The 95/5 Shift: Winning B2B Buyers Before They're In-Market

Full transcript

Neil Anderson 00:00
Hey everybody, welcome to this episode of Outcome Marketing Live, where we talk about all things marketing — and especially how methodology can endure and outcomes compound. I'm going to introduce my guest here in just a moment, but before I do, I want to tee this up. When I talk to founders or CEOs of SMBs, I tend to hear a lot of the same problems. And one of them is that in this era of AEO and whatnot, they're losing deals to competitors that they think are objectively worse than them. Their pipeline is very referral dependent, their agency is chasing leads, and somehow the other dude always keeps showing up on the shortlist that they never even knew existed. So today I want to dig into why that happens and, more importantly, what you can do about it — before a buyer ever even raises their hand.

Neil Anderson 01:15
So today I'm pleased to be joined by Dan Smink, who's the founder of Refract ROI. Dan's got a B2B growth agency based in Denver, Colorado, and he helps his clients grow their business with all manner of marketing — answer engine optimization, SEO, content creation and publication, and on and on. So today we're going to just interrogate Dan on what is known as the 95/5 frame and why it's critical for CEOs and founders to understand how that impacts the way they go about both demand generation and demand capture. So hey, Dan, welcome.

Dan Smink 02:02
Hey, Neil, it's nice to be interrogated by you again. Usually I have a martini in front of me when it happens though.

Neil Anderson 02:10
Yeah, exactly. We have had some fun in those interrogations. Do you want to just say a word or two about Dan and or Refract, just so the audience has more perspective on who you are and where you're coming from?

Dan Smink 02:24
Yeah. So my name is Dan Smink. I'm the owner, founder, CEO and president of Refract ROI. We're a digital media and marketing company based in Denver, Colorado. I started the company in 2011 with a friend of mine. Before that, I did about a dozen years as a product manager in medical device manufacturing — my team actually helped build one of the three COVID tests, so many people in the audience have probably used one of my products.

Dan Smink 02:54
Anyway, I shifted from that to building an agency, and it has evolved dramatically over the years. We started out just doing SEO and paid search, and now we do full-funnel marketing, email marketing consulting, and even some operational consulting — because we believe you can't solve a marketing problem in isolation from sales and operations. That concept, we feel, is really important to understand at the beginning, because if you can identify those issues and solve them, it only makes your marketing investment more productive.

Neil Anderson 03:31
Very cool. Thanks for that. So I want to start with a question as sort of a reality check. When you tell a CEO that 92% of B2B buyers begin their purchasing evaluation with a vendor already in mind, what's their reaction? I mean, do they believe you?

Dan Smink 03:56
I think no — but I think mostly it's because they don't understand the concept. So I put it in consumer terms to help them understand it, because what this reality check is referencing is a consideration set. I use the example of insurance. I say, you need to buy insurance — who are the top three insurance companies that come to mind if you're going to buy homeowners insurance? And they'll say something like Geico or Progressive or Nationwide. And I'll say, okay, how do you know about them? Do you use them? And they're like, no, but I've seen the advertising and Super Bowls and whatever, and so I know about them.

Dan Smink 04:47
I say, well, what if there was a company called Acme Insurance — for those of you that are Bugs Bunny fans — and it has arguably the best product for the best value in the marketplace, but you've never heard of it. You search online, best homeowners insurance policy for my home, and you get the three that you mentioned. And then down below that, you have Acme. You don't know anything about Acme, and it is, for the purposes of this conversation, arguably the best product out there at the best value. How likely are you to buy from Acme? The answer is usually very low. Not saying you wouldn't buy from Acme, but it goes down.

Dan Smink 05:30
Tons of studies have been done by McKinsey and others that show if you're not in a consideration set, you are one third as likely to close than if you were in the consideration set. That example tends to help them get the framework, because being in the consideration set — and being one third as likely to close if you're not — is true not only in B2C, it's true in B2B. It's a truism that runs through marketing. So then they start to understand the importance of being in the consideration set. And then the question becomes, how do you do that?

Neil Anderson 06:02
Right. Okay. So then maybe that's a good time for you to edumacate us and the audience a bit on the 95/5 frame. If you could walk through that core concept — if only 5% of your market is actively in a buying mood, what the heck are you supposed to do about the other 95%?

Dan Smink 06:28
Yeah. So first, the concept of the 95/5 framework was developed by an Australian marketing professor named John Dawes, and it's a brilliantly, elegantly simple concept. I tell people that I meet that this is the base issue for every business. It doesn't matter if they're B2B or B2C, small or large — it could be any kind of business. And the concept is that you have two groups in your target market. Of the people that fit your ICP, 5% of them are ready to buy right now; 95% have a latent need, but are not ready to buy yet.

