Volume 163: The B2B Brand Imperative.
The B2B Brand Imperative.
tl;dr: Yeah, brands matter.
I’ve done a lot of B2B work over the years, and I consistently see the symptoms of brand weakness - weak overall demand, a view that a competitor is sucking all the oxygen out of the room, a sales team working overtime to convert at a higher rate than they should have to, having to continually tell prospects who you are instead of what you can do for them and ongoing declines in response rates for your short-term tactical activities leading to anemic growth and a massive increase in pressure on the marketing department to move faster, become more agile, and perform.
Unfortunately, all too often, the diagnosis that the problem is moving too slowly and inefficiently is flat wrong.
When we weaponized waste and inefficiency as the biggest problems in marketing, we created a much bigger weakness in the form of chronic underfunding - particularly at the brand-building end of the spectrum, which constrains an organization's ability to grow to its potential.
Rather than view this as a message of doom, however, we must instead view it as an opportunity. If the underfunding of marketing has become an industrywide competitive weakness, then those who recognize it as such and respond accordingly will be able to realize outsize value.
The challenge is that having worked in this space for a long time, I can confidently state that marketing in general, and brand more specifically, remain poorly understood concepts in the B2B arena, even though we have well over a hundred years’ worth of data to work from.
Yet, as an ever greater percentage of corporate valuations are made up of intangible assets, the value of brands as a proportion of total enterprise value is considerable.
So, why are we so ignorant about such a significant source of enterprise value, and what can we do about it?
I think there are predominantly three reasons why brand remains a dirty word at the top of so many B2B corporations:
There is widespread misunderstanding and ignorance of how marketing, and thus brand, works.
The brand conversation needs to be a business value conversation rather than a ROI conversation.
The AdTech industrial complex moved in a different direction.
The primary reason brands don’t receive greater commitment within B2B organizations is a widespread misunderstanding and ignorance of how marketing works and, thus, the value brands create. This leads to common misunderstandings about what is necessary to be successful, how much it’s going to cost, and when the return should be seen.
In other words, when we do the right thing in isolation, like talking about the long-term nature of brand building, we also run the risk of accidentally reinforcing people’s ignorance. It’s not an irrational response to look at two proposals, one for “long-term brand building” and the other for “short-term performance marketing,” and decide to put all your eggs in the performance basket. After all, if you don’t know any better, the promise of cost today and revenue today beats the promise of cost today and revenue tomorrow.
Equally, when we say binary things like “brand campaigns don’t show or sell the product” (not at all true, btw, but a common trope), we accidentally reinforce a negative stereotype of underperformance within an audience that generally doesn’t think in terms of ads anyway, and when they do, intuitively thinks they should always showcase the product.
Shifting To Demand As The Frame Of Reference
So, here’s a different way to think about it.
First, if I borrow from and then build on the excellent work of Dr. Grace Kite and Tom Roach, then we might simplify and frame everything through different approaches to demand:
Demand harvesting
Demand capture
Demand creation
Any strategic approach to marketing needs to cover all three bases. Let’s walk through each in turn:
Demand Harvesting
This is where you harvest demand that’s already in market, where you’re either in the consideration set already or you have a chance to connect yourself to purchase intent. Activities designed to drive harvesting are things like Google AdWords that tend to be always on and work more like signage than advertising. The idea is to put yourself in the position to harvest demand that might be coming your way anyway and to make incremental gains relative to competition.
Demand harvesting may appear to have outsize value for very small corporations because their existing sales are small. However, it’s a tactic that tends to hit its mathematical limits pretty quickly, so be careful not to be overly optimistic in your projections to avoid over-investing in things like search that hit the limits of incremental growth quickly and then flatline.
Demand Capture
This is where you seek to capture demand from buyers who are actively in the market by attracting them to your offering. It builds atop demand harvesting but seeks to have greater incrementally. In other words, if demand harvesting is primarily focused on ensuring you make sales that were likely coming to you anyway, demand capture seeks to grow new sales. The tactics we label “performance marketing” and “growth marketing” tend to be demand-capture activities. While they may be more campaign-like in practice, such activities often have a more always-on cadence.
Because you’re seeking to attract buyers actively in the market, demand-capture activities tend to be driven by feature/functionality - proving that your product or solution delivers what the prospect needs. As a result, these tactics tend to add value while they are in the market, but they have little ongoing commercial impact in subsequent quarters because people forget such messaging.
Like demand harvesting, because demand capture is bounded by the number of customers actively in market at any given moment, such activities tend to stall out over time as you begin bumping up against your demand ceiling.
Demand Creation
Because they both seek to attract demand already in the market, demand harvesting and demand capture activities are reactive in nature. We’re reacting to market signals that someone is actively in the market for a product or service, and we’re then seeking to get our proposition in front of them before they can act on that purchase intent.
Demand creation, by contrast, is proactive in nature. It seeks to create future demand for our offering by either: A. Strongly associating our brand with a prospect's need so that they’re most likely to think of us first when they are in market or B. To stimulate the market, create new demand where it didn’t previously exist, and draw customers toward our offering.
Because we need to cut through in an environment where prospects aren’t actively looking to buy right away, we’d typically focus less on feature/functionality and more on being memorable (so they’ll remember us when they are in market) by creatively connecting what we offer to their need (so they don’t just remember us, they’ll actively consider us) and doing so consistently over time (so everything we do builds on what came before).
