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- [00:00]
Chris Walker
You're listening to Revenue Vitals with Chris Walker.
- [00:18]
Unknown Speaker
I'm going to start a little bit philosophical after that. I want to talk through. I just most clearly explained, I feel like sort of how. And this is not from an org structure level, but just as like a mindset and thinking and even investment scrutiny level. The concept of the big categorization of this, we do marketing here and this is the marketing budget, I think is a terrible categorization for all the different things, objectives, long term, short term, strategic, tactical, thought, leadership, lead gen. It's just a bunch, a bunch of stuff in one bucket. And I think having a little bit more definition around. What are the subcategories of this bucket? What are the purposes of them? How should we measure those sub buckets? What would create a lot of clarity? Marketing has two core responsibilities from my perspective, and I'll break it down in more detail later, but you have the business strategy element. Positioning, messaging, competitive intelligence, category creation, strategic narrative, thought leadership, analyst relations, product marketing, sales enablement. You got the strategic layer and then you have pipeline creation, which is a totally different objective and honestly requires totally different skill sets and experiences. Between these two things, you're. Yet they fall under one category right now. And in pipeline creation, in order to create pipeline in a sales led motion. And even a PLG company is going to grow up and have a sales led motion. Every one of them does. If you look that prospecting is part of pipeline creation, not part of sales, a qualified opportunity happens. Well after the prospecting happens, it actually has to go one stage further. Sit on a meeting with the sales team, become actually qualified by a rep, usually to become forecasted pipeline. And so this gap between marketing and SDRs that majority of the time right now sit under sales and then sales makes it very difficult for anyone to own a true pipeline number. Super excited. It got a little bit detailed there. Let's back it out for a second. Sometimes things are working for me and I just want to share them with you. And some of them become like philosophical mindset, like life, life stuff. This sort of mantra has been working really well for me actually. I'll share two. The first one is slow is fast. The things that give you the illusion that you're going faster in the long term usually slow you down because you pay the price for it later. Think about the person that uses OIC to lose weight and then they get off OIC and they gain all the weight back and then they figure out, oh, I used OIC and I have osteoporosis now. Would have been way faster to just do it the right way. Think about the company that has 30 million in revenue and raises at a 1.2 billion valuation, something that's been promoted a lot. What does that mean? That means that company needs to get to a $4 billion valuation, a larger market cap than most of the competitive publicly traded companies to just pay back their investors. And I know that it was secondary. So I know the founders just took all the money off the table and it's great for them. But then what happens? Then you have like if the $40 million did get injected into the company, then what happens? We spend more money, we get less efficient, we get more wasteful. Now we try to pursue seven different markets instead of focusing on one market. We hire a bunch of people that we don't need. What's another example here? Hiring people, for instance, or having a big team. I think that's a mindset that I've been really trying to change. We just had the debate at my company yesterday. We said we need to hire two more people. We're going too slow. We need to go a person over here and a person over here. And then when we get these two people, we'll magically go faster. And in theory, yeah, you would. But oftentimes more people makes you go slower. The a hundred person marketing team goes slower than the 5 person marketing team. Hate to say it, the 100 person marketing team also spends a lot more money and does a bunch of shit that isn't needed and a bunch of stuff that's wasteful. When the five person marketing team spends effectively is very focused, strategic. Typically I'm generalizing here that being slow, methodical, thoughtful, strategic gets you to the end result faster. Even though taking the shortcuts or things like that makes it feel like in the short term you're going faster. In my own business at Refine Labs, my previous business, I still own it, we were going super fast in 2021 into 2022, and I made some bad decisions around how fast we're scaling, how much we're hiring. And then what it did was it set my company back two years. And last year we were basically the same size we were in 2021 and just wasted two years. To go up and then down and feel like you're going faster and really you're going way slower and methodically moving would have been a way better strategy. And entrepreneurs need to learn that lesson for themselves by feeling the extreme pain and financial pain that comes with making those types of mistakes. So please I say that just for one person that's listening to this podcast or coming to this event to just listen to this advice and avoid something that's really painful and not have to feel the burn on your hand to realize that you shouldn't do that thing or need to learn the lesson. One big lesson there. The next one is kind of in the same vein, but a little bit different. When things feel easy, lean in and go harder. And when things feel hard, step back and go slower. And before five years ago, I was the opposite. Things are going good. I'll take my foot off the gas. I'll just let things roll. We're coasting, I don't have to do much, and things are going to work. And then when things got hard, it would be, I need to work seven days a week, 12 hours a day to be able to make this thing work. And if I just work harder, things will work better. But in reality, the opposite is true. And I'll try to explain this as succinctly and clearly as I can. The way that I think about it is like, imagine that whatever you're trying to do, artist, musician, entrepreneur, executive, whatever, you're in the ocean on a surfboard, looking to ride a wave. This is life, okay? And what happens is that you're out there paddling around, waiting in the water, waiting for a wave. And sometimes that can take 18 months, two years, three years before you find the right wave. And then you find this wave, you have a chance. Do you see the wave? Do you have the skills and the discipline to catch the wave and then not fall when you have the wave and ride that wave out, and when you find the wave and hit it, you get 10x productivity and gains than you would. And then the wave goes away, and then it slows down again. And then you have to be wading in the water for two or three years. 