B2B brand building – using the 95:5 rule

How Dawes’ 95:5 rule affects B2B marketing (and non-marketing stakeholders)

A few years ago, Professor John Dawes of the Ehrenberg-Bass Institute wrote down a simple observation of B2B marketing.

According to Dawes, at any given time, only 5% of B2B buyers are in-market. 95% are not. He writes:

“Corporations change service providers … once every five years on average. That means only 20% of business buyers are ‘in the market’ over the course of an entire year; something like 5% in a quarter … put another way, 95% aren’t in the market” (Advertising effectiveness and the 95-5 rule).

Dawes notes that these buyers already have what you’re selling and won’t need a replacement for months or years. Or they’re under contract with your competitor. B2B marketers cannot ‘create demand’ in the out-of-market.

B2B marketers must therefore focus on priming those 95% with emotive brand-building advertising, so that when they enter the market (become the 5%), yours is the brand that comes to mind.

Calling it the 95:5 rule, Dawes offers his credo as a mental model, rather than a hard and fast rule. If you know the average interpurchase time of your category, you can run your own calculation. But whatever the ratio, the implication will be the same: most business customers aren’t looking to buy right now.

Once they are ready to buy and waving the company credit card around, brands that aren’t already well-rooted in the minds of those buyers will probably miss the boat.

brands that aren’t already well-rooted in the minds of those buyers will probably miss the boat

For example, a recent study of B2B buyers found that 80-90% already had a list of vendors in mind before they began the research phase – and 9/10 went on to select a provider from that day one list.

We know that rational, “buy now” sales activation has short-term impact – buyers won’t remember it months or years down the line when they do come in-market. Thus, B2B marketers should nurture the long just as diligently as the short.

Simple, right? Yet it’s worth highlighting some misapplications of the 95:5 rule to circumvent any challenges from on high. At its core, this is a budgeting decision and that usually means justifying spend to stakeholders.

Don’t fixate on the 5%

We’ve seen Dawes’ rule conflated with Pareto’s 80/20 Principal*. Taken this way, 95% of B2B advertising efforts are a waste of time and therefore you should focus exclusively on the small percentage of buyers who might actually give you money. It might be true that all revenue comes from 5% of your market, but the nuance is lost without adding “…at any given time.”

Our key message isn’t that only 5% are buying. It’s that 95% aren’t buying right now. Therefore, a hefty chunk (roughly half) of your resources should be focussed on priming those 95% for when they are ready to buy, AKA long-term brand building.

Preempt ROI fanatics and short-term thinkers with a list of all the reasons why it’s a bad idea to only target that in-market 5% and hit them with everything you’ve got each quarter. For instance, that buyers prefer brands they are already familiar with (see: How Brands Grow and 82% of searchers choose a familiar brand for the first click).

Or stagnated long-term sales growth. There’s nothing better to strike fear into the hearts of CFOs than Les Binet and Peter Field’s (in)famous line graph:

*Pareto Principal: 80% of results come from 20% of actions (or 80% of profit comes from 20% of customers, products or services)

It’s not the new long:short

Dawes’ 95:5 rule is not meant to replace or B2B-ify Peter Field and Les Binet’s seminal work in The Long and the Short of It.

Dawes doesn’t offer a proposed promotional budget split between the ready-to-buy and out-of-market. For that we defer back to Binet and Field, then apply Mark Ritson’s two-speed marketing approach.

In their paper The 5 Principals of Growth In B2B Marketing, Field and Binet update their original research to include the optimum budget split for different sectors. For B2B, this sits at 46% brand building : 54% short-term activation.

What Dawes’ rule does, however, is offer a powerful rationale as to why. Binet and Field tell us what – on average – is the most effective advertising split. Dawes gives us a reason why.

The immeasurable long becomes 95% of your potential customers

For B2B stakeholders then, 95:5 is an amuse-bouche to the idea of long:short. The immeasurable long becomes 95% of your potential customers and suddenly half the advertising budget to spend on brand doesn’t seem like such a big ask.

As Mark Ritson can testify –

“I have used the 95:5 rule this year in B2B with non-marketing senior managers and they get it. They don’t get long and short. They don’t get brand building. They don’t get any of it. But the 95:5 rule, they say, ‘Huh! I get it. We need to prepare the 95 for when they turn into the five.’ It really works.” – Mini MBA in Brand Management Q&A* (Nov ’22)

So, used as a mental model, 95:5 is a beautiful addition to the marketer’s toolkit. It highlights an important truth in rousingly simple terms.

Cover image: OlekStock/shutterstock.com

 

*Q&As with Mark Ritson

Biweekly Q&As are a key part of the Mini MBA in Marketing, Mini MBA in Brand Management and Mini MBA in Management – giving learners a chance to raise any questions, share their thinking on the previous weeks’ modules and glean extra insights from the course professor.