# In-Market vs Out-Market — Budget Split Logic

One of the most consequential frameworks in digital marketing. Most junior marketers do not learn this, and most marketing tools do not enforce it. It fundamentally changes how budget is allocated.

## The two states

**In-market:** People who are actively looking to buy right now. They are searching, comparing, evaluating. They are in the market. **They convert at the highest rate but represent a small percentage of the total addressable audience — typically 3–5% at any given time.**

**Out-market:** People who will need your product or service in the future but are not looking right now. **They represent 95–97% of your addressable audience.** They will not convert today, but if they know and trust your brand when they do enter the market, you win.

## Strategic implication

Most digital marketing budget defaults to chasing the 3–5% who are in-market today. That feels logical because:

- Conversions are immediate
- ROAS is high
- Attribution is clear
- The CFO can see direct revenue

But this ignores the 95–97%. If no investment goes into building awareness, trust, and recall with the out-market 95%, the brand has no pipeline of future in-market customers. Eventually the in-market pool dries up because the brand is invisible to them when they enter.

## Channel mapping

| Bucket | Channels | Mode |
|---|---|---|
| **In-market** | Google Search ads, Bing Search, retargeting, brand-search, comparison-keyword campaigns, BOFU email, abandoned-cart, sales outreach | Demand capture |
| **Out-market** | Display advertising, programmatic, YouTube TrueView, Meta Reach campaigns, LinkedIn brand campaigns, content marketing, organic social, PR, podcast advertising, sponsorships, influencer partnerships | Demand generation |

## Recommended starting allocations

Allocations vary by business stage and category, but as a starting point:

| Business stage | In-market % | Out-market % | Reasoning |
|---|---|---|---|
| Early-stage / startup needing immediate revenue | 80% | 20% | Survival mode — must convert what is in-market today. Out-market investment is the seed of future in-market. |
| Growth-stage with proven product-market fit | 60% | 40% | Need to scale beyond the in-market ceiling. Out-market builds the pipeline. |
| Mature brand defending share | 40% | 60% | Defensive posture — protect category mind-share. |
| Mature brand growing into new category | 30% | 70% | New category requires creating demand, not just capturing it. |

The Binet & Field research (IPA, "The Long and the Short of It") finds that the long-term-optimal split is around **60% brand (out-market) / 40% performance (in-market)** — though this varies by category and business stage.

## How to size the out-market opportunity

The out-market is large but not infinite. Sizing helps decide how much investment makes sense.

**Step 1:** Estimate the Total Addressable Market (TAM). This is everyone who could possibly buy your product / service.

**Step 2:** Estimate the in-market percentage at any given time. For most categories, this is 3–5%. For high-frequency categories (groceries, dining), it can be 10–20%. For low-frequency categories (cars, mortgages, B2B enterprise software), it can be 1–2%.

**Step 3:** The remainder is the out-market. If TAM is 1,000,000 and in-market is 5%, then in-market = 50,000 and out-market = 950,000.

**Step 4:** Estimate the cost to build awareness with the out-market. Typically far cheaper per impression than in-market clicks, but requires accumulated frequency (3+ exposures over time) to register.

**Step 5:** Decide what percentage of out-market the brand wants to be top-of-mind for. Then size the investment accordingly.

## How to know if your out-market investment is working

Out-market does not produce immediate ROAS. Measuring it requires different metrics:

- **Brand search volume trend** — Are more people Googling your brand name? (Track in Google Search Console + Google Trends.)
- **Direct traffic trend** — Are more people typing your URL directly?
- **Branded organic CTR** — Is your organic CTR on branded keywords rising? (Indicates better recall.)
- **Aided + unaided brand recall surveys** — Periodic surveys to track brand awareness.
- **Share of voice** — Your share of all category-related social/PR mentions.
- **Time-to-conversion lengthening** — A counter-intuitive signal: as out-market investment grows, more people enter the funnel earlier (longer journeys, more touchpoints).
- **Lift studies** — Conversion lift tests on Meta, geo experiments where out-market campaigns are paused in some geos and not others.

## How this plays in the engagement methodology

Core Doc 3.4 (DMFlow) explicitly documents the in-market vs out-market split decision and the rationale.

The decision is revisited in Part 12 (Continuous Improvement) quarterly: are we under-investing in out-market? Is the in-market pool growing or shrinking?

Performance reports (monthly + quarterly) report performance separately for in-market campaigns vs out-market campaigns to prevent direct comparison (out-market should never be measured by ROAS alone).

## Common mistakes

1. **Spending 100% on in-market** because direct ROAS is highest. Drains the funnel over 6–12 months.
2. **Spending too much on out-market too early** when the in-market is not yet captured. Wasteful — go after the immediate revenue first, then invest the gains in out-market.
3. **Measuring out-market by direct ROAS.** It will look terrible because that is not how it works. Use the metrics above.
4. **Cutting out-market budget when business slows.** This is exactly when out-market matters most — if competitors keep advertising while you go dark, share-of-mind shifts to them.
5. **Believing brand and performance are different teams.** They are different functions of the same budget. Both must be measured and optimised together.

## Related references

- [five-digital-markets.md](five-digital-markets.md) — channel taxonomy
- [four-core-documents-spec.md](four-core-documents-spec.md) — DMFlow (Core Doc 3.4)
- [unit-economics-framework.md](unit-economics-framework.md) — CAC / LTV that gates investment decisions
