In recent times, CMOs (under pressure from their CFOs and CEOs) have increasingly – wrongly – shifted focus and budget away from long-term brand building, and towards short term growth through sales activation.
In part this is because the impact of sales activation is easier to measure (e.g. PPC rates), increasing pressure for MQL volumes from sales teams, and in part due to a mistaken belief that constant focus on a series of short-term profit activities leads to sustainable long-term profit.
This fundamentally misunderstands a core foundation of the value of a businesses – which is its ability to generate long term cash flow. A company’s share price is a function of its future earnings potential: investment in brand building is an investment in future sales.
This doesn’t make short-term sales activation redundant.
It does mean, though, that constant focus on the short-term can actually diminish a firm’s ability to generate long-term profit.
In their excellent report, 2030 B2B Trends: Contrarian Ideas For The Next Decade Peter Weinburg & Jon Lombardo explain why this is especially true in B2B brands.
In B2B marketing, “there are…two types of customers: in-market and out-of-market. In-market customers are ready to buy your product or solution right now. Out-of-market customers are not ready to buy today but will be ready to buy from you in six weeks, a year or ten years. Successful marketers harvest short-term demand from in-market customers, while building long-term demand among out-of-market customers.” (my italics).
The report’s authors go on: “Now, ultimately, you need both brand building and sales activation to grow a business. But…you need to adopt different creative, distribution and measurement strategies for these two types of marketing. Conflating long and short is a mistake”.
The authors widely reference the work of Binet & Field, which explains that short-term sales activation activity “doesn’t create demand; it just helps businesses capture the demand that already exists. Brand building is what actually generates demand, in both the long term and the short term.”
The authors’ own research with Binet and Field shows that in B2B, the optimal balance between brand and activation is a 50/50 split: 50% long-term brand, 50% short-term activation.
Weinburg & Lombardo happily acknowledge that Sales Activation activity generates short term sales, and should not be discounted.
However they have identified a number of benefits of Brand Marketing that are frequently disregarded. For this blog, I’ve picked out four of the key benefits they cite:
(i) Short term sales activation directly benefits from long term brand marketing
B2B buyers are no different from B2C consumers in that they “are much more likely to buy from companies that (they) have heard of already. By priming potential buyers with brand messaging, you will find that your activation campaigns work much harder. Brand thus lowers activation costs, increasing its overall efficiency.”
(ii) Long term brand building provides an investment in future sales that short term sales activation cannot deliver
This is important because sales cycles in B2B tend to be long – 2-3 years, possibly more. It follows that in the short term, there are going to be relatively few customers looking to buy your B2B product/service in the next one to three months. The authors cite experts from the Ehrenberg-Bass Institute’s estimation that at any given time, only 5% to 10% of customers are in-market in a given category.”
The vast majority of the your eventual B2B purchasers will therefore not currently be “in market” for what you are selling.
This means distinguishing between “In-market customers” (at whom short term Sales Activation should be targeted) and “Out-of-market customers” (at whom Brand Building marketing should be targeted).
The key point is this: “Out-of-market” buyers deliver future cash flows, which is how companies are valued.
Or, in your CFOs terms:
- Sales Activation = In-Market Customers = Current Cash Flows
- Brand Building = Out-of-Market Customers = Future Cash Flows
(iii) Long term brand building increases pricing power
The authors claim that “Increasing pricing is often a more profitable way to grow a business than increasing sales volume. In fact, decreasing price sensitivity might be the single most important effect of brand marketing.”
Again, this is particularly relevant to B2B marketers, where the volume of sales prospects is dramatically smaller than in B2C markets.
Weinburg & Lombardo cite Warren Buffet who believes “the single most important decision in evaluating a business is (its) pricing power. Good businesses can increase their prices and gain more customers. Bad businesses can’t.”
Pricing power is a function of Brand Marketing. The authors’ research with Binet and Field shows that “brand building becomes more and more important as businesses attempt to raise prices.”
In the simplest terms, the more famous you are, the more you can charge your clients.
If you choose to compete on price, however, you can always be under-cut.
(iv) Long term brand building gives you a “competitive moat”
Think of your B2B brand as your reputation.
Competitors can try and copy your product and processes, but it is incredibly hard for them to copy your reputation.
As the authors point out, “Your brand codes or distinctive assets are ownable, in perpetuity. Product benefits, on the other hand, are easily copied. Activation or lead generation marketing is even easier to copy.”
An ongoing investment in your brand therefore helps build a barrier to market competition.
(v) Long term B2B brand investment makes doing shorter-term business easier
In B2B, pretty much all key accounts are introduced via face-to-face meetings (either in person, or on Zoom).
If your B2B brand is well known – and for the right reasons – it is far easier for your sales team to book immediate appointments with their prospects than if no one has heard of your brand, or knows what it sells or stands for.
Your sales team will therefore have to spend much less time explaining who your business is, and can focus with greater credibility on why a prospect should agree to see them.
My conclusions from the above
B2B sales activation has an important short-term role, but it does in itself not create long-term desire – indeed it can actually lead to long-term margin erosion where a lack of brand investment can weaken a seller’s pricing power.
B2B sales activation primarily provides an opportunity to purchase – it is a channel to release the “pent up” demand.
What must not be missed it that short-term demand is “pent up” by long-term brand investment.
The lowest hanging fruit leads for a B2B sales team are often within easiest reach because the buyer is already aware of – and well-disposed towards – what a brand offers.
Buyers, specifiers, influencers, budget-holders and decision makers are demonstrably happier to buy from a brand they believe they can trust, and are prepared to pay a margin premium for it.
B2B brand building is a long-term investment in that trust.