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- [00:00]
Chris Walker
You're listening to Revenue Vitals with Chris Walker. Happy Tuesday. Great to have you all here. Last episode of this recording for 2024. We're trying to figure out the logistics of what's going to happen into the next year. And so for right now, we're just going to extend the meeting cad for this into January and further. So you'll need to re. I think you'll need to re register on Zoom to get the updated calendar invites that go longer. We had it for the whole year and then we're planning sort of some type of format adjustment and maybe it'll be in addition to maybe we'll keep doing this one and I'll have a different format that, that I can do in a different way. I'm going to spend the Christmas time really thinking about that. And just for insights, I just did a whole podcast with people that like, that want to do something like what I'm doing some form of like evangelism, founder, CEO, product strategy, customer insights, all through this medium. And one of the things of advice that I gave is that a lot of it is about you as the person, right? So think about a musician or an artist or something like that. Over time, they need to evolve in their own creative thing. If they keep making the same music or keep talking about the same thing, when they start to change, somebody's like, aw, those people sold out, right? I used to like their old stuff, but now they sold out. And what you don't realize is that those people cannot keep making the same music or they will be miserable. And the same thing happens in content that eventually you need to sort of make changes around the topics and the elevation and what you're talking about. I talked about demand gen and marketing I still do today and I still love talking about marketing, but I talked about it intently for five years straight. And I've left a lot of my mark around how to run advertising and demand gen versus lead gen and a lot of those core topics that many people find as best practices today. And so I just, I'm looking for an elevation because there's, I think, a lot more that I can give to this audience in this community. So that's where we're going. I wanted to spend some time just for some gratitude last, last episode of the year, appreciate the people that have been showing up all year, people like David and also people that are newer and continue to contribute. So I appreciate everyone that shows up live. I also appreciate everybody that just listens to the podcast afterwards every once in a while. Someone sends me a note and says, like, damn, that episode really hit hard. Like, it's clear that you understand that thing. And those things make me happy. So grateful for people when that sort of moment happens and you're like, that clicks and I get it, like, and then you let me know. That is also something that makes my day often grateful for the team at Pesetto, Carolyn joined over the summer. We're planning for a couple other people to join in. Q1 Just feeling really grateful. There's another thing, and I don't know if I talked about this in the last episode. I hope I'm not being redundant, but there's a been an element in my life that I've been studying a lot. This concept of slow is fast. And that it doesn't mean be complacent or be patient or like, slog around all day. It means that when you're making important decisions around, like your life or your business or relationships or things like that, that when you try to make things happen fast, you end up slowing yourself down because you do the wrong things. And so it feels like you're going faster for a little while. You're like, ah, I got it. See the shortcut that I got? And then boom, the bottom falls out and you're further behind than you started. And I think that that is present in go to market, like, to bring this back. Like, I think that that element is present and go to market. I think people look for shortcuts, they look for hacks. The foundational core things that you can do are very clear and can be delivered at proper unit economics. And then let's do the new stuff, the crazy stuff. So I think there's an element there of just of having the right mindset and the right value set when you are making decisions about your life or your business. Okay, now I got some new stuff here that I want to share, and I'm just trying to figure out how to work my way through this. So there's a couple of different angles of positioning that I've been thinking about related to what companies do today in terms of how they collect their data, scrutinize and analyze their investments, then use that data to then plan for the future and align teams and set KPIs and ideally have early warning signals in this whole process of people and data and technology and things like that, and to recognize that the way that it's operated today are all best practices that were built pre2022. What was going on in pre2022 was the growth at all costs. Sarah, what was the main thing about that? Like that the only decision that a revenue leader needed to make was, okay, how much more money do I have to spend every year? The budget went up. It went up dramatically. And the solution was buy more ads, hire more SDRs, add more heads. We'll just scrutinize the budget this way so we can put a million over here and 2 million over here and 3 million over here. And there was zero scrutiny around unit economics. Most revenue leaders didn't even look at the full expense data. They weren't getting visibility into that. So they didn't have that stream. They weren't able to allocate the investments and things like that. So it created this system where all of the analytics, I'm calling this a fair weather strategy system, which is that all of the analytics work fine when things are going well. And then immediately when things start going off track, you realize, fuck, I don't have any information to make decisions. I have none. All I can say is, oh, SDRs are missing plan by 4%. I guess it's their fault, but you can't actually diagnose and figure out why. And then when things start going really bad, then all of a sudden you're like, whoa, CAC is up 2x now what are we going to do? We don't have the data. So what do you go to? You go to blanket cost cutting, which is what companies have done for the past six quarters, which is just, okay, we'll just lower a set amount of reps and we'll cut a set amount of marketing headcount, we'll cut a set amount of advertising. Basically just take 20, 30% and just take a blanket cut across everything. And when you do that, what