For Local Companies Focused on Specific Verticals, a Sharp Focus Can Be Key for Growth

When Groupon was introduced to the local merchant community in 2008, it was supposed to be a marketing technology platform that everyone could use. Restaurants, retailers, and home service professionals all jumped on board, and Groupon started beefing up its features to better serve businesses in a huge variety of industries. Less than four years later, as the daily deals industry began to implode, people in the industry quickly discovered that in the world of marketing tech it’s hard to be everything to everyone.

Bloated technology platforms designed to serve the entire SMB market have slowly been replaced with more targeted vertical plays, but industry veterans still caution that every vertical requires a unique approach.

“A fully-integrated vertical solution is far more powerful than the sum of its parts,” says Winslow Marshall of Venga, a CRM and business intelligence vendor that’s chosen to focus on the restaurant industry.

In recent years, Marshall has seen a movement toward greater integration of various systems. For example, tying together data points from the systems that businesses in a certain industry might use. Within the restaurant industry, that might mean creating a Facebook marketing campaign that’s targeted based on the menu items ordered by a guest in-house.

“When building a tool for a specific vertical, it’s important to be cognizant of how that vertical operates and how those who work in it think,” Marshall says. “For this reason, we’ve found it important to build a tool that pushes actionable insights to our clients, rather than requiring them to go out of their way to access data.”

The trend toward industry specialization is partially the result of increased pressure from investors to focus on a model that provides the highest return, says Devaraj Southworth, CEO and co-founder of Thirstie, an on-demand delivery service that focuses exclusively on alcohol.

“Many startups start with a big vision end up branching out in different directions in an attempt to increase their addressable market,” Southworth says. “It’s not necessarily a bad thing to do in the early days, but it’s important to confirm your strategy and evaluate whether the business needs to narrow its focus at certain points.”

For many startups with limited resources and funding, focus is the key to success. But Yong Kim, co-founder and CEO at Wonolo says there’s always a higher likelihood of success when startups are focused on solving very well defined problem sets versus trying to do too many things.

“Uber, Airbnb are all great examples where they became experts in one vertical — transportation and hospitality — and once they won that market, started looking at adjacent markets where they could apply their lessons learned and extend their presence.”

When deciding to target a specific vertical, Southworth confirms that it’s important to religiously test your hypothesis.

“Success isn’t always predicting future use cases for your product, but it is remaining laser focused on what your current customers’ needs are,” he says. “On the flip side, because things are changing so quickly, and we’re living in such exciting times, we shouldn’t always try to replicate what’s made a company successful in the past, but rather examine and focus on what’s possible today.”