RV217 - MUST LISTEN: How to Fix Your Pipeline Problem via Marketing ROI | Go To Market Live Episode 34

Summary

Podcast Summary: B2B Revenue Vitals - Episode RV217: "MUST LISTEN: How to Fix Your Pipeline Problem via Marketing ROI | Go To Market Live Episode 34"

Introduction

In Episode RV217 of the B2B Revenue Vitals podcast, hosted by B2B Refine Labs’ CEO, Chris Walker, Sydney delves deep into the critical issue of pipeline problems and how marketing ROI plays a pivotal role in resolving them. Released on October 11, 2024, this episode shifts focus from traditional demand generation strategies to a more data-driven approach centered on Return on Investment (ROI).

1. Marketing ROI vs. Pipeline Targets

Sydney opens the discussion by addressing a common misconception among Chief Marketing Officers (CMOs) who prioritize hitting pipeline targets over understanding and improving marketing ROI. She asserts, "Results equal investment times ROI. So if you want to get more results, one of the two ways that you can do it is by improving the ROI" (07:30).

Impact of Declining ROI on Pipeline

Using a real-world example, Sydney explains how a company’s declining ROI can lead to substantial pipeline losses. She states, "The degradation in pipeline for the next 12 months, that is lost due to the degradation in ROI, which can be a combination of spending more money and getting less results, is $95 million" (10:15). This highlights how crucial it is to monitor ROI continuously, as it directly affects the company's revenue pipeline.

2. The Role of Brand Marketing

Sydney tackles the debate between brand marketing and performance marketing, emphasizing that measuring ROI is essential to prove the effectiveness of brand marketing initiatives. She explains, "Measuring on the ROI of your investments blended against actual results is the number one way to prove that brand marketing is working if it was actually effective" (13:45).

Accountability in Marketing

Further reinforcing the importance of accountability, Sydney argues that marketing teams should be responsible for demonstrating tangible business results. "A marketer and a marketing team must have accountability to 2.5x return. Well, a high performing sales rep will do 6x. We must have accountability to business results" (17:20).

3. Evolution of Go-to-Market Efficiency

Reflecting on her experiences since 2019, Sydney draws parallels to the initial resistance she faced when advocating for the inefficiency of traditional lead generation models. "What's happening right now feels a lot like that in 2019. If you were there in 2019, the amount of people that told me that I was an idiot for talking about how bad lead gen works... All of us know that it doesn't work" (21:00). She notes that the market is gradually recognizing the necessity for a unified approach to go-to-market strategies centered on efficiency and ROI.

4. Critique of Attribution Models vs. Business KPIs

Sydney criticizes the reliance on single attribution models (e.g., last-touch, first-touch) to measure marketing effectiveness. "All you are doing is slicing a model that doesn't work into four parts that also are not going to work" (25:42). Instead, she advocates for a holistic view of business KPIs that evaluate the entire go-to-market engine, allowing for more accurate diagnosis and strategic planning.

Proposed Approach: Unified Metrics

She proposes segregating marketing investments into distinct categories and applying appropriate measurement models to each. "If a top-level business metric is wrong... then you need to use all of the tools in the right purpose to get the answers that we need to deliver plans that address the business KPIs that matter" (29:09).

5. Key Metrics for Go-to-Market Success

Sydney outlines the five critical metrics she prioritizes for evaluating go-to-market efficiency:

1. Growth Rate
2. Total Go-to-Market Expense as a Percentage of Net New Annual Recurring Revenue (ARR)
3. Net Revenue Retention (NRR)
4. New Logo Go-to-Market Efficiency (equivalent to Customer Acquisition Cost (CAC) Payback Period)
5. Create Pipeline ROI

“Growth rate, total go to market expense as a percent of net new ARR, net revenue retention, new logo go to market efficiency... create pipeline ROI.” (33:16).

6. Real-World Applications and Examples

Discussing high-efficient companies, Sydney observes that very few (around 12-15% of public SaaS companies) achieve high efficiency. She emphasizes that true brand strength often stems from product excellence rather than aggressive marketing tactics. "The companies that measure strong on brand, it doesn't necessarily mean that their brand marketing is strong. It means their product is great" (34:18).

7. Listener Questions and Insights

Q1: Revenue Opportunity Creation and Conversion

• Rhiann asks if revenue opportunity creation should fall within marketing and conversion within sales.
• Sydney’s Response: She likens the process to a factory, emphasizing that the inbound inspection (SDRs) should handle lead quality, not the expensive sales reps. "Salespeople close shit if it's good. That's how they're compensated." (20:02).

Q2: Attribution Models and Pipeline Architecture

• David inquires about populating opportunity sources and aligning them with pipeline architecture.
• Sydney’s Response: She advises against using a single attribution model, advocating for tracking multiple signals that prompt sales actions. "It's the sales trigger. It's what prompted our sales team to reach out." (25:42).

Q3: Brand Activities in High-Efficiency Companies

• Casper questions the necessity of brand activities like thought leadership on LinkedIn for high-efficiency companies.
• Sydney’s Response: She clarifies that genuine brand strength comes from product excellence and customer satisfaction, not just marketing efforts. "Building brand is about delivering on promises and making customers happy." (34:18).

Q4: Turning Around Poor Marketing Programs

• Gregory seeks examples of marketing programs that effectively turned around poor performance.
• Sydney’s Response: She emphasizes the importance of cutting ineffective programs rather than adding new ones. "Cutting a bunch of shit that doesn't work is how you turn things around." (42:46).

8. Conclusion and Upcoming Episodes

Sydney wraps up the episode by highlighting the importance of strategic investment based on accurate ROI measurements. She encourages listeners to align marketing strategies with business KPIs and prepare for upcoming live events featuring industry experts like Tom Wentworth, CMO at Recorded Future. “If you want to attend that live, feel free. I think it'll be a great one.” (42:05).