you do is you lower your go to market expense, but you do not improve the efficiency of your go to market because any individual investment is not performing better. You're just lowering the spend on each individual investment so you get the same ROI at a lower spend. Generally you see further degrading net new arrival and so you lower cost, but your efficiency or your cost of growth continues to go up. Which is what you I posted about today on LinkedIn this converging thing, people think that cutting costs immediately improves efficiency, not if you don't cut costs faster than you lose net new ARR. And that's the spiral that a lot of companies have been in because they simply just don't have the data right. So they can't make a confident decision instead of saying no it shouldn't be 20% on all of these things. It should be a hundred percent of national trade shows and 100% of that and make confident decisions around these investments are super low performing. And I want especially I've been positioning this for finance leaders, but it really needs to be positioned for revenue leaders. Like revenue leaders really need to understand this is that you can deliver 2x growth by just getting twice as efficient and not spending a single more dollar and everybody defaults to. The only way to grow is to spend more money. But in the new world, if you spend 10 million and you get 5 million in revenue and you change your strategy and you look at the investments carefully and you make different decisions, then you could spend 10 million and get 10 million in revenue and then you create ridiculously more scalable business when your CAC is 2x lower and your sales team has appropriate quota coverage and you have the right early warning signs and metrics in place. And when you're a revenue leader, it's really about imagining that, let's say as the CMO and the CMO in this instance also has the BDRs reporting into them. I think this is an important distinction, right? So theoretically they'll take some of their investments, that'll go to customer marketing, they'll put it into pipeline acceleration or some field events for opportunities. But then a majority of that budget after being segmented is now straight to create pipeline and the CMO can own that number. And then they're going to spend money on advertising. Inside of advertising, different channels, Google, LinkedIn, Instagram, Facebook, YouTube, Connected TV, G2, Capterra, all these different places where they could spend, you know, trade publications. So they have all this different digital and inside the digital, all these different investments. Then you have events, you got national trade shows and a bunch of stack of those. Then you have regionals and a bunch of stack of individual events and you have owned events or some type of micro field partner events in the stack about that. And then you have the people and you have the team and then you have all the different people on the team and then you have these agencies and you have product marketing and events and ops and data. And then you have seven different technology tools and six, you can think and look at all of that stuff now that's coming out of the CMO's budget. When you add all that stuff up, including the BDR headcount and all the tools that BDRs use and all the data sources that they use, it could be a lot of money, right? And There are a bunch of individual investments. It's not like you just have three things that you need to babysit. When you break it down, there's a lot of different expenses. And then you have this like complicated touchpoint, multi touch, marketing mix, modeling over complicated type of stuff going on. That doesn't actually and that doesn't have the financial data. It doesn't help you as a C level executive. It's way too over complicated. So simplify it and say we have a portfolio of investments. As I'm a cmo, I have a portfolio of investments and you make a pie chart about all the different things you can spend and then you can categorize them and you can see. And now I'll imagine that you have a hundred different investments. When you roll them all up, some of the investments have 5% of your portfolio. Other investments have a tenth of a percent, but you have a set of the portfolio and then out of that portfolio, if you have 50 investments, what you would do if you're trying to maximize the return of that portfolio would be one. To understand what is the return of my entire portfolio? What is that this quarter, what was it last quarter, what was it the quarter before that and the quarter before that? Is it going up or is it going down? You need to know the trend and the context about where you're at. And then from there you can look inside and you say, Now I have 50 investments inside of that. When you have an investment portfolio, you don't look at every investment the same. Different investments have different ways that you would scrutinize and analyze them. Some of them are for dividends and cash flow. You're going to look at that, did I get my dividend? Some of them are for value. And you're going to buy a stock like Nvidia and hope that the stock price goes up. Other things that you're going to buy for diversification or risk mitigation, other things you're going to buy because there's a ton of upside like a penny stock or cryptocurrency. Like if I hit this right, I one small investment could make me a very wealthy person. Right? So you have all these different investments and different types of investments and then taking one thing and saying, I'm just looking at which one produces the best dividend, or taking one way of looking at all the investments and saying, that's the only way that I look at it. You're going to ruin your portfolio or you're going to be totally overweighted in one area which is what companies do with single touch attribution, lead source origination, attribution, department level, they apply influence revenue on top of it. That's what you do. You apply every investment that has particular reasons of why you're investing in it and applying one model to it, which forces all the investments into one area. And so we need a process. And then if you look at that, let's say the return is 1x, right? So you spend 10 and you get 10 million in revenue back, which is not so bad. Next year we want to try to figure out how to make that return a$125 that like we spend the same amount of money, but we get 25% growth in pipeline and revenue just by being better at how we allocated the investments and making every dollar work harder. And so when you do