The 95:5 Rule of Marketing. How it works and why it makes sense

95% of your target audience are NOT interested in buying your product or service - A study from the world’s largest centre for research into marketing (Ehrenberg-Bass Institute for Marketing science) has significant implications on how we view marketing - particularly B2B marketing.

What is the 95:5 rule? This is a deceptively simple rule - based on extensive marketing research that applies to B2B and Marketing in general across all industries.

The 95:5 rule states that at any given time (usually over a quarter), the majority of your target audience is ‘Out of Market’ or not actively looking to make a purchase.

Only around 5% are actively ‘In Market’ looking to buy a product or solution.

What does it mean for marketing?

This challenges the typical view of marketing - Where there is the idea of persuasion and ads that can convert almost anyone into customers as they are pushed through funnels.

“Marketers don’t move buyers in-market – buyers move themselves in-market based on their needs. For example, if an IT manager purchased a brand new cloud computing solution, then that need is gone, and there’s nothing a B2B marketer can do to generate an immediate sale.” Professor John Dawes

In reality the primary or only focus is on a limited 5% of people currently ‘in market’.

Brands compete with one another, spending more than ever to get through to this 5%. Increasing their CAC costs and ignoring 95% of potential future customers in the process.

The 5 and 95

The exact number doesn’t really matter - Depending on your industry it could be 92-8 or 93-7 but the principle remains that the majority is not ‘In market’.

This makes a lot of sense, when we analyse how we purchase key B2B product & services or even some B2C products. A new phone system for the office?, a CRM? Or a marketing agency? - You can find the exact number by finding out the average inter-purchase time for your category.

We also see some key characteristics in the 5% “in market”. Firstly, the size of this audience is particularly small. This makes it harder and more expensive to target.

Secondly those in the market already have some idea of what brand, variant, type of solution they will be looking to buy.

The “Out of Market” 95% are the opposite - They are significantly larger as an audience size and are open to new products or solutions as they are not close to the buying stage. Why are marketers ignoring the 95%? How to calculate the 95:5 rule.

Calculate what percentage are in market for your industry. or business.

The rule is based on the average length of buying cycles. How often things are purchased.

We know many products are purchased once ever five years or three years. If you take the duration of your campaign or time normally spent in market (for example it takes 2 months to find, compare and buy business phone contracts) If you know the average inter-purchase time for the product (for example a new business phone is purchased every 2 years) Time / Inter-purchase period x 100 = % in Market 2 months / 24 months x 100 = 8.3% in Market Which means 91.7% are out of market - or 92:8. Researchers stress that the actual number can distract marketers. The rule proves across many industries the vast majority will be out of market, and that marketers should change their approach to reflect that.

Implementing the 95:5 Rule

So how does marketing work? Marketing works by increasing “Mental availability” or how easily your brand comes to mind when a consumer is considering a product or service.

When a customer is ready to go to market for a solution the brand, product or solution remembered is the one that gets bought. The 95:5 rule has potential to make marketing more sustainable, efficient and improve the quality of leads.

How can you implement it?

Objectives - It’s about understanding the concept and setting these long term expectations and objectives at a senior level - Then making sure the Marketing team whether that is internal or external understands and specialises in taking a long term scientific approach and is able to measure the impact of both.

Messaging - Balancing the short-term and long term in line with marketing science and changing your ads, creatives, messaging and marketing material to reflect a longer term approach - that is more educational, memorable, creative and less short term ‘ buy now’ retargeted till it puts people off.

Channels - Instead of hyper-targeting a small group, broadly target the 5% and the 95%. Target the category and reach all potential buyers and decision makers both current and future. Utilise a wider range of channels - both offline and online - this can reduce what you are spending on marketing (less competition) and increase the audience size and type - Which in the long run gives you sustainable growth.

Get in touch to find out how we implement the 95:5 rule and take a scientific approach to marketing that gives you more for less.