Industry verticals are narrowly-defined industries, markets, or business lines that focus on a specialized customer audience. They are also known as business verticals, market segments, or vertical markets.
Unlike horizontal markets, which target a broad customer base in many different industries, vertical markets present products, services, and solutions that are tailored solely to the needs of a specialized, niche audience.
Industry verticals are a key strategy for many enterprises, either as their sole focus or as a subset of their overall business.
Verticals can occur in a variety of industries and for a variety of different audiences, including B2B, B2C, and B2G. Common examples are:
These industries, by themselves, are not necessarily verticals, as there are many examples of companies targeting broad audiences in each of these areas. It becomes an industry vertical when a company carves out a small subset of the wider market.
For example, a big consumer goods retailer or grocer would be considered a horizontal market, as it is trying to reach a large, diverse audience with its products. If a company decides to focus on one small segment of that audience, such as an upscale or organic retail experience, it would become an industry vertical. Other examples include a healthcare company that specializes in hospital equipment, or a software company that provides specialized programs and services to a B2B market.
Industry verticals face different challenges and opportunities than horizontal markets, based on their size and focus. Common characteristics include:
Because industry verticals are targeting a smaller, niche customer base, they can better tailor their customer acquisition and outreach efforts to that one specific audience— potentially leading to more efficient, effective sales and marketing tactics than if they were trying to connect with a broad, multi-faceted audience.
Because of the specialized nature of the product and service offerings, the number of potential customers is by definition smaller and potentially less diverse for industry verticals than for horizontal markets. This does not necessarily limit the chances of success, but any industry vertical would need to consider that smaller margin of error.
Industry verticals are usually seen where there are larger technological, financial, and knowledge requirements for a company to enter (and compete) in a specific segment, especially ones requiring sophisticated products, programs, tools, or staffing. This means that industry verticals tend to favor more established and successful companies with the necessary resources and capital.
Because an industry vertical may be focused on one specific segment of a market, it may be at risk of overspecialization in the event that the segment experiences a downturn, changes beyond their capacity to support it, or even becomes obsolete. A larger enterprise with more diverse lines of business may be able to sustain this change, while a smaller company with a sole focus would encounter extreme challenges.