that, you go in and you look, okay, we have 2% spent on Google Ads, right? It's probably more than 2% for most people, right? When you look at the whole pie. But when you have headcount and everything, we have 2% there. And then you scrutinize that investment in a specific way and you say, should it be 2%, should it be 0%, should it be 5%? And you literally go through that with every single thing that you spend money on. You estimate, you apply a specific model to measure it based on what you're trying to do with it. And then after you do that, you can estimate the impact of that investment. And then all you do is sort it from top to bottom, look at the lowest things, take them out, move them to the high performing things or new things. Do that every month or every quarter, probably every quarter. And all of a sudden you just have a consistent way to optimize your, to scrutinize your investments and then optimize your investments where right now I just don't see marketing leaders changing the budget that much, aside from blanket cuts. And I think that when you shift it more to unit economics, like there's a lot of Companies that spend 6, 60% of their program dollars on Google advertising, marketing program dollars, 60% on Google advertising, right? And then they use an influence revenue report that says, oh, we get a 2 to 1 roas on our 6 million in Google Ads. But if you just measured the entire 10 million, you would say this whole thing doesn't work, this whole thing is not productive enough. And then you would slim it down and say, oh, 60% of this in Google Ads. This is probably the issue, 60% of the spend here we're not hitting our target, we have to go scrutinize the 60%. And so when we transition the idea of it's not just about trying to grow pipeline by 10%. We can do a bunch of different things to make our factory run better, Especially as a CMO that also owns the BDRs. We can do all of our prospecting better. We can integrate our signals and have better data. We can optimize our performance, marketing and supply chain to achieve appropriate unit economics. We can do all these things on brand and demand creation. We can have a balanced mix. We can analyze unit economics across the customer lifecycle. And I as a CMO can confidently go back to the board every single quarter and say this is our number. This is why the ROI is strong. This is where we're have opportunities. This is why we're weak. This is our plan. Simple. Where right now it's a bunch of fucking data and nobody in the board knows whether marketing's working or not. Trying to figure out how to simplify it down. And then marketing is the only department in go to market where you can't get to a clear that nobody's accountable to a clear unit economics target. Because pipeline creation usually not always gets split between the CMO, some partner team that fault rolls into sales and SDRs. And so nobody's accountable to that whole engine working properly. It's three individual things. We need to create accountability around the entire pipeline creation process and have one person be accountable to that. It doesn't have to be the cmo, but it could be. And so I would like to spend a little bit more time on the investment portfolio. So if people have thoughts on that or want to go a little bit deeper on the process or why to do or anything, I would love to chat about that. But I see how a lot of these financial principles that I've been developing and learning through my interactions with a lot of smart finance leaders and smart companies and CEOs that bringing this into the CRO and CMO and them having visibility into the unit economics performance trending over the past eight quarters, knowing what their baselines are. As a new cmo, the first thing that you should do is measure the baseline performance for the past eight quarters against real numbers unit economics, not cost per marketing source, qualified opportunity, not cost per mql, not cost per demo request, everything that comes out of the financial system, all of the revenue, all the CRM data, and that is the number one thing that you could do to set yourself up for success because nobody's measuring that Right now, even though it's the most important metric in the business as a cmo and you can show, hey, I know that we have all this touchpoint data, I know that we were doing all these things, but you brought me in to fucking scale this business. And in order to scale it, we need to have appropriate unit economics. And right now we spend a dollar in marketing and 50 cents in SDRs and we barely get a dollar in RE and we haven't paid our sales team yet. This is not scalable. I'm going to fix this. This is how we're going to do it. And I think that's how you come in as a executive C level leader where most companies out there, the number one thing that they need is the right financial data and a great cmo and they have all the other pieces that they need to be successful. And so I think it's a really interesting time for marketing leaders. And I talk, I had coffee with a great one recently and I just think that there's a, a transformation happening here where I think that marketing. Let me just talk about marketing broadly and what I see. So I think that teams will get much smaller. It won't happen overnight, but teams will shrink down and that a lot of the middle management and the tactical stuff will end up going to AI, offshoring or external experts. You eliminate all these management layers, all of these fixed costs and that use the power of the people that are outside your organization's services. As a service, what do you like? Recurring services, external experts, things like that. I think that when you think about a revenue factory, there's one huge things that most factories have that B2B revenue factories don't, which is flexibility. And that a factory can scale up and they can do a third shift and they can buy more materials from their vendors for Black Friday. They know six months in advance we need to ramp up production and they can ramp it up. And then when the time slows down, it's all done. They can stop doing the third shift with their hourly workers. They can stop buying the raw materials and their variable costs go back down in revenue factories. We can't do that because most of the stuff is in fixed cost fucking headcount. And so I think the companies will figure out a way to be a lot more flexible with their investments to not have so much tied up in headcount, which is not just in marketing, but if you think about sales, like sales expenses is mostly headcount. So