Demand creation tends to be most closely associated with what we consider “branding” or “brand-building” activities. However, rather than allow this to devolve into the trap of a brand = expensive, wishy-washy ad campaign that underperforms, I think it better to use the term “demand creation” and talk about this as being the ongoing activities we need that will lift the ceiling on our demand potential.
Using the lens of demand allows us to re-frame the sales funnel into something that feels less pejorative and loaded with false meaning. Rather than talking about the top, middle, and bottom of the funnel and things like “performance marketing” or “brand marketing,” now we’re talking about demand and the need to harvest and capture demand that already exists while also creating new demand that will lift our overall ceiling over time.
Now, let’s layer in some additional context around why we need to do this and how it all works together.
Why This Matters:
In any market, only around 5% of the audience is actively seeking to purchase at any given moment. This means 95% of potential buyers aren’t looking to make a purchase right now.
Accurately identifying and attracting active buyers is hard and can be expensive. Their time in market is fleeting, and we often lack good signals to demonstrate that they’re now active. (Judging the accuracy of such targeting data is difficult, but academic research suggests it’s vastly less accurate than data brokers would have you believe)
Approximately 90% of all purchases are from a brand you’ve already heard of. This puts those corporations that focus exclusively on demand harvesting and capture at a disadvantage (since they only pop up when you’re actively in market, chances are you won’t have heard of them before, and you’re less likely to buy from them if you’ve never heard of them).
Although estimates vary, we know that a significant proportion of the B2B buyer decision is made before they ever speak to your sales organization. In other words, marketing now plays an outsize role in influencing perceptions compared to the past.
As the costs of entry fall, many B2B categories are becoming increasingly competitive. To use a single example, SaaS has grown from a $31bn category in 2015 to $197bn by the end of this year, marking a considerable lift not just in category revenue but competitive intensity.
So, here’s why we need to pay attention to all three forms of demand:
B2B categories are becoming more competitive rather than less, which means it’s becoming harder and more expensive to cut through successfully.
A huge chunk of the B2B purchase decision is made before the buyer engages with a salesperson, meaning marketing plays an outsized role in shaping perceptions.
Only 5% of buyers are in market at any given moment, meaning 95% of potential buyers are not seeking to make a purchase right now.
90%+ of the purchases we make are from brands we’ve already heard of, meaning we’re at a disadvantage if we aren’t making sure they’ve heard of us before they’re ready to buy.
Empirical research shows that focusing on all three forms of demand is more effective than solely focusing on one or another.
In other words, B2B success is becoming more difficult as it becomes more competitive. To succeed, we need to stop engaging in asinine “brand versus performance” arguments that only exist due to the chronic underfunding of the marketing function and instead cover all forms of demand while also understanding that different forms of demand work differently and must be optimized differently as a result.
Now, here’s where it gets really interesting.
Brand Strength Is An Outcome, Not An Input.
If we are successful in managing growth by effectively harvesting, capturing, and creating demand, then increased brand strength becomes an inevitable outcome. (In other words, great brands primarily manifest as the outcome of doing other things well, including product, experience, and, yes…fairly far down the list, advertising).
Businesses with stronger brands tend to outperform those that do not for the following reasons:
Brand effects mimic monopoly effects in categories where there may be no monopoly potential. More specifically, brand strength tends to correlate with positive effects on both volume and margin
Brand strength tends to accelerate the performance of both demand harvesting and demand capture activities because it increases the chances that people will already have heard of you and think positively about you. In other words, demand-creation should increase the effectiveness of your brand harvesting and capture activities.
Brand strength future-proofs the organization. In businesses undergoing a significant transformation of business models and/or product propositions, brand strength eases the transition by creating trust that de-risks the new offerings.
Of course, we must also recognize that different tactics work across different timeframes. Because demand harvesting and demand capture seek to attract demand already in the market, their performance can be measured in very short-term increments. Because demand creation, however, is focused primarily on the 95% who are not in the market, its performance should be judged across longer timeframes.
Short + Long Term Cashflows
The best way I’ve heard this view of demand put into business terms is as follows: (My apologies for not crediting this to anyone; I forget where I saw it first):
Demand harvesting and demand capture seek to optimize and lift short-term cashflows by exploiting demand already in the market. Demand creation seeks to lift our long-term baseline cashflows by creating demand for us that lifts our demand ceiling. Do both well at the same time, and we achieve optimal growth with a stronger brand a desirable side benefit.
So, that’s my take.
Even though the LinkedIn B2B Institute has done some great work, marketing, and thus brand, remains a widely misunderstood concept in the B2B arena. Mostly, I think, for two reasons. First, we haven’t done a good enough job of framing the different ways in which marketing tackles different kinds of demand. Second, chronically underfunded B2B marketers are being forced to pit short vs. long-term activities against each other rather than figuring out how to optimally manage both.
To rethink this, it may be better to frame marketing in the context of demand and demonstrate how brand-building is complementary and value-additive to other approaches rather than setting it up as a binary either/or.
I’m not sure that I can put a number on the opportunity potential here, but it must be considerable. Truly, there’s no good reason for there to be such a paltry number of genuinely strong B2B brands, and there’s a very good reason why it shouldn’t last for much longer.