I was watching an on-demand local news one evening, when during the ad break I was served ads that seemed unusual: B2B services. I was presented with ads for Xero (an accounting software), Thryv (a CRM software platform), Square (a point-of-sale (POS) service) among others. I also noticed that some of the ads for the major banks in Australia during prime time on TV also focused on their service and solutions for small businesses.
Are they wasting money by advertising on mass media? Shouldn’t they focus on tightly defined small business owners or companies?
Well, if you have seen the collaborative research by the Ehrenberg-Bass Institute and The B2B Institute at LinkedIn, this wouldn’t be a surprise for you. You see, reach and penetration are as important in B2B as they are in B2C. In B2C, brands achieve sustainable growth by increasing the number of brand buyers. The way to do this is to ensure that the brand is at the forefront of consumers’ mind when they are ready to make a category purchase (‘mental availability’) and that consumers can find the brand easily in whatever channel and environment that are expected for the category (‘physical availability’).
The pushback against the focus on reach and penetration in B2B typically includes the belief that it’s more sensible to focus on retaining a small group of customers. They are typically hard-won through tedious tender process. Besides, with the hurdles that both parties need to jump through, that would be enough for the long run, right?
Well, right — but that’s not entirely true.
Yes, in B2B settings, the ‘purchase’ settings are far more complex, and that the amount money exchanged for the service is naturally far greater than the amount spent for shampoo, chocolate bars, vacuum cleaner, or clothing. It’s also true that in B2B the servicing component is also very important – thus there are dedicated teams and Account Managers in many cases. However, can B2B brands survive and grow by relying on the limited cohort of clients or customers? The devastation experienced by agencies when they lost their key accounts is an example that relationship complexity is not a guarantee for partnership loyalty.
So, what’s the link with the point about B2B advertising on wide-reaching media then?
This is where the 95:5 rule that was discovered by Prof. John Dawes from the Ehrenberg-Bass Institute. Prof. Dawes describes that up to 95% of business customers are not in the market for particular goods and services at any one time. So, any B2B advertising will probably be served towards the audience who aren’t in the market to purchase anytime soon. However, this doesn’t mean that the advertising efforts are wasted, as advertising mainly works by building and refreshing memory links to the brand. These links are activated when the category needs arise, such as somebody who is setting up a catering business and requiring an accounting software; a church treasurer wanting to get a contactless payment platform to collect offerings, or a dog groomer wanting to have a better solution to manage her contacts and appointments. Chances are, they may remember the ads they saw earlier and action accordingly.
If B2B brands only focus on a narrow target segment, they would’ve missed these potential customers.
It doesn’t mean that all B2B companies should advertise on TV and any kinds of wide-reaching media. The point is, B2B companies need to find strategic and creative ways to sensibly build mental availability widely: cast a wider net to catch more fish, rather than depending on few fishing rods. Reach and penetration matter a lot in B2B, and not just in B2C.
I’ll close this post with a personal experience. In one of my previous positions in banking and finance, I managed the Market Intelligence and Research function. On separate occasions when I was required to send RFPs to multiple companies, I often had to wrack my brain to add an ‘outsider’ along with two typical favourites. For one project, I selected a company just because they sent me a coffee mug out of the blue (they’d done their research well!). The committee ended up awarding them the project. Come to think about it, it stemmed from their advertising that hit me when I wasn’t looking for their service — and when the category needs arose, the brand was right in front of me. For another project, the bank ended up awarding it to a research organisation after I heard one of their key presenters spoke at a local Marketing conference I attended. It didn’t happen instantaneously – I remembered her when again, I had to find a third contender for another RFP. After the conference, the organisation sent me writing pads, pens, and even a mini succulent for my desk at work. I didn’t need to think too far, than noticing the plant in front of me to consider them for the project tender. That organisation was the Ehrenberg-Bass Institute. The rest, as they say, is history — who would’ve known that in less than five years afterwards, I ended up joining it as well!