is CS and am very little programs like the marketing budget and so across the whole thing, it's just mostly fixed cost headcount, which is very hard to move up and down that I think people will solve over time. So we got smaller teams. Marketing as soon as tomorrow needs to be accountable to that unit economics target across pipeline efficiency. If you're going to be a true C level executive that owns marketing and you need to bring that back, own it with your company. Show that, hey, there are two things that go into our CAC number. It's how much we spend on sales to close the deals and pay them, and then how much we spend to create the pipeline that they close. Those two things put together are cac, right? And we have a pretty consistent PRP per rep production or per rep productivity for the past three. We have a bunch of data on that. We know how many reps hit quota, what the average amount they can sell, what their capacity are. We have all that data. And so we can effectively scale up and run our sales team up and down based on how much pipeline we create. But we have no visibility on the pipeline side. And so when that number goes up, it's actually the most interesting leading metric to CAC that I've ever seen is that when your cost to create pipeline goes up, it's almost impossible for your CAC not to go up one to two sales cycles later because you're creating way less pipeline, getting a much lower return. And you could predict higher cac, lower PRP earlier by measuring that type of number, which again is not taking marketing expenses and dividing it by how much revenue or pipeline you created. It is much more intentional than that. And so don't try to take the shortcut, right? Slow is fast. Don't take the shortcut and really look. And I think it's a great exercise for every single marketing leader to literally get a full download of every single expense that hits your gl. Look at it expense, line item by line, item by month. There are thousands of lines. Look at every single expense and say, what is the point of this investment? And try to categorize them and then look at. Okay, so make a pie chart. I had to categorize these in all these different buckets about what was the point? Okay, now when I put it together, is everything going to one objective and not all the other ones? Just looking at like, because my team and I sort through those expenses, I look and there's a $30 bill for someone at a restaurant, at a trade show, right? So I see everything and so that doesn't matter. But when you see The Google Ads expense of 200k a month, hitting every single month. And you're looking at that as a CMO and you look at that in context of all your other investments. I think that that is just something that is not happening frequently enough personally. And I think that the biggest issue is that CMOs don't have the visibility. All of the stack has nothing to do with finance data. They know how much they spend on advertising. Right. So they can make a Google sheet and say we spent 200k on advertising and we got a million in pipeline through our website. We get a 5 to 1 roas on our advertising. But all of us know that that is not the real calculation and that is not a representative sample. And it's different than how they're calculating CAC and unit economics of other things. And so with all that said, appreciate you all being here. I am fired up about this opportunity. I can see how much having this visibility would help everyone on the executive team. But interestingly, the CMO and the CRO quite a bit. Yeah, looking forward to diving in. I hope people have questions or good topics to talk through and then we'll. We'll end 2024 with a bang. Thanks everyone.
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Moderator
Awesome. Yeah, I think this is resonating with a lot of people. A lot of questions in the chat already. Duke, I'm gonna unmute you and you're up first. Go ahead.
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Duke
Sounds good. Thanks, Chris. So my question was, you were talking about if it's not the CEO who's ultimately accountable for driving forward the go to market strategy, how do you decide if, boy, maybe you have a sales leader who's saying I want it, or if you have a marketing leader who says I want it, what's the best way to go forward in that situation?
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Chris Walker
So it's different. It's breaking the vision down into what is step one. How can you create step one where it doesn't need to be this massive transformational change where all these executives need to happen and be bought in, which almost never happens. And so instead figuring out like, what is one part of this that could really help everyone? Oh, like figuring out how to manage the $30 million we spend on go to market investments and giving our key leaders the data that they need to understand that information. Like that sounds like an easy win. You can sell that into sales and marketing and they can implement that without approval from anybody. Any CMO could approve that expense to make them better at deploying their investments. It would be no different than hiring Insights Agency professional services or buying an Attribution tool. It's just a totally different way of characterizing and making the decisions than how attribution and many vendors try to approach it. But what is the core question trying to be answered here? What is the unit economics, which attribution tools don't answer? So it's different in that way. What are the unit economics across the customer lifecycle? How do I communicate this to the board? It's almost like a different angle. I think that companies try to solve this. When you think about what are all the things that we need, part of it is the touchpoint data, right? Maybe 5% of making the overall strategic decision is the touch point data involved in it. But then you need a CRM architecture. You need a way to tag and categorize your expenses. You need a decision process across your executive team about how these types of decisions get made. So there's a, I think a lot more to it than, than just attribution data.
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Duke
Well, and if you've got alignment between sales and marketing, then it shouldn't really be a big issue of, you know, who owns it. If you're lock and step in agreement of here's what the division of labor is, it shouldn't really be that big of a deal either, right?
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Chris Walker
Say that one more time.
