Adopting Vertical Marketing Can Help Accelerate The Growth of SaaS

Growth of the software market: focusing horizontally versus vertically

A vertical software company provides solutions for niche markets including food distributors, auto dealerships, and plumbers. Two such examples are ProCore, which offers construction management software, and AppFolio, which offers apartment management software.

Conversely, horizontal software typically targets B2C or B2B markets and can be sold to any kind of business. Some instances of horizontal software organizations are Salesforce, Atlassian, and HubSpot.

Software companies might easily obtain large sums of money and attract large customer bases in 2021–2022. The growth rates of software businesses with a horizontal focus and those with a vertical focus were similar over this time.

Under the heading of “efficient growth,” vertical software is becoming more and more popular in 2024. In 2023, vertical SaaS increased by 17% and horizontal SaaS expanded by 18%, which is about equal, according to financial filings from public SaaS companies. In contrast to horizontal SaaS, which invested 41% of its revenue in sales and marketing, vertical SaaS only spent 22% of its revenue in these areas.

For every additional dollar of annual recurring revenue (ARR), vertical SaaS companies spent $1.76, but horizontal enterprises spent $2.40. Vertical software companies have stronger gross retention, larger expansion sales, and cheaper acquisition costs. Their incredibly targeted solutions are made to be used right away in the customer’s everyday environment.

Additionally, they use industry-specific terminology, rules, and use cases in their marketing, which is quite focused. These businesses are well-known in the media and at industry-specific trade exhibitions, and the pricing is adjusted according to the value that vertical clients derive. Customers frequently believe they are losing out since the software may be being used by their rivals.

Marketing for horizontal software is less industry-specific by nature. Broad value propositions, client quotes from a range of industries, and general value statements are commonly found on homepages. A menu item called “Industries We Serve” can be found on most websites, and it lists industries including software, retail, financial services, consulting, agencies, and higher education. These parts lack the complexity of vertical marketers, but they do contain case studies and vocabulary relevant to the industry.

How to modify your program so that it works in vertical markets

By actually becoming quite vertical, horizontal items can thrive in a market that is oriented toward verticals. It’s critical to treat vertical buyers seriously because they are still in the market.

You can keep adopting horizontal go-to-market tactics, but in the absence of a defined plan, you run the danger of your staff becoming burned out. Here’s how to successfully entice vertical buyers to your horizontal software.

Select one vertical

Select a market segment that you are dedicated to controlling, where you have a solid product-market fit, case studies, a solid client base, and eye-catching branding. Ideally, there aren’t many competitors in this field.

Divide up your clientele and potential leads

Create and maintain an extremely targeted database that includes every buyer and ideal customer profile (ICP) in this vertical.

Investigation

Create a strong ICP and buyer persona by interacting with your clients and potential clients in this vertical. To prevent making assumptions, become familiar with their everyday procedures and compare them to those of your other clients.

Assess the fit of the product

Get a customer’s opinion on your goods by conducting buyer research. Determine the subtleties that might not work well with your product, especially in relation to integrations and laws.

Establish what you are replacing and what success looks like in this sector. Make necessary changes to your product without completely rewriting your roadmap. Make sure the “units” you price for make sense for this customer set by reviewing your pricing and packaging.

Because vertical software is typically more deeply ingrained in the stack, it necessitates more services, therefore take that into account when designing your service offerings.

Ads, digital experiences, and content

Utilize vertical aspects to personalize your brand. Make sure your logo, marketing, and content, if you’re targeting the pharmaceutical industry, both visually and textually represent the sector.

Keep abreast on current affairs and emerging trends, and offer your thoughts in business media or vertical forums.

Adopting a live mindset

Engage in communities, trade exhibits, and other vertically relevant events. Get speaking engagements where your consumers may talk about the vertical fit by influencing the influencers. Organize virtual events on a regular basis covering hot subjects in the industry.

Committed task force for customer success and sales

Pick a limited group of sales representatives, engineers, and customer success specialists who have received substantial vertical training. They should be able to communicate with customers in their native tongue, be a valuable consultant, and have easy access to customer testimonials. To find any fresh opportunities or pain spots, get feedback.

Record and acknowledge victories and defeats

Even in cases where the purchase falls through, every exchange with a customer is worthwhile. Celebrate victories to raise team spirit and analyze defeats to improve tactics. You go closer to attaining vertical efficiency with each victory.

Making the shift from horizontal to vertical success in SaaS

It is difficult to implement this strategy, and many attempts end in failure because of a lack of commitment and early abandonment, which raises the cost of acquiring new customers. On the other hand, perseverance will fuel a word-of-mouth engine that draws qualified, quick-moving customers to your inbound marketing flow.