A vertical marketing system is when members of a distribution channel at the manufacturing, wholesale, and retail levels work together to meet customer needs.
Unlike a conventional marketing system, where each channel member is an independent business that competes for their own profits, the vertical marketing systems channel members to act as a unified system.
Implementing Vertical Marketing Systems
When planning and executing a strategy for vertical marketing systems, follow these five steps:
1. Identify Your Solution and Define the Sales Process
You should no longer be just presenting the great features of your product, you need to understand and market towards the needs of the end user in your vertical. What are the user needs, and how can your company meet those? The users, even more than the buyers and decision makers, will play a key role in defining those needs.
Tip: 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.
2. Create Commitment Among Sales Teams and Channel Partners
Prove your dedication and commitment to the customer by being informed. Does your sales staff understand the vertical target, or how to track and analyze their product usage? Specialized knowledge is required when addressing a vertical's needs, so your staff may need additional training.
Tip: Find a partner with experience in your marketing segment and find out if other players need to be involved too, such as consultants or SIs.
3. Develop Your Solution
Vertical customers simply want to have their problem solved. The details of the 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.
Tip: The process of transforming various components into a bigger solution will likely add value that comes from your channel partner or VAR.
4. Market Your Solution
It is important to determine who you are marketing to in order to market your solution effectively. You are likely now marketing those messages to a layered audience that includes your partners, such as SIs, ISVs or VARs. You must also define who is marketing your story to the end user. Will your sales team do this, or your third-party channel, or both? How will you support their efforts, and with what types of materials?
Tip: Branding of the solution (not the product) should be considered. Expect and prepare for your product to get spun into a bigger solution with a brand of its own. Your brand could completely disappear under someone else’s label.
5. Set Measurable Goals and Analyze Results
Plan to devote a lot of time, energy, and money to your new sales and vertical marketing system. You need to know if/when it is a success. Besides the obvious that company starts making more money, you’ll need to set some KPIs (key performance indicators) to help you recognize success.
Tip: You can also measure things like strategic account penetration, ARPU (average revenue per user) and whether it increases (or decreases) over time with your new strategy, and much more.
Using vertical marketing systems 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. There are many pieces to this puzzle, so before jumping into it, take time to create a strategy. This will ensure success with a vertical marketing system.