If you've ever visited California wine country, you may have fantasized about owning a vineyard. Acres of trellised grapevines laid out in neat rows create an idyllic landscape, like the one shown in the above photograph.
Of course, the reality is that operating a vineyard is hard work. And some of that work must be done long before the vineyard owner receives a payoff.
For example, it typically takes three years for newly-planted grapevines to produce a useable harvest. During those three years, the vineyard owner must install a trellis system to support the vines as they grow, and young vines must be regularly pruned and "trained" to grow correctly. They must also be judiciously watered, occasionally fertilized and constantly protected from harmful insects. And all of this work must be done before the vines produce the first dollar of revenue for the vineyard owner.
Some of you may be wondering what this brief foray into grape horticulture and vineyard management has to do with B2B marketing. Quite a bit actually, particularly for B2B marketing leaders who need to develop marketing strategies and programs that will produce sustained short-term and long-term revenue growth.
To generate maximum revenue growth over an extended period of time, marketing leaders must design programs that will maximize performance in the present, while simultaneously investing in programs that will lay the foundation for success in the future.
The Challenge of Out-of-Market Prospects
So what does this 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 far less likely to occur when marketing and other business leaders fail to take an expansive view of their market.
In B2B, a company's "market" should be defined to include all organizations located in the company's service area that could derive substantial benefits and earn an attractive ROI by purchasing and using the company's product or service. When the market is defined in this way - that is, by customer "fit" - it will include almost all of the prospective customers the company can potentially earn revenue from.
At any given point in time, however, most of the organizations comprising a company's market are not considering the purchase of a solution like the one the company offers. Many veteran marketing and sales professionals call this circumstance the "95-5" rule, meaning that at any point in time, 95% of the company's potential customers are "out-of-market," while only 5% are actively "in-market."*
Based on our definition of the market, out-of-market organizations are a good fit for the company's product or service, but these prospects are not ready to begin a buying process. And it's unlikely that typical demand generation programs will persuade them to change their position.
However, many potential customers that are out-of-market in the present are likely to be in-market at some point in the future. So, out-of-market prospects are like those young grapevines in a vineyard. They aren't productive today, but if handled properly, they can be productive in the future.
The issue for marketing leaders is what marketing programs, if any, should be used with out-of-market prospects. There are currently two major schools of thought regarding this issue.
In This Corner . . .
Some marketing practitioners, agencies and consultants argue that marketers should use intent data and predictive analytics to determine when an organization is likely to be in-market, and then focus marketing efforts on those prospects. Not surprisingly, this approach has been loudly advocated by firms that sell intent data and/or predictive analytics technologies.
Most proponents of this approach don't explicitly say that marketers should ignore out-of-market prospects, but some come pretty close. Consider, for example, this blog post passage from a firm operating in the intent data/predictive analytics space:
"To avoid wasting time and money pursuing prospects that either already just bought the product from your competitor or are not serious about buying yet, your team should focus on the right people, targeting them at the right time by leveraging intent data, which will help you understand total active demand. Instead of a broad market of generic buyer personas, it enables you to find specific accounts that are active in your market."
And In This Corner . . .
Other marketing practitioners, agencies and consultants contend that companies should reach out to all organizations that are a good fit for the company's product or service regardless of whether those prospects are currently in-market. The proponents of this approach typically stress the importance of brand building to long-term revenue growth.
I'm not aware of any rigorous research study that compares the effectiveness of these two approaches. The analysis performed by Les Binet and Peter Field in 2019 comes close, but Binet and Field expressly acknowledged that their findings should be viewed as tentative.**
Despite the limited amount of direct evidence, I contend that it would be risky for most B2B companies to ignore prospects that don't make the in-market cut. Such an approach is dangerous because it fails to account for an important aspect of how business buyers make purchase decisions.
The conventional view is that a B2B buying process begins when a company's leaders or managers recognize a need or a problem and decide to do something about it. These "buyers" then gather information about the need or problem, evaluate possible solutions and may or may not decide to buy a product or service to address the need or problem. So the traditional view of B2B buying is that information gathering, learning and evaluation all occur after an intentional buying process is underway.
But business decision makers rarely begin a buying process with a clean slate. Every day, they are forming impressions of companies, brands and products from touch points like ads, content resources, news reports and conversations with business colleagues and friends.
When something triggers an intentional buying process, these accumulated impressions exert significant influence on the purchase decision. For example, a 2020 study by The B2B Institute and GWI found that millennial business buyers, ". . . spend the most time on research, explore the widest range of vendors, and yet are the most likely to ultimately pick one that they already know."
If marketers focus their efforts solely on in-market prospects, they'll be abandoning the opportunity to influence the perceptions and preferences of many future potential buyers and likely missing out on future growth opportunities. Such an approach would be like a vineyard owner failing to properly nurture the young grapevines that will drive the vineyard's future revenues.
* The percentages in the 95-5 rule are not meant to be taken literally. The actual percentages of out-of-market vs. in-market prospects will vary from industry to industry and company to company. What makes the rule valid in a general sense is that companies almost always have far more out-of-market prospects than in-market prospects.
** It would be very hard to design and conduct a study of this issue that is scientifically sound because of the difficulty of controlling for all the variables that could affect the research outcomes and because the study would need to be conducted over an extended period of time.
Image courtesy of Aaron Logan via Flickr (CC).