Vertical SaaS vs Horizontal SaaS: What Is the Difference?
Modern offerings in the SaaS market cover many industries, ranging from accounting to building a supply chain. However, this industry is not limited to the professional sphere; many use it for domestic purposes, from financial transactions to listening to music. It led to the division of SaaS into vertical and horizontal. Today we want to tell you about these two varieties, how they differ and which type is right for your business.
What Is Horizontal SaaS?
The Horizontal SaaS definition says that this software is for many customers. It doesn’t focus on one industry, but makes products that many people cross-industry can enjoy. Typically, the clients of such organizations are people with different goals and needs, which gives access to a considerable number of potential clients.
This business model has been around for a long time and has proven effective. If your horizontal SaaS company wants to attract many customers, you need to evolve constantly by offering new solutions.
Horizontal SaaS Pros and Cons
Understanding the horizontal SaaS meaning is easy, but it can take time to understand the advantages and disadvantages of such a business model.
Advantages
If you choose this business model, your organization will have many potential users. It means you can use your marketing strategies to attract more customers rather than focusing ads in one niche.
It will also make it much easier for you to scale your project. Since your product is not focused on a single market, you will constantly be able to find new opportunities to grow, add new features and attract many new customers.
Another advantage is that it will be much easier for you to create a recognizable brand. Communicating your product to a considerable number of users will maximize the visibility of your product.
Flaws
Most likely, there are already a considerable number of competitors on the market who, like you, want to get as many customers as possible. It makes it much more difficult for you to compete; you have to cut prices and come up with other tricks to keep customers, which often leads to the collapse of the business. Thus, to stay afloat, you must constantly monitor the market, look for what competitors are doing better and improve. Working on such projects requires a lot of patience and a willingness to accept criticism.
What Is Vertical SaaS?
Vertical SaaS definition says that it is unique software to solve the needs of an individual market. It can solve several problems. The call can be anything from healthcare to finance. Today they are becoming increasingly popular, allowing for solving many business issues.
Practice shows that vertical companies can be more flexible and inventive as they use many AI and machine learning features.
It doesn’t matter if it’s a new or old project; interest in it is growing as it can prove it can do the job it was designed to do.
Vertical SaaS Pros and Cons
Vertical SaaS meaning says that this software helps solve various business issues. Any software has its strengths and weaknesses.
Advantages
Firstly, using such a business model, you will have fewer competitors. Only a few companies develop solutions for business needs today, especially if you work with new areas (for example, supply chains). So, it will be much easier for you to evaluate the market, highlight those services that do not yet exist and offer your unique software with no analogs.
Secondly, it will be much easier for you to take the largest market share due to the small number of competitors. It will allow you to reach more potential customers and build a good reputation.
Thirdly, it will be much easier for you to retain your customers, which is also due to the lack of competitors. Even if your product does not suit customers 100%, they will not refuse to cooperate, as they will not be able to find a worthy alternative.
Flaws
This business model has several drawbacks that should be remembered.
It is challenging to scale such a business, as it is designed for the needs of one market. You should check in advance whether there are enough potential market customers interested in your product.
It will also be difficult for you to improve brand awareness. Since your product is designed for one industry, you will need more time to build a marketing strategy, and you will be able to get new customers mainly through recommendations, which takes a lot of time.
Aspects that differ Vertical vs Horizontal SaaS
If you need to know what to choose between horizontal SaaS VS vertical SaaS, we advise you to consider the main differences between them.
1. Different business model
You need to decide in advance what kind of business model you want to build – for one particular industry or the daily needs of many people. When creating a business model, you need to consider how you want to profit and what services you will provide your customers.
2. Target market
Think about what your potential buyer should look like. If this is a businessman who works in logistics, then vertical is better for you. But, if it can be any person, regardless of professional activity, this is horizontal.
3. Competitive environment
If you are afraid of competition, is it better to prefer vertical? Where it is almost absent. But, if you want to constantly improve your product and compete with those companies that are already on the market, then horizontal is more suitable.
4. Marketing
From a marketing point of view, horizontal is focused on customer acquisition, while vertical is focused on user retention.
5. Growth prospect
Vertical SaaS company needs help with the prospect of growth, as they only work for the needs of one industry. At the same time, it is much easier for horizontal companies to grow and develop.
What is the best way to scale your project?
If you want to scale your business, you need to answer a few questions in advance:
- Do you want to create a product for a general audience or a private company?
- What services are you planning to provide?
- Are you ready to compete?
Answering these questions will make it easier to understand exactly how you best scale your project. If you have any questions, please contact our SaaS development specialists. You’ll get all the needed help in creating your project that will meet all your requirements.
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