What is a 'Vertical Market'

A vertical market is a group of companies that serve each other's specialized needs and that do not serve a broader market. A vertical market is tightly focused on meeting the needs of one specific industry. Vertical markets are focused on a single niche, such as creating payroll software for start-up Internet companies, whereas a horizontal market is able to sell its goods and services in more than one industry and is therefore focused on a wider range of business segments.

BREAKING DOWN 'Vertical Market'

Vertical market providers are focused on specialized goods and services that meet the needs of a niche customer group. That niche customer group can be either a specific industry or a specific demographic. With this customer group the vertical market provider has the advantage of marketing its products to a specialized group, which can make marketing campaigns more direct and effective.

Vertical Market Marketing

While vertical markets are concentrated on a specific industry or demographic, these concentrated markets can have a wide customer base. While concentrated, a wide vertical market customer base is advantageous for vertical marketing because the greater the demand for a specific product, the greater the revenue opportunity. In vertical market marketing, marketers can prepare targeted marketing programs directed for their niche market. This can make marketing efforts more effective than a broader horizontal marketing program.

In a vertical market, customers have a high level of spending power. This requires an important focus on the customer relationship by the vertical market provider. While there may be a wide customer base for a specified vertical market, each customer relationship is important because of the market’s narrow focus. Customers within a vertical market typically rely on a single service provider to meet their needs. These customers have a deep and long-term need, which makes the customer service relationship especially critical.


One example of a vertical market provider includes a company that manufactures automobile parts. This type of company would belong to a vertical market since it would have a limited market of auto manufacturers and mechanics for its products. A furniture manufacturer, on the other hand, would belong to a horizontal market because its customer base could include homeowners, apartment dwellers, offices, hotels, restaurants and more.

Horizontal Market Comparison

Companies who provide horizontal market services must take a different marketing approach. In a horizontal market, a company must be able to market to a wider clientele. This requires a broader marketing campaign that could include a much wider range of marketing tactics and channels. In a horizontal market, customer interaction can also vary considerably. As companies market to a broader horizontal market they often have a wider range of customers for which they may interact with less frequently. Horizontal market interaction may require providers to focus on different aspects of product marketing and customer service including a greater focus on product distribution.

  1. Vertical Well

    A well that is not turned horizontally at depth, and which allows ...
  2. Vertical Line Charting

    A technique used by technical traders and market technicians ...
  3. Horizontal Well

    A well that is turned horizontally at depth, and that allows ...
  4. Vertical Integration

    When a company expands its business into areas that are at different ...
  5. Horizontal Merger

    A merger occurring between companies in the same industry. Horizontal ...
  6. Vertical Merger

    A merger between two companies producing different goods or services ...
Related Articles
  1. Investing

    What's a Vertical Merger?

    A vertical merger occurs when two companies that produce goods or services for the same finished product merge operations.
  2. Investing

    Understanding Vertical Analysis

    In vertical analysis, each line item on a company’s financial statements is presented as a percentage of a larger number.
  3. Small Business

    Vertical Integration

    Vertical integration occurs when a company buys and controls other businesses along its supply chain.
  4. Small Business

    What's Involved in Customer Service?

    Customer service is the part of a business tasked with enhancing customer satisfaction.
  5. Small Business

    Understanding Marketing

    Marketing includes all of the activities of a company associated with buying and selling a product or service.
  6. Insights

    How Big Data Has Changed Marketing

    Big data has enabled marketers to enhance their customer engagement and customer retention strategies by providing insight into behavior and thoughts.
  7. Small Business

    What's a Horizontal Merger?

    A horizontal merger occurs when companies within the same industry merge.
  8. Small Business

    How Can Companies Increase Market Share?

    Companies that increase their market share enjoy a competitive advantage. They receive better prices from suppliers, and they’re able to produce goods faster.
  9. Investing

    What is Horizontal Analysis?

    Horizontal analysis compares a company’s balance sheet or income statement over two or more accounting periods.
  1. What are the major costs to a firm when pursuing vertical integration?

    Following a vertical integration, there are initial setup costs and additional administrative costs as well as other costly ... Read Answer >>
  2. When does vertical integration reduce transaction costs?

    Trading is not just based on supply and demand, but negotiations between companies. Vertical integration can eliminate this ... Read Answer >>
  3. Can Internet companies be vertically integrated?

    Find out how online businesses are beginning to take advantage of vertical integration for many of the same reasons as traditional ... Read Answer >>
  4. When is outsourcing preferable to vertical integration?

    Deciding between outsourcing and vertical integration can be challenging. Understand the benefits of each to make the most ... Read Answer >>
  5. What are the legal barriers to vertical integration?

    Learn how embarking on a vertical integration through a merger is liable to run into legal barriers if the integration is ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center