BtoB

Vertical Variety

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B-to-b marketers are becoming extremely savvy in their approach to vertical marketing, from conducting extensive research with customers to using highly targeted communications to reach different industries.

Many factors influence vertical marketing strategies, including acquisitions, the global economy, new-product launches and the competitive landscape.

In each case, marketers must carefully evaluate the market opportunity for each vertical segment and develop a targeted marketing plan to meet unique customer needs.

Johnson Controls, a 121-year-old company that provides power control systems, made a major change to its vertical marketing strategy last year after it acquired York International, a global supplier of heating, ventilating and air-conditioning (HVAC) equipment and services.

"The acquisition made us much more able to play in verticals that neither one of us was able to really play in before," said Andrew DeGuire, VP-strategy at Johnson Controls.

For example, Johnson Controls and York each had relatively small service businesses in the HVAC space, he said. Now, with the combined resources brought by the acquisition, Johnson Controls has been able to expand its HVAC service business to retail stores and businesses with many buildings.

"Now when customers are building a building, rather than going to multiple vendors for chillers, air handlers, control systems and other mechanical equipment, they can go to a one-stop shop. It's attractive to more types of customers," DeGuire said.

Another factor that's driving vertical marketing is rising energy costs. Johnson Controls has expanded its marketing to schools and government buildings to make them more energy efficient, and other companies are targeting businesses in the energy industry.

Jeff Winsper, president of b-to-b marketing agency J. Winsper & Co., has several clients that target the oil, gas and energy industries. He said marketing to these verticals is really heating up as energy prices rise.

This month, J. Winsper client Kalido, a Shell Oil spinoff that provides data warehousing applications, will launch a highly targeted campaign aimed at CEOs of oil and gas companies to show how its data management products can help them perform better against their competitors.

Kalido focuses on 70 CEOs

Kalido has selected 70 CEOs of multimillion-dollar corporations and will target them with an e-mail campaign to drive them to personal URLs offering key performance indicator reports.

"These are all customized, one-to-one communications that show how Kalido can improve customers' profitability within their industry," Winsper said.

General Electric Co., which has diversified well beyond electrical products, has taken a slightly different approach to its vertical marketing strategy, said CMO Dan Henson.

"We define verticals in four areas-country, projects, events and industries," he said.

While the latter category is the most traditional way of segmenting markets, the others represent unique ways of targeting business opportunities, Henson said.

For example, a project might be targeting a new football stadium to provide products and services. Through a relationship with the National Football League, GE has access to football team owners that are building new stadiums around the country.

"Previously, we might have sent in our electrical team to do the lighting, and sent our wire, water, security, financial services and even health care people in separately, and we would go to market with six different commercial efforts," Henson said.

Under a new vertical approach, GE sends in a small team with experts from each of its major business groups to negotiate with team owners.

"Now we go in with one face to the football team owners who are building new stadiums and say, `Look at all that we can do for you,' " he said.

IBM Corp. is another marketer that pursues a strong vertical marketing strategy.

The company targets 17 vertical industries that are grouped into five major areas-financial services, wholesale distribution, public sector, communications and industrial.

"Every six months or so, we look at trends in these industries to determine where the growth is and where we need to shift our resources," said Ed Abrams, VP-integrated marketing communications at IBM Americas.

IBM uses extensive research, including internal market intelligence, secondary research from companies including International Data Corp., Gartner Inc. and industry-specific research companies, as well as in-depth customer research.

"We look at where we need to retain and grow our customers, and where there is `white space' opportunity where the market is growing," Abrams said.

Often outside circumstances will determine IBM's vertical strategy. For example, after Hurricane Katrina, IBM realized there was a huge need for infrastructure services for the public sector market and looked at ways in which it could assist in rebuilding efforts.

Once it has identified the vertical segments it will focus on, IBM uses a combination of industry-specific marketing techniques-including database marketing, direct mail and personalized e-mail-to reach customers in these segments.

"We want to talk to our customers in a one-on-one environment," Abrams said.

IBM focuses on key customers

To achieve this, IBM has shifted from a broad industry marketing strategy to an account-based strategy, in which it focuses on the key customers in each vertical segment.

"Rather than blanketing the industry, we want to talk to those key customers that really matter in an industry," Abrams said.

Once it has established relationships with key customers, through one-on-one sales meetings, industry events and other direct methods, IBM leverages the relationships to build credibility in the industry.

"Using those customers as references is a critical aspect of our approach," Abrams said.

Sometimes companies add new verticals as their product portfolios expand.

LexisNexis, a research service for legal, corporate and government clients, recently expanded it's legal search service into the tax law vertical.

"LexisNexis had traditionally targeted law firms and internal law departments at corporations, but now they are adding in accounting firms and in-house corporate tax departments," said Gary Slack, chairman and chief experience office at Slack Barshinger, which handles advertising for LexisNexis.

To reach this new vertical, LexisNexis added new print titles, Web sites, search engines and direct response vehicles to its media plan, separately targeting accounting firms and in-house corporate tax departments, Slack said.

"In the direct response area, we were able to segment even further, for example communicating with tax practitioners within the Big 4 accounting firms differently than we did tax practitioners in smaller accounting firms," he said.

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