This article originates from a presentation at the Revenue Marketing Summit in New York, 2022. Catch up on this presentation, and others, using our OnDemand service. For more exclusive content, visit your membership dashboard.
Hello everyone! I'm Ty Heath, Director of Market Engagement at LinkedIn’s B2B Institute think tank. If you're not familiar with The B2B Institute, we work with leading academics and practitioners to investigate how marketing can create more value, and we're going to do exactly that today.
We’ll link buying situations to brand sales, and I'll introduce a concept called category entry points.
I want to start with an idea, the idea that most purchases start not by searching Google for a product but by searching your mind for a memory. Now, if most buyer behavior starts with searching your mind for a memory, it follows that the job of marketing is not to generate clicks but to generate memories.
Marketers are in the memory business, and I think that's pretty exciting, but before we dig any deeper into this idea, let’s get a little bit of context.
Marketing’s reputational crisis
Marketing is facing a reputational crisis right now. There's a disconnect happening: many people aren’t clear on the value that we as marketers create and bring to the business.
I think we could do better at closing that gap and building bridges, especially with our finance departments. If we can learn to speak in a language that finance understands, we’ll be in a much better position.
So where's this coming from? Well, according to a study by Forbes, only 2.6% of over 65,000 board members in their database had managerial-level marketing experience.
That’s such a tiny proportion, and it feeds into a negative cycle – according to a further study, only 4% of people on boards said that marketing was an important skill for board members to have. In contrast, 47% of the people surveyed said that finance was an important skill.
Below is a chart of current business priorities and the number of non-marketers who believe a strong brand is important in achieving them.
Those priorities include things like margin improvement, enterprise growth, future cash flow, and increased productivity – I don't think there's any doubt in our minds that marketers drive opportunity here, but there's a gap in terms of what other people feel.
One of the things we like to do at the B2B Institute is to take inspiration from other fields. We can learn a lot from the field of finance. We can learn a lot from the field of customer service. There are so many different things we can draw from, but thinking about the way finance looks at capital allocation is a great place for us to start.
When finance looks at operations, they make decisions about where to invest, where not to invest, risks, opportunities, and trade-offs before eventually deciding to invest in something at the expense of something else. That’s capital allocation. As Warren Buffett says,
"The skill with which managers allocate capital to the most financially and strategically attractive projects has an enormous impact on enterprise value over time."
Psst! Nobody cares about the funnel!
So, what does all of this mean for marketing? It means it's time for us to revisit our models and how we position ourselves. We can start with the marketing funnel. We're all familiar with the funnel. It’s probably the most recognized mental model in all of marketing, and we use it all the time.
However, at the B2B Institute, we have a contrarian point of view when it comes to that funnel. We don't believe that there's an awareness stage and a consideration stage.
What we believe is that marketers should look at customers as either being in-market or out-market for your products and services. If they're out-market, that means they're not thinking about your brand at all.
The trouble with the standard funnel we all use is that it makes us believe that it's our job as marketers to put people in-market through advertising. But advertising doesn't put people in-market – people put themselves in-market when they experience a relevant buying situation.
A better mental model is the cash flow funnel, which you can see below, behind the typical funnel. The cash flow funnel recognizes that buyers are in-market or out-market and that in-market buyers represent current cash flows and out-market buyers represent future cash flows. In that way, this version of the funnel is both customer-centric and finance-centric.
The research we did with Professor John Dawes at the Ehrenberg-Bass Institute says that 95% of category buyers are out-market at any given time. This means that the potential for growth in your business lies with future customers and the cash flows they’ll bring.
Now, of course, we have to focus our lead-gen efforts on the 5% who are in-market and we have to capture their latent demand, but the problem in the B2B industry right now is that we almost exclusively focus on that 5% – we're missing out on 95% of future buyers.
We're not priming them to remember our businesses so that we're the brands they think of when they come in-market.
By the way, in times like these when we're facing a recession, we have even fewer people in-market – the ratio might be 99:1. It’s even more important to think about how we're priming future buyers in economies like this because people may not be ready to buy right now.
Doing this work is not a matter of lead generation; it's a matter of memory generation. Let's talk about how we do that.
Messaging for memory, not clicks
This is where our new concept comes in: category entry points (CEPs). Professor Jenni Romaniuk coined this term. Here’s how she explains it:
“Category entry points are the cues that category buyers use to access their memories when faced with a buying situation.”
Take a look at this analysis of the cloud vertical that came out of our B2B Edge program. Typically, the buying situations that bring a buyer in-market for cloud solutions are scalability, reliability, and savings. Of course, these buying situations can differ from industry to industry.
Once we understand these buying situations and category entry points, we can start messaging for memory. The aim is to show our offering supports scalability, reliability, and savings.
This will allow us to better allocate our time and resources. Going back to our friend Warren Buffett, category entry points can guide marketers’ capital allocation. They allow us to align marketing dollars, attention, and time with what's going to deliver.
There's also another term to understand here: excess share of voice, which is defined as your share of voice relative to your share of the market. If your share of voice is greater than your share of the market, your brand will grow.
If your share of voice is less than your share of the market, your brand will shrink. In the example above, the excess share of voice translates into 0.5% market share growth, leading to $386 million.
We work with an ad effectiveness agency called System1. They analyze ad creative based on a one- to five-star system that predicts how effective that creative is going to be.
In the analysis we did of the global CRM market, we found that by moving from brand-led creative to CEP-led creative, we would improve our score by 1.4 points. That translates into more opportunities and, in this case, 2% growth in market share, equaling $1.5 billion.
If you haven't had your coffee yet and all those numbers are clouding your mind, the point I'm trying to make is that CEPs are crucial, and focusing on them in your creative can deliver significant opportunities for your business. Let's get into how we can do this.
How to identify your category entry points
Getting down to your priority category entry points is a three-step process.
- Elicitation: Conduct a survey asking category buyers a series of tailored questions about their buying behaviors.
- Elimination: You might have as many as 15 or 16 different reasons why somebody would buy your product. Your job is to whittle this list down to the five most relevant and actionable reasons.
- Prioritization: This is the capital allocation stage, where you prioritize where to invest.
Let’s dig a little deeper into each of these steps.
Step one: Elicitation
I’d like to introduce the W's framework. The W’s represent the different types of questions that include in your survey to start to whittle down the different reasons why somebody might be in the market for your services.
