At a speaking engagement recently, I shared this astonishing statistic with an audience of senior tech executives from APJ: “Only 5% of B2B buyers are in-market to buy.” The room fell silent, and it grabbed everyone’s attention.
This revelation first came from a 2021 report published by the B2B Institute, introducing the concept known as the 95:5 rule. The rule suggests that a staggering 95% of business buyers are not actively seeking to purchase at any given time.
When I first stumbled upon this finding, it immediately caught my attention, prompting me to include it in my book (Page 45). Ty Heath, Global Lead of B2B Marketing Institute, even remarked that ‘this is not only a rule but a law!’
But wait, let’s look deeper into this. I invite you to consider these key points:
First, this figure refers to the absolute market, encompassing all potential buyers, rather than leads or responders to campaigns.
Secondly, the percentages in the rule are not meant to be interpreted literally. It is not universally applicable:
- There can be variations within different categories and industries, depending on the frequency of purchasing a particular product or service.
- Averages can’t always accurately reflect the purchasing patterns of your company’s specific customer base. Each organization may have unique dynamics and buying behaviors.
- The 95:5 rule does not account for unexpected conditions that may disrupt typical customer buying patterns. For instance, an introduction of disruptive new technology may excite the market.
Now, while the 5% figure seems incredibly small, I believe the rule is true in a general sense and as such, presents a valid and useful principle for all B2B Marketers.
It is very clear that B2B companies have a significantly larger pool of out-of-market prospects compared to in-market prospects.
Furthermore, this rule can offer valuable insights for forecasting when specific customers or prospects may be ready to initiate a buying process.
What does the 95-5 rule mean for B2B Marketers?
The 95-5 rule in B2B marketing can be translated into a strategic approach of playing the marketing game of short-term (targeting in-market buyers)- i.e. demand marketing and long-term (out-market) – i.e. branding.
It is an ongoing battle between short-term and long-term marketing. But from what I have seen, marketers tend to lean more heavily into demand marketing (short-term) to demonstrate measurable near-term impact, due to the quarterly business pressures of building immediate pipeline and sales impact.
However, targeting out-market buyers is equally important for long-term success, although the results are not immediately measurable. This is then often a barrier to brand building among marketers and often poses a challenge.
Throughout my career, I have had senior sales leaders telling me “I do not care about awareness or downloads, where is the pipeline?” or in the start-up space: “End this campaign immediately! It’s been running for 3 months, and we have not gotten any business from it.”
So, should B2B marketers follow the advice and market to potential buyers who aren’t currently in the market? My answer is a resounding “yes,” and it becomes evident when we examine how people make buying decisions. Most business buyers are already aware of major companies or brands offering relevant products or services in their field. When a perceived need arises to purchase something for their company, these buyers easily identify an initial consideration set of potential vendors.
A comprehensive study conducted by LinkedIn (which included the APAC region!) looked into the dynamics between brand (long-term) and demand (short-term) marketing. The study reveals a clear finding: neither approach can work in isolation. Growth is achieved by finding the perfect balance between the two.
As a general rule, marketers should adhere to the 50/50 rule when allocating investments between brand and demand activities (please consider the maturity and health of your organization, as there will be nuances for these different scenarios).
The data from the report also highlights these potential issues:
Measuring Marketing Impact in a too short Timeframes
The majority of marketers measure the ROI of their investments within a three-month timeframe. This approach is not ideal, considering that the average sales cycle in B2B can span up to six months. Please also consider the time it takes from lead to convert the opportunity. In most cases, they would have to be touched multiple times before these leads agree to a meeting, and a few meetings may be required before they become qualified opportunities. Marketers need to exercise patience and extend their measurement timelines to accurately evaluate the impact of marketing efforts. Marketers and Sales Professionals need to look at the progression of the lead status as well.
Too Narrow Targeting
While focus is essential and highly beneficial for businesses, hyper-targeting can have its limitations. Overly narrow targeting may restrict reach and overlook potential buying circles and future buyers. In most cases, it can be very effective to adopt a broader targeting approach to reach the full buying circle and capture the attention of future buyers as well.
In summary, it serves B2B Marketers to consider the 95-5 rule to be valid. Secondly, achieving a balance between short-term and long-term marketing efforts is simply crucial. You cannot ignore out-market buyers.
As Professor Dawes from the B2B Marketing Institute stated in the report:
“To grow a brand, you need to market to people who aren’t in-market now so that when they do enter the market, your brand is one they are familiar with. And, they mentally associate your brand with the need or buying situation that brought them into the market. This increases buyers’ purchase propensity and, if executed effectively across a substantial customer base, can lead to significant market share growth.”
Stay tuned for an upcoming article where I will talk about specific and powerful tactics to identify and capture in-market buyers. This will without doubt win the support of your Sales Organization due to its fast measurable impact.
B2B Marketers, these reports are MUST READS :