Horizontal Market

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Last Updated:January 28, 2024

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What Is a Horizontal Market?

Horizontal markets span a variety of industries. As a result, consumers and purchasers of a business operating in this market will come from various economic sectors. In other words, businesses that sell to multiple industries are in a horizontal market.

A horizontal marketing system refers to a distribution channel wherein two or more companies operate at the same level but unrelated to one another to gain economies of scale. In other words, it is the combination of two unrelated companies that have come together to exploit market opportunities.

Companies that lack capital, human resources, production techniques, and marketing programs tend to adopt this marketing system and are afraid of incurring heavy losses.

To overcome these limitations, organizations are forming joint ventures, which can be temporary or permanent, or forming mergers with other companies that have a market share much more significant than their own. This enables them to grow and continue in the business.

Since there is huge competition among the market players, and everyone is striving to garner a good position in the market with the potential to earn a significant amount of profits, this marketing system has recently gained popularity.

This marketing system:

Enables partnership between two or more companies to make the best use of scarce resources.
It brings together two or more wholesalers, enabling them to spread their market across a wider area, possibly extending their distribution networks.
Enables two or more retail outlets within a specific geographical area, intending to sell bulk quantities.

Benefits Of Horizontal Markets

To develop an effective advertising strategy, it is essential to determine your target audience. With this marketing system, one can target a broader audience instead of narrowing the focus to a niche.

Accordingly, companies with products or services that are universal in appeal are more likely to go horizontal than firms without such products or services.

The advantage of this marketing system is that you can afford to be less targeted with your campaigns, resulting in fewer hours dedicated to tailoring every message and more focus on reaching as many people as possible.

Partnerships can be one of the best strategies to grow your market appeal within an industry. For example, many such marketing systems are currently used by industry-leading tech companies, such as Apple, to market their products.

For example, Apple has partnered with Starbucks so that their clients can listen to iTunes music while sipping on their coffee. In addition, Nike has partnered with Apple to support the needs of people considering using iWatch for sports and improving their performance with it.

Apple has even built sensors that athletes can place directly into their Nike shoes as a running program.

More recently, healthcare company Johnson & Johnson partnered with Google to develop effective and affordable surgical assistant robots to reduce the need for surgical assistants and provide excellent safety during surgery.

A fundamental part of this marketing is that it allows you to connect with a broader range of customers by appealing to a universal and accessible desire, such as the desire to enhance one's quality of life.

Collaboration is another marketing puzzle piece that can lead to a successful horizontal marketing system. Additionally, one can take advantage of several other opportunities to improve their reach, including:

Taking Advantage Of New Trends

Coca-Cola introduced Diet Coke in 1982 as part of a strategy to target a new segment of its market by leveraging the desire for weight loss and fitness.

Expanding Into A New Location

Businesses can develop more suitable strategies aligned to a local market by diversifying their market. It is also a good idea to look for other areas where one can sell or ship to grow the organization.

Take Control Of The Market With Acquisitions

Business acquisitions and mergers can be challenging, but they're an excellent way for a company to grow. For instance, look at Facebook and Instagram. The Instagram Partners program promises to match Instagram advertisers with marketing partners.

Marketers can benefit from marketing partners in various ways, whether they seek strategy advice, explore custom tools, or scale their existing campaigns. For example, Instagram now has a marketing partner program.

Facebook did not directly compete with Instagram, but purchasing Instagram gave them the chance to reach new customers.

Cost Reduction

The advantages of a very simple and diverse offering include the ability to operate at a larger scale and connect with a more significant number of customers simultaneously.

Inclusive companies are 1.7 times more likely to be innovators in their industries. In addition, diversity increases a company's chances of outperforming its competitors by up to 35%.

In other words, you can save time and money as you do not have to spend as much time and money on customized marketing materials.

It is often easiest to implement a marketing strategy that is broad in scope. Even so, there is a possibility that you need to shell out a slightly higher price for your keywords if they are very competitive.

Unlimited Sales Opportunities

One needs to adopt this marketing system to gain customers' attention across a wide range of demographics.

For example, by partnering with Starbucks, Apple reached out to the millions of coffee drinkers who liked the convenience of using their Mac computers and iPhones while relaxing at a nearby café.

The cooperation with Nike allowed Apple to appeal to a completely different set of consumers to gain customers on practically every side of the market.

In terms of value, this is one of the most successful brand partnerships since it began in May 2006. Apple and Nike both invested strategically in their respective markets.

They did this through co-branding. This extraordinary partnership has reaped the benefits of co-branding more successfully than any other.

If one can establish the right connections through this marketing strategy, then that can lead to unlimited opportunities to generate sales.

Brand Awareness

Building trust and awareness are the most challenging things you must do when developing a new brand.