99% of people aren't even in the ocean looking for the wave. They're on the shore watching people surf. 1% of people are in in the ocean looking for the wave. If the wave comes and you miss it, you have to wait another long period of time before you get one. I found, personally, I can't say this for everybody. Growth in business and personal is a stair step, not a linear line. It's do a bunch of stuff and kind of stay stagnant. Then boom, something happens, basically s curve up and then you hit a plateau and then boom up. If you miss the wave, you just keep going this way. And then you have to Wait for the next one. And it's basically one big opportunity. Like an example for me was LinkedIn in 2019. That was a boom. You sort of get the example. And so there's a lot of work that you do in the meantime, paddling in the wave where you don't see the immediate result for it. The only other option is to get out of the ocean and watch other people ride the waves and get all the results. So when things are working, things are going well. Lean into it because you only have that one wave. Squeeze all the juice out of it as you can, squeeze it as hard as you can. And then when you're just paddling around, don't use all your energy when there's no waves around, when things are hard, just take a step back, slow down. Question Do I have the right strategy? Am I doing the right thing? Do I have the right mindset? Am I on the right team? Do I have enough budget to hit my goal? Is my product strategy good? Should I get out of this market? When things are hard and there's a lot of friction, take a step back and challenge it. Because when things are hard, it's usually because something isn't right. That's why they feel hard. So let's talk structure. And then I source, I talk to Rev Ops Consultancies, Marketing Ops Consultancies Consulting firms go to Market Consultants, Rev Op like all over the place and I just collect from them here all the things that my customers don't get. And they're working with 50 companies, right? So they see the pattern of here's all these things that my 50 companies don't get and then I just collect that. So I have a couple of those queued up as well. But first I want to start by offering a reframe of how we think about the subcategories and objectives of marketing. Not to change your org structure or blow up your team or things like that, but as the leader of it or as a C level executive that is invested in your marketing department performing so you can hit your plan and exit that the way that we currently do it, where we have the brand team that has like social media and some other shit and then we have the, the demand team that does all this and spends most of the money and then we don't really know how we're going to measure all of it. The situation right now is just not working. So I'll offer a different perspective and you can consider it or just dwell on and maybe it may challenges you to think and maybe you come up with a better structure than what I'm about to say here. And I don't want to use the word structure, a different mindset or framework to operate on. So number one is that you have strategy in business, messaging, positioning, strategic narrative, product marketing, analyst relations, some forms of thought leadership, and some form of events. Depending on the objective of the events, that becomes business strategy. The important part about business strategy is that it impacts across the entire customer life cycle. You being in the top quadrant of Gartner impacts your retention arguably more than than it does your pipeline creation. It impacts you closing deals. It impacts the customers renewing and expanding. And so we can't take these strategic investments that impact the whole go to market and then scrutinize them against pipeline creation. We can't. Additionally, all that different stuff. There's a specific skill set, experience, type of person that's going to be great at that stuff. They have to be a C level person that can influence the product roadmap, influence the how analysts view your company. Maybe they have to speak on Fox News or CNN for your publicly traded company. This has to be a great person that leads that stuff. This is art. This is qualitative insights. This is customer research. The qualities and the things that make a person great at this job are very different than the ones that are going to run and manage your $10 million in advertising. Okay, Your business strategy over here. Then we're going to take pipeline creation and break it into three core phases. The first phase is demand creation. The purpose of demand creation is to say we have these target accounts named accounts. You can have a hundred of them, a thousand of them, a hundred thousand, a million. The numbers don't matter. Every single company should have every one of the companies they want to sell to, the name of the company, the website inside of their CRM and database. You should only be actively spending money to get those companies in this phase. Okay, so target account. The objective in the end of the demand creation phase is that target account is engaged with your business. You can decide how to define that. We've created a standardized definition. Someone's on your website. It could be that they're coming to your events. It could be that they're talking about you at a community. It could be that six people in their buying group have been on your website. You decide what engaged means. But the objective is we know who they are. We're gonna go out and get them and pull them in. So they are engaged with our business. Okay? That is demand creation. Instead of building brand and just waiting for people to show up. We're gonna, we know who they are, we're gonna go out and get them, we're gonna pull them in and we're gonna shorten the time between them deciding or considering our business. We're gonna shorten that time. That's the purpose of this stage. Okay, next is supply chain. This is going to be a big one for people because it gets rid of the inbound and outbound conversation and consolidates all the signals into one process, one data layer. So it doesn't matter whether it came from Zoom info, user gems, account based marketing platforms, the million signal platforms like