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What’s Your Appetite for Vertical Marketing? Five Strategic Steps to Going Vertical

By January 22, 2013Article

My client Alex recently told me his company was planning to market their flagship product — an analytics and inventory-tracking software — to the healthcare vertical industry for tracking the storage, use and inventory of prescription meds. I asked him what his vertical strategy was and his response was, “We’re making some changes to our marketing materials and adding a few new web pages. We don’t have a lot of time. We just need to get something out there for our product launch in three weeks.”


I shared with him a few anecdotes about companies I know who succeeded in going vertical — and some who didn’t. He was used to his product being the main focus in their customers’ eyes. But in a vertical strategy, I asked if he was ready to be just a part of a bigger solution, very much like an ingredient in a recipe, or let’s say, the fine wine alongside a full-course meal. What’s more, this “solution” meal might be served to the customer by a waiter rather than Alex’s own sales staff. Was he prepared to invest in such changes?

Going vertical is more than tossing a few niche terms into your messaging

As companies branch out and explore vertical marketing strategies, one of the biggest misconceptions is that you just simply toss in a few vertical industry terms into your sales collateral and a couple of website landing pages.

While those web page and marketing pieces do indeed have to be rewritten, before a single word is penned, developing a new marketing and channel strategy is critical.

Appette for Vertical Marketing GraphicI advised Alex to consider three things about his new vertical marketing plan:

1)     Clue in to the new reality: You’re no longer selling your products; you’re involved in a solution sale.

2)     Get ready for a new conversation: You’re going to be talking to a different sort of decision-maker than you’re used to, possibly a channel partner instead of the customer.

3)     Be prepared to make some sacrifices: You might have to give up your brand in favor of a partner’s label.

Alex was willing to listen. Are you? Below are the five vertical marketing best practices I shared with him for planning and executing a vertical strategy.

1. Identify your solution and define the sales process

Your message is no longer all about presenting the wonderful features of your product; it’s now about knowing the greatest needs of the end users in your vertical. What are the users’ (not the buyer’s) pain points and how can your company meet those needs? Chances are the users, even more than the buyers and the decision makers, will play a key role in defining those needs.

Next, define who owns the buyer relationship. The end user is key to the buying process and is a lot more influential than you may think, even if they are not the decision-maker. And be ready to nudge your way in because the end user and/or the buyer likely already has another solution in place and is comfy with another vendor or partner.

2. Create commitment among sales teams and channel partners

Show you’re committed to your cause by being informed. Does your sales staff know the first thing about the vertical target, in this case hospitals, and more specifically, tracking and analyzing the dispensing of meds? Addressing a vertical’s needs requires specialized knowledge (perhaps even some customized adjustments to the product itself); so your staff may need training.

Alex’s sales force would need to understand in depth what a hospital deals with when buying, prescribing, and tracking powerful medicines and drugs — rules, regulations and laws. Will his product be bundled into a bigger solution? Will compensation structures change? Probably. Find a partner with experience in your marketing segment and find out if other players need to be involved too — consultants, system integrators (SIs) or ISVs.

3. Develop your solution

Ask yourself who owns this solution in your customer’s eyes. Vertical customers simply want to have their problem solved — the pieces of software and hardware that solve it are less relevant than the solution as a whole. Consequently, your go-to-market strategy must now revolve around end-to-end solutions rather than the individual pieces that make up the whole.

The process of transforming various components into a bigger solution probably requires added value that comes from your channel partner or VAR. It’s OK if the customer sees the VAR as the provider rather than you, in which case, step out of the way and let them do the job.

4. Market your solution

In order to do this one effectively, determine who you are marketing to. You’ll still tell your best product story somewhere, but you may now be marketing those messages to a layered audience that includes your partners, VARs, SIs or ISVs.

You must also define who’s marketing your story to the end user. Will your sales force do this, or your third-party channel, or both? How will you support their efforts and with what materials? While that’s being decided, the branding of the solution must also be considered. This is huge. Branding a solution is different from branding a product. In fact, be prepared if your product gets rolled into a bigger solution with a brand of its own. Your brand may “disappear” altogether and reside under someone else’s label.

5. Set measurable goals and measure your results

When done right, you’re going to devote a lot of time, energy and money to your new sales and vertical marketing strategy. You need to know if/when it’s a success. Besides the obvious — your company starts making more money — you’ll need to set some key performance indicators (KPIs) along the way. You can measure things like strategic account penetration, average revenue per user (ARPU) and whether it increases (or decreases) over time with your new strategy, and much more — including a measurement for “when to hold and when to fold.” Once you’ve set these KPIs and understand where the trends are going, you can then determine your payback period, or internal rate of return (IRR), for your efforts.

Going vertical can be tremendously successful, but it’s critical to know what kind of commitment you’re willing to make and what kind of return you expect. Many ingredients are involved, so before jumping into the fire, take time to create a strategic vertical marketing framework. And, if you can get comfortable being one ingredient in the whole meal — or the wine on the side — of your VAR’s vertical solution menu, you might just find your product’s best recipe for success.

Bon appetit.

Glenn Gow is CEO of Crimson Consulting Group, a strategic marketing consultancy focused on B2B clients, with a particular strength in technology marketing.

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