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Duke
If you have the alignment between sales and marketing worrying about, well, who's ultimately accountable for go to market. If you understand that there are different responsibilities that each of you have as long as you're in alignment, it's not necessarily that big of a deal of who's ultimately accountable.
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Chris Walker
Yeah, but alignment's not binary. As I interact with a bunch of executive teams and, and like, so then I'm in the, not in the middle. Like I'm working with the five people, right? So I see it, right? It's not like these people are aligned and these people aren't. It's really more like a spectrum of alignment. And, and I just noticed that we should do this right? We should ask our, before our customers start with us, how do you feel about alignment? Ask five executives on a scale of 1 to 7 and then track what they say differently. So we should do something like this. But my just take observing. Most companies would say that they're aligned to keep up with the politics of the five other people, but in reality they aren't. So what happens in this private meeting with like the CRO is very different than how everyone's politicking when they're all five together. But then when it comes to like the alignment, right. Either person could bring this in and use it for their specific function. So like alignment is great. Alignment is important. If you're gonna buy a tool that sort of impacts both, it'd be nice to be aligned, but I don't think that it necessarily needs to be that way. Right. A CMO will buy a lot of things that the CRO doesn't necessarily like buy into and vice versa. That's why they're different jobs and different budgets.
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Duke
Helpful. Thank you.
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Moderator
Well, up next we have John Kim. Go ahead.
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John Kim
Hey Chris.
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Duke
Hey, John.
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John Kim
Hey, just a quick question here. So the sense that I'm getting is that the kind of along this path of achieving greater efficiency, redefining pipeline by win rate instead of kind of operationally focused stages is a key factor. And I've heard you talk about this briefly before, but wondering if you could double click into what are some of those stages that you would recommend and what are just kind of for illustrative purposes. What are some of those key factors or triggers that you would see between those stages?
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Chris Walker
Yeah, so it's a little bit higher order than what you mentioned. And the key is implementing a closed loop feedback system. And so that's really what we're after here. And so when you transition from mass manufacturing that's inefficient to lean manufacturing that is very efficient and optimizes for that. The main difference is that when marketing brings in a thousand MQLs and 0.1% of them convert into customers and they just keep every month just send another thousand because there's no feedback loop that say hey, these all suck. Fix it. That the accountability level isn't there. Right. And the same thing that would happen if a sales rep keeps selling bad deals and those people don't reach onboarding and churn. Right. You need a feedback loop to say hey sales salesperson or hey sales process or hey people that use this proposal or sell this SKU like this starts to happen. You need a feedback loop to say something's wrong here that's starting upstream. Let's fix it at the real root of the problem. So you could look at that across the whole customer life cycle where it just moves that the problems that people have at the quote unquote top of the funnel to be get the entry point of the factory cascade down and impact everybody. Which is why MQLS is a is especially high volume, low quality MQLs. It's the number one problem in Go to market and people still love pumping up their MQL numbers. What it does, it just creates A massive inefficiency that everybody else has to have all your humans sorting through a bunch of garbage. And so if you did that in a manufacturing facility, you would be like, what? Stop buying the stuff that converts at 0.1%, go find a better supplier. Go do something different. The ROI is bad. There's just like basic principles. And so the one that you attempt to get to by using win rate to control quality of pipeline is just one implementation of a closed feedback system that if you bring in, if something in the process changes upstream and affects something downstream, that you can flag it and then actually identify what the true root cause. A lot of people blame a lot of the issues on whether like SDRs don't follow up with my marketing leads or like marketing's doing great and sales just isn't closing them or a lot of that traditional stuff like sales isn't performing because of the stuff that happens upstream. That is not necessarily marketing's fault, but it's the fault of the key performance indicators that drive marketing to do the stuff and make them feel successful when they do the wrong things that have negative impacts downstream. So that's just to illustrate the point that we need consist like in any opportunity we can to create a close feedback loop that goes back and holds people accountable to a later stage in the process and gives them the feedback about how they should adjust. Got it.
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John Kim
Makes sense. Thank you.
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Moderator
Thanks, John. So we've got another question. It's a little bit more tactical, Chris in nature. We've got Chris. I'm going to unmute him now, who has some questions just around how we actually measure unit economics.
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Listener
Hi Chris, longtime listener, first time caller. So thanks, thanks for having me on. I think my question is, I really like the way you're talking about kind of going through and scrutinizing every line item. So it's definitely top of mind. Having gone through the budgets recently for next year, I wondered if you could kind of carry through your thinking of with a couple of specific examples. It might be helpful for me to understand this. I gave a couple of examples in the chat. One could be like a licensed analyst report that you have on your website and it costs a certain amount of money to put that report on your website. You promote it a little bit, I find I don't get too many leads from that. But it might actually be really helpful for reps who are using that report to try to move deals along through for, you know, for credibility. There's another example, but maybe, maybe we start with that one if, if that makes sense.
