Most companies understand the importance of the marketing planning process. They create plans that include quantifiable goals, activities to engage in, assignment of responsibilities and a budget to fund the plan. That process, however, overlooks one key element: a strategic approach to marketing. When it comes to marketing, strategy should be the foundation or cornerstone of the marketing plan. It is not the “what” but rather the “how” and the “why” of what companies plan to do. Part of a strategic approach to marketing means understanding and taking advantage of upstream and downstream marketing.

Upstream and Downstream Marketing Defined

The terms upstream and downstream marketing were first coined by top management consultant Dr. Ram Charan in his 2004 book, “Profitable Growth Is Everyone’s Business.” Since then, the concept has grown to shape many marketers’ approaches to uncovering growth opportunities and sustainable tactics. The key is understanding how the two work in tandem.

According to Charan, “Upstream marketing refers to the strategic process 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-users use the product or service and what competitive advantage will be required to win the customer and at what price point. It 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.” At its most basic level, upstream marketing involves the identification of potential revenue sources. Charan says leaders should ask themselves the following questions when considering upstream marketing:

• Where to play? (Which customers, market channels and broad product categories should we pursue?)
• How to win? (What is our value proposition? What is our business model? Which products and services address the area of opportunity?)
• How might we? (How might we solve the customers’ problems, improve their experience or revolutionize the marketplace?)
• What would have to be true? (What business metrics and resources are needed?)

Charan goes on to explain that downstream marketing, on the other hand, “is 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 are primarily downstream in nature. In other words, they enhance the acceptance of a product or service that already exists.” Downstream marketing is what the company does through its sales and marketing efforts to make money.

Two Directions But One Stream

Keep in mind that while upstream and downstream marketing are different and require unique skill sets, the stream is one and the same. Build the marketing strategy upstream and implement the tactics downstream. If you start with tactics then try to formulate a strategy, you’ll be fighting your way upstream against the natural flow of business. Conversely, if you focus on the upstream “big picture” functions of innovation, projection and market evaluation, but never develop or implement a game plan, nothing will get accomplished. The question is, how do you develop a successful upstream foundation?

Research Leads to Understanding

Laura Patterson, bestselling author and president of VisionEdge Marketing, explains how to effectively prioritize upstream marketing in her book Fast-Track Your Business. “Upstream marketing requires a longer-term investment and keen focus on performance management. It also requires delving into a different level of data−gaining deep customer insights and competitive intelligence by investing in research; understanding the principles of segmentation, positioning and differentiation; and distilling this into a strategy and plan for growth that is aligned to the business.”

Prioritize upstream marketing efforts at early stages and throughout the marketing process by asking the right questions that lead to understanding of your clients, your own business and the surrounding market. Patterson’s 10 questions that need to be answered as part of upstream marketing include:

1. What will our customers want next?
2. How would we deliver what our customers want next?
3. How will we convert this into a competitive advantage?
4. Where is the market moving?
5. How do we want to participate in these moves?
6. What customers do we want next?
7. Where will we find them?
8. What will they value?
9. What is our roadmap for developing future products that deliver this value?
10. How will we bring these new products to the market?

Patterson reminds us, “The answers to these questions are vitally important because they fuel growth. But, never forget that when it comes time to execute the plan derived from your upstream efforts, you’re going to need solid downstream skills.”

Always Look in Both Directions

According to Charan, many “companies spend an inordinate amount of money on downstream marketing activities and ignore critical upstream marketing activities,” Businesses that take the time to develop an upstream marketing strategy have a deep understanding of the marketplace, gaps in current product or service offerings and ideal buyer personas. Armed with this knowledge, leaders can create a competitive advantage by developing innovative solutions. Only after building this strategic foundation can marketers develop the downstream plan that will attract customers, support sales staff and drive revenue. When done well, the two systems go hand-in-hand. Upstream marketing ideation flows directly into downstream marketing initiatives that result in sales.

It’s important to understand that upstream marketing is a continuous process. If you stop looking ahead, you could miss the next big thing that floats down the river while you are hyper-focused on the downstream part of your marketing efforts. Likewise, if you are too focused on the big picture, you fail to consider marketing altogether and, as a result, will have no plan for customer outreach in place. Where are you in this process?