The law of brand user profiles: The sharpest nail in the coffin of hyper-targeting
Data shows B2B brands, like B2C, generally serve the same customers, which demonstrates the wisdom of marketing to every buyer in your category.
Hyper-targeting might be the single most destructive idea in B2B marketing.
This one bad idea has cost companies billions of dollars in lost revenue.
According to hyper-targeting apologists, B2B brands grow best by targeting very specific customer segments with very specific creative. For example, hyper-targeters believe it’s wasteful to target all the IT professionals in Europe when instead, you could hyper-target IT directors in the pharmaceutical industry at companies with 10,000 employees in the UK.
Hyper-targeting enthusiasts claim that B2B marketers can use targeting to “choose their customers” and selectively grow segment by segment. B2B gurus wax poetic about the value of ‘ideal customer profiles’ (ICPs) and ‘best fit accounts’. Conventional wisdom says that going after every customer that could possibly buy from you is a stupid, simplistic strategy.
On the surface, the argument for hyper-targeting seems perfectly logical.
But beneath the surface, you’ll find a Titanic-sized iceberg.
The assumptions don’t line up with the evidence on how B2B brands grow.
We’ve spent the past decade making the case against hyper-targeting in B2B, and advocating for broad targeting that reaches all potential buyers of the category. We’ve argued that hyper-targeting isn’t possible in most media channels, since 84% of third-party B2B data is inaccurate. We’ve argued that hyper-targeting drives up your cost and complexity, cancelling out the imaginary efficiencies. We’ve argued that hyper-targeting fails to address future buyers, since almost 50% of B2B buyers change industry, function and seniority over a five-year period.
But even our argument was (ironically) too narrow.
We failed to include the most compelling case against hyper-targeting.
So today, let’s hammer the sharpest nail into the coffin of hyper-targeting.
One B2B brand on growing marketing from ‘subservient’ function to growth engine
Introducing the ‘law of brand user profiles’
Let’s reason through inversion.
If the theory of hyper-targeting worked, what would you expect to see in the data?
Well, you’d expect to see different competitors serving different customers. If Oracle grows its ERP business by hyper-targeting the healthcare industry and SAP grows by hyper-targeting the financial services industry, then the composition of SAP and Oracle’s ERP customer bases ought to reflect those very different choices, right?
The problem is that you don’t see that, in any category, in B2B or B2C.
Instead, you see the Ehrenberg-Bass ‘law of brand user profiles’, which states that “the customer profiles of rival brands seldom differ”. In other words, all the brands in a category end up selling to the same customer. Marketers don’t get to choose the composition of their customer base. The only meaningful difference in the customer base is its size, not its composition.
So your ‘ideal customer profile’ is… anyone who buys the category.
B2C marketers can see the law at work in the data below, from the credit card category.
As you can see, the size of the customer base is very different for different brands, but the composition stays almost exactly the same. Every brand, big or small, has about 19% of its customers aged 55 to 64, and every brand, big or small, has about 46% of its customers identifying as female. This pattern holds, no matter which demographic data point we look at.
The law of brand user profiles comes to us from the geniuses at the Ehrenberg-Bass Institute, whose empirical research on the ‘laws of growth’ has overturned decades of marketing orthodoxy. Some B2B marketers are too busy debating their ‘law of double jeopardy’ to notice the law of brand user profiles. It’s probably their seventh most famous law.
But make no mistake, law of brand user profiles is a revolutionary idea.
But does this criminally underrated law hold true in B2B categories?
Customer acquisition is the only viable growth strategy in B2B, says Ehrenberg-Bass’s Romaniuk
The law of brand user profiles in B2B
For the past few years, at The B2B Institute we’ve been on a mission to prove that the Ehrenberg-Bass laws of growth hold true in B2B, not just B2C. But recently, our colleague at the B2B Institute, Derek Yueh, partnered with PhDs Nicole Hartnett and Carl Driesener from the Ehrenberg-Bass Institute to study three of the biggest categories in B2B: infrastructure-as-a-service (IaaS), business intelligence (BI) and customer relationship management (CRM). So, what did we find?
Sure enough, we found that all the laws held true.
For now, let’s focus on the law of brand user profiles by looking at data from the BI category. We’ve blinded the names of the brands for privacy reasons.