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Chris Walker
Yeah. So take all your raw export expenses and then we apply a proprietary taxonomy that I, I'm not going to share here, but we apply a primary taxonomy around different ways that we tag the investments. So then when you make the pie chart, it's not just GL code marketing, GL code sales, you can look at it in different ways. And then the point is that every single expense you then select, one of them is like, what is the purpose of this investment? Right. So you're running into the problem AR report a lot of people might think goes on the website and then advertising goes to. A lot of people might say, oh, like we need to measure that on how much pipeline is directly attributed to that thing. Right. And I look at it differently. I think if you're using advertising to market the content, then the money from the advertising should be scrutinized against the lead gen objective. Right. So the advertising part, but the actual analyst report I think creates impact across the entire customer lifecycle and should be distributed across it. Right. It helps you close, it gives you credibility to close deals and it helps in credibility for renewals and expansions of customers. Because if people know that you're in the top of the market or you're a big player in the market, they're less likely to leave, I think because they understand where you fit in terms of the suitable alternatives. And so I think just applying that across the entire go to market would be how I would do that once. So and you can just repeat that over and over. Right. What is our Google Ads that's driving everyone into our ebook download so SDRs can call them. What is the purpose of that expense? It's a supply chain expense to get data to go prospect. And so then you can just measure it again. You apply your attribution model against that and you just keep going.
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John Kim
Perfect.
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Chris Walker
Thank you.
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Moderator
Okay, so we've got a, a message in the chat here. The, the caller can't come on live, but this one for you, Chris. So just feeling like there's this general, I guess, problem with go to market teams that most leaders are actually trying to solve for a symptom of a problem. Right. Versus the actual problem itself. So how would you address this with go to market teams that are aligned around what we consider the wrong KPIs? Maybe the KPIs that are addressing the surface issue versus like the underlying root cause of the issue.
- [29:10]
Chris Walker
Yeah, I mean I think this comes back a lot to like future how work and talent and whether it's W2 or external or AI doing the work or I think AI plays into this a little bit which is that if you think about the people that work in on a line in the factory or a part of a factory, or even the leader that runs the part of the factory that the people on the line are responsible for following a process and achieving the end objective in that process. So it could be, if you run Google Ads, it could be my responsibility is to be able to achieve X amount of qualified pipeline on this spend and I have my objective. Right. And then it rolls up to greater people and those people are responsible following the process and achieving the target that's set based on what can this factory do. And then the mistake that people make is that they put the people that are in the weeds in the working in the factory, responsible for trying to figure out what are the capabilities our factory should have in six months or 12 months or 18 months, which is a lot more engineering R and D strategy, long term thinking. And they are in a role that is tactical and short term. And so it's very hard to compete against those two objectives. Tactile and short term always prevail and you get a lack of general innovation and incrementalism. And so companies that are smart will realize that they not necessarily from external people though I think that could really help. But outside of the department will become the place and the ways that optimize the department and they will bring those things in place. Think process improvements, cross functional things, recommendations to completely divest from some expensive program and put that in some in other places like yeah, CMOS might catch that. But oftentimes I think you need someone else saying hey, here are these clear opportunities, whether that's based on benchmark data, their own experience working with a lot of companies or something like that. The problem is relying on the people that work on the line to make exponential changes to your go to market. You'll always get diminishing return incrementalism from that strategy.
- [31:07]
Moderator
Right, that makes sense. And I think that also goes back to what we were talking about last week which is typically you've got, you know, people who are in the weeds operating in all of these like individual silos which is producing reports that don't necessarily like bubble up to the top line business performance either.
- [31:23]
Chris Walker
Yeah, 100% I would say pretty much all of the go to market reporting that happens, that goes bottoms up into the executive team happens with incomplete financial data at best. But oftentimes no financial data or an estimate, not actuals for sure. And Definitely not every expense line item they have, oh, we spent 200. Somebody goes into Google Ads, looks and then sort of puts copies that over manually and then makes a calculation. They find some pipeline number in Salesforce and they put that in there and they make a calculation in Google sheets and nobody else could replicate the same calculation. And so I think there's just. Yeah, I think that is apparent. And I think there needs to be a new way to be able to get this insight together. And I don't think it's the responsibility of a manager level employee. I think this is a big expensive problem that senior leaders need to own.
- [32:13]
Moderator
Yeah, for sure. Okay, so a couple more questions before we wrap up, Chris. So the one thing that I'm seeing a couple of folks here chatting on the side about is really how message market fit and pricing and value contribute to growth efficiency. How do you see that with some of the customers, you know, that we work with at Passetto contributing to their growth efficiency overall?