Common Room, warmly a trillion of those. All the third party signals that you have or the first party signals that you get from marketing things that aren't actually marketing, they're first party business assets like your website, your events, your product, things like that. And you put them all together and then you have one supply chain of signals and you can look at these are the signals, these are the conversion rate to meeting pipeline closed one. These are how much the signals cost and you can have literally calculated cost of acquisition targets for every single signal in the stack. Up to 90% of the marketing investments get spent on the supply chain. That part performance marketing, Google advertising, events for leads, all the different data platforms they use. ZoomInfo 6 sense all the trillion things, most of the marketing budget gets spent there. That part of the process should not be measured against multi touch attribution. And when you do it that way it makes it look like a bunch of shit in that process is working when it's not. And that's why marketing analytics and marketing ROI is off. Because that part of the process is where the money gets spent and it does not have an appropriate way to measure against that specific objective. And then lastly you have prospecting. If you want to own pipeline creation, you must own prospecting. And prospecting can be done by BDRs, XDRs, SDRs, AI bots. If you are smart, maybe you have a direct calendar book so that a qualified person and a qualified account can just book a meeting with your sales team and bypass this whole process altogether. There's like very simple easy technology tools that can do that. I'm surprised how few companies consider that AES might prospect for your enterprise deals. Regardless, those people that do prospecting prospect against a signal or set of signals that become a compound signal. And that thing is the reason that they reach out to some company. And many of the times where they do it is completely untracked as A Salesperson Reaching through LinkedIn Sales Navigator, doing random stuff that never gets tracked. We need to compile all those together. Like I mentioned on LinkedIn, RevOps should have been doing this at your company five years ago. I talked about doing this five years ago and most companies still don't do it. It makes me bring up the question and offer it to you. Why hasn't your RevOps team done this yet? It should make you question and think about what is the purpose and where are the gaps in that function which are large and really important and hurting the growth and performance of your company. And so then you have those three phases, demand creation, supply chain, prospecting. One huge benefit of that is you no longer need to debate, did that come from our website or did it come from a bdr? Who the fuck cares? Did we get pipeline or not? How effect, how efficient was it? Did it meet our CAC target? These are two different things. A Google Ad is different than the website is different than the SDR that books the meeting. You need all three of them need the path to the website, the website conversion, and then the person who calls the person after the meeting to get the meeting and execute that process. And so trying to say did SDRs do that versus marketing did it is just a totally useless debate. And you're comparing apples to oranges and you're digging yourself a bigger hole as you do it. And I sat Carolyn did as well into a top learning school for C level executives last week where there were hundreds of revenue leaders being taught that the way that we should plan and measure our revenue is how much SDR sourced versus what marketing source versus what partners source versus what sales sourced. And that's what a top school for revenue leaders is teaching everyone in this industry. And that methodology is one of the number one reasons why there's go to market dysfunction today. And what is go to market dysfunction? Slower growth, higher CAC, poor misalignment, revenue leaders being fired or recycled every 18 months, sales teams being 40% of quota marketing, ROI being so terrible that they don't have enough quota coverage. The dysfunction, sometimes it's on the retention side too. So I want to be considerate of that dysfunction. And on the new logo side, the unnecessary unhelpful debate of did marketing do that versus SDRs versus sales is actually one of the core reasons why we don't hit our pipeline targets. While we don't know how good marketing is working or where we should invest more dollars and where we should stop, why the how the CFO can't answer those questions and neither can the cmo, frankly. And so something to to chew on. I invite when we get to the question part, which I'll get to relatively soon. That part I think is a place where we should try to facilitate a discussion around cause I'd love your feedback on that and any other questions that come up about what's not clear and tell me all the reasons why you think it won't work. I would love to hear. Because you all are in a different position than me, I'd love to hear sort of what challenges you see coming up. Okay. Lastly, it actually is a nice extension from what I just talked about because from two different firms that have in total probably 60 or 70 active customers where they do operations work for both of them. Tell me one of the most painful things that my customers don't get is the difference or why between multi touch attribution and single touch attribution and that they've been brainwashed to think that single touch attribution sucks and we should only use multitouch. And then they don't understand the cons and the drawbacks of a multi touch attribution model. And they don't understand that in reality we need 3, 4, 7 models potentially to truly understand what investments we're using. And we pick a model based on the objective. Right? So if the objective was strategy, we would have a specific you're actually not going to have a lot of program dollars there, but you'd have a specific way to measure that, which is against business metrics. Right. Strategy covers the whole customer life cycle. So we're going to measure analyst relations and product marketing and things like that against things like close rate, CAC growth rate, net revenue retention, business metrics. There's actually not a lot of investments that go there. Believe it or not, in the supply chain section where you're saying I'm going to spend money, I'm going to get a signal, my prospecting team is going to prospect against that signal and I'm either going to get a meeting or not. Single touch attribution actually works great