The 95: 5 rule is the new 60:40 rule – Marketing Week

How does B2B marketing work?

It’s a fun question, but here’s an even funnier question:

How do B2B marketers think marketing works?

What if we told you that: (1) many B2B marketers have an extremely inaccurate understanding of how marketing works, and (2) because of this fundamental misconception, many B2B marketers are set to fail?

Spoiler alert: that’s what we’ll tell you!

How Marketers Think Marketing Works: The 5:95 Rule

Many B2B marketers seem to think that marketing works by persuasion, “pushing” buyers through a funnel by explaining the benefits of the product. According to our surveys, 95% of B2B marketers expect big sales within the first two weeks of a campaign. And that’s a reasonable expectation, if you think the ads are convincing buyers to buy products.

How Marketing Works: The 95: 5 Rule

So how does marketing actually work, you ask?

The exact opposite.

This is the conclusion of our new research with Professor John Dawes of the Ehrenberg-Bass Institute. According to Dawes, only 5% of B2B buyers are in the market to buy right now. This means that 95% of the buyers you reach are off-market and won’t buy for months, if not years. And, contrary to popular belief, you can’t persuade the buyer to enter the market because they already own what you’re selling and won’t need a newer version anytime soon.

The madness of accounts: the new craze in B2B

Marketers don’t move buyers around the market – buyers themselves move around the market according to their needs. For example, if an IT manager just bought a brand new cloud computing solution yesterday, that need goes away and there is nothing a B2B marketer can do to generate an immediate sale.

So what can we do?

To give up? Are you focusing on the 5% that is in the market? Ignore the 95% who are not?

No. Marketers should focus on the 95% – off-market buyers.

Effective marketing increases future sales in future buying situations. How? ‘Or’ What? By increasing the likelihood that the brand will come to mind when the buyer enters the market. Simply put, the brand that is remembered is the brand that is purchased. You can’t push buyers through a funnel, but you can, to quote Professor Jenni Romaniuk, “catch buyers as they fall”.

Rule 95: 5 is such a simple observation that Dawes never even bothered to write it down before. But this simple observation has profound implications.

Implication # 1: Rethink your goals

The most obvious implication of the 95: 5 rule is that the majority of marketing effects are long term, not short term. In other words, those 95% of B2B marketers who expect to see significant sales results in two weeks are going to be sorely disappointed.

Why?

Well, pretend you’re marketing business banking. Research shows that 80% of businesses change commercial banks once every five years. This means that over the next year, only 20% of companies are likely to be in the market. Over the next month, only about 2% of accounts will likely be in the market. Over the next two weeks, only ~ 1% are likely to be in the market. And you have to share that 1% with your competition, who are probably targeting the exact same segment.

The key point is that there is a low cap on your short term selling potential.

The 95: 5 rule teaches us to set realistic goals.

Implication # 2: Rethink your creation

If you think marketing works by pushing buyers down a funnel, then you should develop product-centric advertising with an aggressive call to action (“Buy it now !!!”).

If you believe that marketing works by influencing future buyers, you need to develop a creation that gets noticed and is remembered. Buy-now advertising will be ignored and forgotten by the 95% of buyers who are off-market – it is only relevant to the 5%.

Rule 95: 5 gives you permission to be daring, put on a show, and have a little fun. It broadens the creative canvas in B2B, encouraging us to focus on advertising, not persuasion. This recent work by Ping is a prime example. It’s strange and surprising, and it’s hard to forget.

Implication # 3: Rethink your distribution

If you think that buyers in the market are the only buyers that matter, you are going to hyper-target and retarget a small segment of customers based on “intent signals”.

If, on the other hand, you apply the 95: 5 rule, you will take a different approach.

First of all, you will recognize, as Dawes puts it, that “people use their memories extensively when shopping, rather than searching.” And even the fraction of buyers who research “strongly prefer the brands they [already] familiar with “. In other words, if you are waiting for the buyer to enter the market, it is already too late. You have to initiate the market well in advance.

So instead of hyper-targeting the 5%, broadly target the 5% and 95%. In other words, target the category and reach out to all potential buyers. Ignore the competitors who only target today’s IT decision makers and target both current and future IT decision makers – your future will thank you. And manage your media at a leisurely pace, with budgets spaced out over long periods of time, so your brand is always fresh whenever buyers enter the market.

Successful investors don’t try to “synchronize the market”.

Successful marketers don’t try to “synchronize the customer”.

Rethink everything with the 95: 5 rule

Les Binet and Peter Field’s 60:40 rule has changed the way B2B and B2C marketers operate, inspiring a much needed rebalance towards brand marketing. Like the 60:40 Rule, the 95: 5 Rule is an invaluable “mind model” that can teach B2B (and B2C) marketers to:

  • Expect primarily long-term sales results, not short-term ones.
  • Develop designs that future buyers will remember primarily, not current buyers.
  • Maximize reach primarily against off-market buyers, not in-market buyers.

Peter Weinberg and Jon Lombardo are the heads of research and development at the B2B Institute, a LinkedIn think tank that studies the laws of growth in B2B. You can follow Peter and Jon on LinkedIn.

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