Vertical markets are one form of a niche market. Essentially, this is a market that is composed of a subset of vendors and customers that conduct transactions that are based on particular needs. Generally, a vertical market will appear as a small group within a larger industry setting, with the vendor supplying products and services that are directly related to the a customer who is considered part of the same industry.
A vertical market is different from a horizontal market in one key aspect. While this type of market addresses specific needs associated with the market sector, a horizontal market will have a broader appeal. The products and services offered in the horizontal market will still be useful to the customer, but much less specialized. This makes it possible for vendors in horizontal markets to sell the same goods to businesses that are engaged in a number of different industries.
One of the easiest ways to understand a vertical market is to look within a given industry and note situations where both the customer and the vendor are engaged in some aspect of that same industry. Telecommunications is an excellent example of an industry with vertical markets. For example, a teleconference service provider is a specialized telecommunications provider. The teleconference company will purchase bridging equipment from a manufacturer in order to set up a working call center. In this scenario, both the provider and the manufacturer are considered to be part of the same industry.
By contrast, a vendor in a horizontal market would supply a less specific service that would be of interest to a wider client base. Long distance services are an example of a broad horizontal market, as is word processing software. A broad range of customers can easily utilize each of these services.
