Winning marketers relentlessly focus on expanding their playing field using upstream marketing to identify and fulfill unmet customer needs. Creating and capturing new market spaces and building strong brands is the domain of upstream marketing and the focus of our work and best-selling book. Here we’ll explore the differences between upstream vs downstream marketing.
The idea of going upstream to unlock growth is a proven concept, though it lacks familiarity, understanding, structure, and practical instruction.
Downstream marketingis what most people visualize as marketing and involves advertising, promotion, brand building, and communicating with customers through public relations, trade shows, and in-store displays. While these activities are extremely important, they tend to enhance the acceptance of a product or service that already exists. Further, companies spend an inordinate amount of money on downstream marketing activities and ignore critical upstream marketing activities.
Upstream marketing, by comparison, refers to the strategic pro- cess of identifying and fulfilling customer needs. Upstream marketing takes place at a much earlier stage by developing a clear market segmentation map and then identifying and precisely defining which customer segments to focus on. It analyzes how the end user uses the product or service and what competitive advantage will be required to win the customer and at what price point. This is done very early in the product or service development cycle and is one of the missing links for generating revenue growth at many companies.
In considering upstream marketing vs. downstream marketing, it’s crucial to ensure both are fully aligned and seamlessly integrated. After all, upstream and downstream marketing are different parts of the same stream.
An Upstream Analogy
Here’s another way to look at Upstream Marketing, by way of analogy. Ever gone fishing? Think of upstream marketing as everything that happens before the hook is in the water. Expert anglers will consider and act on a number of factors before they actually cast the line, which allows them to catch a lot more fish. First, they’ll consider what type of fish to fish for, the method (fly fishing or baitcasting), and tools needed, including the type of rod, reel, fishing line, and so on.
A few other questions will be considered: where exactly should I fish, which lake or river? When and where within the lake will they be? What’s going to be the most effective bait? Finally, they set the bait and put the hook in the water. Embedded in this example are key upstream principles – thinking through the key decisions that take place to win with the customer. Essentially, it involves the who, what, where, when, how, and why that need to be considered before planning downstream implementation methods.
Why Upstream Marketing?
The primary reason to pursue an upstream vs. downstream marketing focus is improved business performance. Companies that rapidly identify and reallocate capital to new growth businesses outperform those that take a steady-state approach. When executed well, strategic marketing provides substantial new revenue and profit streams that extend far beyond the core business. Uncontested “white space” market opportunities open up, making the competition irrelevant.
After adopting upstream principles and practices, companies tend to look very different than they did in their early stages. The playing field—the customers they serve and the products they deliver—expand significantly.
Despite its proven importance to business success, many business leaders are unfamiliar with upstream marketing. Why is it so neglected? Why do so many companies focus on downstream and under-value upstream? This occurs for several reasons.
Upstream Marketing Challenges
Upstream Marketing . . .
Is hard to do. Upstream marketing is neither a strategy nor a process but rather a set of principles, framing questions, and underlying practices that need to be consistently applied . Many companies don’t know how to get started, or they treat upstream components as separate or distinct, as opposed to an integrated system.
Takes time. Before realizing its benefits, upstream marketing requires thoughtful strategizing, planning, and testing. The payoff in new business is not immediate. Faced with a soft business climate or limited resources, many companies turn downstream to spur short-term growth and never get around to upstream activities. Upstream is a journey that requires displaying patience and a sense of urgency at the same time.
Lacks tangibility. Downstream efforts like an ad campaign, new website, or slick brochure are often more appealing than a marketing strategy or business plan. It can be challenging to envision the potential value of upstream marketing tools like framing questions, concept statements, and prototypes.
Success can be hard to measure. Sales revenue, ad impressions, click-through rates, lead tracking, and other metrics provide a sense that downstream marketing is working. There are fewer ways to track upstream marketing successes in the short term.
Upstream Marketing Opportunities
There are counterarguments for why upstream marketing makes sense, and why now. The main reason is the substantial business growth that results. New markets, new business models, new products, new channels, and other growth areas open up entirely new revenue streams. Here are other factors:
Customer obsession helps focus the organization. The answers to most marketing strategy questions reside in the marketplace. Companies that invest in deep, proprietary insight into their customers are better equipped and inspired to meet their needs both today and in the future.
Upstream marketing expands the playing field and creates uncontested market space. Many organizations are driven to hit short-term numbers and therefore fixate on the current state. Be careful. Amazon’s Jeff Bezos said, “If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that.”
Upstream offers the opportunity to be “roughly right” rather than “precisely wrong.” While precision may be required in certain downstream business practices (in tracking metrics and sales, for example), upstream marketing thrives on being “roughly right .” Many business decisions are reversible. Use test-and-learn to minimize the cost of failure. You don’t have to win every time, but you need to be in the game. Upstream marketing gets you in the game.
New tools, techniques, and accelerators that support upstream marketing emerge every day. Upstream marketing is more efficient today than in prior years. Agile planning, rapid prototyping, web- site mock-ups, and 3-D printing are huge time- and cost-savers. New business incubators and entire innovation districts are increasingly available to assist with development .
Consumers are comfortable with the concept of beta products and product updates. Customers have become conditioned to accept products that may not be 100 percent. “Ship and iterate” is an acceptable way tech companies gain early, loyal customers. After version 1, it’s 1 .1, then 1 .2, and eventually version 2 .0 . Consumers get this, are comfortable with it, and have become more forgiving over time .
With upstream marketing, the Pareto principle (80-20 rule) and Parkinson’s law work in combination. The Pareto principle, named after economist Vilfredo Pareto, holds that roughly 80 percent of the effects come from 20 percent of the causes. For example, 80 percent of sales come from 20 percent of your customers, and so on. Parkinson’s law states that “work expands so as to fill the time available .” These two ideas become even more powerful when combined. In our experience, companies that integrate a general comfort with ambiguity with a bias for action can reap 90 percent of the benefits of strategic marketing with just 10 percent of the effort.
Upstream marketing combines strategy formulation with execution. There is no centralized planning department, organizational silo, or hand-off between functional groups. Rather, upstream marketing is built into strategy from the start and naturally flows to downstream implementation.
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