What Is a Vertical Market Penetration?

Vertical marketing means selling products and services to a specific target customer, as opposed to horizontal marketing, which attempts to get a wide variety of customers to buy what you sell. Understanding the difference between the two selling methods can help you decide if you should use a mix of both to maximize your sales, or stick with one strategy.

Vertical marketing is a strategy of selling products and services to people with similar interests, such as businesses in a specific industry or people with the same hobby. An example of vertical penetration includes selling a variety of gardening tools to homeowners interested in taking care of their own yards, as opposed to selling kitchen appliances, furniture, bathroom items and bedding to all homeowners. A business-to-business example would be selling an accounting software program tailored to physicians, rather than selling more generic bookkeeping software to all businesses.

Horizontal marketing involves selling your product or services to a wider audience who want a more generalized product. For example, instead of opening a pet store that sells only products for dog owners, a retailer might sell pet supplies for a variety of animals. A public relations company would offer its services to any business, rather than specializing in PR for law firms.

Using a vertical marketing strategy for some or all of your products and services helps you create a brand that establishes you as an expert in your area. You might have a smaller customer base, but it will be willing to pay a higher price, and you might do more volume from this smaller segment of the marketplace. Instead of competing head-to-head with a national clothing store that sells men’s, women’s and children’s apparel, a local retailer might focus on women’s clothing, then add women’s footwear, handbags and cosmetics. To avoid competing with a big-box sporting goods store, a local retailer might specialize in tennis if the area has a large tennis-playing community.

Creating a vertical niche reduces your sales opportunities with larger customer bases. Even though you might not be able to charge as much for a more generic version of your product or service, you might make higher gross profits on volume. You might have less competition in a vertical market, but that might be the result of the market not being able to support many players. If your competitor can lower prices or create a sought-after brand and grab more market share, you might not be able to generate enough sales to stay in business in that market segment.