Notable Quotes with Timestamps

• “Results equal investment times ROI.” — Sydney (07:30)
• “The degradation in pipeline... is $95 million.” — Sydney (10:15)
• “A marketer and a marketing team must have accountability to 2.5x return.” — Sydney (17:20)
• “What's happening right now feels a lot like that in 2019.” — Sydney (21:00)
• “All you are doing is slicing a model that doesn't work into four parts that also are not going to work.” — Sydney (25:42)
• “Cutting a bunch of shit that doesn't work is how you turn things around.” — Sydney (42:46)

Key Takeaways

1. Prioritize ROI Over Pipeline Targets: Understanding and improving marketing ROI is crucial for sustainable pipeline growth and overall business health.

2. Accountability in Marketing: Marketing teams must be held accountable for delivering measurable business results, not just generating leads.

3. Holistic Approach to Metrics: Relying on a single attribution model is insufficient. Instead, adopt a comprehensive set of business KPIs to guide marketing strategies.

4. Efficient Allocation of Resources: High-performing companies focus on cutting ineffective marketing programs and reinvesting in strategies that yield higher ROI.

5. Evolving Go-to-Market Strategies: Embrace data-driven and unified approaches to align sales and marketing efforts, ensuring they contribute effectively to business goals.

Final Thoughts

Sydney’s insights provide a compelling argument for rethinking traditional marketing metrics and strategies. By focusing on ROI and aligning marketing efforts with overarching business KPIs, companies can drive more efficient and impactful revenue growth. This episode is a must-listen for marketing leaders seeking to navigate the complex landscape of B2B revenue generation and pipeline management.

Transcript

[Chris Walker]

You're listening to Revenue Vitals with Chris Walker.

[Sydney]

