Is it better to focus your attention on a general audience or a specific niche?
That’s the question at the center of the debate between horizontal and vertical distribution.
The idea of the two distribution models exists across any number of different fields.
From the tech world – where horizontal and vertical distribution can be applied to app and software development – to the operations and supply chain space, comparing the two different approaches to integration takes place in nearly every business looking to scale.
Today, I’m focusing on highlighting the two distribution models as they relate to marketing strategies (this is, after all, a digital marketing blog).
I’ll take a look at how the two approaches differ and whether or not there’s opportunity to leverage both in your marketing strategy.
What is Horizontal Distribution?
Horizontal distribution marketing focuses on the broader audience. The idea of “casting a wider net” applies directly here.
As a marketer, if horizontal distribution is part of your overall go-to-market strategy, you’re likely working with a product or service that has universal appeal or application.
As a result, your campaign focus can afford to be less targeted and in fact, you may prefer it that way as a means of attracting people outside a certain demographic.
Often, horizontal marketing strategies include mutually beneficial partnerships with other brands. A great example of this is the relationship between Nike and Apple as part of release of the Apple Watch.
By joining together, each brand expands their audience through to the other’s target market. Apple benefits from selling more watches to runners and Nike capitalizes on the launch of a much-hyped and in-demand product.
For a digital marketer focused on building out your horizontal strategy, seeking out these same sorts of partnerships may be easier said than done. But with some creative thinking and a growth marketer’s mindset, there are big opportunities to grow your reach to a more broad audience. Partnerships are just one piece of the horizontal distribution model. Other ideas include:
- Growth outside your current location. Do you currently only market locally? Domestically? Expand your reach by growing into new, untapped markets.
- Expanding your solution by taking advantage of trends. Think Coca-Cola in 1982. They reached new heights of popularity by taking advantage of the new-found emphasis on weight-loss and science correlating high sugar intake with obesity. And so, they released Diet Coke, a low-sugar, similar tasting version of the beverage everyone knew and loved. That’s horizontal marketing at it’s finest.
- Take control of a market through acquisition. Of course, not everyone has the means to go out and start acquiring competitors, but that’s not necessarily the goal. Think Facebook and Instagram – while not a direct competitor, Instagram was a fast growing social app whose acquisition by Facebook allowed them to consolidate ownership of the photo sharing space.
All in all, a horizontal growth strategy means increasing your exposure and demand within the market as a whole, not necessarily a specific niche. Vertical distribution, on the other hand, focuses on the exact opposite.
What is Vertical Distribution?
Vertical distribution means developing a marketing campaign focused on a targeted group with the hopes of furthering your hold on that audience.
From the supply chain world, this often manifests as what’s called “vertical integration,” where a company owns and manages each and every component of their product or service’s life cycle.
A well-known (albeit now defunct) example of vertical integration in the retail space was American Apparel, who actually labelled themselves on their clothing tags as “a vertically-integrated manufacturer.”
American Apparel owned and operated each step of the manufacturing, marketing and distribution of their clothing all within their 800,000 square-foot factory in downtown LA.
They completely managed the fulfillment of both online orders and retail stock. They even went so far as to create their own magazine and radio station for retail stores as further means of vertically integrated promotion.
Of course, from a marketing perspective, it’s not quite so easy to just “own” each stage of your marketing process (none of us are likely acquiring Google or Facebook in the near future).
Vertical distribution in marketing might mean seeking more unconventional ways of getting the word out about your product or service. If vertical integration is all about cutting out the middleman and owning each step of the process, how can digital marketers seek out similar inefficiencies in their go-to-market strategy?
Often, this is where the help of a growth hacker becomes critical. Growth hacking is all about seeking less-traditional paths for expanding your audience within a specific niche market.
One infamous example of doing exactly this would be Airbnb’s rapid growth through craigslist ads.
Rather than marketing through traditional ad space hoping to attract renters and hosts, Airbnb scoured craigslist in target markets for people renting out their pads, then reached out individually asking them to list the apartment on Airbnb instead.
Then, later on when there were enough hosts but not enough traction from renters, they began hiring freelance photographers in markets to go to people’s homes and take professionally styled photos of their apartments. That’s true vertical integration from a marketing standpoint.
How Can the Two Work Together?
If you want to make the most of both distribution models, take a look at a new concept evolving for marketers called “functional integration.” Barry Wacksman, Chief Growth Officer at R/GA, put it best in an article published on the Wharton School’s website:
“This new generation of successful marketers is building entire “ecosystems of value” that blur together products and services in ways that deliver greater value to consumers. Each new piece creates an additional node in the ecosystem, further driving up value. What constitutes an ecosystem of value? There are increasing consumer benefits that accrue from buying into more nodes, while each node is also a potential entry point for new customers.”
The example he uses, Apple, makes a lot of sense considering their broad range of products, but the same could now be said of Google, Facebook and even more purpose-focused solutions like Uber, who have began expanding into food delivery and self-driving vehicles.
Bringing together the worlds of horizontal and vertical distribution is the way of the future for marketers. Time for us all to get on board