Big corporations usually enter into agreements for different reasons. Some may join forces to explore each other’s customer base, while others come together to benefit from their economies of scale and expertise. The latter partnership is referred to as horizontal marketing. It is an arrangement where two or more companies on the same level but selling unrelated products agree to join forces to enjoy each other’s expertise and economies of scale.
This creative partnership saves the participants time, money, and effort and increases their profit and brand margins. Not-so-large companies with limited funding and resources mostly do it for the opportunity to exploit the market easily. It also saves companies with limited production techniques and human resources from losses. This marketing system has become more popular recently owing to increased competition. It helps participants gain a good position in the market and make profits.
Examples of Horizontal Marketing
We have chosen a few examples to help you understand how these partnerships work in real life. Learn from these:
Johnson & Johnson & Google
Johnson & Johnson is a pharmaceutical and healthcare company that has been operating for over 13 decades. It is known for a wide variety of pharmaceuticals, medical, and consumer packaged products. On the other hand, Google is one of the biggest technology companies in the world, known for a range of products and services such as search engine technology, computer software, consumer electronics, and cloud computing, among many others.
The two companies partnered to create a robotic-assisted surgical platform to improve healthcare systems through easier integration of advanced technologies. By partnering, these companies agree to capitalize on their expertise, thus improving their market standing.
1. Nike and Apple
Nike is one of the world’s most popular footwear and apparel companies. It designs, manufactures, develops, markets, and sells different signature pairs of shoes and apparel. They are also known for several accessories, services, and equipment and are headquartered in Beaverton, Oregon. Like Google, Apple is a multinational technology company headquartered in Cupertino, California. It became the first US company to be valued at $1 trillion and deals in several products and services.
These two giants joined hands to create a special Nike+ footwear that allowed an external connection with the iPod for easier music playing. The footwear also displays time, calories, distance, and heat pace.
2. Apple and Starbucks
Apple has always been at the forefront of promoting this type of marketing given its love for different inventions. It partnered with Starbucks, an American coffee company and the largest coffeehouse chain in the world, allowing anyone using the coffee house’s Wi-Fi to search, download or buy songs from the iTunes store, shortly after launching iTunes. This partnership benefitted Apple as it leveraged on millions of customers who would come, relax and enjoy music.
These three examples are some of the best horizontal marketing systems. You can see that these reputable companies dealing in unrelated products come together to tap into their expertise and enjoy their economies of scale.
Types of Horizontal Marketing
There are three main types of horizontal marketing systems you should be wary of. Collaboration in this system can take the following forms:
- Two or More Retailers- Two or more retailers can decide to partner to supply products to a given area in large quantities.
· Two or More Manufacturers- Multiple manufacturers can come together to utilize limited or scarce resources efficiently.
· Two or More Wholesalers- Two or more wholesalers can come together to increase the area covered when distributing their goods and services.
Who Implements Horizontal Marketing?
In understanding this marketing system, it is important to look at and understand the parties involved, i.e., businesses and clients. Let’s explain this further.
Horizontal marketing is initiated by businesses which can be two or more. They must have one common objective- a desire to increase their customer base without overstretching/ increasing their marketing budget. They must also offer different products that serve the same market. However, it’s also possible for competitors to form this type of partnership provided that they can offer a wide range of services to a satisfied clientele. For example, McDonald’s, Subway, and Walmart formed a perfect horizontal marketing strategy when they opened mini versions of their restaurants in Walmart stores in the 90s. This partnership was mutually beneficial.
Those on the receiving end of any marketing strategy or system are the customers. For a horizontal marketing partnership to work, the target market must share similar interests and demographic characteristics.
How to Develop a Horizontal Marketing Plan
Like any other marketing plan or campaign, horizontal marketing campaigns begin when businesses realize that there is an opportunity that can be leveraged to improve brand awareness and/or bring new products into the market successfully. When companies realize that they can partner with each other to intensify their marketing campaigns without significantly increasing their budgets, this type of marketing is the resultant effect.
Each company contributes to the overall marketing and presentation of the products in question. After a partnership has been formed and recognized on paper, all efforts are channeled to push the offerings. Companies also have to answer difficult questions such as the marketing tactics to be used, whether a party should merely endorse the product or its unveiling should be a joint venture, the best ways of communicating the reasons for the partnership, and the strength of every partner’s effort. The answers to these questions normally depend on several factors, including and not limited to the product being brought into the market, the campaign’s goals, and the reputations of both companies.
Unless well-known brands form a partnership, participants should be ready to educate customers about the intentions of their partnerships and the products’ quality. Well-known brands which enjoy a huge customer base usually get a pass on this, given that they enjoy the trust and confidence of their customer base.
How to Successfully Execute a Horizontal Marketing Strategy
A good strategy is important to build a successful horizontal marketing campaign. Here are some of the things you should do:
1. Set Clear Objectives
The first thing to do when creating any marketing campaign or strategy is to define objectives. You get to achieve your end goals easily if you set clear collaborating objectives early enough. If you want to build a wellness or nutrition brand, partnering with businesses such as fitness centers of your caliber will work. Defining your objectives will help you settle on the right business to partner with, which is necessary.
2. Understand Your Audience
Knowing your audience is equally important. It should be one of the first considerations when framing a marketing strategy. It helps you identify the kind of effort to put into your partnership or marketing campaign. Therefore, find out important things such as the age, hobbies, education, income, likes, and preferences of your new audience and use the information to frame your sales pitches.
Researching your audience helps you understand them better, increasing your business success rate.
3. Choose the Right Business to Partner With
Even the best marketing strategies and plans fail if organizations do not partner with the right people. Make sure the business you join hands with will offer a win-win situation. If you are involved in vegan products, partnering with a meat production company is useless to you.
