July 10, 2023 The 95-5 Rule: A Paradigm Shift in Marketing Strategy

Marketers often fall prey to the belief that their efforts will yield immediate results. This belief stems from the traditional marketing model, which asserts that advertising can immediately persuade potential buyers to make a purchase. However, recent research has unveiled a new perspective, known as the 95-5 rule, which contradicts this conventional wisdom.

Understanding the 95-5 Rule

The 95-5 rule is a marketing concept that proposes that at any given time, only about 5% of your potential customers are ready to make a purchase. The remaining 95% are considered 'out-of-market,' meaning they are not ready to buy just yet. This insight underscores the importance of long-term brand-building as opposed to short-term sales activation.

The 95-5 Rule Vs. The Traditional 80-20 Rule

The 95-5 rule is a departure from the widely accepted 80-20 rule, also known as the Pareto Principle. The 80-20 rule suggests that 80% of your sales come from 20% of your customer base. These 'golden' customers are the ones businesses should focus their marketing efforts on.

However, the 95-5 rule argues that concentrating only on the 5% of customers who are 'in-market' leaves a significant 95% of potential customers untapped. This larger segment, although not ready to buy immediately, will eventually be 'in-market' in the future. Therefore, marketing strategies must account for this larger segment to ensure long-term sales success.

The Reality of Buying Behaviour

Studies conducted jointly by LinkedIn Marketing Solutions and the Ehrenberg-Bass Institute have shed light on the actual purchasing behavior of customers. According to their findings:

• 75% of companies purchase computers once every four years.
• 80% of firms switch banking services once every five years.
• 90% of consumers buy new cars every ten years.

These long purchase cycles imply that most potential buyers are 'out-of-market' for your product or service at any given time.

The Myth of Immediate Sales Results

Despite the long purchase cycles, many B2B marketers still operate under the assumption that their advertising efforts will bring immediate sales results. A study conducted by LinkedIn Marketing Solutions revealed that 96% of B2B marketers expect to see the primary effect of their ad campaigns within two weeks. This expectation is a myth. Businesses need to shift their focus to building long-term brand awareness rather than chasing short-term sales activations.

Practical Steps Towards More Customers

Embracing the 95-5 rule requires businesses to rethink their marketing strategies. Instead of focusing solely on immediate sales, businesses should:

• Build a Strong Brand: A memorable brand that resonates with your target audience is crucial. This can be achieved through long-term advertising campaigns that aim to build emotional connections with your audience.

• Stay Top of Mind: Even when potential customers are 'out-of-market,' businesses should strive to remain top-of-mind. This can be achieved through content marketing and social media engagement.

• Be Patient and Focus on the Long-term: Businesses need to be patient and focus on the long term. Instead of expecting immediate results from marketing campaigns, the focus should be on building a strong brand and remaining relevant to the audience.

The 95-5 Rule in Action: Case Study of Lexicon

A real-world example of the 95-5 rule in action is provided by Lexicon, a B2B marketing agency in Bangkok. Through consistent messaging and providing helpful advice, Lexicon has managed to build a steady stream of inquiries from LinkedIn, Google, and word of mouth. This approach underscores the importance of building credibility all year round and being there to advise your audience, even when they're not actively looking to purchase.

Promotion with Purpose

While the majority of your marketing efforts should be focused on providing value, the remaining 5% can be used for direct promotion. However, even in this promotional aspect, it's crucial to maintain a customer-centric approach. Instead of bombarding potential clients with sales pitches, highlight how your products or services can solve their specific problems or fulfill their needs.

Measuring and Optimizing Results

To ensure the effectiveness of your marketing efforts, it's essential to measure and analyze the results. Monitor key metrics such as website traffic, engagement rates, lead generation, and conversion rates. Identify which educational content resonates the most with your audience and refine your strategy accordingly.

In calculating ROI, try to quantify the value. What do you charge for a single big ticket purchase? Winning a couple of clients for these projects can justify an entire annual marketing budget, with plenty left over.

Conclusion

Implementing the 95-5 rule in your B2B marketing strategy can transform the way you engage with your target audience. By focusing on education, value creation, and relationship building, you can establish trust, position your brand as a thought leader, and ultimately drive meaningful results. Embrace the power of educational content, engage with your audience, and purposefully promote your offerings to unlock the potential of the 95% of your target audience who will be ready to buy from you at some point.