Vertical markets are niche markets made up of suppliers and customers with specific needs within the same industry, while horizontal markets have broader appeal. Telecommunications is an example of a vertical market, while long distance services and word processing software are examples of horizontal markets.
Vertical markets are a form of niche marketing. Essentially, this is a market made up of a subset of suppliers and customers who transact based on specific needs. Generally, a vertical market appears as a small group within a larger industry configuration, with the vendor providing products and services directly related to the customer who is considered to be part of the same industry.
A vertical market is different from a horizontal market in one key way. While this type of market addresses specific needs associated with the market sector, a horizontal market will have broader appeal. 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 products to companies involved in many different industries.
One of the easiest ways to understand a vertical market is to look within a given industry and look at situations where the customer and supplier are involved in some aspect of that same industry. Telecommunications is an excellent example of an industry with vertical markets. For example, a teleconferencing service provider is a specialist telecommunications provider. The teleconferencing company will purchase bridge equipment from a manufacturer to install a functioning call center. In this scenario, the supplier and manufacturer are considered part of the same industry.
On the other hand, a supplier in a horizontal market would provide a less specific service that would be of interest to a larger customer base. Long distance services are an example of a broad horizontal market, as is word processing software. A wide range of customers can easily utilize each of these services.
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