for that and you can see clear patterns in the data. I know a bunch of people are going to hear me and some fucking idiot with marketing mixed modeling software that they're selling is going to post about take that clip and take it out of context and say this guy's an idiot. He's promoting single touch attribution for that specific part of the process where 90% of the marketing investments get spent. That is a very, very strong model to use. Yes, it matters everything that happened before it. But if you look and you look at we use LinkedIn to get ebook downloads, and then you look at the conversion to meeting pipeline and things like that, and then you look at some data tool that you use or like let's say a target account list based on intent data, then you look at the conversion rate to meeting pipeline, acv, all the sales velocity dynamics, then you look at your website and the demo request, and then you look at your website and a webinar registration and all those different things that cause your prospecting team to reach out will have clear patterns of different conversion rates. The drop offs will happen at different points. Some drop offs will happen before it gets to a meeting, other ones will happen way late stage. And your sales team invests all this time and then loses the deal in the last hour on certain signals. The conversion rates will be different, the deal sizes will be different, the cost of how to get that type of signal will be different, the sales cycles will be different. And so there's a ton of good stuff that you can learn just by tracking that stuff. And the most important part of that stuff is not where you win, it's where you lose. Because your sales team, when they're prospecting are going to lose 99.9, 99.7% of the time, meaning they're going to do something and they're not going to achieve the goal of getting a meeting. And so right now all of marketing measurement is trying to figure out where's the 0.3% that we win? And when we have an ROI discussion and we're trying to say how do we get more efficient, how do we stop wasting money, how do we figure out what to do? It's not about the 0.3% that we win, it's cutting all the stuff, the 99.7 where we're losing. And that is a huge insight because multi touch attribution software doesn't track it inside of CRMs. Companies build their own homegrown multi touch attribution or single touch attribution models. You don't see all the times that you lose when you measure the data this way. That's why the CRM architecture exists that we've been promoting for years that's able to track every single time we do a prospecting action. We need to track the outcome of that so that when we lose, it gets recycled and when we start again, a new record starts. When we lose, it gets recycled and then we start a new record and Then all of a sudden we have millions of data points, we can see all the times that we lost and then you have this demand creation type of area which is basically what are the things that we're doing to get our target accounts in market and some form of mixed modeling, multi touch attribution, self reported attribution, qualitative customer interviews, all that type of stuff can help you better characterize and understand what is working there. But what I'll offer to everybody is that actually very little money gets spent on that objective. Very little. 5%, 10% of the budget at most. Go and look at any company that has a LinkedIn ad account. 90% or more of the investments are on lead gen campaign objectives. Sure there's outliers 1, 2% that have listened to my content for a while and adjusted their mix on those channels. But Most a majority 90% or more of B2B companies still run almost exclusively lead generation campaigns on LinkedIn, which means they're do that's not demand creation. Getting a first touch e book download that your customer never reads is not creating demand. The insight here is companies spend all this effort and all this technology to be able to measure something where they don't even spend that much money on and then they bring the measurement from there and they bring it into the other areas of the business and it makes that where they spend most of the money. The measurement not work is good. The take home message here is we cannot use one blanket model across all of our marketing investments. Marketing investments are used for different purposes and different objectives and different time horizons and require different types of measurement in order to be properly characterized against roi. And then the last thing I'll say and I want to make sure we get to questions monologue has been going on for far too long. The three questions Whenever I am talking with either a customer or pro perspective customer or someone, the three questions that both a cmo, a CRO and a CFO all want to answer and they're all related to creating Pipeline are number one where should I spend my next dollar to get the highest return? Number two what are the things that are working the best that I can figure out? How to squeeze more juice out of and number three what are the things that are my lowest performing investments that I should cut or stop? Those are the three questions that people want to answer. The reason that nobody can answer them is because all three of those questions are rooted in return on investment. That's what makes one of those things good or bad. A best performing investment means that it delivers the highest return on investment. A lowest performing investment is not that we have the least amount of touch points, we spend the most money on and get the lowest return. And in marketing analytics, nobody is looking or measuring properly return on investment. It's all about efficacy. It's all about what is the point 3% that we did that worked. And when you just look at efficacy and you say, oh, we got 200 touch points from our LinkedIn ads on an influence basis, I guess we should keep doing LinkedIn ads because it influenced $3 million in revenue, it's impossible for you to tell what was the actualized impact of that investment. Most people don't even look at how much you spent. Maybe they know how much the ad costs were. A demand gen director will say, oh, we spent 100k on ads, or let's just make it more realistic. We spent a million on ads and we got 3 million in influenced revenue. But they don't include the agency costs, they don't include all the headcount costs in marketing, they don't include the sales costs, the operations cost, the data tools, all the other expenses that are involved there. And then on the influence basis, what other things are saying that they influence