- [32:35]
Chris Walker
So I think generally, and this is sort of to a previous question, that generally the way that companies use a taxonomy to then like look at the investments only come from GL code. And so then you take things like analyst relations, right, that has an impact clearly in the sales. Like salespeople might be using that report. It could be used for prospecting. Customers might see it and like learn about your new feature or think that you're better. It happens across the entire thing. But then you take that and say that $150,000 needs to be scrutinized against pipeline creation and it creates a misleading and inaccurate calculation around the impact of that particular investment along everything else that you spend in marketing, more or less. And so most of the things that the art of marketing, some people might call that brand positioning, messaging art, whatever you want to put, how to put it in a box, has an impact across the entire customer life cycle, does as much impact on getting you new pipeline as it does with your best customer renewing next year. And that we should be looking at those investments differently than we look at the investments used to create pipelines and that they should be scrutinized differently. And that should not be an excuse to put our national trade shows in that bucket and say, oh, we don't need to scrutinize that. I am not replicating. Take the demand gen spend over here and measure it on leads and then take our trade show stuff and all the stuff that we can't measure or just don't want to admit how bad it's working and Then put that over here and say, oh, we do that for brands, so we're not going to measure it. I'm not suggesting that. I am suggesting though that things that have an impact across the whole customer life cycle get scrutinized differently than the things that are purpose built to do a specific thing like a field event dinner, a Google Ad, you know, a customer marketing event or something like that. Many investments have a particular place that they're meant for. And then there are some that have an impact across the whole thing. Like I think product marketing, some forms of strategy that a marketing leader or somebody else might own, ar, pr, other things like that should go across the whole customer life cycle and be viewed differently than the many other parts of the marketing budget. And we help, we basically help companies like sort of sort through that.
- [34:40]
Moderator
Right. Thank you. Okay, so no more questions in the chat. There is sort of one last one before we wrap up, which will probably be a few minutes early today. But Chris, cool. We've talked a lot about how the CEO champions go to market and drive strategy. But thinking a little bit more aspirationally for the revenue leaders that listen into this call, what is one thing that they can do if they see and they feel the problem in their own companies and their own organizations and they want to drive change next year? What do you feel is like the one or two things that they can do going into a new year to sort of like spark or ignite some positive change around making decisions with respect to unit economics sort of at the.
- [35:21]
Chris Walker
Forefront, A system to measure and optimize around unit economics. If you had that visibility, it's like the number one thing, like if I'm the CMO and I'm starting at this new company, right? So they just got rid of their old CMO in October. Why'd they get rid of their old cmo? Because like pipeline and performance has been going down for the past six quarters. What does that mean? As a new cmo? My baseline is super low. Like I don't. I actually can move the needle very quickly. Right. They fired the last person because the performance wasn't good. They're bringing me in and now I can show from going from really bad to just bad. And it makes a huge impact for the company. And then bad to average, and then average to good. And I have a clear path to continuously make it better. And what people underappreciate as a marketing leader is when you look at the numbers every day that magically they start getting better. It's almost impossible for Them not to get better because it's sitting right in your face, just raising the awareness to it. And then, so then you say, okay, like I need to get this number to 50%. Remember, lower is better. It's the cost of growth related to pipeline creation. So you don't want this number to be high. We want it to be 50%. If you're walking in as a CMO and it's at 150%, that means that every single thing that you spend has the potential to be at least three times more productive. So then go and look at the big expenses and the big chunks of money and then take that big chunk and say, is this working? And then put it to somewhere where it can. And then if you measure it again, trailing 12 months, by month or by quarter, in one or two quarters, you can show a story in the board of oh, our marketing investments have all of a sudden gotten twice as productive. We were planning on getting 10 million in, in, in revenue throughout the year, but because our win rate went up and our pipeline efficiency went up and different things like that, we can actually raise our forecast by like a million five. We're ahead of plan. So I think that is the, the missing piece as a marketing leader. And when you look at all of the issues that happen in marketing, it is because the marketing data and reports are not connected to financial outcomes like every other department in the company is. And so there's this, this nebulous, complicated sort of understanding around marketing, which I'm just trying to help you simplify. There's no debate around the metric that I produce, aside from how we, how you allocate the expenses which the CFO eventually signs off on. So there's really no debate at that level. And then you can just say like, just like sales has a number. We had this much in sales expenses, we closed this much in new logo. You could say the same thing. And it's not marketing, it's pipeline creation. Because. Right. It's not just sales, it's rev ops, it's technology, it's solutions consulting. There's a lot of things that go into closing new logos, marketing dollars that get spent there as well. So. Right. We're thinking about it differently. So now you got create pipeline and you just say, we spent $3 million that quarter and this was the ROI. And then here's how it compares to the previous quarter before you hired me and two quarters