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Vertical and horizontal market

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A vertical market is a market in which vendors offer goods and services specific to an industry, trade, profession, or other group of customers with specialized needs. An example could be software that manages services in hotels—amenities solutions. A horizontal market is a market in which a product or service meets a need of a wide range of buyers across different sectors of an economy.[1] Compare with vertical market.[2] Vendors offer a non-specific, broad range of goods and services to a large group of customers with a wide range of needs, such as businesses as a whole, men, women, households, or, in the broadest horizontal market, everyone.

The activities of participants within any given vertical market are typically similar in that they aim at 'solving' the same or similar 'problems'. These markets are typically competitive, because of the overlapping focuses of the products and services that are provided to the customers.

The single defining characteristic of the participants in a vertical market is competition within a well-defined segment. Horizontal market participants often attempt to meet enough of the different needs of vertical markets to gain a presence in the vertical market. Their similar products/services tend to be less of a fit but also less expensive than specialized, vertical participant solutions.

Vertical market software is software aimed at addressing the needs of any given business within a discernible vertical market.

Comparison

A vertical market meets the needs of a particular industry: for example, a piece of equipment used only by semiconductor manufacturers.[3] A vertical market can be subdivided into narrower niche markets. For example, the government vertical has niches, like candidates seeking office, and the pet market has niches, like dog training for hearing-impaired owners.[4][5]

A horizontal market meets a given need of a wide variety of industries, rather than a specific one: for example, word processing software[6] or machine-to-machine technologies. On occasion a horizontal market can be highly specialized at the same time. Consider the market for converting mainframe databases developed with the tools of a particular company. The market for such a database conversion service might involve many vertical markets (aerospace, manufacturing, banking, etc.) but nevertheless be labelled "niche" if the database technology is technically obsolete and no longer mainstream.

Professional definitions

Governments and professional organizations have developed various standards for defining vertical markets. The United States Department of Labor, Bureau of Labor Statistics[7] maintains a taxonomy called the North American Industry Classification System (NAICS) that has a tiered structure with numeric codes. Each additional digit in the numeric code represents a further subdivision of the industry.

The International Standard Industrial Classification has been maintained by the United Nations since the 1950s and was last updated in 2008.[8]

Examples of vertical markets

Examples of horizontal markets

The market for computer security services may be regarded as a horizontal market, because a broad range of industries and government sectors purchase services and software to protect their computers.

The markets for legal services and accounting services are other examples of horizontal markets.

The market for legal research software, by contrast, is vertical. The software is directed at the specialized requirements of the legal services industry.

See also

References

  1. ^ "horizontal market". InvestorWords.com.
  2. ^ "vertical market". InvestorWords.com.
  3. ^ "vertical market". InvestorWords.com.
  4. ^ "Think Vertical When Creating a Mobile Strategy - ShoutEm - Mobile App Creator". 15 January 2013. Retrieved 4 March 2018.
  5. ^ "Understanding a Niche vs a Vertical and the $ making difference - Andrew Wee - Blogging - Affiliate Marketing - Social Traffic Generation - Internet Marketing". www.whoisandrewwee.com. Retrieved 4 March 2018.
  6. ^ "horizontal market". Investorwords.com.
  7. ^ "Industries at a Glance: NAICS Code Index". www.bls.gov. Retrieved 4 March 2018.
  8. ^ "United Nations Statistics Division - Classifications Registry". unstats.un.org. Retrieved 4 March 2018.
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