The Power of Vertical Marketing
Vertical marketing can be a powerful tactic to accelerate adoption
Sometimes vertical marketing gets a bad rap. There’s a perception that to target your product for a specific industry limits your Total Available Market (TAM.) There is some truth to this when taken to extreme, but in most cases, vertical marketing can be an effective tactic to accelerate adoption among specific market segments with common use cases. In other words, think of it as a way to tackle many markets one at a time.
Most of the businesses I’ve been involved with at the executive or board level have launched broadly applicable products across many different industries. Nonetheless, we often saw different adoption trends across industries. Not surprisingly, tech companies and startups tend to be the earliest adopters. Additionally, I’ve often seen patterns of significant adoption in health care, telecommunications, financial services and higher education.
It’s not always obvious when or how to target vertical markets. Sometimes there’s a deep-seated fear that it will require making engineering changes that weaken the broad appeal or otherwise distract from your overall roadmap. I have found that in most cases, it’s mostly a matter of creating the right marketing materials and campaigns to appeal to people within a specific industry.
Stepping Stones to Broad Adoption
Consider the case of DocuSign. It’s a broadly applicable technology for electronic signatures. But in the early days, they focused on real estate. Why? Because real estate closings are complex! By using electronic documents and automating the signing process, DocuSign eliminated errors, increased accuracy and enabled deals to close faster. Success in the real estate industry led naturally to the mortgage industry. And that led to even broader adoption in the financial sector.
Focusing on real estate didn’t make DocuSign a niche product. Instead, it provided foothold in an industry that was eager to use the product. Even though DocuSign was purchased by real estate professionals, the signatories were regular consumers. They saw the product, had a positive experience and introduced DocuSign to an even bigger audience. DocuSign used referral marketing to great effect, encouraging customer to invite others to try the product, enticing them with $20 Visa gift cards.
People have a high affiliation with the industry they work in. They feel a part of it. They attend industry conferences, read industry newsletters and gossip about who’s winning and who’s falling behind. When they change companies, they often stay within the same segment. Experts share their experiences regarding new products and best practices with their peers in other firms. There’s nothing that speaks to them better than a case study from a leader within their industry. Conversely, professionals within a particular industry will care little about what companies do outside their sector. So that case study from a well regarded high-tech company isn’t going to work when you’re selling to a bank, a hospital or a university.
Know Your Customer
One ironic situation with high volume SaaS companies, is they sometimes don’t know a lot about their customers. They can speak to general trends, such as what percentage of customers progress from trial to purchase, but they don’t necessarily understand the reasons. If you have hundreds or thousands of customers signing up and buying online without sales assistance, that’s great. But don’t let it prevent you from understanding who these people are and why they buy from you. Even if it’s not a fully scalable exercise, it’s worth reaching out to customers, asking what problem they’re trying to solve and why they picked you. You will likely discover some interesting patterns that can help you market and sell more effectively to others in the same situation.
In the early days of Zendesk, we signed up many freemium gaming companies who were looking for a more effective way to handle the high volume of support requests coming in from their free users. They wanted to minimize the time and effort their support agents needed to handle fairly simple requests. Once we solved the problem for a few of these customers, we realized we could repeat it across other online gaming companies. We were able to show them we understood their problems, we spoke their language and we had name customers we’d helped through similar problems.
Is there a specific type of company signing up for your product? Are people in this segment all dealing with the same challenges? Then why not build a marketing campaign that speaks directly to their issues and shows how you’ve solved that particular problem many times. If you can show logos of leading brands that can be very compelling.
From High Ed to Health Care
At Duo Security, we noticed interest from universities trying to protect their faculty and staff, possibly from the hacking efforts of adventurous students, something our founders readily understood.
We were practically dragged into the higher ed market by InCommon, a university consortium that focuses on identity and security. InCommon also negotiates volume discounts on behalf of its members which in many cases led to shorter sales cycles. There were no particular technical hurdles in serving this market, though they often deployed with Shibboleth, an open source single sign-on system. These early university customers also led to opportunities in related teaching hospitals.
Our biggest success in health care came through a large New York hospital that was interested in using Duo Security for Electronic Prescription of Controlled Substances (EPCS). New legislation had been put in place that required two-factor authentication in such cases. While the legislation was vague, our prospect was confident that Duo would fulfill the requirements. If we could make it work, he also offered to introduce us to a dozen other hospitals, all of whom were facing the same legislative requirements.
There was just one problem. We needed to integrate with Epic Systems, the dominant vendor of Electronic Medical Record (EMR) systems. We had no idea what an EMR was or how it worked, but they had APIs, so we set one lone Windows developer loose to work on the integration. Within a few months, we had a solution, and the customer made good on their promise to introduce us to others. This opened up a big opportunity for the company, enabling our largest vertical market contributing about 22% of revenue and eight of the top ten largest deals over the next two years. Not only did these deals accelerate our growth, they also enabled us to prove our scalability for large enterprise accounts.
We trumpeted our experience in targeted vertical industries by creating landing pages, white papers, webinars, integration guides and other content, starting with higher eduction and healthcare and later expanding to other sectors including finance, retail, legal and government. While some performed better than others, it was part of an overall strategy that enabled us to focus on specific use cases that resonated with customers.
Vertical marketing can be an effective tactic even for the most broadly applicable technologies. It’s all part of showing customers that you understand their industry and their specific problems.
What are the patterns of adoption you see in your company? Are there use cases driving adoption in particular industries? How can you better target those prospects?