Article • Sales Tip

EXPANDING INTO VERTICAL MARKETS

Written By Jim Heilborn, INDEAL • September 1, 2022

This month’s topic is “Expanding Into Verticals.” On the surface this sounds simple; just identify and start selling into business types that comprise all the potential purchasers in a particular occupation or market; healthcare, GSA, education, hospitality, etc. – but there’s more to it than that. 

Business verticals in general are essential components of a company’s growth and marketing efforts. Horizontal markets serve a broad base of businesses while vertical markets allow dealers to focus on a specific industry to better and more fully meet those consumers’ needs.  

Let’s first take a quick look at Horizontal Markets.

Horizontal Markets 
Most dealers are involved with horizontal markets. These are markets that address the needs of companies in a wide variety of industries rather than one specific or vertical industry. 

I was able to find a list of some of the benefits associated with a horizontal market business model: 

  • The ability to reduce costs because you are sharing resources to sell to multiple companies 
  • The opportunity to identify and optimize the quality of products or services more easily 
  • A more proficient and specialized workforce that is often more productive 
  • Reduced chances of being impacted by lower demand because there is a wider customer base 
  • The opportunity to use different pricing models for different markets based on different values 
  • A single sales force that sells all products and services


Horizontal markets are often the starting place for smaller or new businesses that might not yet have the necessary capital, staff, or general resources required for many verticals. These companies often partner with an outsource company—temporarily or permanently—to provide the products or services they can’t offer on their own. 

Vertical Markets 
Before getting involved and expanding into vertical markets, it’s a good idea to make sure you understand them and how they may fit into your business model. Unlike horizontal markets, which include individuals or businesses from various sectors, vertical markets consist of narrow industry groups. Keep in mind that each one may have distinct requirements and require a separate sales team. 

Definition: Vertical markets, or “verticals,” are business niches where dealers serve a specific audience or business type and their set of particular needs.  

Some Benefits Associated With Selling To Vertical Markets: 

  • The ability of sales experts to focus all sales and marketing efforts on a very specific audience for maximum effectiveness 
  • Gained experience and expertise in a specified niche environment that ultimately contributes to increased success and exposure in the market 
  • More streamlined marketing campaigns that can be less expensive than marketing tactics that target a mass audience 
  • The opportunity to offer specialized products and services that can be charged at specific rates due to market credibility and expertise 
  • The chance to build strong relationships with specific manufacturers and clients who are involved in the vertical market 


Vertical Strategy 
I think it is safe to say that every business owner would like to have the magic formula or right balance that guarantees future success which will allow their company to endure. While there isn’t one right blueprint that applies to every company, there are some commonalities that companies that have a successful Vertical Market program employ. These commonalities typically involve some key components; each requiring a separate strategy; Market Potential, Implementability, R.O.I., and Impact on Current Business.   

Choosing the right vertical is crucial to ensuring success, so due diligence is vital. 

Market potential – Are there enough prospects to fill your pipeline for an extended period of time? Don’t choose too niche of a market with limited potential. Each product or service offered should be evaluated to see if there is enough demand. Your company may offer a cutting-edge product, but if there are not enough clients who wish to purchase it, it does not meet the test.  It is best to eliminate the offering or outsource it. 

Implementability – Choose a vertical that you and your team have the ability to respond to immediately and provide a high level of service. Simply put, implementability asks the question, “Do we have the resources needed to provide a product or service?”  This covers everything from people (especially salespeople) to space, and equipment. 

R.O.I. – Developing a vertical market takes time and effort, so make sure it will offer sustainable returns on your investment within a reasonable amount of time. It is critical to understand the financial impact and additional overhead that may be required before seeing any profits. 

Impact On Current Business – Not every business opportunity is a good match for every company. It is important to make sure that offering a specific product or service offering is a good match for your company and that it won’t have a negative impact on other parts of your business.   

Additional considerations should be given to developing a content strategy, knowing and understanding your audience, your website (vertical markets are increasingly being served via e-commerce businesses because of the minimal overhead and ability to reach a worldwide audience), and identifying the right vertical markets (not all will be a good fit for every dealership). 

A key to success in either a horizontal or vertical market is selling the entire environment; not just furniture – selling service, design, labor, accessories, flooring, wall coverings, lighting, etc. is the key to increasing the G.P. and profits. 

“The essence of a successful business is really quite simple. It is your ability to offer a product or service that people will pay for at a price sufficiently above your costs, ideally three or four or five times your cost, thereby giving you a profit that enables you to buy and to offer more products and services.” Brian Tracy 

 

Jim Heilborn is INDEAL’s Training and Development Consultant specializing in the office furniture/products industry, working nationwide with dealers, manufacturers, and service providers. Jim has been associated with INDEAL since 2011, focused on training and dealer development. Jim can be reached at jheilborn@indeal.org.

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