Does Brand Awareness Work in B2B? Here’s How to Prove it Does to Your CFO

So your sales team says they just want more leads,
but your CFO wants you to only spend money on things that you can measure.
But in today's episode of Closing Time, we're going to talk all about
spending your precious marketing funds on branding
and why that might be a good idea.
Thanks for tuning in to Closing Time the show for Go to Market Leaders.
My name is Chip House.
I'm the CMO at Insightly CRM, and today. I'm joined by Dale Harrison,
who is a consultant and strategist in B2B marketing.
Welcome to the show, Dale. Well,. I'm glad to be here.
So I'm super excited to have this conversation
because I saw a post that you’ve done on LinkedIn, which combines
some data from different research that's been done on the value
of spending on demand creation or branding on your brand.
And, you know, I think a lot of marketers really stress out about this,
and especially as we're going into planning season for budgets next year,
you know, how much spend should go towards content, towards branding,
and how do you justify that to your CFO and to your head of sales, frankly,
that is still going to generate business for you over time.
And so let's start there, Dale.
Okay.
I mean, I think that the key point is, if you look at the data,
there's been a number of research projects in the last couple of years
looking at B2B enterprise sales, a very good one from Bain and Company.
There’s another one from Gartner.
And if you combine these research studies
to give kind of a global look at how your,
how a particular sale will move through the process
with a large B2B company, one of the things that comes out of
this is the fact that about 80% of buying groups
will already have a day one consideration
set before they begin any purchase research, which means,
you know, all of those intent signals that you're picking up out in the market
are really only occurring after about 80% of your potential
customers have already come out with the consideration set.
So they're starting with a group of vendors,
you know, typically it's
going to be around three, maybe four vendors that they'll select.
It'll typically be the market share leader
plus maybe one or two additional
companies that are in the top five
or top ten market share leader positions.
And then maybe, you know, a Challenger brand.
This is in place before they begin to do any research, before
they're going
to show up on a Google search, before they're going to come to your website
or anything else.
But the critical thing here is that the final buying decision,
90% of of the purchase decisions come out of that initial
day one consideration set.
You know, And what that means is, is that if you're not already known to them
before they begin to research the category, then you've got a very,
very thin chance of becoming, you know, of actually getting selected.
And then the other thing, there's a separate piece of research
that comes out of Gartner looking at the rate
at which these buying decisions and in a no decision
and that number is between 40 and 60%.
So, you know, a rough rule of thumb is about half of
B2B purchases end in
basically a decision to stay with the status quo, you know,
And so you combine these together and what you see is that if your prospect
is not already aware of you before they begin the purchase process,
you really have about a 5% chance of being selected during the research process
and then actually winning the deal for those deals that actually close.
You know, so the challenge there is
how do you get into that day one consideration set?
And the answer is by doing the work ahead of time
where you're communicating to future buyers and you're giving them information
about the existence of the brand, you know,
what your key point of differentiation is enough information
that they'll be able to remember you when a need emerges.
I love that.
And we've actually had a lot of guests on talking about the evolution
of digital marketing.
And for example, Chris Walker was on and he's talked
a lot about the concept of demand creation,
which is much more like branding spend, where you really focusing on
delivering valuable content to your audience versus demand capture,
where you're just capturing the demand that already exists.
And a lot of his argument has been if you only focus on
capturing the existing demand, you're not impacting
the other 90% that's not in the market for your solution.
And I love your scientific approach to this, Dale.
That's part of what really. I was excited about.
And because I know you've been a physicist, you've been in the biotech
space, you've led sales teams, you've led finance teams.
So your perspective on this. I think is really, really unique.
And so is that how you see it?
You know, does that emerge from the numbers as well?
Is it just super important to get into that buying set
and make yourself aware, make your brand part
of the awareness set for the 90% before they even get into market.
Is that right? Right. And,
you know, part of what this is also predicated on
is this idea of the 95-5 rule.
This comes out of research from a professor named John Dawes
out of the Ehrenberg-Bass Institute.