Dan Smink 07:20
The example would be: you and I walk into a room of 100 people, and you and I sell cars. You sell Mercedes and I sell Honda. And we go in and we say, how many of you are looking to buy a car in the next 30, 60, 90 days? Five people, maybe ten, are going to raise their hand — we're not going to quibble about the exact percentages, but it's a small number. The other 90 to 95% of the people in the room have a need for transportation. Are they going to buy a car? Ninety-nine of them will. I have a son that lives in Chicago who does not have a car — he is a huge outlier. But most people are going to be in the market at some point to buy a car.

Dan Smink 08:06
So then the question becomes: how do you market to the five to ten people that are looking to buy right now, and how do you market to the other 95? That becomes the operative question. For the 95 in the room that are not ready to buy yet, you have to make them aware of your product. You have to educate them about their buying decisions such that they trust you, and you differentiate yourself from the competition.

Dan Smink 08:31
And I always tell people, good marketing will drive away the people you don't want and it will attract the people that you do want. You sell Mercedes — you're going to talk about power and performance and luxury in your marketing. I'm a Honda — I'm going to talk about value and efficiency and affordability. My positioning is going to drive the Mercedes buyer away; your positioning is going to drive the Honda buyer away — but then attract the ones that we do want to us. That's true of every market. Good marketing should actually alienate a third of your market.

Dan Smink 09:12
So you're making them aware of you, and you do that through various types of media. The media that we use today is so much more efficient than when I first started working in marketing almost 30 years ago. Back then I'd spend $50,000 a month in print advertising, and I knew that only 10% of the readers were my customer — which meant 90% of the dollars were wasted when it went out the door. And that 10% might read my ad once. Once. They certainly weren't going to go back and read it again.

Dan Smink 09:45
Today that same $50,000 is going to appear 10 to 40 times in a month in front of the people that fit my ICP. It's not going to be wasted on people that don't fit my ICP, and they're going to see my ad one to four dozen times. It's going to be in a banner ad, on a pre-roll video, in a text — it could be in a phone call. There's a variety of ways we can do it. But that's how you build awareness, because you have to have a certain amount of reach and a certain number of impressions to get people to know and remember you. The other advantage is they can actually interact with modern technology — they can click through the ad or the video, go to the website, and start to engage in a conversation.

Dan Smink 10:32
Once you get them doing that, then your job is to educate them. That's why so much of marketing today, particularly in an AI-driven world, is about producing content that educates the customer about their buying decision. You have that 95% of people that have a latent need but aren't ready to buy. You have to make them aware, then you've got to educate them, and you have to continue that conversation. I believe if you're a marketer today, you have to think like you're a teacher. Your job is to educate the market about their buying decision.

Neil Anderson 11:07
Right. Okay. Perfect. So let's talk a little bit about this 41% number. When you and my co-founder of Outcome Marketing, Angus Robertson, and I were in the virtual green room before this thing started, we were talking about your purpose-built or proprietary methodology, if you will. This 41% stat — almost half of buyers have a single preferred vendor before any RFP or any purchasing process starts. We're trying to figure out: how do brands end up on that list, and what did they do in the 95% phase that got them there? You talked about your circle, and maybe explain that to the audience, because I think it was interesting. It's great to be in the 41%; it's really bad if you're not. How do you get to be the preferred vendor — what we would consider the thought leader in the market? That's the question at hand here, right? Would you agree?

Dan Smink 12:16
Yeah, absolutely. So you can educate and make people aware of you, but how do you position yourself as the leader in your market? We operate in B2B spaces, and honestly, it's easier in that space because most people aren't doing it. But the way we would do it would work in a B2C space and a more competitive space — it just takes longer and much more investment.

Dan Smink 12:42
So the way that we do this: the first thing, as I said, is using programmatic media to drive awareness. A certain amount of your spend has to be devoted to that, because if they don't know who you are, they're not even going to know enough to read you — they're not going to find your content, or it's going to be harder to find your content. But then once you get them to come see your content, you have to educate them about the buying decision, and this takes time. It can be 12 months, 24 months or longer.

Dan Smink 13:11
The way that we do it starts with the value proposition of our client in the center. What is it that they do for their customers? Then around that, we look at the three or four main problems that they solve for a customer. Just using us as an example: we make marketing drive revenue. That's our value proposition. Why do people buy from us? Because we make marketing drive revenue. If you want to figure out your value proposition, you have to just ask yourself why people buy from you — and you've got to answer it in one sentence. That's your value proposition.