We've been doing the little ping pong. One week we'll have a guest on and the next week I'll kind of be able to reflect and share some of the things and the next week we have a guest on. So this is one of the weeks where I'll be just like reflecting on some of the things that I've been sharing and the feedback points that we've gotten and some talking through some of that because I think there's a little bit of confusion where some people feel like I'm like coming and making it harder for them and really I'm just showing them the path, the easiest path to do what they think is right. So I'm going to clarify that. And then next week, Tom Wentworth, current CMO at Recorded Future that just announced the massive acquisition I think by MasterCard. So shout out to all of them. I know Tom's been in that game for more than five years. We'll be lucky. He'll be joining us for an event specifically to talk through how a CMO of 100 million plus dollar company can work better with finance in terms of planning and analytics and alignment and KPIs. And so I think that'll be hugely beneficial to every marketing leader out there and potentially some finance leaders that want to see best practices that come from what people have been successful with. So that'll be live next week here at 12pm Central on October 8th. So if you want to attend that live, feel free. I think it'll be a great one. Okay, so getting into the topics here, there's some stuff we've been studying and some things. So I'm going to share a couple of different stories and we'll kind of like bounce in a couple of different directions. So some feedback points both from clients that we've worked with at Pesetto. Also some stuff that you hear in the LinkedIn Ethereum where a CMO will say, I don't care about marketing roi, I need to hit my pipeline target. And I've said very clearly results equal investment times roi. So if you want to get more results, one of the two ways that you can do it is by improving the roi. So to think that hitting your pipeline target and ROI are two entirely different things is just wrong. And so we did some analysis with the exact company that said I don't care about roi. So the ROI can be going up or it can be going down on a quarter over quarter basis. You can measure it in quarter you can measure it trailing 12 months. You can look at it in a bunch of different slices. But when marketing ROI is going down, and it's going down significantly, say from like a $10, $10 to $1 return down to a 3 to $1 return, that means that for every dollar you spend, you get $3 in pipe instead of $10 in pipe when the ROI drops by 67%. Now, if you string that out over four quarters and you say, if our ROI had just 10 instead of our ROI declining, how much pipeline would we have gotten? And then you can calculate the loss of pipeline that you get due to declining ROI. And for this company, it was $95 million. That the degradation in pipeline for the next 12 months, that is lost due to the degradation in ROI, which can be a combination of spending more money and getting less results, some combination of those two things. And so to frame it, it feels one way to say, oh, we used to spend a dollar and get $10 in pipeline back, and now we spend a dollar, get $3. Sure, you can, like, feel that. But what that actually means is, fuck, we're missing about 100 million in pipe that we could have had this year. So it's just a different framing. I think it makes people feel it a lot more than just, oh, our ROI is going down. And so it's just something to really take into consideration about how ROI affects actual results. And then a thing that I have to say is that your return on investment on go to market is not going to just magically get better over time. If you just keep doing the same stuff, it's not going to magically turn around from $3 to $10. Again, you need to have an intentional plan. You need to know what the root cause of the issue is. You need to allocate investments differently. You need to say no to things that you've been doing for a long time. You need to have an intentional plan to make improvements to those numbers. And if you can't spend more on go to market next year, which most companies are not increasing their budget by 50% on go to market overall, it's an incremental improvement at best, or a lot of budgets are staying the same. And so if you can't spend more, the only way to get to your goal is to improve the ROI of what you spend. A little algebra. One lesson for marketing leaders there on how ROI multiplies by spend and gets you results. Okay, then the next one little bit of a different topic, but this will be fun to explain. And so There's a lot of people in the brand marketing camp that are looking at my message without understanding the nuances, saying, oh my gosh, if we measure on roi, we'll never do brand marketing. This is the worst thing ever for what we're doing. And what they don't understand is measuring on the ROI of your investments blended against actual results is the number one way to prove, prove that brand marketing is working if it was actually effective. And it's one of the easiest way to prove that performance marketing is ineffective regardless of the attribution and touch points. And so let's talk through it because I, I am a huge brand marketer. Look at the things that I do in, in the way that I go to market, like podcast events. You never see me with a message saying, hey, come and get a demo with me. You never see my companies run ads about how to get demos. I am not a performance marketer. And so I'm with you brand people and I've been studying this for a long time. And if you want to continue to invest more in brand, then measuring on the blended ROI of all the investments is the number one way to make these transformations. Only if your shit actually works. And so one of the things that people might be afraid of is that it actually starts to drive accountability on brand investments. But let's talk through it. Okay, so if performance marketing, like most companies will spend 90% of the program budget on what you would call some performance marketing, I want to spend a dollar and I want to get some type of measurable result back. Typically a lead that our SDRs can call 90% on average of budgets is going into that area. And if it was working then the ROI would be really high. But all of us know that it doesn't work in the ROI is super low. And so regardless of whether we can track it against the channel, against an MQL, it doesn't matter if we spend $10 million on programs and create $10 million in pipeline from performance marketing. The ROI is one to one and it is terrible. And it would say our lead gen strategy doesn't work, which is the analysis that we do for $100 million. Companies that spend 90% of their budget on lead gen. And sure they can make an influence revenue report that says how good everything is working and they can put together the marketing bullshit reports to justify it. But when you measure it against ROI and you get a 1 to 1 or a 2 to 1 back and you need to get a 10 to 1 for your business model and go to market model to work. It's very clear this stuff doesn't work and that we need to make transformational changes around the strategy. And so very quickly you can get in a room with the CEO, CFO and the revenue leaders and analyze and present this data and quickly get everyone aligned on the shit we're doing right now isn't working. And it's not the CMO's fault necessarily. It could be the company's fault for setting up the metrics in the system like this that sets the CMO up to fail. But either way, we need to get people aligned. Now if you had that situation where companies do this and now their ROI is 2, and all of a sudden you cut $7 million in Google Ads that suck, you take 6 million and say we were spending too much on marketing, so we're going to take the 6 million and we're going to put it back on the line and we're going to take 1 million and we're going to invest it in brand. However we decide for that, that next quarter your ROI would go up by 30% or more. And then if the brand stuff was working the next quarter it would continue to go up as you cut the shitty performance marketing programs and you introduce Connected TV and LinkedIn and a podcast and different types of events and all these strategies that people want to do. And the number one way to go back to the board, the executive team, as a marketing leader and say our ROI used to be $2 and now it is $5. So instead of getting 20 million in pipe this year, we're going to get 50 million on the same exact spend. And then you know what that means that we're going to have this much more pipeline coverage for our sales team to go and win deals and then we're going to win 13 more customers that we can go and renew and expand with our 107% NRR. And you can see how this change is impacting the entire business and that usually the breakdown happens for companies in different spots. Sometimes they have a leaky bucket at the end and NRR is 92% and new logo has to carry the load and then there's just a leaky bucket at the end or the company's got 115% NRR and they can't acquire a new logo for shit. They typically have a pipeline problem, not a sales problem. And so anyway, if you truly believe that brand marketing delivers better results than lead gen and performance marketing, then you should easily be able to jump in this camp and say we're going to measure against blended ROI and I'm going to put my money where my mouth is. And if you just want to be a brand marketer that hides behind brand surveys and impressions and fucking influence revenue reports that, be my guest. But this will clearly tell you whether or not it's working. And I think that as marketers and marketing leaders, we need to be accountable to these results. We need to be accountable. Somebody gives us $8 million for digital, we need that 8 million to turn into 80 like it's our own $8 million. A sales rep gets paid 200 grand and must deliver to a company $1.2 million. A 6x ROI on revenue. What I'm suggesting is that a marketer and a marketing team be accountable to 2.5x return. Well, a high performing sales rep will do 6x. We must have accountability to business results. This profession will die if it does not change. I hear what private equity people are saying, I hear what smart executives are saying. A lot of people are not pleased with the business acumen that comes in the marketing department. And I'm not here trying to shit on people. I'm trying to help everyone. I just see it from a different angle now. So please take that message. If your brand marketing works. And