And what he looked at
was, you know, within a given category,
what percentage of buyers are in market at any given time.
And the outcome of his research across
multiple geographies, multiple categories was that about 5% of your market
is in market in any given time, About 95%, you know, lack an active current need.
And so, you know, they represent your future buyers,
but they don't represent people that you're going to be able to capture
demand currently.
If your entire marketing effort is around performance marketing,
then you're really narrowly focused on that 5% and your focus on that 5%
basically trying to capture them once they come in market,
which means that you are very much behind the eight ball as opposed
to having some portion of your marketing being spent toward brand.
It's not just brand awareness, it's, there's a more technical term
called mental availability, which is, they need to be aware of you,
but then they also need to understand, they need to have recall triggers
that are associated with buying situations.
And, you know, so this goes beyond just simple awareness
into something a bit more nuanced and a bit more complex.
And, you know, these are things that need
to be baked into your approach to brand awareness and to brand marketing.
So it's not just that they recognize your name, they recognize your logo.
You know, they also need to understand,
do you have a particular point of differentiation?
Is there particular buying situations where they need to think of you
and that needs to be instilled, you know,
in their
minds, through your marketing as you try to create
these kind of memory traces in the minds of your future buyers.
And this is a very, very different way of thinking than what you see
within performance marketing teams that are obsessed with,
you know, with simply capturing people that have an active current demand.
Well, I think that's the interesting thing, kind of knowing how this works
and having a view of what marketing funnel metrics
look like for different types of sources where you can spend money.
And as a CMO, it’s something I'm always thinking and obsessing about.
And I think a lot of people in the B2B
space do as well.
But really what really is exciting to me, it's exciting,
but also it's damning to just the demand capture approach, right?
Is it's exciting that by doing
content towards, you know,
kind of towards your target audience, even if they aren't in market,
will help put you part of, part of that consideration set.
Whereas if you spend only your time
on the 5% that are actually in market, you know you're going to have,
you know, you’re only
going to have a 5% chance of winning the deal.
Most people are going to, you know, a good share of people are going to
go in no decision anyway for multiple different reasons.
We have also seen certainly CFO, you can measure
when somebody comes from Google, you know, and be able to tie that to your spend.
But the fact of the matter is there's no affinity to your brand, right?
So that the chance for that person who you've exposed to your content
and they've downloaded piece of your content or something
like that, and then you call them,
they're new to your brand, right?
Right.
Well, and you know, the other thing you have to take in mind is that
a large part of brand
awareness is tied to your market share position.
So if you're selling a CRM and your name is Salesforce,
pretty much everyone that's in market is going to know your name.
There are a lot of other CRMs that people may or may not know your name.
And so what happens is, is that the top 1 to 3 market leaders
will generally always be in that consideration set simply
because they've had enough longevity and they've had enough exposure
over time in the market that people know or know that if you say CRM,
you should at least consider. Salesforce as an option.
And so it's going to be in there in that consideration set.
And, you know, and so the challenge is how do you get,
you know, how do you get in there if you're a challenger brand,
if you've got a small market share, you haven't had the longevity or just the
sheer marketing dollars to be able to blanket
the market with your messaging.
And that becomes a real challenge is, you know, how do you
you know, the phrase I always use is you want to look bigger than you are.
You know, you want to look large where you are.
And this is one of the reasons why differentiation and market
niching is important, because it allows a small company
to concentrate their spending on a small fraction of the market
so that they have as large a voice in that
small niche as the market leaders do.
And, you know, so this also becomes a very key part
of how you approach approach brand strategy.
The last thing I’d throw in there as well is a bit of a quibble,
but I think it's an important one, which is this
kind of perverse notion that has grown up in the last few years in marketing
and especially in B2B around the term demand creation.
And the fact is that there's
absolutely no such thing as demand creation that
people
bring themselves in-market when there has been some fundamental state
change within their organization that surfaces a new need
and that need is widely recognized and urgent.
And when those conditions are met, then they come in market.
