The Genesis of Strategic Marketing-Tier II Marketing (Part I)

In a previous article, I explored the difference between marketing tools and marketing strategy and described Tier I marketing in detail. This post continues in that vein by exploring the next step in an organization's marketing sophistication, what we refer to as Tier II marketing. Where organizations engaging in Tier I marketing are tactically driven, Tier II marketing is driven by strategic goals and insights. The strategy drives the tactics. The characteristics of a Tier II marketing organization include the following:

• Key Performance Indicators
• Preliminary market research
• Customer segmentation
• Positioning strategy
• Strategy drives tools
• Touch Point Integration
• Performance measurement
• Marketing mapped to sales process

Key Performance Indicators

The first thing a Tier II marketing organization does is identify the key performance indicators the marketing strategy should affect, as well as all of the subcomponents of those KPIs. For example, we recently performed a marketing analysis for a local salon. Their primary goal was, as should be with all organizations, to boost top-line revenue. However, given the many items within the system that affect revenue, simply looking at revenue figures doesn't provide much clarification as to how to market the salon. As such, we identified all of the subcomponents of revenue, which for them included clients served, new vs. repeat clients, product vs. service revenue, and more. These items comprised the salon's KPIs that were crucial to affecting top-line revenue.

After analyzing the historical performance of those KPIs, the solution to their marketing strategy became much more apparent. Rather than simply taking our best guesses at how to market the business to affect top-line revenue, the data suggested that the areas of emphasis for marketing efforts should be on improving client retention and increasing the average revenue generated per client. The data also indicated that to reach a significantly improved top-line revenue, the salon needed only to service 14 more clients per day.Suddenly, the task of developing a marketing strategy become much simpler and more focused.

Preliminary Market Research

As opposed to simply taking a stab at who the organization should market its products and services, the Tier II marketing organization finds out exactly how to sell it. It conducts enough research to identify its target audience (more on that later) as well as the key selling points of the product/service as they relate to that audience. They also analyze both their competition and industry to identify potential threats and opportunities. There are many ways in which the research can be conducted (e.g. interviews, surveys, observation, ethnography, etc.). The important point is that the organization collects enough data about marketplace to develop a strategically driven marketing plan with confidence that it will work. A Tier I organization does nothing but guess as it takes shots in the dark.

Customer Segmentation/Ideal Customer Criteria

In conducting its preliminary market research, the Tier II marketing organization identifies its customer segmentation as well as its ideal customer criteria. By identifying customer segments that make sense, the organization can tailor its marketing efforts to those segments rather than taking a buckshot approach to its marketing and hoping for a hit.

For example, we recently performed a marketing research project for a California-based petroleum distribution company. As a part of the project we identified significant differences between subdivisions of its customer base according to their usage of the company's services and the perceived value of those services. Heavy users maintained high value perception while the medium to low users saw little, if any, value in those same services. Being able to segment the customer base according to usage was extremely helpful when approaching the marketing function because the company now knew that it had to do more to communicate its value to the medium to low user groups. Once again, instead of guessing, the segmentation of its customer base permits focus.

Secondly, the Tier II marketing organization uses its KPIs and market research to understand its ideal customer criteria. The criteria dictates who the organization targets in its marketing efforts, which in turn dictates all of the marketing tactics and media used in all marketing efforts. The organization isn't afraid to lose a potential customer who does not match those criteria and is willing to walk away from a bad deal.

Positioning

Finally, at least for today, the Tier II marketing organization develops a positioning strategy around which all other marketing efforts will be based. Ries & Trout (1981) defined positioning as the rung mental ladder an organization occupies within the mind of the prospective consumer. In other words, for each product category (e.g. grocery stores, computers, soda pop, etc.) there is a mental ladder on which the consumer ranks the various vendors of which the consumer is aware. For example, Wal-Mart and Target compete within the same product category (i.e. big box department & grocery), but they are thought of very differently. Where Wal-Mart has traditionally positioned itself around its low prices, Target has positioned itself as being about designer goods on a budget.

Instead of simply talking about features and benefits, a Tier II marketing organization develops a positioning strategy that will distinguish itself within the mind of its target audience. That distinction should not only be unique (it couldn't be a distinction if it wasn't), but it should also be meaningful to the target audience. For example, it does no good to market my laundry detergent as the detergent that gets clothes bright if what my audience really cares about is that it removes stains. Of course, there could be market for bright clothes as well so you'd better understand your audience.



Part II of this story will explore the remaining characteristics of the Tier II marketing organization.

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