the only reason that we do brand is because it drives the highest results at the lowest cost, AKA it delivers the highest roi. Okay. And the impacts of brand marketing that come through improved win rates, increased asp, better deal velocity, anything outside of pipeline generation totally get covered within the ROI equation. It's not just about pipeline, Jen. If the pipeline starts winning at 5% instead of 20%. So all of the impacts of brand that impact how we acquire a customer throughout the life cycle get covered within the ROI equation. That is really important as well. And I got to say, and David's going to like this one because he was there back in the day. This moment is starting to feel like the moment in 2019 when I started talking about how bad the lead gen model was working. And I remember how many smart people hated me, talked shit about me, would write comments about how stupid I was when I did this in 2019. And I talked about, everyone believes it now, five years later. But if you were there in 2019, the amount of people that told me that I was an idiot for talking about how bad lead gen works just by going in the Salesforce data at 20 companies and seeing the same pattern every time and I knew for sure it was broken. And all the people that were saying that I was Wrong, had never looked at the data that way. What's happening right now feels a lot like that in 2019. As I try to talk about this transformational change around how we look at go to market and how we think about pipeline creation, marketing, SDRs and other investments as a unit to create pipeline rather than the siloed lead source view that I'm feeling the same resistance. And if I go back to 2019, I'll give you an example. In 2019, I did a webinar with Alice de Courcy, the CMO at Cognizant, and she spent an hour debating me about how she needs her ebook download so that she can track them so that she can report it to the board. And I debated her for an hour and then five years later she wrote a book about the marketing strategy that I was advocating for back then. She's a really smart person, but she had the resistance to it because of the, the internal. Whatever had happened up to that point in her career, she had a resistance to it even though it was right and she eventually bought into it. The same resistance is happening right now with smart people. Smart people that haven't taken the time to fully understand the nuances of what I'm saying and how it benefits them. And so they think that I'm two steps behind them while they look at their mmm or whatever they're doing in marketing. And in reality I'm like four steps ahead of them because I look at the sales data, I look at the nrr, I look at the financial data, I work with the CEO and the cfo and I see the picture at a much different level than the way that they're looking at it. So it'll take six months, it'll take a year. The smart people are already jumping on it. I get the inbound messages from people that want to come work at my company because they know I'm right. It'll take six months or a year and eventually five years down the road it'll be common best practice. Just like demand Gen and lead gen have been used as best practice right now. And so it just went. And there's a bunch of people that jumped on the things that I was talking about in 2019 and went from a manager to a CMO or went from a manager to running a 20 person agency in three or four years by having the timing right about where the market is going and where this profession is going and communicating a new opportunity in the exact same situation here that great marketers or great people that work anywhere across the go to market are going to look at it in a unified view. They're going to start measuring against business KPIs. They are going to have strong financial acumen and bring that acumen to their function as a sales leader or a director of demand gen. They must have the financial acumen to understand how their work impacts the business. Not just a piece is the attribution. I talked about this on my LinkedIn post, but I want to expand on it even more. Is that the last four or five discovery call conversations with companies that I'm having, most of them are more than 100 million or beyond there. And they're all asking for one perfect attribution model to measure everything in their go to market. And they're also whoever's out there telling everyone to build a four funnel demand waterfall model. I don't know who it is but like a bunch of companies are doing it and it's just a big mistake. All you're doing is slicing a model that doesn't work into four parts that also are not going to work because bunch of hundred billion dollar companies are. Oh, now we're going to measure how much our SDRs source versus our partners versus marketing versus SDRs or sales sourced or whatever. And it's just taking one funnel that doesn't work and then making four smaller funnels that also don't work. And so please don't do that. And then the idea that you just need one attribution model across your whole company is like saying that I only need one wrench to build a skyrise. Building attribution is a tool. It's a tool. And inside of an attribution platform you probably have a slew of tools. You probably have a wrench, a hammer, a screwdriver, some nails, some tools, some stuff like that. You got a bunch of different stuff. So just to say I only need this linear W shaped screwdriver to build this high rise building just doesn't make any sense. And so instead of that, I'm spending so much time communicating to executives, we should be looking at the business KPIs first that have nothing to do with attribution by department, channel or investment. It looks at the whole thing objectively. It tells you how much are we spending to create pipeline, how much do we get back? It's not about how much marketing spent or SDRs or partners, how much do we spend overall. You can roll all that up to the top level metrics. You can compare that against private and public companies and the benchmarks and meetings around that. You can see how the issues in your business impact enterprise value and growth rate. And you can make projections on, if I fix this one problem, it'll make a $500 million impact on my company over the next 18 months. You can make those calculations and projections using all of that data without ever talking about attribution or anything. So then when you look at that, we did one with a company today, it was actually a fantastic analysis. Growth rate 45% go to market. Efficiency around 400%. So they're not efficient, but they're growing 45%. And if you look one level deeper, NRR, 122%. That is fucking insane. For right now, that is humming. Most would be happy to be above 100, right? So they're at 122. So they're growing 22% just from their existing customer base. And then just the new logo side is just lagging so hard. And the CAC payback is four years. And it's just being offset by this great NRR that if you fix and then if you even look into new logo. Sales teams performing fine. They have a huge pipeline issue. They spend way too much money. They get a 2 to 1 return, their sales team's starving for pipeline and their CAC is super high. And if they just fix the pipeline, Instead of getting 2 to 1, they start getting 8 to 1 or 10 to 1 like a good company should with a good strategy that all of a sudden that whole problem goes away, their new logo goes up and now they're growing 60, 70% and their efficiency's down in the 200s. And they're one of the best private SaaS companies in probably on the world in terms of metrics. And you see a clear path to how to get that done. And then once you say, okay, that's what we do, we're at 2 to 1, marketing, SDR, all that type of return. On create pipeline, we need to get to 8. Then when you go into attribution, you start looking with a purpose and you say, okay, all these things we're doing to get leads, what's the conversion of these things? How much do we spend on SDRs? Do these, all these individual investments make sense? And then you rebuild the plan based on attribution and segmentation and stuff like that. But the metrics, the business metrics tell you whether your plan is working or not. Not the attribution, the attribution helps you understand why is it working, why isn't it working. But not the determiner of Whether it is working or not. So a bunch of companies just have an issue on this, blending KPIs and attribution into one thing. And then the attribution starts driving their key performance indicators as they try to break it down to marketing and SDRs and demand gen and field, and it just simply doesn't work. And so I guess that's what I have to communicate. On my perspective. We should be using all the tools that we have available and we should be using the right tool for the right job. And so I'll just go through some of the tools that we have available. If a top level business metric is wrong, let's say sales win rates have gone from 18% to 10%, what are all the available tools that we could look at to use and diagnose that issue? We could look at the signal that triggered the sales opportunity and we could do an analysis around that. And we might find that there's a lot of opportunities that fall off at stage two that get enticed with a gift card to sit on a meeting with us. And that might be why we lose 3% less opportunities year before than that. So that might be one insight. We might want to interview 25 of our latest deals that move to close lost outside of the sales process and talk to each one of them and understand why we lost. That'd be a whole different way to understand why our win rates went down by 40% over the past 12 months. We might want to look at it by segment or vertical. And maybe customers that have deal sizes above 100k win at 7% and deals that are 50 to 100k win at 27%. And that's a big insight for us on where to focus and prioritize. We could slice the opportunity performance by segment. There's a bunch of different examples, but those are just three individual things that are very different than attribution. To help root cause diagnose what the issue is. And when we're a $100 million company, we should not be just looking at whatever the attribution report says and then making our decisions around $50 million next year based on that, we need to use all of the tools in the right purpose to get the answers that we need to deliver plans that address the business KPIs that matter. Okay, thank you for bearing with me there. That was a struggle over the past three minutes, but we got through it. We'll go to questions right now. Thanks, everyone.

