The 95-5 Rule: Why Your Small Business Marketing Strategy Is Failing (And How to Fix It)

Does this feel familiar?

You spend a few hundred dollars on Meta or Google ads. You get a few sales, and you feel a brief moment of relief. But next month, you have to do it all over again. And the month after that, it seems like your "cost per click" has gone up. And the month after that, your "cost per acquisition" is even higher.

You feel like you're on a marketing hamster wheel, spending more and more money just to stay in the same place.

I see this all the time. You're following the advice you've been given. You're focusing on "performance marketing" and "bottom-of-funnel" (BOFU) ads. You're being told to chase the immediate sale.

Here's the hard truth: That advice is built on a flawed premise. And new research confirms it's not just flawed—it's a high-risk "efficiency trap" that's actively costing you money and guaranteeing your long-term frustration.

There is a better way. It's a small business marketing strategy that's more ethical, more sustainable, and, as the data proves, significantly more profitable.

It all starts with understanding one simple, powerful concept: The 95-5 Rule.

The "Performance Trap": Why Chasing the 5% Is a Losing Game

The "95-5 Rule," made famous by Professor John Dawes at the Ehrenberg-Bass Institute, is stunningly simple:

At any given time, only 5% of your potential buyers are actively in the market to buy. The other 95% are not.

Think about that. All that money, all that time, all that stress you're pouring into ads that scream "Buy Now!"... you are aiming all of it at a tiny, 5% sliver of your total audience.

This is what the industry calls "performance marketing" or "bottom-of-funnel" (BOFU) activation. It’s the act of harvesting the people who are ready to buy right now. And on the surface, it makes sense. Why wouldn't you focus on the people who are ready to give you money?

This is the "efficiency trap". It looks like it's working in the short term, but it creates a "doom loop" of rising costs. Here's why:

1. It's a Bidding War: You and every single one of your competitors are all bidding for the exact same 5% of people. This saturated, hyper-competitive space is why your ad costs (CAC, or Customer Acquisition Cost) just keep going up.

2. You're Harvesting a Field You Never Planted: The 5% who are ready to buy didn't just appear out of thin air. They've spent weeks, months, or even years in the 95% "passive" phase, learning, researching, and building trust with brands. A BOFU-only strategy is a "harvesting-only strategy". You're trying to reap a crop without ever having planted any seeds.

3. The Game Is Over Before You Show Up: This is the most important, and most terrifying, part. Recent research from Forrester found that by the time a buyer enters that 5% "ready to buy" window, a staggering 92% of them have already formed a shortlist of vendors.

Read that again. 92%.

This means all your expensive "Buy Now" ads are showing up at a party after the guest list has been finalised. Your brand is the unknown stranger trying to butt in at the last second, while your competitors are already on the 92% shortlist.

A BOFU-only strategy is an "abdication of the work of marketing". It's allowing your competitors to define the market and build all the preference. You are then forced to pay an enormous premium in ad costs to try and steal a sale from buyers who already know, like, and trust someone else.

This isn't a sustainable system for growth. It's a recipe for burnout.

The 95% Solution: Marketing as Stewardship, Not Manipulation

This is where my core philosophy comes in. I believe the purpose of marketing is not to manipulate, but to "connect what is valuable with those who value it". I see marketing as a form of stewardship.

And the 95%? That's where the real work of stewardship begins.

A smart, sustainable small business marketing strategy doesn't ignore the 95%. It serves them. It focuses on building what researchers call "mental availability."

I call it trust.

You stop screaming "Buy Now!" at a cold audience and you start whispering "I'm here to help" to a much, much larger one.

"But Steven," you might say, "that sounds expensive. I'm a small business. I can't afford to just 'waste money' on 'brand awareness' ads that don't make sales."

This is the single biggest misconception in marketing, and now we have the hard financial data to prove it.

Investing in the 95%—the "top-of-funnel" (TOFU)—is not a cost. It is a capital investment in a critical business asset: audience receptiveness.

And this asset pays compounding dividends.

• It Makes Your Sales Ads Cheaper: Nielsen's research established a direct financial link. On average, a 1-point gain in brand metrics (like awareness and consideration, which you build with the 95%) drives a 1% decrease in your short-term cost per acquisition (CPA). Your "brand" spend isn't separate from your "sales" spend—it is an active subsidy for all your future sales ads.

  
  

• It Makes Your Sales Ads Work Better: The data from Meta's own platform is even more stark. Campaigns targeting "warm" audiences (people who have engaged with your helpful 95% content) can deliver a Return on Ad Spend (ROAS) up to 8x higher than those targeting cold audiences.

  
  

• It's the Only Way to Get a Full Return: A short-term, 30-day ROAS is what one study calls an "accounting illusion". Why? Because large-scale econometric analysis found that, on average, the long-term effect of brand-building (talking to the 95%) makes up 60% of your Total ROI.

A business that only runs "Buy Now" ads is measuring 100% of its costs against only 40% of its potential return.

The full-funnel strategy is a "renewable resource model". You invest in the 95%, which creates a large, "warmed-up" audience. You then "harvest" the 5% from this warm pool at an 8x higher return, which gives you more profit to reinvest in helping the 95%.

