Tier 2 and Tier 3: the New Top Tiers for OOH

Investment in out-of-home advertising is growing all across the country. Places like New York City and LA have famously shown us what modern OOH can do, and now marketers are setting their sights on secondary and tertiary markets.

Tier 2 and Tier 3 markets are hot. Why?

• The biggest markets are too expensive, already saturated and, in many cases, too broad in terms of targeting.
• With generally lower pricing and expanding inventories of OOH media options, secondary cities are cost-effective for testing campaigns destined for larger markets.
• Competition is lower, since most marketers are still focused on top tier cities.
• OOH is just as useful for hyperlocal advertisers as it is for big national brands, making secondary, tertiary and even smaller cities ideal destinations for an OOH campaign. Smaller brands can afford to play, rather than being priced out of this increasingly important channel.

Secondary markets are growing

The pandemic triggered a tsunami-size wave of migration, primarily away from urban areas. The ability to work from anywhere enabled people to choose livability and affordability over proximity.

"Secondary cities have a stickiness to them that keep people there."

That's according to NAIOP. They note that smaller metropolitan areas are "less expensive places to live, work, play and run a business" and tend to have industry clusters in life sciences, tech, media, professional services and finance/insurance. Cities with universities are obvious draws for companies looking to attract talented and innovative workers.

The takeaways for marketers:

• Your former go-to cities for testing or executing campaigns may no longer reflect your audience.
• To find the best markets now, you'll need to consider what matters most to your targets as they go about their new normal out in the real world.

Which tier 2 or 3 market is your audience in?

If you're promoting a national brand, you want a test market that is, in effect, a microcosm of the US. For most marketers, however, the audience is not that broad. You'll need to get more specific.

Picking your own top cities is really just a different type of geo-targeting. Before you can identify certain areas or destinations within a city, you have to identify which cities are now home to your target audience.

Age is a key targeting factor. Tye Medical notes, "Cities across the U.S. have distinct policies, populations, job openings, and housing markets. Because of this, certain cities are better-equipped to suit the specific needs of one generation over another."

They looked into this question, and generated some very useful findings, which they plotted on maps.

They suggest that, while diverse age groups make for a vibrant city, most people would rather live where the population skews toward their own peer group. Other key observations:

Boomers care about things such as healthcare and tax-friendliness for retirees. Their top cities are all in the eastern US.

• #1 Pittsburgh
• #2 St. Louis

Gen X is looking for good mid- to upper level jobs and quality schools. In fact, 80% of Gen Xers were planning to leave big cities before the pandemic. Their top cities range broadly across the country.

• #1 Atlanta
• #2 San Francisco

Millennials need early-level job openings and, maybe, an affordable first home. Their top cities are on the west coast from Seattle to San Jose, plus Denver, Seattle, Phoenix and Colorado Springs.

• #1 Salt Lake City
• #2 Washington, DC

(Interesting fact: in this study, Washington, DC ranked in the top 10 for every age group.)

Gen Zers are still students or just entering the job market. They need entry-level and part-time jobs and low-priced rentals. They are flocking to urban areas from San Francisco and Seattle to Washington, DC.

• #1 Salt Lake City
• #2 New England including Boston

Growing OOH markets

Overall, the south and west regions are growing fastest. Atlanta, Austin, Charlotte, Dallas, Denver, Miami, Nashville and Raleigh all grew faster than the national average between 2010 and 2020.

Projected to grow fastest between 2022 and 2023? Numerous locations in Florida plus Boise, Austin, Phoenix, Raleigh and Charlotte.

You'll notice many of the same cities keep popping up. A quick look at these four explains why:

Austin

It seems if everybody is moving to Austin, especially millennials, says Blue Whale Moving Company. "The economy is booming, the culture is fantastic, and the weather can't be beat." Austin welcomes another 50 new residents every day.

Current average billboard CPM is $7.16.

Denver

Denver is a big draw for outdoor lifestyle enthusiasts. But it is also described as an "18-hour city" that has a growing tech sector and a very supportive, city-center focused economic development plan.

Right now, average billboard CPM in Denver is about $4.43.

Phoenix

Between 2010 and 2020, Phoenix grew faster than any other big city in the country. Phoenix is affordable, has a broad business base with good job opportunities and overall low cost of living.

At the moment, average billboard CPM in Phoenix is $5.22.

Nashville

This city has a strong and diverse economy (well beyond its famous music industry), a good quality of life, low cost of living, vibrant tourism, academic institutions and sports teams. And Nashville is growing — 82 new residents arrive in town every day.

At the moment, average billboard CPM is about $3.13.

Move your OOH with your audience

Secondary and tertiary cities are where the audience is, no matter who your targets are. After all, New York and LA may have the largest populations, but out in the real world your audience is living in – or moving to – Tier 2 and Tier 3 cities. If you don't follow them, you'll miss your connection.