[David]

All right, here is Bring on Dick first.

[Rhiann]

Hey, Chris. So my question was looking at and asking the question of is it fair to say revenue opportunity creation should fall within marketing and revenue opportunity conversion should fall within sales. And Sydney, I, I agree with your point of not having it be something where this was a sales created opportunity or marketing led opportunity. But thinking about the activities of marketing should really be helping drive what is allowing a salesperson that send off something of value to the total addressable market that leads to them saying, well yeah, I should talk to this company. Is that a fair descriptor of again, the revenue opportunity creation for marketing and revenue opportunity conversion for sales?

[Sydney]

Most companies don't have that type of granular data to make a more detailed assessment. So the easiest way on standard CRM fields is just to look at opportunity creation, which is why it works for every company. It's why we do it that way. It's not ideal, but in the future forward you would determine when is that cutoff point? Maybe it's stage two, maybe it's stage three, maybe it is opportunity create. But you would make that distinction inside of your own based on how you set up the opportunity stages and then just cut it there. Got it.

[Rhiann]

Okay.

[Sydney]

Yeah. So sometimes stage zero is like meeting booked, right? So the meeting's booked and then stage one would be sat qualified, for instance. Then you could determine whether stage one or stage zero is the cutoff point. If you think about it like a revenue factory, the first thing that happens in a factory is that you have the supply chain, you have all the stuff that comes in. Right. In the go to market example, the supply chain is all of the signals that trigger sales actions. So that could be intent data, MQL demo requests, sales doing a bunch of random shit, which is what happens a lot. So you have all these different things that are happening. Then the next level in the factory is called incoming inspection. This is where low level people look through all of the supply and say this supply is good and this supply is bad. That is the SDR layer in the factory. And then underneath that you have the expensive people that do the important work about assembling the car or doing whatever. And that is the sales team. And so if you think about that, you don't want your expensive people on the factory doing incoming inspection that a person that costs 25% of them can do. And you definitely don't want them going up there trying to figure out what's going on in the supply chain. So you see that a lot where companies end up scaling out and you say, oh, we can scale out as long as our sales team could source 60%. It just doesn't like you're using a very expensive resource. Typically unless you're in a high touch motion high ACV where it can work. But if you're in a mid market velocity 30k deal, it's just not gonna. It'll break down for volume reasons. And so when you think about that order of the factory, if you have your expensive people at the end waiting for stuff and they don't have any stuff, you're just paying people to sit there and do nothing or paying them to sit there and go work in other areas of the factory where they don't belong because they're starving. And companies do do that with sales resources. And the real solution is to fix the problems of the factory that are causing that in the original place, which is poor supply chain bad signals or poor alignment in the incoming inspection process. But generally it's like what I found is that if sales teams get good signals, they close deals. The idea that oh, we're in marketing and sales doesn't follow up with our leads and boo hoo, most of it is bullshit from my perspective and the one time where it isn't bullshit is when marketing delivers 45,000 MQL and 44,975 suck. And then sales follows up with them, realizes that they suck and then say I'm just going to ignore these for now on because my closed loss list or however I decide how to follow up is going to be better. And so I hear it all the time from marketing leaders. Must be a process problem. SDRs don't follow up with our stuff. They either are following up and it's garbage or they don't follow up because they already know it's garbage. Just to set the record straight, because that debate has been going on for a long time. I've been through it enough times to realize that salespeople close shit if it's good. That's how they're comp. That's how they make money. That's how they're incentivized. If you give them good stuff and they can close deals from any other place and you're in a business where you close $10 million in new logo business, your sales team knows how to close. And so I just think it's more isolated to a marketing supply chain quality issue at that point.

[Rhiann]

Well that's the idea of the revenue factory. It's again so appealing of having those salespeople just be fed those opportunities on a reoccurring something that you can expect way of being able to have that be something that you can predict makes it a lot more easier. To your point of why would you want somebody who costs and is that expensive doing some of those activities if there is a more efficient way for them to be spending their time?

[Sydney]

Because 10 years ago you would just hire reps and they would do it all. And the market and how customers bought and everything was entirely different. And so the companies that continue to use those models of say our average rep does 600k, we have 20 reps, let's just add 10 more and then they'll all do 600k. And what really happens is it goes from 600k to 440k and you just dilute everyone. Then you have less quota attainment, you have too much headcount, your cat goes up, your scaling. Sales headcount isn't the way to grow or model anymore. There's some part of it that you need to know how much capacity you have. So you still should do it. But it can't be the core driver like it used to. I remember in 2017 it was like, we have 30 reps, we need to grow 25%. Okay, let's just add 10 more reps. Love it. Yeah, great. Thanks for being here. Great discussion.

[David]

There was a quick follow up question in that same thread. So this question was how do you recommend opportunity sources to be populated, assuming this would be filled in by sales rep at the time of opportunity creation. But I'm more linked back to kind of the pipeline architecture episodes that we've covered before. But if you want to touch on that at a high level.

[Sydney]