Choose to devote yourself to a narrow niche and exclusively to vertical marketing. You will likely have to spend a lot of time building relationships with your target audience.

However, if you have the right connections with companies that already have a hold on other horizontal industries, you are much more likely to expand your reach quickly.

To gain new customers and establish your brand name as a household name, it's essential to team up with companies from various backgrounds.

Taking advantage of horizontal market growth

The idea behind this marketing system is that it allows companies to exploit the opportunities that come with 'horizontal growth.'

Acquisitions, mergers, or takeovers of companies in the same industry and at a similar production stage constitute horizontal integration. Mergers take place when two independent firms of the same size join forces to form a new joint venture.

You are developing your service or product by expanding your business and product into new markets, business domains, or geographic areas.

Developing a business horizontally has its challenges. Even so, there is a good chance that you will come across audiences and customers with whom you have little familiarity.

Mergers are risky as they can destroy shareholder value rather than create it. This is because the synergies don't materialize despite the potential advantages of horizontal integration.

Most large-scale mergers fail to achieve the gains in shareholder value forecast beforehand.

To build loyalty and affinity with your new clients, you will have to become more familiar with your horizontal endeavors as possible.

Additionally, these marketing systems are also prone to problems related to industry-specific regulations and localization commitments, which can create considerable friction.

Despite the challenges, these marketing strategies still have a great deal to offer your company or brand. However, to successfully implement your horizontal marketing system, you need to adopt the correct approach. Typically, you will have several options at your disposal.

Delivery Of Products & Services To New Markets

You could do this by enhancing the idea of the existing product to create a new item that appeals to different types of consumers.

This involves improving an existing product or service, changing it so consumers use it more frequently, or adopting it to allow for more consumer use.

For example, a heart rate tracking system for athletes could potentially be developed in the medical sector with some changes to appeal to the medical field.

Collaboration

Connecting with organizations in other verticals will allow you to reach new customers more compellingly.

A company's customer experience encompasses all aspects of its products and services, including advertising, packaging, product and service features, ease of use, and reliability.

However, very few people responsible for those things have given sustained thought to how their decisions affect customer experiences. They all have different customer experience perspectives, which need to be brought together.

For example, a coffee company and a hospitality brand may partner up to deliver luxury coffee to guests.

Exploring New Geographies

To get new audiences, you will need to be willing to sell in different countries, and plenty of ways can help you do so.

You will need to be willing to sell your products in several different countries to reach new audiences. There are several ways in which you can accomplish that.

Make sure you do your research.
Visit the area in which you are marketing
Avoiding offensive terms
Observe the competition
Become familiar with the language
Establish relationships with people you trust
Discover your niche
Create an action plan

The easiest way to achieve this is to partner with other brands in the locations you wish to target to improve your reputation in those locations.

Uber is one of the best examples of a company with a solid horizontal marketing strategy. As a travel-focused start-up, it began its operations in a single city before expanding to other localities worldwide.

Due to the company's recognition of the demand for accessible and smartphone-oriented services, it expanded into things like 'UberEats,' which has become one of the most successful apps.

Unlike other on-demand travel services, UberEats has taken the logic of an on-demand food delivery service.

Using this system correctly can also help decrease marketing costs in the long run. For example, it has been shown that when two companies collaborate on a horizontal marketing strategy, a smaller company can reduce the strain on its marketing budget by working together.

A growing number of young start-ups are turning to horizontal marketing to help launch their brands into new industries by leveraging the pre-existing reputations that other businesses have in that industry.

Unlimited Sales Opportunities

The main benefit is that it allows you to connect with various demographics.

The partnership between Apple and Starbucks is an example of appealing to coffee drinkers who relax or work on their MAC in a nearby cafe, for instance.

Apple and Starbucks need a robust innovation strategy to compete effectively in international markets.

Innovation can take many forms. Essentially, it refers to a continuous, organization-wide process that enables companies to simultaneously improve existing products and services, allowing them to invest in the development of breakthrough inventions and breakthrough technologies.

Additionally, Apple could reach different customers when it collaborated with Nike.

Cost Reduction

It can be argued that such marketing provides a more diverse range of offerings and operates on a larger scale. As a result, more advertising tools are not needed, and small businesses can save money.

Brand Awareness

It becomes increasingly difficult for a company to build trust and awareness when launching a new brand. Vertical marketing can prove costly, while horizontal marketing can help reach much faster.

Building a brand name and reaching out to new customers becomes more accessible with a team of people familiar with the company's background.

Marketing Strategy

Marketing strategies are probably one of the most significant elements of growing a business. An effective marketing plan allows you to analyze potential growth opportunities.

Furthermore, it allows you to identify who your actual customers are instead of who you believe them to be and determine where to focus your marketing dollars in the future. The development of such a marketing system can be a very challenging process.