Dan Smink 13:46
Then the question is, what problems does that solve for your clients? In our case, we solve really three problems for our clients: not enough leads, can't get found online, unpredictable revenue. The way we solve "can't get enough leads" is capturing active demand — it's that 5% at the bottom that we call active demand. For "can't get found online," it's activating latent demand — we're marketing to the 95% there. And then for unpredictable revenue, all the campaigns that we do, when they work together, create predictable lead gen and predictable revenue streams.

Dan Smink 14:29
Then within each of those solutions, you have certain tactics. In the case of capturing active demand, our tactics are SEO and AEO types of content work that's going to drive people to convert at the bottom of the funnel, Google Ads or other types of paid search, content development, and sales enablement or sales outreach. Those four things drive conversions in the 30, 60, 90 day timeframe for our new clients and are capturing that 5%. The same goes for our activate latent demand solution — we have tactics for that, and for predictable revenue we have other solutions.

Dan Smink 15:17
We take that array of problems, solutions and tactics, and we ask 10 to 20 questions about each one of them. We then interview our customers on video to answer the questions. We take the video, process it with our videography group, and produce professional videos and professional reels that we push out on social media and YouTube. We take the transcript of the video and turn that into blog posts and LinkedIn posts and other types of social media that we then push out through their website, through their newsletter, through their LinkedIn page, through the leaders — because people follow people, they don't follow companies so much. One piece of content or one interaction produces one to two dozen pieces of content. We do that two to three times a week, and in 50 weeks you produce roughly 100 to 150 pieces of content.

Dan Smink 16:27
At the end of the first year, we take that content — done in a way where we're covering the entire triad, all three layers, all the different segments of it — and we actually write a book. We call it The Way. You could think of sports teams: the Patriots under Bill Belichick had a way. I'm dating myself, but the Orioles when Cal Ripken was there had a way. The San Antonio Spurs have the San Antonio Spurs way. Sports teams are a good analogy for this, but companies do it too — McKinsey has a way, Procter & Gamble has a way. Everybody has a way. We unearth that way for our clients through this production of content, and we produce a book from it.

Dan Smink 17:16
That book is then shared at events, handed out with sales teams. We have a way to make them, at least for a day, a best seller on the Amazon business list, so they can claim being best sellers. There's a variety of things we do. We then take that content and start to push it out — we build podcasts for the client, we run webinars for the client, we get the client on other podcasts, and we get them to speak at events. And you want this because you need third-party sources that reference back to you for large language models to use the content when it synthesizes answers. You can't just get links and have AI suddenly put it into an AI response. So all of that content that we've built and the book that's written starts us down the road of positioning our client as the thought leader in their industry — and that's what's necessary to become the one that is in the 41%. It's not a small lift, but it's very doable, and there's a very clear methodology to do it.

Neil Anderson 18:30
Got it. So you're almost answering my next question, which is the CEO —

Dan Smink 18:37
I'm reading your mind.

Neil Anderson 18:39
Yeah, I guess so. I shared the questions with you in advance. No, seriously — the CEO's role versus the marketing team's role. How much of this is a CEO problem? Because a lot of the CEOs that I've talked to, when I start an engagement with them, they say, well, that's what I hired a marketing team for. Like, why do I have to be in the loop?

Dan Smink 19:08
You know, that depends on the company. And I do think it depends on what they're looking to do — if they have an exit strategy, you don't want the personality of the company to be tied to one individual. That being said, the leader of the company is one of the people that needs to have a public face, along with other people. Like in our company, I am the public face for how we talk about strategy and stuff like that. My head of operations is the public face for how we do what we do. So all of the leadership team has a role in being a public face for the company.

Dan Smink 19:46
Honestly, there are a lot of people, I'm sure, who don't want to be present on social media, don't want to do that kind of stuff. They either have to accept it and adapt, or they have to find somebody else in the leadership team who's willing to take that role on. But it's important because, like I said before, people don't necessarily follow companies — they follow individuals. And so you need to get out there and talk about this stuff.

Neil Anderson 20:16
So, okay. So then for a CEO who's watching this podcast right now — they know their pipeline is very referral dependent, they're losing deals to competitors they consider inferior, they don't know where to start. What's their first move? What would you tell them? They're tired of the referral ceiling, they're tired of losing business to competitors that are not as good as they are. Where should they start?

Dan Smink 20:49
Yeah. So, one, what you're talking about is such a common tale that we see, particularly in manufacturing and other B2B spaces. They had a good product or an idea, they might not have had a great salesperson, or that owner or CEO had a really good network — and so they built a business on it. We have a client right now, a $125 million client, been around 75 years. Five clients make up 80%, and they sold those clients a long time ago, and they are capped. They're going to get marginally more revenue out of those five clients, and they want to go from 125 to 200 million. So they've got to find other places to get business. This story is repeated time and time again.

