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What is a Vertical Market?

Malcolm Tatum
Updated Jan 23, 2024
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Vertical markets are one form of a niche market. Essentially, this is a market that is composed of a subset of vendors and customers that conduct transactions that are based on particular needs. Generally, a vertical market will appear as a small group within a larger industry setting, with the vendor supplying products and services that are directly related to the a customer who is considered part of the same industry.

A vertical market is different from a horizontal market in one key aspect. While this type of market addresses specific needs associated with the market sector, a horizontal market will have a broader appeal. The products and services offered in the horizontal market will still be useful to the customer, but much less specialized. This makes it possible for vendors in horizontal markets to sell the same goods to businesses that are engaged in a number of different industries.

One of the easiest ways to understand a vertical market is to look within a given industry and note situations where both the customer and the vendor are engaged in some aspect of that same industry. Telecommunications is an excellent example of an industry with vertical markets. For example, a teleconference service provider is a specialized telecommunications provider. The teleconference company will purchase bridging equipment from a manufacturer in order to set up a working call center. In this scenario, both the provider and the manufacturer are considered to be part of the same industry.

By contrast, a vendor in a horizontal market would supply a less specific service that would be of interest to a wider client base. Long distance services are an example of a broad horizontal market, as is word processing software. A broad range of customers can easily utilize each of these services.

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Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By Bhutan — On Oct 28, 2010

Suntan12-Vertical market segmentation is really breaking down the vertical or niche market in order to expand the business model.

For example, a company that supplies the medical alert necklaces might also offer an alert system for car like a Lo Jack.

The company’s niche might be security and in the umbrella of security, they can produce a variety of related products that serves this same market that wants security.

Also a automotive company that makes cars might expand by manufacturing tires which is a related item. This is an example of vertical integration.

By suntan12 — On Oct 28, 2010

Icecream17-Horizontal integration involves when a company expands by offering similar new products. For example, the Mars candy company that makes M&M’s recently came out with a chocolate covered pretzel M&M product.

They also have a new peanut butter filled M&M which is similar to what is currently on the market, but they are slightly expanding their product offering by producing slightly different candies.

A luxury company market might expand by offering less expenisive items for sale. For example, Mercedes introduced the C series vehicle as an entry level Mercedes that allow the market to open up to people that normally can not afford a traditional Mercedes car. These features are lower end, but the engine is the same.

This result occurred from segmentation market studies that demonstrated a potential new market for Mercedes.

By icecream17 — On Oct 28, 2010

A vertical market by definition is a market that is clearly defined with smaller parameters then a general market. A vertical market definition involves a level of exclusivity.

For example, the BMW 7 series retails for over $80,000. This brand marketing focuses on the luxury product market only.

The vertical market segment might include customers with professional degrees earning over $250,000. The commercials for this vehicle will be found in upscale magazines for example, like Worth.

You will not see an ad for this car in a traditional magazine because these cars are so much more expensive than a traditional car.

You may see some ads for this car on television during programming that mirrors the car’s demographics and target market. This brand marketing is specific and targeted because the target market is smaller.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
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