Is the second tier second tier?

Second tier. Middle tier. Neither term is particularly flattering. Both inherently suggest the existence of a first tier or a top tier, which in turn suggest that the distinction between the two tiers is one of quality. And with the ‘third’ tier cornering the ‘specialist’ tag, that one’s out of the question, too. 

Perhaps it’s a semantic point, because although the border between second and third (or middle and bottom) tier may be a bit blurry, most people on either side of the client consultant divide instinctively understand who the top tier are. Write down your list and see if it looks something like this:

Accenture, Bain, BCG, Booz, Deloitte, Ernst & Young, IBM, KPMG, McKinsey, PwC

Got something pretty similar? Fine: let’s park the terminology issue for a moment and think about perception. If an increasing number of clients are becoming interested in second tier firms (and they are) then it’s probably worth understanding why.

Wanting a genuine choice is a factor, particularly amongst sophisticated buyers. What they see is everyone consolidating their supplier bases to reduce the number of firms they use, and everyone ending up with the same suppliers. See exhibit A, above.  All well and good, except when you and your competitors are basically buying exactly the same consultancy from exactly the same suppliers. So they start looking elsewhere.

More significant, particularly at the moment, is cost.  Clients expect the second tier to be cheaper, and cheapness is rather fashionable now. What’s more, if you listen to the talk the opportunity is actually like-for-like cheapness. The second tier, the argument goes, is packed full of ex-top tier consultants waiting to offer you top tier consultancy at knock-down prices. On price at least, this may be justified: a recent survey showed second tier fee rates anywhere up to about 60% cheaper than their top tier counterparts.

But there’s a lot more talk about using the second tier than there is action, which suggests that when push comes to shove clients really don’t believe they can buy the same thing for less money from the second tier. And that, faced with the choice, they’re still putting quality before price.

What the top tier is offering them, above all else, is reputation. The quality may be there in the second tier (and it may be significantly cheaper) but the reputation is harder to gauge. Our surveys consistently reveal that access to information (on which, presumably, to judge reputation) is the key that unlocks the use of the second tier, but presumably a name change wouldn’t do any harm either. Answers on a postcard. Just send it first class, please.