Dan Smink 21:37
And it comes back to the idea — I forget the book that has it — that what got you here isn't going to get you there. This is true of so many businesses. The first set of issues you had to solve got you to like three million, then the next set of issues got you to like five to seven, then the next set got you to like 15 to 20. Each time you're expanding, you're solving a new set of issues, and if you don't solve them, you're not going to go past them. This issue of "what got me here" from a new-business standpoint isn't going to scale. So we have to figure out a way to help them create predictable, scalable opportunities that are going to allow them to grow and reach the goal that they have. And I would tell you that the solution is not just in marketing. The solution is also in sales, the solution is also in operations, and finance is a hindrance to all of these.

Dan Smink 22:40
In marketing, you have to figure out how to get steady new business opportunities to come into the funnel, and they cannot be dependent on the CEO or a salesperson's ability to go out and network. A lot of companies that we run into will spend 11 percent on sales and marketing — 10 percent on sales and one percent on marketing, if that. But I would argue they're actually probably spending half or more of the sales budget on marketing, because those salespeople are spending 50 to 70 percent of their time doing cold outreach, networking, LinkedIn, email, phone calls — all sorts of different types of prospecting to generate a prospect. They're not spending much of their time doing discovery and closing.

Dan Smink 23:48
It's not to say that salespeople shouldn't spend any time doing that, but I would say no more than maybe 10 percent. You want to minimize the amount of time they're doing that, and minimize the amount of time they're doing admin stuff, so you can maximize discovery and closing. That's how you get efficiency in your sales force. So what do you do? You have to shift that to marketing, and you have to get marketing to be able to generate those MQLs that sales then qualifies and closes.

Dan Smink 24:20
So the first solution: you have to take some activities in sales or in marketing that are going to create predictable, scaled lead gen. Then you're going to have to fix the sales systems around both the sales team and the sales process so that they're actually good at discovery and closing. You don't want lead-gen SDR types of people — you want discovery, you want hunters, you want closers. And then you also have to make sure that the sales systems are capturing the right data, reporting it accurately, and connecting it to marketing's data to understand what kind of return on investment you're getting and what your most optimal campaigns are. So you have to do a certain amount of assessment of the sales team.

Dan Smink 25:04
But then at the end of the chain — what we call the growth chain — you have operations. Let's say marketing does a great job and generates really good leads, and sales does a great job and closes deals. It hands off to operations, and operations is not high quality — they don't do a really good job taking care of the customer, or making the product or the service, and they drop the ball. So you're going to lose business there. You have to make sure that operations can take on, from a capacity or quality or output standpoint, what sales and marketing are putting in front of them. So as I said before, you can't solve the marketing problem in isolation from sales and operations. We would tell people: take a look at all of those, see what the issues are that are in the way, and then address them so that your marketing investment is optimized.

Neil Anderson 25:56
Yeah. When I hear you guys — when I hang out with you and your team, what I call the Refract growth guys — it's all about this stack where you have operations and your sales and your marketing, and where the linkage is breaking across them, with finance going all the way across the bottom. And if you don't fix the whole stack, it's tough to grow. So this is awesome. Hey, Dan, I want to bring this to a close, but I want to thank you very much for talking with us today. How should people get a hold of you if they want to have a deeper discussion about what they can do with this 95/5 topic?

Dan Smink 26:43
Well, first, I want to say thanks. It's always a pleasure to chat — you and I could talk about marketing till the cows come home. And we do. And we don't always agree, but they're always great conversations. So thanks for inviting me to do this. It's been a real pleasure. And congratulations on Outcome Marketing — I think it's such a great step forward. Honestly, watching you take on this new challenge at this point in your career, I admire people like you that do this kind of stuff. So kudos to you.

Dan Smink 27:19
But if people want to get in touch with me, you have my name. You can find me on LinkedIn, and you can book an appointment with me through my LinkedIn profile. Happy to talk through whatever the challenges are that you have. If we can help, happy to talk about that — or I'll introduce you to people that can help you. To me, at the end of the day, I just want to get people going in the right direction and get them the resources that they need. And some of them will be fits for each other and we can work together.

Neil Anderson 27:53
Awesome. Well, I want to thank you again. And for the audience — Dan mentioned Outcome Marketing. I want to remind people that we have a marketplace with more than 40 Outcome Marketing practitioners who all believe in the notion that marketing is not just some cool creative stuff — there's a methodology behind it, and systems and process that help you achieve the outcomes you're looking for. So Dan and his team are part of the Outcome Marketing marketplace network. And we have the methodology that's represented in the book, and we have some AI tools that help you get those outcomes faster. So thanks very much for your time and attention today. And if you can chase us down at outcome.marketing or refractroi.com, we'd love to have a deeper conversation with you. So thanks a lot. Bye for now.