This is the "investment flywheel". This is a sustainable system.

A Simple, Sustainable Small Business Marketing Strategy

I know what you're thinking. "Funnel... TOFU... BOFU... this is the exact jargon that makes me feel overwhelmed."

You're right. So let's throw it out.

As a systems thinker, my goal is to bring clarity and create systems that work for  you, not at your expense. I don't use a "funnel." I build a "Trust Flywheel."

This is the simple, 3-part system I build.

Step 1: Visibility (Serving the 95%)

• The Goal: Be generously helpful. Build "mental availability." Get on the 92% shortlist.

• The "Old" Way: "Boost post" for 3 days. Hope for a sale.

• The "Flywheel" Way: You identify the real questions your ideal customers are asking before they're ready to buy. You answer those questions with simple, honest, and valuable content—a blog post, a short video, a checklist.

• Your Mindset: "I am planting seeds." This isn't about sales; it's about stewardship. You are demonstrating your expertise and integrity long before you ask for anything. This is what the 60/40 rule calls for—the 60% of your effort that builds long-term value.

Step 2: Familiarity (Nurturing the Relationship)

• The Goal: Turn a passive viewer into an interested follower. Earn permission to speak to them again.

• The "Old" Way: Hope they "like" your page and the algorithm shows them your next post.

• The "Flywheel" Way: You offer a small, valuable "content upgrade" (just like the one at the end of this article). In exchange for their email, you give them a high-value checklist, a guide, or a template. This is what marketers call "mid-funnel" (MOFU).

• Your Mindset: "I am building a community." This is the factory that turns "cold" audiences into the "warm" audiences that Meta's data proves are 8x more valuable.

Step 3: Trust (Activating the 5%)

• The Goal: Make the "sale" a natural, easy, and logical next step for those who are ready.

• The "Old" Way: Yell "Buy Now!" at a 100% cold audience and pay a massive premium.

• The "Flywheel" Way: This is the 5%. This is your "bottom-of-funnel" (BOFU). But you are no longer speaking to strangers. You are speaking to your warm audience from Step 2. You run your conversion ads to your email list. You retarget people who read your blog.

• Your Mindset: "I am solving a problem for a friend." Because you've already built trust and proven your value, you don't need to manipulate. You simply present your offer. The result? A 42% lower cost per purchase, an 8x higher ROAS, and a business that feels like it's built on integrity.

Your 3-Step Action Plan to Start Today

This is a system, and systems can feel big. But the first step is simple. My work is about empowering business owners, not making them dependent. Here are three practical things you can do this week.

Step 1: Identify Your "95%" Questions

Your 5% "BOFU" question is "How much does your service cost?"

Your 95% "TOFU" questions are the ones they ask months before that. Forget your service.

What are your customers worried about? What are they confused by?

• Action: Grab a notebook. Write down 5-10 questions your ideal customer types into Google before they even know your business exists.

• Example: A web designer's 5% question is "Can I see your portfolio?" Their 95% question is "Why is my website's bounce rate so high?" or "Do I need a new website or just better SEO?"

Step 2: Create One "Visibility" Asset

Pick one of those 95% questions. Now, answer it. Not with a sales pitch, but with genuine, honest help.

• Action: Write a 500-word blog post. Record a 2-minute video on your phone. Make a simple "5 Tips" graphic.

• Key: At the end, do not say "Buy my stuff." Instead, say "Was this helpful? Sign up for my newsletter for more tips like this every month." (That's your Step 2, "Familiarity"). This is you planting your first seed.

Step 3: Rethink Your "Ad" Budget

Look at your marketing spend. Is 100% of it going to "conversion" or "lead" ads? If so, you're trapped in the 5% bidding war.

• Action: Take just 20-30% of that budget. Instead of running a "Buy Now" ad, use that small budget to "boost" your new "Visibility" asset from Step 2.

• Objective: Set the ad objective to "Reach" or "Engagement," not "Sales."

• Audience: Target a new audience based on your ideal customer. You are now running the "factory" that creates your warm audience. You are starting your flywheel.

Download your The 95-5 Rule Action Plan Today

The Real ROI: A System That Works For You

A "performance-only" strategy makes you dependent on the ad platforms. You are in a "doom loop", constantly feeding a machine that demands more.

A "Trust Flywheel" is different. It builds an asset—an audience that knows you, likes you, and trusts you. This asset makes you stronger and less dependent over time.

While these tips are a great start, I know finding the time to implement them is the real challenge. As a systems thinker, my work is to build these kinds of sustainable systems for my clients. They're designed to run with clarity and efficiency, so you can focus on the work you love. If you'd rather have an expert system handle your visibility, you can see how my Vodli Visibility Engine works.

This new wave of research is simply providing the financial proof for what many small business owners already knew in their gut: marketing doesn't have to feel slimy.

When you stop chasing the 5% and start serving the 95%, marketing is no longer about extraction. It becomes regenerative. It becomes a way to build real, human connections.

You can stop harvesting a barren field and start planting a sustainable one.