Make sure that the partnership is beneficial to every participant. This will help you get the best out of it.
4. Have a Plan of Action
You can’t have a successful marketing campaign without a plan of action. It’s important to come up with the right ones to guide your operations. Here is where you decide on the marketing channels you will use to push your products or any new innovation you can integrate into your collaboration. A plan of action also means deciding on the amount of money to be channeled into the campaign.
How to Maximize Horizontal Market Growth
Keep in mind that companies resort to this type of market system to expand their operations and services by accessing new demographics, markets, and business domains, which can be termed horizontal growth. This strategy has a lot to offer the business if executed well. Some of the best ways to maximize what this system offers include:
1. Targeting New Companies
To make the most out of this marketing system, you need to partner with other companies in different industries or verticals. You will not only be able to reach new customers but also have fun while doing it.
2. Try New Markets
Since you will enjoy each other’s markets, economies of scale, and expertise, you can easily enhance your existing product ideas to appeal to different audiences. A good example is Apple, a tech company, and Johnson & Johnson, a health and pharmaceutical company.
3. Try New Locations
Trying new geographies is equally important if you want to make the most of this marketing system. The good news is that you won’t struggle to find new audiences if you take your business to other regions. This will also help you improve your reputation.
Advantages of Horizontal Marketing System
Here are some of the advantages you stand to get if you go horizontal:
1. More Sales Opportunities
The horizontal marketing system creates unlimited sales opportunities because you can easily connect with customers from different demographics. A good example is Apple, which unlocked different sets of customers when it partnered with Nike and Starbucks. With the latter, it appealed to coffee drinkers, and with the former, footwear and apparel lovers. All you have to do is make the right connections with the target audience and you’ll make more sales than you ever intended.
2. It Reduces Costs
To maximize profits, businesses must reduce their spending. The horizontal marketing system is a simple strategy that allows businesses to operate at a large scale and reach several customers simultaneously. They don’t have to break the bank funding personalized marketing campaigns that may not even be as successful. You don’t even have to use your entire marketing budget if this strategy is well executed.
3. Faster Building of Brand Awareness
Even though building your company’s trust and awareness can be one of the most difficult things to do, it is necessary. Horizontal marketing allows you to partner with companies that have already established a presence in other horizontal industries. You also get to attract new customers and get your name known since you will be working with diverse companies.
4. Bigger Audience
This may be the perfect marketing system if you want to access a broader audience. Unlike other marketing strategies, the horizontal marketing system focuses on a larger audience. You don’t, therefore, have to scale your marketing efforts down to a specific niche, especially if your products or services can be universally accepted.
5. Saves on Time
You don’t have to spend lots of time or get a dedicated team to craft personalized messages in this type of marketing system. It saves on the time your business would have spent trying to reach new people. The most used strategy in this system is partnerships, which means joint efforts, so less time is spent.
Disadvantages of a Horizontal Market System
Even with the advantages, we have seen, the horizontal marketing system has several shortcomings that we should explore. These include:
1. Reduced/ Low Customer Loyalty
Vertical market-focused companies normally find it easier to build deeper emotional connections with their customers owing to the nature of the market and therefore enjoy more customer loyalty as opposed to those that focus on horizontal marketing.
2. Increased Regulatory Scrutiny
The law is particularly cross with big companies entering into partnerships, especially if it means narrowing the competitive market and creating a monopoly. It is, therefore, quite understandable for such a marketing strategy to attract more legal scrutiny from government agents.
Another significant disadvantage of this type of marketing is that it requires businesses to target a larger market base for successful advertising. This is because horizontal markets are broad and defined by demographics instead of industries. However, this can be countered using the right channels, such as social media.
Difference Between Horizontal and Vertical Business Markets
We should compare these two classifications to help you better understand our subject of discussion. A vertical business market is made up of companies aiming to fill one specific role for its customers, i.e., one type of business or industry. Such businesses are, therefore, in the direct competition since they offer similar products or services. On the other hand, the horizontal business market consists of businesses that target a certain demographic or purpose, such as general food producers. They often include businesses, not in direct competition and can work together.
Now that you understand these two markets’ definitions let’s look at their differences.
These markets differ in scope. A vertical business market is made up of companies that serve one industry, meaning that all businesses share a niche or specialty. On the other hand, horizontal markets are demographic-specific, meaning they depend on different demographics of a given customer base, which in this case can be age or geographical location. The marketing materials in this type of market usually succeed if they target a particular demography.
Vertical markets consist of businesses that share an industry and product types, which puts them in direct competition with each other. Marketing efforts must therefore focus more on the specific advantages the products have. On the other hand, horizontal businesses tend to be collaborative because instead of competing, they complement one another. They don’t also seek to serve one industry or produce competing products. For example, an eatery and book company can collaborate to market their products in a school.
The size of these two markets also differs. Businesses in a vertical market are highly specialized and hence smaller than those in horizontal markets. This also comes with its fair share of disadvantages that horizontal markets do not face. On the other hand, horizontal markets are not highly specialized, making them broader and bigger. This also comes with the disadvantage that vertical markets do not face, such as the need to target a greater audience for successful advertising. However, most of the problems faced in both markets can be easily countered with the right strategies.
The businesses in the vertical market aim to fulfill highly specific roles for their consumers, making them highly specialized. Customers, therefore, understand all the logistics in the given industry in detail and often make well-thought-out purchases. In contrast, horizontal markets allow for various businesses, given that the entire market is defined by demographics and not the types of products. It is, therefore, open to several businesses and industries.
We believe that we have exhausted everything you deserve to know about the horizontal marketing system. It caters to businesses serving similar demographics but dealing in unrelated products. You can go ahead and try it out by getting the right partner and agreeing on a plan of action. Feel free to refer to our article any time during your journey.