Highs & Lows

While the middle class may be shrinking, it's definitely a long way from gone. Products such as blue jeans, soft drinks and laundry detergent continue to be sold to the mass market in much the same way as they always were. No one is predicting that everything will go two-tier. Even a two-tier enthusiast like Saatchi & Saatchi's Stark concedes, "The age of mass marketing is still with us."

Two-tier strategists should also realize the phenomenon is largely an American one. "Most marketing today is global," says Dennis Jorgensen, CEO of the American Marketing Association. "And around the world, middle classes are getting larger, not smaller."

And not everyone agrees that America is splitting into two separate markets. "It's an oversimplistic way of looking at a market," scoffs Jorgensen. "There's more at work in the marketplace than to say that some people are getting richer and some are getting poorer."

Others doubt that two-tier marketing is a new concept. "Back in the '60s and '70s, we used to call this market segmentation," says Joyce Gioia, president of Herman Associates, a Greensboro, North Carolina, marketing and management consulting firm. "It's really not that revolutionary."

There's no question that a marketing strategy based on two tiers carries some risk. First is the possibility that you'll choose the wrong tier to market to. "If you try to do something that's not in keeping with the way people perceive your business, it can have catastrophic effects," warns Gioia.

Adding tiers or simply repositioning your product can also be costly. Designing, developing and producing new products is expensive, says Stewart. You will probably also have to invest in retraining your employees so their attitudes and levels of service match the new niche, he adds.

"Any time you differentiate your product, you're going to add costs," Stewart says. "You've got to figure out whether the increase in business is going to be justifiable."

This article was originally published in the October 1997 print edition of Entrepreneur with the headline: Highs & Lows.