Most companies are spending over 90% of their advertising budget just capturing demand.
What is capturing demand?
It’s investing money in places that your Dream Customers are ready to buy from right now. Think: Google, Capterra, G2, direct response ads on social, etc.
The problem with that is in your market, only 3-5% of people are ready to by RIGHT NOW. And if you and your competitors are all competing for that same 3-5% – it’s like jumping into a swimming pool full of sharks. It’s a blood bath out there.
You might have some success initially, but your scale is limited by:
- How many other businesses are competing for that 3-5%
- Whether the category is expanding
- Whether you can pay more for a customer than your competitor can
For most brands, it becomes unsustainable quite quickly. Cost-per-acquisition rises, lead quality reduces, and it becomes a price and feature war with your competitors.
So if that’s the case, why are most companies spending over 90% of their budget on capturing demand?
Myles Madden (ex Refine Labs) puts it down to attribution.
Marketers mostly invest in demand capture (a.k.a ‘digital sales’) because they are the only activities that get tracked by attribution. Most marketers use a software-based attribution model – and whether it’s first touch, last-touch or multi-touch it doesn’t matter because you’re constrained by the limitations of that software.
Myles Madden, Observe.ai
The problem is that attribution software is really only showing what captured demand. It’s not able to show what created the demand.
For example, our Hubspot at The B2B Playbook always shows that applications for our program The B2B Incubator come from ‘Organic’ or ‘Direct’ sources. That would then lead most marketers to conclude that it’s SEO that is driving these applications, so we should invest more there!
But when we ask applicants how they first heard about us (i.e. what created the demand), they inevitably answer: LinkedIn or The B2B Playbook Podcast.
Because software attribution can’t really measure this, marketers aren’t deploying money to those activities.
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