before that and keep looking back, oh, it's up by 30%. My fourth first quarter show a meaningful impact to the board your first quarter. Almost every CMO could do it if they measured this metric. I'm trying to push people to be better. I'm trying to give people the insight that changes their career. A lot of people have been pushing back on this. This is the most important thing to do as a marketing leader and nobody is stopping you. You're going to have to finesse the politics because some companies don't want to export their expenses for you. And if you're a C level, if you're the CMO at a $50 million company and the finance leader doesn't want to give you your expenses, fuck that company. You need that to do your job. There's no way. How are you going to deploy 20 million in investments to get a positive ROI if you can't even get an export of the actuals? And so I think this is a step up moment for CMOs. Every other ingredient is there, but the way that that leader is pointed and then how their team is then reporting and optimizing is just pointed in the wrong direction. And so it's like, what if we just pointed in the right direction? We have the right people, we have the right leader. Hopefully we have all the tools in the world, we have enough program dollars, we can go and hit our goal, but we're just swimming in the wrong direction right now. So I think having that context would be the biggest breakthrough. Don't buy your third attribution tool this year. It's not the way to solve the problem. You need it. I'm not saying don't buy attribution software, but you don't need three fucking platforms. And I know many companies that use multiple attribution platforms and none of them help them. It's helpful, but it doesn't fix the higher order issue, which is that like having 120 trackable touch points and no financial data doesn't help you as a leader, it helps you as a tactician, as the performance marketing associate. Like it helps you as a tactician to look at all that stuff. But as executives, we need the big picture data, we need the business data. So I will continue to push that message hard. Somebody said something to me recently which is like, what would you do if the CEO is interested in owning? Go to market. What if the CEO isn't interested in scaling your rev their revenue factory? That's how it was asked. And the response is that if the CEO doesn't want to scale the revenue factory, AKA grow revenue and value for shareholders, they shouldn't be the Fucking CEO. They shouldn't like the person in that the board is responsible for putting someone in the seat that wants to scale the business. How do you do it? Mostly through sales and marketing. And then you have product and leadership. And the same thing could be said around CMOs, which is that, like, you have the opportunity right now. You've learned how to do be a CMO for 10, maybe 20 or more years. You have a ton of experience. But two years ago, this thing changed where most of the things that you used to do are now going to get you fired, not promoted. And so who can recognize this shift and then be able to be adaptable and reinvent themselves? Just like the musician or the artist that I talked about at the beginning, Things change in the world, whether it's culture or business or something, things like that, we can adjust. We don't have to do the same stuff the same way we've been doing for 12 years. And so I think that is empowering. I think that just like some of the other things that I've talked about, there will be like an early move for camp. Many people, some people probably don't even need me to tell them they're already doing it because they're super smart and they see the problem. And so I'm excited for that. And I think this could be a big breakout year where historically people have been very disappointed, unclear about what the impact is of marketing. Like, I'm serving it up on a silver platter. Like, here you go. This is the. The literally something that every single person in the board would understand and believe. And it perfectly maps to business metrics, which is not something that happens in marketing metrics today where there's no way that this metric can be good and the rest of the business can be bad. We need that. We need the North Star marketing metric for marketing has to be that way. It has to be impossible for that to be hitting and the rest of the company not hitting CAC targets, not growing, stuff like that. And so I think that control can be a great level of accountability. Everyone in the company can agree to it. And then you basically just like, sales needs to close 3 million that quarter and they're at 2.3 million. The sales costs are pretty much fixed, right? So they still have an ROI equation in the background. There's just not a lot of variable to it it. And then on the marketing side, we could almost have the exact same scoreboard, but not like, what is the ROI of our podcast? What is the ROI of everything? Is it going up or is it going down? And then you have your scoreboard as a cmo. And as long as you achieve the scoreboard, nobody can be on your back. It's literally impossible. You have a 15 month CAC payback in SaaS. Like, if you hit your target, it's impossible for anyone to challenge it. And so I think that is amazing. I think that a lot of people would appreciate that rather than, like, the lack of clarity that goes on in the boardroom right now. And I feel for a lot of CMOs that aren't a, like, haven't been able to communicate it in this way. I don't think they've been given the tools or the training to do it. So I think this is a big opportunity. I will get off my soapbox. I hope everyone is ready for the holidays, for whatever you celebrate. Hope you get to spend time with the family. I am meeting my sister in Tulum for New Year's Eve. My sister lives in Spain. I only see her like once or twice a year. So I decided, hey, we'll do like a little sibling get together in Tulum. So I'm flying her out there on, on the 30th, and then we'll be there for a couple of days on the beach. And then the podcast will not occur on the 6th or the 7th, whatever that first true full week in January is. And then we'll get back to the next one, which I think is the 14th, but whatever that Tuesday is, is when we'll get back to it. So again, thank you all for being here, for participating, for making the show great, for making this community great. I really appreciate all of you being here and we'll see you in 2025. Bye.