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Modern buyers, both retail consumers and businesses, are looking for more from the companies they buy from. They want products built specifically for them by experts who understand their needs. On the business-to-business side, we call this verticalization. This is a trend that is extremely prevalent in software.
Research from Boston Consulting Group finds that 76% of software buyers value working with sales teams and management who truly understand their industry, while more than two-thirds value “industry-specific solutions.”
Investors like Bain Capital Ventures (BCV) admit that the concept of vertical software as a service (Vertical SaaS) is fairly new, and for good reason. The issue of depth versus breadth, BCV reports, can divide investors. Why would a software company willingly choose to limit its total addressable market (TAM) in favor of a specific vertical?
When my co-founder, Amir, and I started Duda more than a decade ago, verticalization wasn't nearly as hot a topic, and investors were much more skeptical than they are today. Focusing in depth is debatable now, but it was incredible back then. However, as our product evolved and our company began to grow, it eventually became clear that this was what we needed to do.
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Serving all served none
Our beginner TAM it was basically anyone who wanted to use our product. As a website builder, this meant we were attracting a pretty wide range of skill levels to our platform – from small business owners to full professional website designers.
Developing a platform that appealed to both of these audiences quickly became a real challenge. Someone looking to build a simple menu website for their coffee cart, for example, would expect a simple and easy-to-use experience. A digital marketing agency, on the other hand, would require more powerful and sophisticated tools with a high degree of customization. These two people are completely opposite.
Trying to balance and build a tool that is simple enough for a small business owner but sophisticated enough for a professional proved to be extremely challenging – perhaps not even feasible at all, especially for a small team of engineers.
This was not a very big deal at first. The rapid growth made a lot of sense and our initial product, a website builder specifically for mobile websites, gained widespread traction. However, as the web evolved, so did our company – and we had to FIT.
Businesses went from having a desktop website and a mobile website to having responsive websites that fit both platforms. Websites became more complex and their designs became more intricate. As our platform became more powerful, our focus became less clear and our competition became fiercer.
Not only did this combination pull our product in many directions, but it also put us in competition with much bigger players in the website building space. We had to focus and distinguish.
Verticalization brought us clarity
The decision to verticalize our platform was not an easy choice by any means. At that time, approximately half of our customers were small business owners. How can we justify turning away half our customers?
For us, the decision was based on both the customer data we had and our team's gut feeling.
We saw, from our numbers, that professionals and agencies were growing at a much faster rate than small businesses. Moreover, when we looked from the outside, we saw that this segment was painful underserved by the market. Our engineering team preferred to build more sophisticated tools, too, for more sophisticated users.
With the data on our side and the team behind the decision, we chose to narrow our focus. This brought extreme clarity to every aspect of the company. Suddenly, the sales team knew exactly who their customers were. Marketing knew who to talk to, which publications to work with and which influencers to coordinate with. Engineering knew who to develop for and which features to prioritize. The list goes on.
Here is a good example. We can't say the phrase “responsive design” in our tone marketing before narrowing down our market; Instead, we should have said “works on desktop, tablet and mobile.” This was a clumsy phrase, but after verticalizing we were able to start using specific, technical terms in our marketing like “responsible”.
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Your platform can also be verticalized
The story we tell is one that many businesses can relate to. Once we decided to focus on the pros, we never spent another dollar buying a small business. To date, our copy speaks specifically to website professionals and SaaS companies – people who build or deliver websites for others.
That clarity inspired every feature that came after and helped bring the company to where we are today, with over 23,000 customers and one million sites published on the platform.
To make the same change, you need to ask the same question we did: Who are your best customers?? This is an endless question and one we keep asking ourselves as well. When we decided that Internet professionals were our customers, the obvious next question was: What kind? Freelancer? Marketing agencies?
Once you've found your customer, you need to dig deeper. What are their characteristics? What do they like about your product and what turns them off? How to get more of these customers?
Verticalization is about constantly double-clicking on your customers, diving deeper and deeper into their world until your product fully aligns with their needs. It's also about making sure these needs match the DNA of your business. When the pieces align, the effort is worth it.