Paul Hindle: Never mind 60:40. Try 95:5!

By Paul Hindle, client partner at Carat Perth.

The colloquialism ‘every man and his dog’ implies a level of sheer ubiquity. So, when one of my pets recently quoted Les Binet and Peter Field’s 60:40 campaign investment ratio back at me, it made me realise just how universally their advertising effectiveness work has been embraced. As an aside, to test which of every marketing practitioner and their graduate trainee truly understands this comprehensive research versus has merely rote memorised its top line ratio, ask them to explain in detail how the ratio varies – substantially – by category, brand lifecycle, and competition. That’ll whittle the numbers down real fast.But, frankly, what’s not to love about a good thumbnail ratio? The perennial favourite 80:20 remains a classic because, by and large, the ratio is still spot on for most instances where it’s applied.

The 95:5 Ratio
However, there is another ratio I would draw marketers’ attention to: the 95:5. The refers to the Ehrenberg-Bass Institute’s estimate that at any given time only 5%-10% of customers are in-market for any category [1]. Or, put another way, 90%-95% of potential customers are out-of-market at any given time. Wow.

This serves as a professional slap-in-the-face reminder that most people, right here right now, are simply not interested in what we are selling. Hence why I advocate a switch in nomenclature from ‘Consumers’ to talking instead about ‘Real People’.

Real People Are Not Permanently Ready to Buy
Real people are not Pavlovian, passively call-to-action responding to start consuming immediately upon exposure to advertising. If I bought a jar of Vegemite yesterday, I do not need to buy another one until it is all used up. The purchase trigger is not an ad but the empty jar. Either my car needs new tyres now, or it doesn’t. My home contents insurance policy expires next July, and not before.

As marketers we need to get away from the erroneous notion that real people are permanently ready to buy our brand or category, because they are not. When next reviewing that Awfully Big Number target audience potential – look, ‘consumers’, so many of them! – remember that, right now, c.95% of that target audience are not in-market.

Holidays Compete with Harley Davidsons
Real people do not shop from defined competitive sets, always selecting from a similar set of alternative brand rivals. Rather, they enjoy total control over where they spend their next dollar. As Mark Ritson reminds, “Categories exist only in marketing plans and PowerPoint decks, to maintain a semblance of logical, simplistic structure. But in the real-world categories do not exist. There, cognac competes with vodka. Scooters with light rail passes. Life insurance with gym membership. Streaming services with an early night.” [2] As evidence, look what’s happened in WA during Covid – travel bans have led to increased kitchen renovations and sales of Harley Davidson motorbikes.

Real People Do Not Read Brand Marketing Plans
One of my favourite lines from How Brands Grow is “Consumers often behave as if they haven’t read the marketing plans for the brands they buy.” [3] Byron Sharp writes this while discussing how as marketers we often fall into the trap of underestimating how broadly our brands really compete, and that the simple act of naming either a target audience segment or a competitive category does not necessarily make it exist.

The mercurial purchasing behaviours of real people are also on full display in Google’s Decoding Decisions report [4], which demonstrates significant differences between habitual purchases and infrequent, as well as between planned and spontaneous. In his review, Les Binet states that “(real) people often leap to a decision without any conscious consideration of categories or alternative options at all. Sometimes the brand pops into one’s head before one is even aware of the need it fulfils. The whole idea of a ‘consideration’ process is – sometimes – completely wrong.” [5]

It’s All Omnichannel to Me
Nor do real people see any meaningful divide between traditional and digital media. It is all omnichannel to them (or it would be if they spoke marketing jargon). They merrily skip from device to device – be that a screen, a speaker, or a printed page – as needed. If you were to ask them about their offline vs online media consumption, they would just look at you quizzically as if you were daft.

Campaign Duration In-Market Is the Most Important Thing
Finally, over a decade ago the post-GFC environment begat the compression of marketing’s short-term into timelines of a few months. Post-pandemic, I sense there is real temptation to measure the short-term in mere weeks. However, if real people are not Pavlovian buy-now button pushers and if 95% really are not in the market to purchase right now, this explains why Australia’s Communications Council found that the single biggest and most often missing determinant of advertising success is campaign longevity [6]. Duration in-market is the most important thing, and too many campaigns are simply not in-market long enough to embed the consumer – sorry, real people – purchasing habit behaviour changes they seek to make.

Paul Hindle is Client Partner at Carat.

[1] Contrarian Ideas for The Next Decade | LinkedIn & B2B Institute | 2020
[2] Mark Ritson | Marketing Week | 2020 | www.marketingweek.com/ritson-google-antitrust-investigation/
[3] How Brands Grow | Byron Sharp | Oxford University Press | 2010
[4] Decoding Decisions: Making Sense of The Messy Middle | Google | 2020
[5] Les Binet on LinkedIn | 2020
[6] Australian Advertising Effectiveness Rules | Field & Brittain | The Communications Council | 2019