Okay, so the first thing is I don't think that we should use the word source. I think source implies that it's like the only thing. And I think a lot of people have preconceived notions around what the word means. That, oh, if that was a source, that's 100%. The problem that every company has within their attribution or marketing KPI system is that they measure all of marketing and all of the investments that are made to create pipeline with one model every and they just want to use one. So if they use last touch, it gets biased that way. If they use first touch, it gets biased the whole other way. If they use W, then it lets a bunch of shit that doesn't work make it look like it's working and they just pick one. Now if you thought about it as a factory, then you would realize that one of the key things that matters is who is the supplier that is supplying the signal or data that our sales team is working, which by the way, in a big sales team happens hunt millions or tens of millions of times a year. Just like suppliers send a bunch of stuff into a factory, okay? So you have all this stuff coming in, you have all these different providers and these different reasons that sales is reaching out and different things like that. And imagine you could track all of that and you had 10 million data points around Zoom Info. This signal, we sent this message, this was the result. This vendor and provider, we sent this message, we got this result. Hand raiser, we did this, we sent this message, we got this result. This is how long it took to follow up, blah, blah, blah. And you Repeat that out 10 million times and you look at the trends in data, optimizing your entire business would be way fucking more simple. And so when the things are entering the factory, we need to know what that is. And I don't think that source is the right word for it. It's the sales trigger. It's what prompted our sales team to reach out. That could be a stack of signals, right? You put a common room and needs to be job change in this and a fundraising round and all of a sudden it could be a stack of signals, it could be one signal, it could be an MQL score, be first party, third party. Coming from a partner, we need to be able to track and attribute all that. And the key and the reason why nobody can do this right, is because they want to look at it by the department. They don't want to look at it as a unified engine. They don't want to look at it as a factory, they want to look at it as a bunch of departments. And that's until companies break out of that motion. You don't have to choose one or the other. You can still look at your departments when you do certain things and you can look at it in a different way when you make strategic decisions is what I recommend. So you have that. And if you look at the marketing and SDR budget and all the investments that are used to create pipeline 90% and then even the data sources like Zoom info and the SaaS subscriptions, that stuff should go there too. And if you look at that 90% of those investments are used on the supply chain, trackable things that we use to for sales or SDRs to reach out. So let's build a specific measurement model directly off that and have a great way to measure the 90% of our investments and make huge improvements. There's and then for the 10% of our investments that we use on brand, we can have an MMM and a multi touch attribution model and we can do statistical analysis and all the other horseshit people want to do at the top of the funnel. But it's only 10% of the investment. And so like a lot of companies are so concerned on trying to measure that 10% that they miss all the insights on the 90% that matter because they try to use one attribution model that tries to look at it all instead of looking at this part of the process and using this model and using this part of the process and using this model and then using our brain to make decisions and drive strategy. So the falling down point when it comes to marketing is thinking that all marketing should be measured the same. It shouldn't.

[David]

All right, gonna bring on Rhiann, who's back from last week. Hello.

[Gregory]

Hi Chris, everyone. Good to be here.

[Sydney]

Welcome back.

[Gregory]

As you were starting today, this question came to me as you shared the example of the company whose leader came and said, we're looking for growth, not ROI necessarily. And I think I've heard that on other calls or other companies other the discussion out here about the growth at all costs. I think there's also a culture shift that's at play here. And so I just wanted to have you share some of the reflections from your work with other companies around. How do you get the leaders or understand them where they are on the journey of evolving to go to market efficiency and ROI as their objective, rather than seeing themselves as we're a growth company, we're in our growth stage, and so where does that matter? Is it okay to say, yeah, we're growth stage, so this doesn't matter? And where. Right. In terms of either their maturity or how do you help leaders adjust to that approach?

[Sydney]

I think that sales and marketing leaders, just by looking at the data through a lens that also includes financials, they can make great changes individually for their own departments. I don't want to discredit the progress that can be made just at an individual level, but I think that if you want this change to happen and to happen quickly in a company, then it needs to be driven by the board, the CEO and the cfo, and that the CMO and CRO are totally capable of doing it. They're just not being forced to by the metrics. Like their job is on the line. They're up there being able to still make up whatever stuff they want instead of being driven toward. This is the number this is how we measure it. You are not responsible for measuring it, the finance team is. And we can get into all the attribution reports later. But if this number's off, that means your shit ain't working and it should be able to get down to that level. Just like a factory, you can look at five numbers and know whether the factory is performing or not and know where the biggest problem is. The exact same thing we've done, I don't know in the more than a dozen now. And for me to figure out what the most important thing in, in the go to market is, that used to take me two to three months, now takes me 30 minutes. I can go through and look and find the biggest opportunity in their go to market in 30 minutes. When we, we started doing it manually in 2019, it would take us three months. And that level of clarity is powerful. And I have to say we've done a bunch of them and no one's told me I'm wrong like, but understanding the magnitude and the fact because people are over there spread saying oh we should do win rates and we should do here and we should do. And then every individual department and sub function have their own priorities and they're not usually aligned to one core thing and they're not measured against one core thing to know whether or not it's delivery or not. And so I'm helping CEOs and CFOs now just build out. These are the 37 metrics we track. We track it trailing 12 months. So it's smoothed out. We can look at it quarter over quarter as well. We review this data quarterly. We can monitor it in period. But looking and making decisions off of it in less than a quarter is stupid. And we have a clear picture about where the opportunities are and if we're making progress. And it's just to me it's in this time it is unfathomable that you cannot make forward progress on some of these metrics in, in 90 days the bar is very low. Even since 2019, I've loved walking into companies where it's a, where it's a disaster because showing an impact, a massive impact on business results in a short period of time is simple. So yeah, well, just to get back to your question, just to get back to your question, it has to be driven from board and executives down into go to market. Maybe once in a while you'll be able to have a revenue leader bubble it up, maybe a CRO can drive it home, but really when it comes down to it it impacts how you report how you deploy investments, how you demonstrate progress to your investors and therefore really the CEO needs to own it.

[David]

Totally.

[Gregory]

Yep, that resonates with me and helpful to hear you talk about what it's like entering these companies. You mentioned that there are maybe five metrics but then you kind of said 37. Obviously one of those metrics it might be this go to market efficiency. If you were to make your the five that you would walk in and within 30 minutes know what where to to look. What would those other four perhaps be?

[Sydney]

Growth rate total go to market expense as a percent of net new ARR, net revenue retention, new logo go to market efficiency which is more or less CAC payback period. But I think more objective and then their create pipeline roi. Those would be my five and you can like I'm missing win rate trend. There's a couple that you just can't include in the five, but those give you a sense about some of the things that I'm looking at.

[David]

All right, we've got two or three more questions I'm going to bring on Casper.