And at that point, you know, they you can capture them as leads, you can do
the demand capture, but there's nothing that you're going to be able to do as an
outside third party marketer
to be able to generate demand where there's
no need, to generate demand out of thin air.
And I think this is a very dangerous notion because it leads people to imagine
that they should do certain things that make absolutely no sense.
You know, and one of the challenges you have in brand marketing in general,
and especially in B2B, is that you have very long buying cycles.
So you typically are seeing,
you know, two, three, four, five years between purchase cycles.
You know,
if someone buys a brand new accounting system,
they're not going to need a new one in six months.
You know, someone buys a CRM, they're not going to need a new one in a year.
So you have very long buying cycles, long periods of time to forget to, you know,
to literally to forget that you exist and very, very short attention span.
So if you have just installed a new accounting package,
you are probably not really interested in reading about accounting packages,
you know and so
your attention span, if someone is trying to,
you know, develop some sense of brand awareness
or some mental availability about their product,
that prospects attention span is very short,
which means that you've got a very, very narrow window to communicate
who you are and why they, you know, why you should be considered important.
And a lot of what you see is,
you know, is kind of longer form performance
marketing that tries to get shoehorned into brand awareness marketing.
And, you know, if you imagine
that you can induce someone to buy who doesn't have a need,
it's going to lead you to do things that are completely nonsensical
and are going to be, you know, are going to not be effective
at the things you need to do, which is to connect your core
brand identity with your category in a memorable way.
You know, that's going to be tied to recall triggers
that are associated with buying situations.
Yeah, that's super helpful.
I think the key in what you said before is maybe it's not
demand creation, it's brand awareness,
you know, with an emphasis on awareness for the potential buying set.
But let's pivot a second here,
Dale, because I want to drill into
put your CFO hat on for a second, if you would, because I know you
sat in that chair and sat in the sales chair and, you know, so
if your CFO is challenging you as a marketer about this,
you know, what are some of the tactics and strategies
you can take as the leader of the marketing team to help
convince your CFO that, hey, brand awareness
does make sense for us to do and for us to invest in.
So in some ways I think this is a very simple argument and a very easy argument.
You've got to abandon the ROI
thinking, which is really has infected
marketing groups
in very negative ways and
if you're a finance person,
you thoroughly understand the distinction between different investment classes
and the differences in the payback period
and the payback mechanisms for different investment classes.
So, you know, if you're the head of production
and you need a new factory
and you go to the CFO and you say,
we're going to build this factory out in the middle of an open field
because you know, what's the ROI on a building?
It just sits there and, you know,
consumes repair costs constantly, you know.
Plus, you know, we're in a hurry to get this factory built.
So we're going to, you know, building, you know, spending resources on building
a building first is just a waste of time and energy.
You know, we're just going to build this factory
out in the middle of an open field.
The CFO would think you're crazy.
And because the CFO understands that the building that houses
the factory is a different asset class with a different payback period
and a different payback mechanism versus the machines on the factory floor
that are producing widgets.
And what that building does is it makes all of the other
investments more valuable.
It makes the machines last longer.
It allows you to be, you know, to produce more stuff per week.
It basically enhances the efficiency
and the effectiveness of everything that's inside the building.
And so the sort of longer term
brand awareness marketing is very much like
the building that the factories in or the performance marketing, producing
a lead that can go to sales that can be closed in the next two months
is very much like the machine tool on the factory floor
that's cranking out a widget that you get, you know, that you get to sell next week
and, you know, and so these are very different asset classes
and they and the deal with brand awareness is that
if the buyer knows who you are before they're ready to buy,
you're going to be able to have a higher likelihood of being in the consideration
set, a higher likelihood of being chosen in the final selection.
You're going to have, you’re typically going to have a faster close cycle
because there's already a higher level of familiarity and trust.
And you're probably most important and this is,
I think, the most critical thing to take back to the CFO
is you're going to have enhanced pricing power.