the same $3 million. All these other investments are also saying we influence those things. And so when you try to get to an actualized ROI estimate with these models, you can't get to one. And so what do you do? You make decisions based on your experience and opinion, not based on data. You say, this is what I think we should do. And I know because I've played this game. I consulted at companies for a year when I was building our technology at Passetto and all these conversations led to the same place, which is it's my opinion versus the CMOs or it's my opinion versus somebody else in the company. And the reason why it's an opinion, it could be the same thing internally at your company, right? It could be the CMOS opinion versus the CFOs versus the CRO's. And it's just people weighing in on their opinions based on what they've seen. And the reality is that you do not have the data and you're not looking at it the right way to make a data driven decision. So all you can default to is people's opinions. And that's why you can't answer these three key simple questions around where should I deploy my marketing investments and what should I stop? And it's the lack of intelligence around how do we measure the return on investment of all our investments that we use to create pipeline. And then last thing I'll say, because it just feels like it keeps coming. I was talking in a live event last week. Somebody asked like, hey, what do you think are the biggest problems in sales right now? I told back to them, I consult a ton of companies. Ten million ARR, a hundred million ARR, 250 million ARR, everything in between. Most companies don't have any problems with their sales team. And what they do have is that their sales team doesn't have enough fucking pipeline. And if the sales team had appropriate pipeline coverage, they can manage a stage one opportunity to close one at an acceptable win rate to hit their target. The problem is that they only have 40% of the pipeline that they need, and the win rates are lower than they need for them to hit their target. And when you think about the actualized issues inside of a business right now, it's that we do not get appropriate ROI to create pipeline, which means that we plan, we invest enough money and we plan on getting a hundred million in pipeline and we only get 60 million. And then from there, our sales team is playing behind and has to do heroics to make up for the $40 million loss. And that's why our sales team's at 50, 60% quota coverage. And it has nothing to do with the sales team performance. It has to do with they don't have enough pipeline and the model is broken. And the second part of it is that rev ops is really sales ops. And most of the important things related to all the things I'm talking about, nobody's doing inside of a company. Because the people that own rev ops are the people that know how to build a territory, plan and put account icps into salesforce and administer tech tools. And all the things that I'm talking about are the actual problems. And companies can't fix them because they centralize their rev ops department. And the people that are in that department are not equipped to fix the things that I'm talking about right now. And so with all that said, let me see here, I want to see if we can go over because I was a little bit late, but we'll appreciate you all hanging in there. Hope that was helpful. I hope that it's. Some people might view it as contrarian, but that's not what I'm looking for here. I'm looking like, stimulating. Like, I'd love to hear feedback on some of these points here. Some of people would view them as controversial, confusing. So, yeah, would open it up to the audience. Would love to take some live questions here and then let me see if I can go over for a couple minutes. I don't. So we'll have to end at 1.
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Carolyn
We kicked off the meeting today or the podcast, Chris. We were asking everybody in the chat, like, what's your biggest challenge right now? And a lot of people said budget, planning on budget, knowing where to place their investments. And Reece had a couple additional questions as it relates to like metrics to report to the board on this. So I'm going to unmute them to come on live.
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Unknown Speaker
Perfect. Yeah. I feel like the whole topic that I just mentioned is encompassing of this topic and problem, and the reason that I had to talk about it for 30, 35 minutes is because it's a complicated problem. So. Yeah. Where are you, Rhys? Here. Okay, right on.
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Chris Walker
Thanks. Chris, your answers today covered a lot of the territory they wanted to go over. So I'm sorry if this is kind of just parroting somewhat back to you, but thanks for giving me your time. Thanks for all the incredible, like, literally priceless education you put out on the marketing sphere. And thank you for having, like, the slappiest pod intro music in the biz. So I'm new in my role. This is just entering my second month. It's a 5 million SaaS AR business, and I'm being tasked with delivering contributions to our next board meeting. And like, traditionally just looked at raw pipeline metrics, like how many leads are we delivering and opportunities and meetings held and et cetera. And so naturally, these numbers are kind of not landing very well. And so based on kind of what you said, I want to put my best foot forward for our management team, our VP of finance and our president with kind of framing marketing's investments similarly to what you were just talking about or based on what you've talked about. For a while, I was just kind of looking for more of a, like a yes, no, you're on the right track. I would do it this way, maybe differently kind of answer, but essentially trying to break it down, like you said, based on the marketing stage of like, and this is my framing of like, demand creation, demand capture, and like in pipeline demand, and then getting all the spend in each of those categories and then scrutinizing the spend there against the objectives. In practical terms, I'm saying I'm doing a 10K ad campaign, and 80% of that is supposed to create demand, and then 10% of that is going to impact capture and 10% of that is going to impact in Pipeline, then we can kind of justify somewhat, at least we're going to see 80% impact creating the demand from that spend. And that's where the money sort of is going and that's the impact it's going to have. Am I on the right track there in terms of how I could really frame this for a board?