[Chris Walker]

Hey Chris, what's up? So specifically for the tech and SaaS companies that you work with at Pesetto, do you see any consistencies in brand activities that high efficient companies have? Specifically I was thinking about it and I was wondering, specifically wondering whether having people that's representing the company, you know, especially like thought leaders and key opinion leaders and people on LinkedIn does. Do you see any high efficient companies that does not have that, that's just LinkedIn at all or does it seem to be a requirement, quote unquote to be super efficient?

[Sydney]

I'm smiling because there aren't many efficient companies out there right now. If you look at the public SaaS market, there's maybe 5 or 10 that would be considered high efficient out of 80 or more. 80 that are tracked. Right. So you got what is that 12%, maybe 12, 15% of the public companies which are the best out there are efficient. And when you go into the privates, the privates are almost always the scale slides. The high performer in the private is less efficient than the high performer in the public. And the lowest performer in the public is still better than the lowest performers in the private. So the whole scale just slides out into private. And so for the companies that we've analyzed, maybe there's a couple that had brand activities, but every company we work with says they do brand $100 million CMO is going to tell us that they believe in brand most of the time and they're going to have activities around it and they're going to justify their trade show boosts against brand. And this other stuff they can't measure is going to say is brand. And then when you look at the ROI, the ROI is $3 instead of $10. They're missing out on 50 or 100 million in pipeline because the ROI sucks. And how good is that brand activity? Like it's just about how good are you at shooting a basketball. There's a bunch of companies that try to do brand, but some of them make more shots than others. And it's not all about marketing. People think that brand just comes from marketing. And in CPG brands where marketing owns product price, promotion and distribution. Yeah. So a lot of the times it does. But in a B2B SaaS, company marketing does not own brand. They make content that people might trust or like. But how do you actually build a brand? You get a customer, you deliver on your promise, you make them happy, you get another customer, you deliver on your promise, you make them happy. You do that hundreds of times and all of a sudden people love your brand. And sure, making content can help accelerate that, but building content is not the only way that you build brand. And just building content and delivering a shitty product isn't gonna do it either. The companies that measure strong on brand, it doesn't necessarily mean that their brand marketing is strong. It means their product is great. They've been in the market for 10 or 15 years and they're a leader. So I just wanna clear some of that stuff up. Great question though. Stretched me in a couple ways. Thanks.

[David]

All right, we're going to go to David, who was praising your last rant there.

[Sydney]

Let's go.

[Casper]

Loving today. Loving today. So I had an aha moment and I was like, wait, has this always been true? Maybe I should check in with someone. So I'm going to check in with you. So if we believe that Chet Holmes and the whole buying pyramid and at the top 3% of your market is in buy now mode. So hold that true? I think it's true in my experience. And then we say that PPC is a capture mechanism. Okay, yeah, that's been true in my experience too. So does this infer then that I should only really be spending 3% of my promotional spend money on PPC?

[Sydney]

No.

[Casper]

So it's like an observation question. What do you think?

[Sydney]

No, I don't believe so.

[Casper]

You don't believe so. Okay, tell me why not?

[Sydney]

I think that any place where your customers are Showing intent to buy. You should experiment with that channel. And if you can dial in customer acquisition costs that make sense for the business, then you should keep doing it. And if you can't, you can. It's like, not that it's not that complicated. And most people that spend on Google paid search just don't look at it that simply. And so they keep spending millions of dollars on shit that doesn't work and it gets propped up by a W shaped model or cost per mql. Or if we shut off Google search, we're going to lose out on 5000 MQLs. Even if we know it's not working and we're wasting money, we're going to keep doing it just for the perceived risk mitigation.

[Casper]

That's kind of making my point though, isn't it? The commensurate spend ought to be if we believe these things, right? And of course, scale matters a lot too in these things. But part of our marketing needs to be helping create, let's use that term carefully because I know a lot of people have all sorts of feelings about that word, but explaining the why, so that people who are not in market yet consider us when they do go into market. So there's a lot of stuff we need to do there. And when our budgets are tight, we have to kind of make choices.

[Sydney]

So I agree that you need to have a balance. I just don't agree that the theoretical 3% and 97% is the way to get there. And I think that we should be willing to invest more to win a customer that is in market than to try to get somebody that might buy to want to buy in the future. And that balance needs to be driven by market maturity, cost, the deal size, sales cycle lengths, where the issues are, how many people are in market, what stage our company's at. There's just too many variables. But if you just think about it as the baseline compared to where the future is. Every company is overinvested at the bottom to the point of extreme diminishing returns. When you think about Google Ads, digital lead generation, field trade shows for pipeline and SDRs, all the money to create pipeline is at the bottom and you can spend to a certain amount and then you hit diminishing returns. Then companies spend four times more than whatever the point of diminishing returns is and they just waste a lot of money. And it's not just Google Search. It's like anything related to that stage in that level of the buying process. Google search is the biggest offender because Google has figured out a magical way to measure it to look like it's driving business results, even if it isn't.

[Casper]

Thank you, I appreciate that.

[Sydney]

And then let's talk through the create thing. Let's open up this can of worms. Let's walk through it. Nobody's out there creating demand for a CRM today. Is it happening or not?

[Casper]

My opinion is that there are some brands that are so well known that you don't have to do that kind of activity. And yet there are others that are very much more niche that are CRMs for dentists, CRMs for hairdressers that are so yes and no. It depends, of course.

