B2B marketing and the rule of three in a recession
As we emerge from the market disruption of pandemic lockdowns into a world of supply chain shortages and looming recession, B2B marketers could be forgiven for feeling at best uneasy, and at worst panicked. But in uncertain times, there is comfort – and strategic direction – to be found in ‘the rule of three,’ writes True founder Richard Parsons.
The rule of three has stood the test of time
The rule of three is a hypothesis about the evolution of industry leadership and structure, first set out by Boston Consulting Group founder Bruce Henderson back in 1976. In essence, it suggests a stable, competitive market never has more than three significant competitors, the largest of which has no more than four times the market share of the smallest.
It is a theory that has been re-examined and re-affirmed a number of times over the decades since. And its enduring relevance comes down to the essential point it makes about how in the maturity of fast-changing ‘hot’ markets, businesses face two outcomes: either purchase or be purchased. Why? Because whatever the business sector, the rule of three (or, rather, ‘the rule of three and four,’ to give it Henderson’s official title) will always prevail.
To understand the impact of this on individual B2B business purchase decisions – and the extent to which all business purchases are subject to the same pressures – we studied B2B case studies from 23 sectors across 26 leading economies of the world to unpack the effectiveness of marketing and its component facets.
Our aim was to debunk the myths surrounding B2B marketing and to shine a light on how business products and services are purchased – to prove the link between creativity and effectiveness. Here’s what we found...
The B2C and B2B sales funnels are different
The B2B sales model differs from the B2C sales model because the B2B and B2C sales funnels are different. In B2C, the standard sales funnel has many long-term prospects yet to purchase a brand at the top, filtering down to fewer existing customers with higher brand awareness. And its associated selling model focusing on audiences higher up the funnel tends to deliver the broadest brand impact and greatest financial paybacks.
In B2B, however, our research found that the buyer starts with just three brands, then expands the number of considered vendors to 10 (including the original three), before finally reducing the number down to one – the vendor they buy from. Less of a sales funnel, then; more of a sales diamond.
B2B brand awareness is critical
Because of the different nature of the B2B and B2C sales funnels, brand awareness is critical for those that are not one of the three most significant competitors in their market.
We found that while size and market share dictate the three brands they start with, brand awareness dictates which seven are then added for consideration – in fact, brands in the initial consideration set are three times as likely to end up being purchased than those that aren’t. Creative campaigns are 12 times more efficient at delivering business success.
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The most effective B2B brand awareness campaigns are balanced
Most marketers consciously choose to focus on either end of the marketing funnel – building awareness or generating sales among current prospects and customers. But our findings suggest a need for a more specific set of objectives aligned to each touchpoint used to influence consumers as they move through initial consideration, to active evaluation, to closure.
As a result, B2B brand awareness campaigns should be balanced. This means a balance of emotional and rational elements, as emotional messages are more memorable and likely to contribute to brand and sales success. It also means a balance of big ideas for long-term brand building and elements designed to convert to an immediate sale.
Face the future with confidence
The invisible forces at work for the rule of three within mature markets are also present during an individual’s micro-purchase decision, our work shows. In fact, the macro-observation for mature markets is simply the accumulation of the many micro-decisions over time.
70%-90% of all B2B purchasers end up buying from those brands that were known to them at the start of the buying process, our research shows. The more famous the brand is among a broader audience, the more likely it is that the brand will become one of the three leaders within that market.
By understanding this and then acting on it, B2B marketers can face whatever the future holds with confidence.
Richard Parsons, founder and managing director, True.