Unlike B2C brands, B2B brands don’t hyper-target by age and gender. We tend to hyper-target by company size, revenue and vertical. But just like B2C brands, B2B brands end up selling to the same customers. The size of the customer base varies, but its composition stays the same.
As you can see in the above table, business intelligence brands vary significantly in terms of their penetration, from as low as 5% to as high as 62%. That’s a big, meaningful difference (by a factor of 12). But on all other variables, their customer bases look remarkably similar. For example, for all brands, the proportion of their customers who have 501 to 1,000 employees is about 33%, and the amount with revenue of $10m to $50m is about 12%, with very few deviations.
You can cut the data by industry vertical and observe the same exact pattern. The below data highlights ‘mean absolute deviations’ (MADs) by vertical and business maturity. For example, on average, for the professional services segment, BI brands only differ by around 2 percentage points from the category profile. Deviations above 10 points are highlighted in red and green.
You can look at other B2B categories and observe the exact same pattern.
Behold, the law of brand user profiles at work in the IaaS category:
In IaaS, penetration varies, but customer company size and revenue composition stay the same.
Behold, the law at work once again, but this time in the CRM category:
In CRM, penetration varies, but customer maturity and vertical composition stays the same.
We could keep doing this all day, but hopefully you believe us by now.
Replication is what makes this a law, and not an opinion.
Which leads us to the key, contrarian observation: if hyper-segmentation and hyper-targeting worked as advertised, then you wouldn’t see rival brands – all with different segmentation and targeting choices – all ending up with the same mix of customers. Different decisions would deliver different outcomes. But you do see that pattern, over and over and over again.
“We feel there is a lot of good news here,” say Professor Byron Sharp and Dr Nicole Harnett of the Ehrenberg-Bass Institute. “The evidence shows that rival brands can, and do, sell to all types of customers. Your competitors’ customers can become yours. They resemble your existing customers. No category buyer is off limits, so include as many as you can in your marketing activities.”
The nuance police will rightly point out that you do see some rare variations in customer composition across the category. But most of these variations can be explained by different product offerings, not by different marketing choices. If you haven’t designed your product to comply with pharmaceutical regulations, then you won’t be able to sell to the pharmaceutical industry, regardless of your targeting decisions. If your cyber-security product isn’t physically available in Germany, then you’ll have fewer German customers than Fruggenvernerheimer, the German cyber-security brand that we just made up. Variations are the exception, not the rule.
B2B marketers, go broad or go broke
B2B marketers and B2B sales teams love to divide category buyers into a dozen different segments, and then attempt to cherry-pick the best segments through hyper-targeting. But as the law of brand user profiles makes clear, we have nothing to show for those efforts.
That is the cold reality of the data.
Extreme segmentation and hyper-targeting increase your costs and complexity without increasing your financial performance. Targeting big companies in specific verticals is more expensive than targeting companies of all sizes and verticals, and it doesn’t actually work.
Hyper-targeting limits your growth by cutting you off from customers. It’s a shrinking strategy, not a growth strategy. Our close personal friend Michael Jordan famously said that “Republicans buy sneakers too.” Yes, that’s the sound of Michael Jordan dunking on all the hyper-targeters in B2B and B2C. Michael Jordan didn’t want Nike to hyper-target Democrats because he didn’t want to limit his sales from Republicans, a massive segment of high-potential customers.
Broadly targeting anyone who could buy from you, now or in the future, is the path to sustainable growth in B2B (and B2C). You need to be able to acquire customers across all segments. Some customers will be heavy, some will be light. Some will work in tech, some will work in finance. Some will work at big companies, some at small companies.
Critics are right to suggest that this approach sounds simple.
But simplicity is a feature, not a bug.
You can fight the law of brand user profiles but we all know how that goes…
“I fought the law and the law won.”
Peter Weinberg and Jon Lombardo are the heads of research and development at the B2B Institute, a think tank at LinkedIn that studies the laws of growth in B2B. You can follow Peter and Jon on LinkedIn.
The fact that competing companies have a similar mix of customers by size and industry sector says nothing about the effectiveness of targeting. We want to be more human in B2B marketing and that means talking to the needs of individuals with different job functions in different companies in industries. Of course targeting makes sense at the segmentation, messaging and campaign level, even if the wider go-to-market strategy ‘targets’ a wider audience. They are two completely different things which this article seems to miss.