Expanding into a new vertical (i.e., a different industry segment or product category) can open up major growth opportunities—but it also comes with risks. Fortunately, your ERP (Enterprise Resource Planning) system holds a wealth of data that can help you evaluate, validate, and de-risk expansion decisions into new verticals.
Here’s a step-by-step guide to using ERP data to evaluate new verticals:
🔍 1. Identify Top-Performing Customer Segments
Why It Matters:
Understanding your existing customer base helps you recognize patterns that may align with new verticals.
How ERP Helps:
Use your customer data to segment by:
Industry
Region
Product usage
Order frequency
Profit margin
Look at sales performance across different industries or customer types to spot untapped potential or emerging demand.
Example Insight:
If your ERP shows consistent sales to contractors in commercial HVAC, that might indicate potential in the industrial or institutional HVAC market.
📦 2. Analyze Product Performance by Sector
Why It Matters:
Some products may already have crossover potential into a new vertical. ERP data can show which SKUs sell best—and where.
How ERP Helps:
Run reports to see:
Top-selling products by industry or region
Product profitability
Return rates or complaints
Identify which SKUs have multi-industry applications or consistently perform across customer types.
Example Insight:
A fast-selling fire-rated building material in residential construction might also meet code requirements for healthcare facilities—a new vertical worth exploring.
📊 3. Evaluate Profit Margins and Cost-to-Serve
Why It Matters:
Not all verticals are equally profitable. Some may require more service, longer lead times, or specialized packaging and shipping.
How ERP Helps:
Analyze:
Gross margin by product category or customer type
Cost-to-serve (e.g., freight, labor, handling)
Invoice-to-payment cycle
Compare these metrics across your current verticals and model them for the new one.
Example Insight:
Your ERP might show that retail customers generate higher revenue, but institutional buyers provide better margins and more consistent payment cycles.
📈 4. Forecast Demand in Similar Product Categories
Why It Matters:
Forecasting helps you predict how a product might perform in a new vertical using historical data.
How ERP Helps:
Use demand forecasting tools within your ERP to model:
Seasonal demand patterns
Purchase frequency
Inventory turnover
Combine historical data with external market research for a well-rounded picture.
Example Insight:
You might find that demand for energy-efficient windows spikes in residential Q2–Q3, but that commercial projects need them year-round—suggesting a stable new opportunity.
🛠️ 5. Assess Operational Readiness
Why It Matters:
Before expanding, you need to know if your team and systems can handle the shift in requirements that a new vertical may bring.
How ERP Helps:
Evaluate:
Inventory availability and lead times
Supplier capacity
Workforce utilization and production schedules
Use ERP workflow tools to model order processing or fulfillment changes in the new vertical.
Example Insight:
If ERP data shows your warehouse is already near capacity, serving a high-volume vertical like retail may strain your logistics without investment.
📦 6. Monitor Returns, Warranties, and Customer Service Trends
Why It Matters:
A new vertical might come with unique expectations for support, product performance, or regulatory compliance.
How ERP Helps:
Review:
Return rates by customer type
Warranty claims by product line
Customer service requests or support tickets
Use these insights to predict potential support needs in the new vertical.
Example Insight:
If institutional buyers require more post-sale support and your ERP data shows longer resolution times for complex orders, you may need to bolster your service capabilities.
💬 7. Use ERP-CRM Integration to Analyze Sales Conversations and Pipeline
Why It Matters:
Your sales and customer service teams often get early signals about emerging opportunities or vertical needs.
How ERP Helps (when integrated with CRM):
Analyze:
Pipeline growth by industry or customer type
Sales notes or feedback
Close rates for different types of leads
Identify which verticals are generating inbound interest or quote requests.
Example Insight:
If CRM notes and ERP quotes show increasing requests from educational institutions, this may indicate strong vertical potential—before full-scale marketing is even deployed.
🧮 8. Simulate Pricing and Margin Scenarios
Why It Matters:
Each vertical may require different pricing strategies due to competition, value perception, or buying behavior.
How ERP Helps:
Run simulations using:
Current pricing models
Volume discount structures
Cost inputs from suppliers
Forecast how margins will hold up in new scenarios based on volume, delivery costs, or custom product specs.
Example Insight:
Your ERP might reveal that even with lower per-unit pricing, a new vertical’s high-volume orders could yield better net profits.
✅ 9. Benchmark Operational KPIs by Industry
Why It Matters:
You need to know what operational success looks like in a new vertical.
How ERP Helps:
Track KPIs like:
On-time delivery rates
Inventory turnover
Fill rates
Compare your internal benchmarks to industry averages to assess whether you’re prepared to meet vertical-specific expectations.
Example Insight:
If healthcare projects require 98% fill rates and your ERP shows you’re averaging 92%, improvements are needed before entering the market.
📄 10. Build a Business Case with ERP Reporting Tools
Why It Matters:
To make a smart, data-backed decision, you need a clear business case that shows potential ROI and risk.
How ERP Helps:
Use built-in dashboards and reporting tools to create:
Profitability models
Inventory forecasts
Operational impact projections
Share these visuals with leadership, sales, and supply chain teams to align decision-making.
Example Insight:
A well-structured ERP report showing steady demand, strong margins, and supplier readiness can fast-track approval for a new vertical expansion.
🧠 Conclusion
Your ERP system isn’t just for managing day-to-day operations—it’s a strategic asset for exploring new verticals. By analyzing historical data, forecasting demand, modeling margins, and assessing operational capacity, ERP data gives you the tools to expand with confidence and evidence.
Would you like help building a vertical analysis dashboard in your ERP or identifying which KPIs to track? I can help you get started!
