Software Product Marketing: Horizontal vs. Vertical

Here’s an important discussion for most software companies in the software product planning stage and the downstream active software product marketing phase. In what manner will the product be marketed? The decisions to be made in these phases are separate but closely related. Discussions on this topic need to happen! Regardless of whether you are marketing an infrastructure product, an open source application, or a SaaS application.

One of the more important aspects is whether the product will be aimed tightly at one or several vertical segments or marketed more broadly to the widest possible audience. This is the crux of the vertical vs. horizontal marketing decision. Let’s examine a few topics that can be useful in framing this discussion.

How specific is the “language” of your application to a vertical audience?

This is very important because, in some product categories, the unique business processes of a vertical are critical. In other product categories, there is great commonality in process and language across industries. If you’ve written your application to solve one market segment’s unique problem, it’s probably VERY specific to that segment. When this is the case, it’s obvious that you’ll start (and possibly end) with a highly vertical marketing effort. Sometimes, you may find that you’ve solved a problem for market A, but the product is also useful in market segments B and C. However, often, there needs to be at least some modification for these other markets. If you’ve solved a more generic problem that applies to many markets, the decision to market the solution horizontally or vertically can be much less clear.

How big is your overall software market?

This is a key consideration when entering a new market with a new product. The larger the market, the more likely it is that you will need to take a vertical approach to get initial traction. Often, this means verticalizing the product in the product development phase. But even if there isn’t a strong set of vertical needs concerning product features and “language”, a vertical MARKETING approach may be required to build market traction in many large markets. It is often far easier to create a brand name and market traction in a tight vertical before moving on to the next segment. As opposed to taking a more scatter-shot approach with no vertical focus.

What is the level of competition in the overall market?

This question is closely related to the first question above. Strong competition often goes hand in hand with large markets. They are separate issues, however, and should be evaluated individually. So if the level of competition is high, regardless of market size, a new entrant is likely to have a better chance of success with a more vertical approach. And if there isn’t significant competition in your chosen segment(s), you may be able to have success with a horizontal approach across several market segments. Lastly, if practical, this can be a more efficient way to use product development resources and software product marketing dollars.

Market maturity: Has the overall market verticalized already?

Regardless of the level of competition and the market size, if the larger market has already evolved into many vertical submarkets, it may be too late to take a horizontal approach. It is usually difficult to defeat entrenched verticalized competitors when entering a market with a horizontal application. The exception to this would be a new competitor with a product that provides a quantum leap forward in functionality. This is usually a result of a technological paradigm shift or a huge brand name.

What level of software product marketing resources are available?

The level of software product marketing dollars available is important in formulating your approach to the vertical vs. horizontal question. For example, let’s say you are entering a large, quite competitive market, and won’t have a lot of marketing budget available. In this case, it would be important to develop the product upfront with the strongest vertical focus possible and market it accordingly. On the other extreme, you might be entering a market of modest overall size that hasn’t verticalized to a great degree to date. You are also well-funded, enabling a substantial marketing budget relative to the competition. In this case, it might be easy to take the ROI-efficient horizontal approach from both a product development and promotional perspective. Many potential scenarios lie between these two extremes, which, unfortunately, will lead to less obvious decision-making.

Is your software product a “point” or “platform” application?

Many software applications are “point applications”. This means they have minimal or no native integration with the rest of the customer’s software infrastructure. In addition, any possible customization is generally intended to be done by the application vendor themselves or maybe their channel partners.

I define a software application as a “platform” when it utilizes an open API that enables BOTH channel partners and third-party software vendors to write add-on applications. This extends the platform software’s functionality in two key areas:

1. Adding “vertical” functionality not present in the platform software for a complete solution for a specific vertical market.
2.  Using the API allows other parts of the software infrastructure to integrate with the platform application.

Platform software applications create leverage

In this way, a platform software application allows the software vendor to “have its cake and eat it too” concerning the Horizontal vs. Vertical software product marketing discussion. The platform software provides basic functionality, which can be sold broadly across many markets. While the open APIs enable the product to be tightly customized for specific verticals as required by both your channel partners and independent ISVs.

The platform application can be a product manager’s dream. It is the Holy Grail of software for efficiently serving as many market segments as possible by leveraging partner investments. But it’s not something that can be forced. There needs to be a natural reason for the platform to exist. Or there won’t be third parties willing to write the add-on applications so critical to the platform’s success. Without these add-on developers, a platform will more often than not die a quiet death in the marketplace.

In summary, when you write an application targeted at a problem specific to a single vertical market, the answer to this “vertical vs. horizontal” software product marketing question is often easy. In other cases, you’ve created a useful product across several market segments. But do you have the resources to attack multiple market segments simultaneously? How do you approach this common problem?  Comment below with your take on this topic, or email us with your questions.

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