The 95:5 rule is the new 60:40 rule
B2B marketers shouldn’t be spending time and money convincing out-of-market buyers to consider a purchase but instead invest in making every buyer remember their brand next time they need its product.
How does B2B marketing work?
That’s a fun question, but here’s an even more fun question:
How do B2B marketers think marketing works?
What if we were to tell you that: (1) many B2B marketers have a wildly inaccurate understanding of how marketing works, and (2) as a result of that fundamental misunderstanding, many B2B marketers are setting themselves up to fail?
Spoiler alert: that’s what we’re about to tell you!
How marketers think marketing works: The 5:95 rule
Many B2B marketers seem to think that marketing works through persuasion, ‘pushing’ buyers down a funnel by explaining the product benefits. According to our surveys, 95% of B2B marketers expect to see significant sales within the first two weeks of a campaign. And that’s a reasonable expectation, if you believe that ads convince buyers to purchase products.
How marketing actually works: The 95:5 rule
So how does marketing actually work, you ask?
The exact opposite way.
Such 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-market to buy right now. That means 95% of the buyers that you reach are out-of-market and won’t buy for months or even years. And, contrary to popular belief, you cannot persuade the buyer to go in-market because they already have what you’re selling and won’t need a newer version any time soon.
Account-based madness: The new craze in B2B
Marketers don’t move buyers in-market – buyers move themselves in-market based on their needs. For example, if an IT manager just purchased a brand new cloud computing solution yesterday, then that need is gone, and there’s nothing a B2B marketer can do to generate an immediate sale.
So what can we do?
Give up? Focus on the 5% who are in-market? Ignore the 95% who aren’t?
No. Marketers should focus on the 95% – the out-of-market buyers.
Effective marketing increases future sales in future buying situations. How? By increasing the probability that the brand comes to mind when the buyer goes in-market. Simply put, the brand that gets remembered is the brand that gets bought. You can’t push buyers down a funnel, but you can, to quote Professor Jenni Romaniuk, “catch buyers as they fall”.
The 95:5 rule is a 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 objectives
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.
Well, pretend you’re marketing business banking. Research shows 80% of companies switch business banks once every five years. That means over the next year, only 20% of companies are likely to be in-market. Over the next month, only ~2% of accounts are likely to be in-market. Over the next two weeks, only ~1% are likely to be in-market. And you must share that 1% with your competitors, who are probably targeting the same exact segment.
The key point is that there’s a low ceiling on your short-term sales potential.
The 95:5 rule teaches us to set realistic objectives.
Implication #2: Rethink your creative
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 this now!!!’).
If you think marketing works by influencing future buyers, then you should develop creative that gets noticed and gets remembered. Buy-this-now advertising will be ignored and forgotten by the 95% of buyers who are out-of-market – it’s only relevant to the 5%.
The 95:5 rule gives you permission to be bold, put on a show and have a little fun. It broadens the creative canvas in B2B, encouraging us to focus on publicity, not persuasion. This recent work from Ping is a great example. It’s strange and surprising, and that’s hard to forget.
Implication #3: Rethink your distribution
If you think in-market buyers are the only buyers that matter, you’re going to hyper-target and retarget a tiny 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 you will acknowledge, as Dawes puts it, that “people largely use their memories when buying, rather than searching”. And even the fraction of buyers that do search “strongly prefer brands they’re [already] familiar with”. In other words, if you wait until the buyer goes in-market, it’s already too late. You need to prime the market far in advance.
So instead of hyper-targeting the 5%, broadly target the 5% and the 95%. In other words, target the category and reach all potential buyers. Ignore competitors who target only today’s IT decision makers and target both current and future IT decision makers – your future self will thank you. And run your media at a leisurely pace, with budgets spaced over long periods of time, so that your brand is always fresh whenever buyers happen to enter the market.
Successful investors don’t try to “time the market.”
Successful marketers don’t try to “time 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 rebalancing towards brand marketing. Like the 60:40 rule, the 95:5 rule is an invaluable ‘mental model’ that can teach B2B (and B2C) marketers to:
- Expect sales results mostly in the long-term, not in the short-term.
- Develop creative that will be remembered mostly by future buyers, not current buyers.
- Maximise reach mostly against out-of-market buyers, not in-market buyers.
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.