Founder and CEO of Channel99 .
Beware, spoilers. B2B marketing is incredibly inefficient. I thought it would be a good idea to bring this up now, when everyone is discussing how to improve their marketing investment.
Both CEOs and CFOs hope that marketing always leads to improved performance, whether it's in times of macroeconomic uncertainty (like we're experiencing today) or in times of economic recovery. But unlike business-to-consumer (B2C) marketing, business-to-business (B2B) marketing has been inherently ineffective since the advent of B2B digital marketing 20 years ago.
Why is B2B marketing ineffective?
Let's start with the basic law of numbers. Most B2B companies target other businesses based on specific criteria (specific industry, revenue size, number of employees, and geography) with a total target market (TAM) of tens of thousands of companies. While this may sound like marketing for an imaginary large group of companies THERE, the reality is that the pool is just a drop of water in a big ocean. Tens of thousands turn into single-digit percentages (or even less) when you consider that there are millions of companies in the world.
In today's innovation landscape, AI-based technology is often seen as the answer to inefficiencies. But can technology really save the day? Answer: "sometimes, but it's not easy." Most of the tools used by digital marketers to promote campaigns to their TAMs were created to sell to consumers, not businesses. For example, B2B companies typically invest in paid search programs and get the instant gratification of seeing clicks and conversions. It's nice to see immediate results, which is why marketers typically invest more and often allocate an unreasonable portion of their budget to this channel.
Let's dig a little deeper and crunch the numbers. Ironically, often 95% of clicks and conversions from paid search programs go to companies you can't buy from, simply because they aren't in your target market. What looks like $3 per click is more accurately worth $70 per click (or the dollar amount per visit in TAM). If you factor in losses - flocks and conversions that didn't lead to a purchase - the cost per conversion can exceed $1,000. This is not meant to highlight paid search. Rather, this is just one of many examples of financial inefficiencies in B2B marketing, and companies need to measure volume, quality, and dollar value together to make more effective decisions.
How can you successfully solve B2B marketing inefficiencies?
There are huge inefficiencies across all digital channels in the B2B world. Based on my experience in the industry, only 15% of B2B website traffic comes from a company's TAM account. That's the reality of the market, given how focused B2B marketers have to be and how limited most technologies are to working with target list companies. But difficult does not mean impossible.
Fifteen years ago, I founded and built Demandbase, the first ABM solution and the only true B2B advertising platform that allows you to reach and engage only your target customers. I thought we had solved the problem of B2B marketing inefficiency once and for all. And while we've made great strides, other companies including LinkedIn, 6Sense and others are also making significant contributions.
What is the path to effective B2B marketing?
When thinking about the dollar value of your marketing investment, I recommend starting with a simple KPI like $1 per visit in TAM. Focusing on this allows you to rank traders and channels on an equal footing so you can make more informed investment decisions. And if you're concerned about supporting key stakeholders, I guarantee your finance and sales manager will understand this approach.
Yes, there are huge financial inefficiencies in B2B marketing. But there are also many opportunities to become more effective in attracting your target customers. The first step is to understand what works and what doesn't. Second, normalize the results using a dollar amount as the common denominator to determine which vendor or channel is most effective at attracting and retaining your customers.
Once you develop this process and system, you can translate efficiency into business impact, particularly the pipeline. By doing so, you'll lay the foundation for a more modern and predictable way to align marketing investments with business growth.
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