Going Vertical
“We want to go vertical,” said the executive to me, as a newly-minted leader in their marketing organization. They understood that vertical marketing would grant greater specialization, company focus and with it, they hoped, more and higher value sales volumes. The benefits of verticalization can be compelling: increased efficiency and effectiveness of marketing and brand resources, leading to higher and more qualified traffic and conversion rates. For software developers and resellers, Nucleus Research reported that annual profit margins can jump up 35% as implementation cost overruns decline. Studies from Boston Consulting Group indicated that some companies can see anywhere from a 10-20% uptick in sales cycle speed and the number of closed-won opportunities.
But vertical marketing in isolation is problematic. When sales, engineering, development, support/service and the rest of the organization is not operating in vertical alignment with marketing, you not only lose any companywide benefits of verticalization but customers are lured in with the promise of industry expertise, only to find that they must teach the so-called “expert” about their regulatory environment, buying habits, dominant economic characteristics and more.
This educational responsibility saddles the customer with additional time, effort, personnel resources and delays to their own projects that can move results further and further away from original targets. What’s more, a vertical marketing veneer can have severe consequences from a loss of trust, as customers exit in droves and spread the word to other customers, prospects, investors and potential talent through online reviews, word-of-mouth, and social media comments. It is a small world after all, wrote the Sherman brothers, and that can work just as much for your business as against it.
Studies from Boston Consulting Group indicated that some companies can see anywhere from a 10-20% uptick in sales cycle speed and the number of closed-won opportunities as a result of verticalization.
A comprehensive vertical marketing strategy should take into account the vision, goals and objectives of the organization, like any decent strategy. But the vertical component requires in-depth research of these areas, and much more:
- Existing customer base. Customers should be segmented by profitability, industry, product(s)/service(s) consumption, relationship longevity and other factors to determine commonalities that allow you to pinpoint the proper mix of customers with higher customer lifetime values (CLV) and greater product/service adoption and engagement and customer satisfaction. Essentially, you’re trying to understand what customers are experiencing the greatest success with your company at maximum profit.
- Core competencies. A thorough vertical marketing strategy needs to consider the strengths and weaknesses of your organization: the good, the bad and the ugly. SWOT is a useful exercise to tease these out but can be biased based on the tenure, position and disposition of the executive. Owners can find it difficult to take off their rose-colored glasses; sales and marketing executives can have a tumultuous relationship rife with finger-pointing that clouds their perspective; technical or operational executives can struggle with linking corporate strategy to tactics across functions or business units. A collective SWOT, spanning departments, levels and locations, can ease this bias to obtain a more objective and holistic view of your company’s true core competencies at that singular point in time.
- Competitive analysis. Before you jump into new vertical markets, it’s critical to assess current competitors and their industry specializations. It’s a big marketplace out there – so why waste resources competing in crowded spaces if you don’t have to? A careful charting of the competitive landscape can uncover un/underserved markets, market segments or microverticals, gaps in product or services, price/market misalignments, channel impacts on the buyer journey and more to fuel your Blue Ocean Strategy.
While a proper vertical marketing strategy should be based on extensive research including the areas above and executed through an aligned marketing plan, it is equally important for the rest of the organization to adapt to the strategy. Sales, for example, should be structured and trained appropriately to serve the unique buying habits, language and needs of the new vertical and its target personas. Product should identify and roadmap the features to serve the market at various price points. Service or support should have the knowledgebase resources, technical and people infrastructure to provide value to the vertical market.
A Companywide Collaboration
The truth behind vertical marketing is that it shouldn’t be just a marketing exercise. To be truly effective, vertical marketing should be a companywide collaboration throughout its strategy, planning, implementation and measurement processes – with marketing leading the charge. So what happened to the company that wanted to “go vertical”? Within eight months, I led the development of the company’s first go-to market strategy that included three vertical market specializations, contributing to more than a 60% increase year-over-year in lead generation. Great effort, if done well, can produce great results.
To begin, or redirect, your company’s vertical marketing journey, book a call with Towers Fractional Marketing today.
