Product Strategy: How to Stay Focused While Expanding into Vertical Markets

December 12, 2013

For growing software companies, building products that are designed to be everything to everyone is rarely an effective strategy. Instead, suggests Central Desktop VP of Products Kristy McKnight, SaaS businesses should be striving to achieve better focus on the segments or verticals that give them the best chance for long-term success.  

When Kristy McKnight joined Central Desktop in 2011, the veteran product management executive faced a challenge that she was familiar with from a decade-long tenure as the Director of Product Management at Intuit — six years after launch, Central Desktop’s online collaboration software remained a horizontal offering.

Why was that a problem?

In the short term, it wasn’t. The business was doing well and its sales team could quite literally call on any business. To scale in the most efficient manner possible, however, McKnight says that she and Central Desktop’s management team knew that the company couldn’t continue with that horizontal approach.

“Once we began to create an infrastructure to drive growth, we needed somewhere to point the ship,” McKnight says. “It’s not exactly efficient to build out sales, marketing, and product organizations, and then tell those teams, ‘Our target customer is whoever will pay for our service.’ That just doesn’t work. You may continue to have some success in the short-term, but that lack of focus will eventually prevent you from driving effective long-term growth.”

When she joined the company in 2011, it had started to focus its product strategy and was experimenting with different verticals. McKnight brought a more structured, proven, processed methodology to get it right.

Lessons Learned from Intuit’s Product Strategy

In her time at Intuit, McKnight dealt with a similar issue.

“You don’t necessarily want to have to re-invent the business just to address a new vertical. The goal is to be able to make some basic adjustments and organize your team around building and deploying a complete product that serves the specific needs of a more targeted segment.”


Kristy McKnight, VP of Products at Central Desktop

Any user or business in virtually any segment could derive value from tax and personal finance software like QuickBooks and TurboTax. The question, however, was whether some subsets of users or segments were better customers than others, and whether those better customers could be grouped into more specific categories.

Not surprisingly, the answer was yes — and the same was true when McKnight and her team began to explore the traits and qualities of Central Desktop’s customer base.

“When we really started to look at that customer base, we began to see pockets of customers that represented specific industries or verticals,” McKnight explains. “And some of those verticals performed much better than others. Maybe they were more profitable, easier to target, or had needs that better aligned with the core features of the product, but you could definitely see some trends that suggested we should be focusing more of our energy on those customer groups.”

3 Simple Steps for Targeting and Expanding into Vertical Markets

Armed with that insight, McKnight was able to dive into the traits that made each vertical in Central Desktop’s customer base appealing, and determine a strategy for more effectively attacking those industries.

McKnight says that process involved three key steps:

  1. Perform a market assessment: While it’s good to know that your company’s software performs well with, say, dentists or doctors, McKnight says it’s critical to make sure that there’s upside potential to targeting that vertical, as well. To do that, you should ask questions like: How big is the market? Are there competing solutions servicing that vertical already? How receptive would that market be to your software?
  2. Conduct qualitative research: Before committing significant resources to a specific vertical, McKnight says software companies must perform qualitative research to better understand the challenges and opportunities of a particular customer subset. For instance, you might try to discover what customers want to do with your software that it isn’t currently setup to achieve, or which unaddressed customer pain points could be solved with simple product improvements.
  3. Identify your top one or two verticals: Your research may yield three or four attractive, high-performing verticals, but McKnight suggests selecting just your top option to target first. Otherwise, it’s likely that your team’s focus will be no better than it was when you attacked the market horizontally.

Ultimately, McKnight says that the best way to ensure that you’re choosing the right verticals is to revisit your company’s aspirations, goals, and objectives. If a vertical aligns with those core components of your business, then attacking it should be a relatively straightforward process.

“You have to figure out exactly what you’re solving for and whether the steps you need to take to get there align with your short- and long-term goals,” McKnight explains. “You don’t necessarily want to have to re-invent the business just to address a new vertical. The goal is to be able to make some basic adjustments and organize your team around building and deploying a complete product that serves the specific needs of a more targeted segment.”

kristy-mcknight-vp-productKristy McKnight is the VP of products at Central Desktop, responsible for the company’s product strategy. Kristy has introduced and managed high-tech and software products for more than 20 years. She began her career at Arthur Andersen before becoming director of product management for Intuit, where she led the professional products division and managed end-to-end customer experience, strategy and execution. After almost 10 years at Intuit, Kristy served as vice president of product management and strategy at Most recently, Kristy was the vice president of product management at Telecommunications Systems, which acquired Networks in Motion. 

What successes and failures has your company experienced with verticalization? Let us know in the comments section below.

Photo by Vincent Lee




Vp and GM

<strong>Kristy McKnight</strong> is the VP/GM of <a href="">Veritone, Inc.</a>. Previously, she was the VP of Product Management at Age of Learning, Inc. and previously was the VP of Products at <a href="">Central Desktop</a>, where she was responsible for the company's product strategy.