- [29:28]
Unknown Speaker
Sort of. Maybe you are. And I just need to talk through some of the nuances here. Let's use in pipeline marketing as a great example. Right. The reason that we invest whatever $10,000 or something like that in an air cover campaign or events for companies that are in pipeline or something like that is because that $10,000 investment in comparison to the millions of dollars that we spend on a sales team, the miniscule improvement in productivity on that 10k makes the millions of dollars that we already spent on sales work way better. And so in order to measure and effectively report on those investments, you must have all of the sales expenditures and all the stuff that you do, you spend to and then baselines against all those performance metrics like win rate from stage two to close one, average deal size. You might want to consider doing the marketing to half of the pipeline accounts versus the other half and measuring the impact to make sure that it's valuable. But really the reason that we do it is that if we improve win rate by 0.2% or 0.5% and you're a decent sized company, then the ROI of that additional 10k against what we already spend is astronomical and by far the best 10k that we could spend. And so we just need to be able to be able to frame up the reason why and then be able to talk through it. Because if we don't have that in place, we just say we spent 10k and maybe win rates go down, maybe we, we lose more of the small SMB companies and we win more of the higher deal companies and we just measure it on win rates and win rates go down by 3%. But we're, we win more of the high quality deals and we lose more of the low quality, higher volume deals. So just one metric on its own is not appropriate to try to center on here. Which is why we need to be looking at the financial, the expenses and the CRM data altogether. But you're definitely on the right track here. And then last thing I'll say just to help you and others, is that there's going to be a section of investments that don't fit into those three categories, which is going to be product marketing, analyst, relations, Things that maybe you hire an agency to help with your messaging, maybe you spend 10k to do a customer research project. There's many things that hit the marketing budget that have nothing to do with pipeline creation. And we. It's smart as both executive leaders and marketing leaders to make sure that those are separated so they don't get scrutinized in pipeline creation when that's not the goal. And then that will also make sure that we're appropriately investing in pipeline creation and measuring unit economics properly. So that's why I have the strategy bucket at the top. Because those can't. They should not be measured against pipeline oriented goals. They should be measured against the performance of the business strategy which I mentioned. Cac, nr, win rates, sales velocity, sales quota attainment, things like that.
- [32:09]
Chris Walker
So first step is really like getting with my finance team and, and having visibility into those metrics and creating baselines so that we can measure against marketing's impact on them.
- [32:19]
Unknown Speaker
Really Precisely. Yeah. And then I think that a lot of companies put BDRs in sales. I think that BDR should be moved to pipeline creation regardless of which department they report into. When you look at the analytics and say what is the roi? We should put them. They do prospecting before pipeline is created. They are part of the pipeline creation team. And then you'll have things like solutions, consultants and rev ops and other things that it's not just sales commissions that are used to close new logos. There's a lot of other things in tech and data and the Panda doc and subscriptions. And so there's just when you actually like I mentioned it on the marketing investment, when you actually break it down across all the different departments, there is a lot of expenditures that are people, programs, technology, process consultants, agencies. So just all those line items need to be finance can say this is all the stuff that hits CAC and this is what department spent the money. But even the department is not a good categorization across the customer lifecycle on its own. And then we need to be able to pull out things that have nothing to do with the actual objective. So there's just like some processing that needs to happen more simple at a company that's doing 5 million RR than 50 or 100. For sure.
- [33:19]
Chris Walker
Yeah. Thank you.
- [33:20]
Unknown Speaker
Happy to help. Let us know what you find after a week or two.
- [33:23]
Chris Walker
Do okay.
- [33:24]
Carolyn
Before we bring on our next guest with a different question, Tanya, do you want to come on. She had a question just in relation to what you and Reece were just talking about.
- [33:32]
Tanya
Sure, sure, sure, sure. This so Chris, you were talking about agency expenses. I just wanted to clarify because I like the pipeline creation. I love the simplicity of it. I think we tried to get so prescriptive and so I just, I love this. But this is just a very prescriptive question. When you were talking about the agency, does that fall into supply chain or is that part of the business strategy? I want to make sure that I'm understanding where that falls. Does that make sense?
- [33:58]
Unknown Speaker
Perfect. Yeah, it makes perfect sense. It depends what the agency is doing and what the scope of work is. Okay. So it's really, this is really mapping around the objective, not necessarily just the category of stuff. Right. You could hire an agency to help with your messaging. That would go in strategy. You could hire an agency to run non conversion based LinkedIn ad campaigns and that would go into demand creation. You could hire an agency to run your Google Ads for performance marketing. That would go into supply chain. You could hire a GTM engineer to try and automate with clay. That would go into supply chain. Depending on what they're doing, it might fall into prospecting. You could hire an agency to market to your existing customers to try and increase pipeline for expansion, renewal and that would go on to expansion. And so there's like it's really about the objective of the agency. Bigger companies I've noticed as trend because I own an agency, many of them are asking, hey now we want to hire you to do over the top marketing to all of our existing customer or tier one accounts in our existing customer base to drive up nrr. Right. And they, they set up a separate scope of work and retainer contract for that side of the customer life cycle, which I think is super because it separate the expenses and how those expenses get scrutinized. So it really depends and so gotcha.