[Sydney]

I mean, regardless, there's somebody that came out of Wharton two years ago and works at Bain right now. And 13 months ago they didn't know what HubSpot was, and now they do. How'd that happen? At some point they didn't know what a CRM was and they got into the workforce and someone showed them what a customer relationship management was. The demand was actually created. It was just facilitated through word of mouth. You were taught something. The misconception is that the company creates all the demand. That is not true. The market creates most of the demand. And before I started talking about this stuff six months ago, who the fuck was talking about go to market efficiency? Nobody. Nobody even measured it. They didn't know what the difference was. They thought it was the same as CAC payback, period. They knew stuff was wrong in their go to market, they just didn't know how to explain it. Have I spent time educating people on the problem, hosting these events every week, posting on LinkedIn, communicating these things? Have CEOs started listening to my podcast and figured out these metrics and communicate the stuff back to me that I say on the podcast? Is that not creating demand? Somebody that didn't know shit about this six months ago now wants to sign a $500,000 contract with me just out of thin air, like, oh yeah, that must somebody just figured out that they needed faceto to work with us to solve this unknown business problem. No, it's fucking stupid. But the misconception is that you create all the demand, which is untrue in mature categories, your market creates most of the demand for you. Which is why there's a lot of big companies that get good results and still suck at marketing. And it's one of the number one reasons why I do not recommend copying big company marketing strategies. Because they get most of their results from the market doing the work for them, not them. Actually doing the work. That one's going on LinkedIn.

[Casper]

Yeah, I feel I know who you're talking to as you're having that conversation.

[Sydney]

That's funny. Cause I don't even know who I was talking to.

[Casper]

Okay. All right, well. So it's fine. All right, well, thank you. I appreciate the comments.

[Sydney]

Thank you. Thanks for being here. That was fun.

[David]

David sure knows how to get Chris Roud up here today. So you win today. David might just take over being host.

[Sydney]

I don't know.

[Casper]

No, no, no, no, no.

[Rhiann]

You are.

[Casper]

You are. Sydney, you are awesome. I would totally suck at that. Totally. No way. Thank you. Very, very kind of you to say, but no.

[David]

Okay, well, we have one last question here, and then we'll end after this question, since we only have a couple minutes. This is from Gregory. I'm going to read it for him. He cannot. Come on. Are there any examples of marketing programs you've found that turn things around? Of course. You've had the audit and the diagnose the problem first. By backtracking from business goals and metrics down to vanity marketing metrics, I'm trying to understand what actually works. Well, lately, in a practical example, I'm.

[Sydney]

Laughing because new programs don't turn stuff around. Cutting a bunch of shit that doesn't work is how you turn things around. And then eventually you get to a point where it's okay, we need new stuff, but the mistake that people make is say, oh, we spend $10 million and our ROI sucks. Let's just spend 11 next year and introduce this new thing. We'll spend a million dollars on a TV commercial and that will save us our 10 million. That sucks. Doesn't matter. This 1 million is going to make up for the 10 million not working. Well, that is the problem. You don't just put something new on something that doesn't work, and it just magically works. And so you have to practice the process of measuring the unit economics. Once you get the unit economics, you say, our ROI is really good. Let's go look and figure out all the things that are really good and figure out how hard we can push them. Or you have, our ROI is really bad. And then you look at the data entirely differently and you say, we need to go and find all the shit that's delivering literally zero, because it's impossible that all of these things are working if our ROI is this bad. And so we have to be able to go in there and look through that lens. The question involved turning things around. So let's just go into that way the ROI is bad to begin with. So if the ROI is bad, number one, what does that mean? It means we spend a lot of money and we don't get a lot back. And so then we need to go and look at all the money that we spend and try to figure out where's the places where we're spending money where we're not getting a lot back. How do we look at data in a bunch of different angles to figure that out? Okay, now we figured that out. Then you have to say we have to remove that. So those things are out. Then there's program dollars, there's the people that run those programs, there's the agencies that support those programs, there's the operations resources that get pulled in, there's all the meetings we have and all of a sudden we have 3,5 million dollars in value of all those collective things, then we can go put that energy somewhere else. So then you have where are we going to go and put that energy? And that really depends on your go to market motion, whether you're a low touch, a no touch, a dedicated touch, how big your ACVs are, your TAM, the dynamics that you sell to. But I'll say a couple of things. So if you sell a product that's 30 to 100k ACV on average and you do not fully understand how to build a digital machine that drives pipeline, that's your number one priority. Any company that sells a deal at that size needs to have that figured out in a scalable way. And when you do, it becomes the power to your 30, 40% growth every year. And it's not just adding 30% to the budget every year. You get gains in a lot of different ways. But figuring out that strategy is the number one priority for that deal size. You just need it. You can't do high volume, outbound and intimate field events to sell 30k deals. Just the dynamics of market size and things like that, it just, it's not scalable. You can do some, but it's not going to be the core driver to the growth. Now if you're selling $3 million deals and you sell them on three year contracts and your sales team's closing $9 million in business in every deal that they do, then the strategy that you take forward is very different. I would have reps that probably worked at consulting firms that sold to the customers that I want to sell to and I would pay them to try to figure out how to get these $3 million deals. And we would do events and they would probably have 20 accounts and they would know everybody that worked in those accounts. And I would have a smart revenue oriented marketer paired with each rep that's doing over the top and different stuff like that. And I would build an entirely different go to market to sell deals like that. So it's hard to say what's the magic program to put on. It really varies by a lot of different dimensions, but those are some of the things that I will say. And then if you're $10 a month or PLG, you have to get customers organic. You have to figure out a flywheel to get customers organic. Running paid strategies to get free trial signups at $200 per signup or $50 per signup is just never going to work with the 0.4 conversion rate or 0.1 or 0.04 conversion rate that you get from free trial to paying customer or enterprise customer that pays you a significant amount of money depending on your motion, your price point, your tam. There's certain things that just don't make sense for you. All right, everyone, great episode. I've been liking the dynamic of going back and forth because it gives me a little bit of opportunity to collect information, see what people are saying, and then have get some creativity going on the episode where I'm by myself and then I get to feed off the energy of the experts that we have joining us. So Tom Wentworth will be here next week. Feel free to drop a link, share it with your friends. If you're a director and you think your CMO should hear this stuff, feel free to shoot it to her. If you're a CMO and you feel like your CFO should hear this, shoot it to him or her and it'll be a great live episode. There'll be plenty of time for questions as well. So again, thank you all for being here. Appreciate your support and we will be back again next week. Thanks, everyone.