Nevertheless, if you find one or more companies from the market you want to be able to reach out to that share the same customer base as you, then you could be on your way to extraordinary results.

By implementing a well-conceived horizontal marketing strategy, today's organizations can reach out and interact with a broader audience without dramatically increasing their marketing budgets.

In some cases, the partner company you have chosen to work with may offer similar products or services to you without necessarily being in direct competition.

Whenever you affiliate your business with another that can help you grow your customer base, that cooperation should result in you being able to offer your customers a broader range of products and services.

The following steps can be used as guidance to determine the effectiveness of this strategy.

Business Goals

For any horizontal marketing system to work, you need to know what you are trying to accomplish by connecting with new companies and customers.

Although the apparent goal of this marketing is to increase sales, there is usually something more in mind when deciding which industries or organizations to partner with.

For example, suppose you would like to enhance your brand identity to appear as an engaging and modern corporation. In that case, this is best achieved by partnering with technology brands that are pioneers in the field.

Alternatively, if you seek a more ethical image for your company, working with charitable organizations is a great way to boost your reputation among your target audience.

Knowing where you want your horizontal marketing system to take you in advance will enable you to track the effectiveness of your campaigns.

Know Your Audience

Companies investing in these marketing systems often make the mistake of thinking that because their reach is so broad, they do not need to understand their audience clearly.

The downside, however, is that as your business expands into new industries and geographies, you will need to create new marketing plans and people to guide your promotional strategies.

Considering the above, you might want to know the need to use specific terminology or jargon in your pitches if you decide to move into a new industry.

You must adjust your current tone of voice to match the customers' personalities in your new audience. In addition, if you are moving to a new country, you need to pay attention to any language difficulties that may not translate well.

To achieve a more successful business in your new market, it is essential to conduct the necessary research.

Strategic partnerships

The success of such marketing systems often depends on your ability to build online and offline partnerships with other marketers and businesses.

When choosing which companies to partner with, you must base your decisions on your organization's long-term goals and the shared values that will make your collaboration more effective.

For example, a company whose mission is to be environmentally friendly and that focuses on sustainability should not partner with a company involved in oil exploration and mining.

Even though such marketing systems are designed to widen your target audience reach, you need to ensure that the connection you're making is appropriate for the brand you are trying to build.

On the other hand, it is also essential to ensure that you can provide something of value to the company you are partnering with in return for the value they provide to you.

Any business that intends to sell a product, whether an essential commodity like corn or an advanced offering like a mobile phone, must make the product compelling. In addition, it must hire people capable of producing it at an affordable price.

The challenges of these jobs are enormous; considerable management attention and academic research have been devoted to them.

Delivering a service also involves dealing with customers, who are not simply consumers of the service but can also be integral to its production.

The interaction between customers and producers can create havoc on costs, so service companies must also find ways to fund their competitive advantages.

The most outstanding examples of such marketing systems are those in which both businesses can benefit from the partnership.

Execution

The right strategy is the key to any marketing or promotional campaign success.

You will be able to develop a coherent plan of execution for your horizontal market once you know your marketing goals, the partners you plan on partnering with, and the audiences you expect to reach.

The product you offer must satisfy the needs of your chosen target market. So, define your target market by looking at your most profitable customers.

Your marketing strategy should take advantage of your strengths and match them to the needs of the clients you are trying to reach.

For instance, think about:

How will you use marketing channels to reach your new audience and build a strong relationship with them?
What steps do you plan to connect your current promotional strategies to your new advertising campaigns?
What best ways to create value for your new partners and help their companies grow?
Is there something you can do to ensure that the values and personality of your company are evident as you expand into new markets?

When you're trying to broaden your reach and connect with new customers, don't be afraid to take the time to brainstorm with your new partners.

It would be best if you also remembered that corporate events would give you excellent opportunities to introduce the world to your new horizontal marketing system.

Examples Of Horizontal Market

Listed below are some of the well-known and successful examples.

Starbucks partnered with Apple to connect iTunes music to its coffee shop customers. Furthermore, Apple also collaborated with Nike to improve the performance of athletes using iWatches. Nike shoes are also equipped with sensors to improve performance.
Johnson and Johnson teamed up with Google to develop efficient, affordable, and flexible robots that can perform routine surgical tasks.
Coca-Cola introduced Diet Coke in 1982 in response to the demand for fitness, and Coca-Cola partnered with the fitness industry to see what the market needed.
Instagram and Facebook were not direct competitors for each other. The acquisition of Instagram, however, helped Facebook to reach new customers.
Uber is an excellent example of this marketing system. The company began its service as a one-city operation before opening offices in several countries worldwide.
With the growing desire amongst customers for more mobile-centric services, the company branched out into the horizontal market by launching 'UberEats.'