What we think.

Reading time: 3 minutes

It’s simple: different markets have different needs. A manufacturing customer may be concerned about minimizing cycle time while a medical customer is likely worried about adhering to safety regulations.  

So, it makes sense to offer industry-specific products and services rather than target a wide range of buyers across different sectors of the economy – in other words, vertical marketing.

But is it successful?

The typical result of a switch to vertical marketing is an increase in sales per customer. A recent McKinsey study found that 38 percent of vertical-oriented companies had annual contract values of more than $100,000 per customer, whereas only four percent of companies with a horizontal focus reached that same level. It doesn’t matter if your contracts are in the thousands or in the millions, a vertical approach can be profitable.

But such a switch means you will likely be giving less love to some of your customers who are now outside your target verticals. And many companies don’t have the stomach to reduce their potential audience by narrowing down their focus to a handful of well-defined markets.

As a result, these companies do not go “all-in” with vertical marketing; they simply dip their toe in to see whether it will be profitable. This unfortunately is not a recipe for success.

Certain vertical marketing mistakes are natural and part of the learning curve. But some mistakes can quash the corporate dream of going vertical. Here are three common mistakes to avoid.

1.     Lack of organizational expertise at all levels

Most companies who strive to take a vertical approach have insufficient industry subject matter experts (SMEs) throughout the organization. 

How can employees support customers if they don’t understand their challenges?

What happens is companies hire one or two people – typically in sales and/or marketing – create a piece of collateral, and/or add a new page to their website.

This is a good start but what about engineering? How can a company possibly target a market without industry-specific products? What about inside sales and customer service? How can employees support customers if they don’t understand their challenges? If you’re going to align yourself to a market, you better have an industry focus at every level of your organization.

Making this happen isn’t easy, which is why it rarely happens. 

However, if your company has industry expertise at all levels of your organization prospects will feel confident that you truly understand the nature of their business. And that’s the start of a great long-term relationship.

2.     No community presence

Having little community presence is also a result of companies going about gingerly testing a vertical marketing strategy.

It’s important to listen and learn before you start to participate.

Companies that do not immerse themselves in an industry’s professional community make themselves look inauthentic – and rightly so. How can anyone have a deep understanding of an entire industry and its challenges by simply googling?

If you immerse your company in an industry’s professional community, you’ll gain important insights and create invaluable connections. Simple ways for to do this are joining professional associations, communities, and social media groups to be part of the conversation. It’s important to listen and learn before you start to participate.

Your goal is to become a member, not a vendor.

3.     Lack of investment

Successful vertical marketing requires a commitment to succeed. For companies to establish themselves as a trusted expert or resource in any market takes time, effort, and money.

Research the market. Rethink your messaging. Make yourself visible. Set aside budget. Commit to success.

I’ve seen many half-hearted attempts: a company hires a segment marketing manager to kick start a vertical marketing strategy without dedicated resources to help. A marketing director tries to steer the ship by reorganizing a website into vertical markets while the rest of the company continues along its horizontal trajectory. 

You must be willing to invest. After you’ve hired the right people and immersed yourself in an industry, you’ll need to invest in your vertical strategy. Research the market to ensure your product is a good fit and what else you need to have in your arsenal to appeal to this audience. Spend money on industry reports and participate in industry-specific shows. Pursue industry certifications. Rethink your positioning and messaging. Make yourself visible. Develop a content marketing strategy and set aside budget to execute. Most of all, commit to success.

Successful formula

There are good reasons that many companies take a vertical approach to sales and marketing. Win ratios, project size, referrals are all likely to increase when you build your reputation in an industry. Be systematic, genuine and look for ways to give back to the community so that everyone is more successful.

You don’t need years of industry-specific experience to make a meaningful splash. You just need to take a disciplined, well-structured approach and to avoid these three vertical marketing mistakes.