Owen Ashby hit it on the head with this, we’ve seen this happen in bigger companies who are finding they need to spur new growth to keep up with the curve. Too perfect, no need for me to paraphrase, so here’s the original post in it’s entirety . . . enjoy!
There was a time when all B2B marketing was horizontal and I don’t mean at the Christmas party (!). Companies designed their value propositions to address needs they had identified in organisations of a certain size in a certain geography. There it stopped.
Then someone sold the product or service to a Bank (for example). Everyone was delighted but not surprised because that particular bank had the exact needs the company had identified its product or service could address.
Then some bright spark suggested that actually if they had one bank as a customer, surely other banks would “peer reference” (follow one another) and so the company should now try to sell to all banks. To do that they would need a “Bank’s” sales force (and P&L) and probably a “Bank’s” proposition too. Of course with that would go a “Bank’s” sales target and the hope and dreams of the shareholders as the company would surely be “the number 1 provider to Banks” before the year was out.
Only it didn’t work out like that, by year two they had still only had one bank. The sales team had, had to focus elsewhere and the marketing team were at a loss. Which was annoying because the company had built its entire organisation like this. Now as well as a “bank” sales team it had a “retail” team (because they’d previously won a high street travel agent) and a “transport” team because they’d won a haulage company.
Over the course of a period of three years they’d “gone vertical”. It sounded great and each quarter they’d meet and discuss which new customers and prospects would sit in which of the new vertical teams they’d created. It was always a bit of a bun fight because they didn’t win any more banks or any more travel agents or any more hauliers. So they either created new vertical teams to accommodate each new win, or they stretched their definition of a vertical so wide ( to accommodate each new account) that the vertical became a horizontal again.
Sounds implausible doesn’t it…?
It is happening right now and if it’s not happening in your organization then you can bet your bottom Dollar it’s happening in the company across the street and the one next to them too. In the rush pull all the focus into a vertical market, companies are losing sight of the value of their proposition.
One bank does not a banking vertical make.
So what’s the point?
Start by understanding the business issue your product or service addresses, then look for the kind of operational model that generates that kind of issue, then look for the organisations that fit that profile. You may find that large numbers of these organisations all sit in small number of market sectors in which case going vertical will be appropriate. However, there’s a really good chance they won’t and “going vertical” will make you irrelevant to the vast majority of the companies in that sector.
If you’re not careful, you end up stretching your offering and value proposition to fit the vertical market strategy you’ve imposed…that way lies oblivion…margin and market erosion and a slow and painful death. Ironic really, when you consider you went “vertical” to allow you to focus in on a niche.
For more on segmentation and niche marketing, pick up your copy of “The Marketing Doctor’s Survival Guide”