will explore the logical and creative thinking of concepts that are central to vertical strategies by completing coursework in brand development, project finance, team organization, and management. Marketing students have opportunities for hands-on experience with a number of marketing tools, from advanced applications in office suite programs, to website and graphic design software, to the best uses of new media in modern marketing.
Advanced marketing classes focus on case studies of real-world campaigns, as well as business simulations that give students the chance to develop their own products and marketing plans. This stage is the culmination of everything students learn over the course of the program, and prepares them for future careers in marketing.