Horizontal markets, as the name implies, is a market that meets the collective needs of a large group of people. This group of people cut across different industries where they fall under. As opposed to this, a vertical market is focused on meeting the needs of certain people in a particular industry. In this article, we will be helping you to navigate the challenges of horizontal markets with our expertise.
Oftentimes, the products and services that are marketed by an organization in a horizontal market have the benefit of focusing their business on a wide range of people. This also means these businesses will have the benefit of getting numerous people to demand their products and services. This way, there is less probability for product demand to waver. However, one major drawback in the horizontal market will be the high rate of competition.
Horizontal Markets Examples
For examples of physical products operating in a horizontal market, the coffee market will be one eminent case study. Various people from around the world drink coffee. These people of course cut across different industries. Another example of a physical products business in the horizontal market will be office supplies. The office supplies market sells its products to all kinds of offices in different industries.
Non-specific applications that are used for bookkeeping are examples of software products operating in a horizontal market. People from different parts of the world make use of these software applications. Especially since they are generic and often built in a way that every business owner can make use of them. Other examples of software products operating in a horizontal market are computer security softwares, word processing applications, spreadsheets, email applications and so on.
How to use the Horizontal Market Space to your Advantage
Here are a list of ways in which you can navigate the horizontal space to grow your business
Cutting back on costs
When you have a systemized product and services to offer, as a business, you are able to carry out your business operations to a wide extent. The system of operations can be rightly adjusted to the advantage of your business. It will convert into a lesser price of producing your goods for each unit. Asides being able to operate to a wide extent, a scalable business will also be able to have an automatic process. This will, as a result, lead to you being able to cut back on business costs.
Improved expertise of workers and employees
Businesses in a horizontal market have a consistent procedure. As a result, the entire company will have roles that are repeated. This will make each one become skilled in their personal fields. They are able to gain expertise while repeating the same process of work. From the point of sourcing for the materials for production to the point of producing the goods, selling and getting the goods to the consumers, every step is reoccurring.
When a group of workers scale up in their roles, there will be a chance for improving the reach of the business. This will then lead to increased productivity. However it is important to also state the fact that when there is increased expertise of some workers, this can also affect the business. It is not advisable to rely so much on some major workers as this may negatively impact the business. In a case where an employee is ill, or can not come to work due to certain circumstances. This is why it is also crucial to make sure that the junior workers are well trained.
Positive Business Development
As a result of consistency in business processes of an organization that offers specialized products or services, increased quality procedures are focused on that exact product. It will be less difficult for the organization to recognize the places where they need to do better. This will help them to continue to upgrade the quality of the goods and services.
While the product or services keeps upgrading, it gets to the point of maturity. At this point, it has gotten responses from different places all around the industries and improved on the business. This will now make it evolve into a business that is able to cater to more audiences. Since it blends better with the consumers it serves. When the customers see that their responses are noted and integrated into the product, they will continue to purchase and even refer others. This leads to improved customer loyalty.
Ability to operate with different pricing strategy
A business operating in a horizontal market can use different pricing strategies for different customers. Since this customer base are from different industries. A business can decide to go with a value based pricing or a cost plus pricing for various customers. When it comes to value based pricing, this strategy is to ask customers to pay based on the value that the business is getting for the customer. The company will also consider the value that the customer is getting for the final consumer. This advantage of different marketing strategies for different customers will improve the profit margins of the business.
In the case of a business operating in a vertical market, the business will often rely so much on a particular client. As a result of this, the business will not be able to employ a value based pricing strategy.
Low negotiating ability of customers
Since horizontal markets involve a wide range of customers in different industries, there will be a low negotiating ability for those who buy the goods and services. As there is a broad customer base, the demand for that product will be high, hence making customers have no choice but to buy the product since they are in need of it. In the case of products in the vertical markets, the market provides a high negotiating ability to those who buy the goods and services. The spending ability of each client is lower when compared to businesses operating in the vertical space. This is because the products are focused on a particular niche or group of people. The products and services are limited to the customer base that they are focused on.