If you’ve ever visited the wine country of California, you’ve probably fantasized about owning a vineyard. Acres of winding grapevines placed in neat rows create an idyllic landscape, like the one pictured above.
Of course, the truth is that running a vineyard is hard work. And some of this work has to be done long before the owner of the vineyard receives a reward.
For example, it usually takes three years for newly planted grapevines to produce a usable crop. During those three years, the vineyard owner must install a trellis system to support the vines as they grow, and the young vines must be pruned regularly and “trained” to grow properly. It should also be wisely watered, fertilized occasionally, constantly protected from harmful insects. And all this work must be done Before The vineyards produce the first dollar of revenue for the owner of the vineyard.
Some of you may be wondering what this short journey into grape growing and vineyard management has to do with B2B marketing. To some extent in fact, especially for B2B marketing leaders who need to develop marketing strategies and programs that will produce sustainable in the short term. And Long term revenue growth.
To achieve maximum revenue growth over a long period of time, marketing leaders must design programs that will increase performance in the present, while at the same time investing in programs that will lay the foundation for future success.
Challenging prospects to exit the market
So what does that mean in practice? The starting point is a broad definition of the market. As I wrote in a recent post, identifying all potential growth opportunities is unlikely to happen when marketing and other business leaders fail to take a comprehensive view of their markets.
In B2B, a company’s “market” should be defined to include All Organizations in the company’s service area that can reap significant benefits and generate attractive ROI by purchasing and using the company’s product or service. When the market is defined in this way – that is, according to the customer’s “suitability” – it will include almost all of the potential customers from which the company can earn revenue.
However, at any given time, most of the institutions that make up the company’s market are Not Consider purchasing a solution like the one offered by the company. Many seasoned marketing and sales professionals call this circumstance the “95-5” rule, which means that at any given time, 95% of a company’s potential customers are “out of market,” while only 5% are active “in a market.”*
Based on our definition of the market, organizations outside the market are well suited to a company’s product or service, but these expectations are not ready to initiate the buying process. And typical demand-generation programs are unlikely to convince them to change their position.
However, it is likely that many of the potential customers who are out of the market at present will be in the market at some point in the future. So, the outlook is out of the market like those little grapes on the vineyard. It is not productive today, but if handled properly, it can be productive in the future.
The issue for marketing leaders is what marketing software, if any, to use with out-of-market prospects. There are currently two major schools of thought on this issue.
in this corner. . .
Some marketing practitioners, agencies, and consultants argue that marketers should use intentional data and predictive analytics to determine when an organization is likely to be in the market, and then focus marketing efforts on those expectations. Not surprisingly, this approach is loudly advocated by companies selling intent data and/or predictive analytics technologies.
Most proponents of this approach do not explicitly say that marketers should ignore exit prospects, but some come close. Consider, for example, this blog post clip from a company that works in the intended data/predictive analytics space:
“To avoid wasting time and money tracking down potential customers who have just bought the product from your competitors or aren’t serious about buying it yet, your team should focus on the right people, targeting them at the right time by leveraging intended data, which will help you understand total active demand. Rather than having a broad market for generic buyer personas, it enables you to find specific accounts that are active in your market.”
And in this corner. . .
Marketing practitioners, agencies, and other consultants assert that companies must reach out to all organizations that fit a company’s product or service regardless of whether those expectations are currently in the market. Proponents of this approach usually stress the importance of brand building for long-term revenue growth.
I’m not aware of anything strict A research study compares the effectiveness of these two approaches. The analysis by Les Binet and Peter Field came close in 2019, but Binet and Field openly acknowledged that their findings should be viewed as provisional.**
Despite the limited amount of direct evidence, I assure that it would be risky for most B2B companies to ignore expectations that don’t drive down the market. Such an approach is dangerous because it fails to account for an important aspect of how commercial buyers make purchasing decisions.
The traditional view is that the B2B buying process begins when a company’s leaders or managers realize a need or problem and decide to do something about it. These “buyers” then collect information about the need or problem, evaluate possible solutions and may or may not decide to purchase a product or service to satisfy the need or problem. So the traditional view of B2B buying is that information gathering, learning, and evaluation all happen after an intentional purchase is underway.
But business decision makers rarely start the buying process with a clean slate. Every day, they form impressions of companies, brands and products from touch points such as advertisements, content resources, news reports, and conversations with co-workers and friends.
When something leads to an intentional purchase, those cumulative impressions greatly influence the buying decision. For example, a 2020 study by the B2B Institute and GWI found that millennial buyers, “.. spend the most time researching, exploring the largest pool of sellers, yet they are more likely to eventually choose one they already know.”
If marketers focus their efforts only on prospects in the market, they will forgo the opportunity to influence the perceptions and preferences of many potential buyers in the future and will likely miss out on future growth opportunities. Such an approach may be like the farm owner’s failure to properly care for the young vineyards that will pay the vineyard’s revenues in the future.
* The percentages in the 95-5 rule are not meant to be taken literally. Actual percentages of out-of-market expectations versus in-market expectations will vary from industry to industry and company to company. What makes the rule valid in the general sense is that companies always have far more opportunities outside the market than the expectations in the market.
** It would be very difficult to design and conduct a scientifically sound study on this issue because of the difficulty in controlling all the variables that could influence the research results and because the study would need to be conducted over a long period of time.
Image courtesy of Aaron Logan via Flickr (CC).