- [35:01]
Tanya
It depends on the end use of it.
- [35:03]
Carolyn
Okay.
- [35:03]
Unknown Speaker
It should be the marketing leader's job to look at every single thing that they spend money on and say what is the goal of this thing? And put it into one of those four categories.
- [35:12]
Tanya
Got it, thanks.
- [35:13]
Unknown Speaker
And then you'll find many things that people are like, oh well we do it for brand and like sometimes we get a lead from it and like. And it's like, no. Every single thing should can be segmented off to. This is the goal of it. And if it hasn't been, then what people are trying to do is give it a bunch of different objectives so they can pretend like it's working when it doesn't really have a place.
- [35:33]
Tanya
Right? Absolutely. Absolutely.
- [35:36]
Carolyn
Thanks.
- [35:36]
Unknown Speaker
You're welcome. Great question.
- [35:38]
Carolyn
Duke, you're up next. Go ahead.
- [35:40]
Duke
Thanks, Carolyn. So my question, I had a few different questions that I was throwing in the chat, both related to resources and specifically when it comes to headcount. And I know I don't think I'm making this up, but I thought you had a strong opinion about BDRs, SDRs, maybe if it was even years ago of is it still a viable role? Does it work? And I've noticed you started talking about them more. Is that a role that you still see value in or is it more something that you're noticing that more companies are still continuing to use? And it's just, it's relative based on the industry of the company of if it works or not versus it just blanket isn't something that you should subscribe to.
- [36:18]
Unknown Speaker
Yeah, I'm going to answer your question just one second on Tanya's thing. And this is for everybody. Yeah, agencies are an external headcount expense. They are not, they do not belong in program dollars. And many people will take the pro, put the agency percentage of media fee and put it into their program dollar investment. It's wrong. Those are people that are running the stuff that if they weren't doing it, you'd have to hire internal people for. So agency should always go in headcount costs, external, not in program dollars. And then duke, we got SDRs. Right. So if you listen to the nuance of my message because I've been challenging this role since 2017 on my own and then 2019 publicly, because when you just look at the data and you use easy mathematics, it just like for many companies, it doesn't work. And especially as your ACV gets lower, you get a ton of pressure on CAC and you can't make it up with volume. And the nuance of my message has always been this function needs to be reinvented, not removed. And so there are certain types of companies and I think the cutoff is somewhere around 18,000, maybe up to $30,000 in annual contract value on average. Where you just simply can't afford the marketing headcount, the marketing investments, the operations, the SDR and the salesperson and commissions. And sometimes companies have a solutions consultant involved in those deals too. Right. There's just too many expenses for a small deal and you just do not have the capacity to make it up in volume. There's only a certain amount of deals people are going to be able to work and close within a period of time. And so for those ones, yeah, the SDR gets squeezed out and as the ACV gets lower, they get squeezed out and need more. And those companies used to do SDRA model and they basically get forced to run product led. So that's like one section and then you have this 30k to 100k deal where like mathematically, yeah, like an SDR model works. And yeah, the TAM is starting to get smaller and we know more about who our ideal customer is and we're going to want to, instead of just waiting for them to knock on our door, we're going to also want to go out and engage with them. And when we do that, maybe it shouldn't be a 22 year old kid that's comped on number of dials that they make. Back in the day when I worked at companies that have sound business fundamentals and great financials and were highly profitable and had done that for 10, 20 years in a row and sure they grew at 11% a year, not 40, but the business fundamentals were there. That's where I learned a lot of this stuff. And then you can apply those fundamentals to grow faster, but it's hard to do it the other way around. The business development people were experienced industry experts. They spent a lot of time in the field engaging with companies, working on huge contracts, big strategic deals. They were smart and business savvy and had been a sales rep and carried a bag. And now they were doing this strategic, important role for the company of trying to unlock new markets and new strategic partners and new things. That's what business development should be. And so the churn and burn, high scale, predictable revenue model, like buyers hate that and they've hated it forever. And companies just have taken five or ten years to realize what the reality is. Buyers have always hated that shit. I surveyed our customers in 2017, that's exactly what they said. That was eight years ago. And then you have AES and many AES are strategic and important and if they were fed the right signals that were high quality signals with right people, then they would also be very effective at prospecting. Much, much better than in sdr. But not the churn and burn. We have to make a thousand calls and emails to get a meeting. And so the take home message of the story is that instead of shooting a shotgun a hundred times and hoping that we hit one thing, we should be way more focused, way more productive, way more efficient on these are the right people, these are the accounts that we want. And then use a high value, smart, strategic person to execute those actions that are high probability for success when they're low probability for success, you're going to have people that quit, you're going to have churn problems, you're going to have employee churn problems and you're going to have efficiency problems. And the whole predictable revenue model was built on just if we do more, it doesn't matter how ineffective it is, we'll just keep doing more of it. And over time the performance continues to degrade to a point now where people are like bringing up the questions that you brought up right now. So I just think that the role is not the problem. How the role is measured comped, who they hire, what they do, who's managing them, where they're focused, those are the problems.