You know, the reason that a market share leader
is able to price their product in a relatively price
insensitive way compared to a Challenger brand
is because there is already awareness and trust and confidence
that this purchase is going to be, it's going to be a low risk purchase
and therefore they're going to be willing to pay a higher premium
in order to
take a lower, make a lower risk purchase, where if they're buying
a completely unknown challenger brand that they only heard about last week
because they saw you when they did a Google search
and they suddenly discovered you, you're a complete unknown.
You're going to,
no matter how good your product is and no matter how good your history is,
you're going to be perceived as a higher risk option.
And, you know, your option may be so compelling
that they're going to take that even though it is a higher risk option.
But someone has to pay the risk premium.
And what happens is the risk
premium comes back on the company that selling the product in the
in the form of discounts, in the form of lower prices
then they would have been able to charge if they had been perceived
as a more trustworthy or more reliable supplier.
And so, you know, and I think that's one of the areas
where marketing in general tends to not understand their power
within the company that they've got enormous ability to drive pricing power.
And you can do a 20% savings in your costs and that will be
nothing compared to doing a one or 2% increase in your profit margins.
You know, so very small increases in pricing
can have oversized impacts in terms of profit margins.
And basically the sales team cannot produce
pricing power, production can't produce pricing power.
Really only marketing has the ability to produce pricing power.
And that is an enormously important thing for, you know,
for the long term success of a company.
Yeah,. I love that a lot, Dale, and thank you
for kind of bringing us into the language of the CFO, right?
The different asset class.
I think people who are not trained in marketing think about marketing
as the icing on top of the cake rather than part of the cake itself.
But the truth is, you know, the marketing is the cake.
You know, your engineers don't just get a pass to go
disappear and build whatever your product is.
And you know, how often do you have the CFO talking about the,
what's the ROI of the engineering team or getting up in the morning or,
you know, of the building that you're creating for the factory?
Right, Right.
I mean, the marketing is the product ultimately is the way I look at it.
And that's kind of what I took away from what you said,
and you talked about
when we talked before about sales being sort of inputs are matching
the outputs versus in a situation where you have
non-linear benefit of doing good marketing.
And I'm going to have you comment on that, Dale.
That's probably the last thing that we can hit and then we'll wrap up.
So yeah, I mean, the other thing is that marketing is basically is a non-linear
multiplier of, of the efficiency and effectiveness of the sales team.
So, you know, if I want to sell twice as many, close twice as many deals
next year, I basically need twice the size of the sales team.
So there's a very linear relationship between
how many salespeople I've got in the field and how many deals
I'm going to be able to close.
I'm not going to be able to have my existing team
suddenly close twice as many deals.
But if you look at marketing, marketing has the ability
to massively increase the leads that are going into sales.
The quality of those leads with a relatively minor increase in
their underlying cost.
So they have this ability to really be a non-linear multiplier of the work
that the sales team is doing and of the efficiency of the sales team.
So it becomes a very, very good investment class.
You know, from the CFO standpoint, you know, in the sense
that in the same way that that building that the factory is in
is, is in many ways kind of a non-linear multiplier
that if it's raining, the factory keeps running,
if it's cold out, the factory keeps running,
you know, the machines last twice as long because they're not being rained on.
So, you get this one time
investment that has this huge multiplying
effect on the
return that you get on these other investments,
you know, the return you get on the machine tools within the factory.
And so marketing is very much the same way that they've got the ability
to really expand the rate of growth of the company in a way
that in a way that sales really can't do, you know, and then they can take
that fixed investment in sales and they can make it more efficient.
You know, they can do things that will reduce the close cycle,
they will reduce do things that will increase the
the probability of close and the ability to increase the price point.
And so, you know, each one of these things,
you know, directly feed into basically amplifying
the sales velocity is being generated by the sales team.
Yeah, I love that, Dale and I love your perspective here
and you kind of scientific approach and that's
unfortunately that's the last thing we have time for today.
So but thanks so much for being here,. Dale.
Oh, this has been great.. Thank you very much for inviting me.
Yeah, absolutely.
And thanks to all of you for joining us out there.
Please remember to subscribe.
Tick the bell and we'll see you on the next episode of Closing
Time.