.png)
The 95:5 rule is one of B2B marketing's favorite soundbites. At any given moment, the argument goes, only 5% of a market is in-market to buy, while the other 95% is not. It appears regularly in board meetings, brand strategy decks and arguments about where marketing budgets should go.
The problem is that, in many fast-growing B2B technology categories, the 95:5 rule doesn't describe the market very well. Depending on how quickly a category is growing, the proportion of buyers entering the market for the first time can be several times higher than the rule suggests.
That's the argument Dale W. Harrison and Liam Moroney explore in Episode 4 of B2B Effectiveness: Evidence-Based Marketing Ideas for B2B Practitioners. Building on Episode 3's discussion of lead scoring, they turn to another factor that can influence the likelihood of finding buyers: the market itself.
The 95:5 rule isn't necessarily wrong. It's based on a particular set of conditions, and those conditions change when a market is growing or shrinking.
Where the 95:5 rule actually comes from
The principle traces back to Andrew Ehrenberg's NBD model of purchase frequency and decades of research across thousands of products. The research found that, within a category, a relatively small number of buyers purchase frequently while a much larger number purchase occasionally. At any particular point, only a small proportion of the market is actively buying.
The important detail is the type of market the model describes. It applies to stationary markets, where the category is neither growing nor shrinking and purchases are largely repeat purchases.
Laundry detergent is a straightforward example. People aren't continually entering the category for the first time; they're replacing a product they've bought before. That's very different from a growing B2B technology category bringing new buyers into the market every year, or a declining category where the pool of repeat buyers is getting smaller.
Why growing markets break the rule
Consider the iPod when it launched. Every unit sold in its first month went to someone who had never previously bought an MP3 player. The category was new, so 100% of those buyers were first-time buyers.
That's an extreme example, but the same mechanism operates in growing categories. As new buyers enter the market, they sit alongside existing customers making repeat purchases. The faster the category grows, the larger the proportion of first-time buyers.
Harrison uses the CRM market in the early 2000s to illustrate the point. The category was growing at around 100% a year, and under those conditions he estimates that roughly a quarter of the market could be in-market at any given time. That's a long way from 5%.
Even with the US CRM market growing at a more modest 13.5% annually in the period discussed, Harrison estimates that 30–40% of active buyers are still first-time buyers.
The growth rate of a category therefore provides useful context about its buying audience. In a rapidly expanding market, assuming that only 5% of potential buyers are in-market can significantly understate the opportunity.
Why marketing investment rules also need context
The same principle applies to another familiar piece of B2B marketing wisdom: how much budget should go toward brand building versus performance marketing.
Like the 95:5 rule, research into marketing investment can provide useful guidance. But applying a single ratio across businesses with different budgets, buying cycles and market conditions risks overlooking what drives growth in each case.
The trouble with the famous 50:50 split
Binet and Field's research is often used to support dividing marketing investment roughly 50:50, or sometimes 60:40, between brand and performance activity.
Harrison's criticism isn't necessarily of the principle itself, but of how broadly the finding is applied. The research draws heavily from large, established companies with substantial marketing budgets and the resources to enter marketing award competitions. That creates a selection effect, potentially making the findings less representative of smaller businesses or those operating in rapidly growing categories.
The result is that data from companies operating under different conditions gets combined into a single ratio, which is then treated as a universal rule.
Harrison points to the number of large B2B technology companies that appear to have reached significant scale without investing heavily in traditional brand advertising. Of the roughly 500 B2B technology companies generating more than $1 billion annually, he estimates that around 70% reached that milestone without running a single brand ad, relying instead on performance marketing.
Salesforce illustrates the broader pattern. According to Dale, the company didn't make a significant investment in brand advertising until it was around 20 years old, once CRM category growth had begun to flatten.
Why some successful brands barely advertise
The pattern isn't unique to technology.
Walk into an American supermarket and you'll find 4,000–5,000 unique brands on the shelves, 60–80% of which, according to Dale, have never run a single advertisement. Their marketing consists largely of shelf placement, packaging and occasional in-store displays, reaching buyers when they're already shopping.
Brand marketing becomes particularly valuable when purchases are infrequent. With buying cycles lasting three, four or five years, there's plenty of time for prospects to forget a company exists. Without reinforcement, memories can fade within weeks or months.
Established market leaders like Salesforce have an advantage here. Dale estimates that roughly a third of buyers have already used its product, giving it a level of familiarity that a smaller challenger would struggle to establish through a single campaign.
Dale draws another contrast between exterminators and DUI attorneys. Home exterminators rely heavily on broad brand marketing to remain memorable until someone needs their services. DUI attorneys, meanwhile, use memorable slogans and billboards concentrated around bar districts, targeting the moment when their services might become relevant.
The point isn't that one approach is inherently better. The value of brand and performance activity depends on the buying cycle, market structure and how likely someone is to need a product at a particular moment.
A law, not a soundbite
The 95:5 rule is better understood as a model with conditions than as a universal constant.
Dale uses an analogy from physics. Gravity behaves differently on the Moon, Earth and Jupiter, but the underlying laws haven't changed. What changes is the value calculated in each context.
The same principle applies to the 95:5 rule. Market conditions determine how closely the baseline reflects reality. Rising markets are like wind at your back; falling markets are like friction. F still equals ma – you just need to account for the forces involved.
For lead generation and scoring, that context matters. A category growing at 25%, for example, will have a different mix of first-time and repeat buyers from a stationary market. A qualification model that ignores those differences starts with an incomplete picture of the opportunity.
And market context is only one part of that picture. Two companies can operate in the same category, target similar customers and still have very different chances of winning.
That's where Dale and Liam go next in Episode 5, “The ICP” Is Not Necessarily Your ICP, exploring how Buyer–Seller Fit shapes where a company's real opportunity lies.
