The mission of B2B Marketing is to get Sales on the short list of vendors that a prospective buyer wants to meet with. That is what happens to Top Tier Vendors—they get invited to present anytime a potential buyer has a need.
However, the vast majority of B2B companies are Tier 3 vendors—they compete with hundreds, if not thousands of other companies for the same customer base. Tier 3 Vendors never get invited, so they must spend a great deal of time and money trying to get noticed for a deal they are unlikely to win.
The first step towards building predictable revenue and high growth is to focus on becoming a Top Tier Vendor in a clearly defined market space.
What Tier Vendor are you?
This concept of vendor tier is critical to the goal of achieving high growth rate. Tier 1 and Tier 2 vendors grow at a high rate. Tier 3 vendors either miss their targets or grow at an anemic single digit level.
Tier 1 Vendors
A tier 1 vendor is the market leader in its chosen market space. It has a deep bench when it comes to products, services, and expertise that are a high fit for its customers. As a result, it is the vendor that most customers want to buy from. It also charges a premium to customers for the privilege of buying from the leader.
There are usually no more than 2-3 Tier 1 vendors for any given market.
Tier 2 Vendors
A Tier 2 vendor is a strong niche competitor, but it probably doesn’t have the same scope and scale as a Tier 1 vendor. However, within its limited scope and scale, its offer is as complete and unmatchable as a Tier 1 competitor. In addition, a Tier 2 vendor typically charges less than a Tier 1 vendor. Therefore, for customers who don’t need the scale of Tier 1, a Tier 2 provider is a very attractive alternative.
There are usually no more than a handful of Tier 2 vendors for any given market.
Any B2B company that is not a Tier 1 or Tier 2 vendor is automatically a Tier 3 vendor—meaning that it is one of many dozens, if not hundreds, of vendors attempting to serve the same customer base with an undifferentiated, “me too” offer. Tier 3 offers are typically seen as “commodity,” and price competition is the only way to win deals.
In this article, we will refer to Tier 1 and Tier 2 vendors as a Top Tier Vendor.
The Real Test of Top Tier Vendor Status
Here is a simple test. If your prospective customers know who you are and what you do, then you are a Top Tier Vendor in your chosen market. On the other hand, if your target customers don’t know you, then you are a Tier 3 vendor as far as that market segment is concerned.
If we have agreed so far, then the mission of B2B Marketing should be to make a B2B company a Top Tier Vendor in its chosen market space.
What we typically see from vendors is an unfocused, highly undifferentiated message that goes something like, “Company ABC, the leading provider of XYZ, has the best…” No one really cares, so that vendor is relegated to Tier 3.
Here is a question for you, the CEO, to ask yourself:
- Would you rather be a Tier 3 vendor competing with everyone for anyone’s business and earning hair-thin margins with anemic growth, or
- Would your rather be a Top Tier Vendor competing with less than a handful of other vendors for the business of a market that knows and respects you and invites you to present your solution, so that you grow at a healthy rate and earn healthy margins?
The Power of the Short List
From the vendor’s perspective, getting on the short list of a buyer confers two very important advantages:
- Since the list of competitors is short, the probability of a win is much higher, resulting in more predictable revenue and higher growth rate.
- Since the list is short, buyer-vendor engagement level is high. Reps can more accurately gauge their chance of winning and can exit early if they don’t see a win. This further reduces wasted sales resources, which reduces cost of sales.
However, from the buyer’s perspective, getting on the short list depends on whether you as a vendor are trustworthy or not. Can the buyer trust you to not to waste her time? To be honest with what you can and cannot do? And most importantly, is trusting you going to cost the buyer her reputation, or even her career?
If you are a Tier 3 vendor, the answer is simple. You are not trustworthy, and the only thing that would make up for the risk of working with you is rock-bottom prices.
However, if you are Top Tier Vendor, you have proven to be trustworthy, and you are invited in to present.
The purpose of B2B Marketing is to make your company a Top Tier vendor so that you can get on the short list.
From there, you just have to prove to be the best fit for the opportunity— and that’s Sales’ job.
Read about the three hurdles in proving trustworthiness.