- [40:34]
Duke
Got it. And if there's more, if there's time, when it comes to the question of when you had said a five person marketing team is going to be able to work and move much more quickly than a 100 person marketing team, the same hold true on sales where trying to add more sales HUD counter is that really going to solve the problem versus shouldn't you be trying to be more efficient with the sales team members that you had going back to if you want more activity, you need to be creating more pipeline for them to work on, right?
- [41:01]
Unknown Speaker
Yeah. So there's a different segment in a previous event, but I'll sort of reiterate the Cliff Notes and then maybe like Carolyn or someone can find you. Carolyn, that was when we talked about the how is headcount going to change? It was the first question after my opening statement. I think on last week's episode or the last time we did it, I missed last week. That's why it's okay. We'll give you the podcast link. But sales headcount and productivity can't change until you fix the pipeline engine and the prospecting engine. Because right now all that's happening is there's a ton of garbage coming through and there's not enough of it. And so yeah, I think that companies should strive to in the next three to five years to double the PRP and productivity of every single sales rep and potentially have significant half of them. There's significantly less sales reps that achieve more revenue, make way more money, stay way longer, are better for customers, are the highest quality people like it's good for everybody. But you can't when the productivity of the efficiency of the overall engine is so low when it comes to win rates, conversions, things like that, and then the goals are too high. So marketing and SDRs are shoving low quality pipeline in There. And then sales is taking a first and a second meeting with a company that's never going to buy your stuff. Not because they're firmographically disqualified, because they're just not interested. And just over and over, okay, let's give away gift cards because then we'll get the meetings and then marketing SDRs are hitting their target and then sales is left at the bottom of the funnel with a bunch of low quality pipeline. And so the only way that sales productivity and headcount can dramatically change is if you fix the front of the factory. Think about it, it's just like a factory, right? Imagine that you the beginning of the supply chains coming in. We're trying to make a car. 99% of the wheels have holes in them. And we have our sales team at the bottom getting ready to put the wheels on the car and make the car. And most of them have holes on them. So what are they doing? They like look at them and they expect that they put it on. Then they realize there's a hole and they have to go back and take it off and they get another one. Then there's another hole and it's just like, what do we need to do? We need to get better wheels. And that, that is not a, that's not a sales problem. And if they're my one man's point of view, I'm sure some companies have sales problems and sales performance problems. But one man's point of view, a majority of companies do not have a sales problem. They have the wheels have holes in them that come from marketing and SDRs. And they need to fix the wheels, not try to make their sales team 2 or 3% better. And then once you do that, then you create a whole different. This is what I talked about, this since 2017, the ability to scale your business totally changes when the marketing SDR engine is working under proper guardrails of unit economics and performance. And when that happens, sales headcount can change, sales productivity changes, sales quota attainment changes. Boom, boom, boom. Then they start playing ahead. They have more confidence, they're bringing in better customers. And those customers are coming in, they're better prepped, they go in, they expand faster, they onboard better, the whole thing changes. But the front of the factory, everyone downstream of that, which is everyone on the go to market outside of marketing, has to live with the stuff that comes in the factory. So I don't think that there's any better way to end this episode than that. I mean most CROs are most focused on trying to fix marketing and that's where they should be because that's that's what actually holds them back from achieving the goal or the biggest risk. The plan is pipeline performance right now. Cool everyone. We ran a couple minutes over we'll be back next week. I will be on time next week. I promise that. It doesn't happen to me often so I apologize for that. And I'm about to go on my first finance podcast. I got invited to speak on the CFO podcast and talk to CFOs about go to market because honestly I'm starting to believe that the problem that I talked about today is really a finance problem that just negatively impacts marketing and then downstream impact of it. The CRO needs to live with and I don't I some CMOs are going to be I can do anything and I am in. I'll clap to that. I'll clap to you for thinking that way. But really the finance team should own the calculation of unit economics and the struggle with is Most finance people, almost 99, maybe 99.9% of finance people just don't understand go to market at a level where they can help. So they default to whatever Gartner says or whatever their CRO says or whatever their investors say and all those models are outdated and don't work anymore. Okay, thank you all for being here. Appreciate all of it and we'll see you again next week. Sat.