How do I move my software product upmarket? You need to understand the differences between your current customer base and the one you want to have.
BSMS 41 - What should marketing contribute to revenue?
We identify that there are three main buckets where revenue can originate from:
- Relationships from sales organization (sales generated leads)
- Outbound (prospecting and lead generation)
Welcome to episode 41 of B2B SaaS Marketing Snacks. My name is Mike, and I am the product lead here at Kalungi. And as always, I'm with Stijn Hendrikse, who is a multi-time CEO, CMO, CRO, and founder, and also the ex-product marketing lead for Office 365 at Microsoft. Today we're talking about how much pipeline marketing should be responsible for, and the reason we were kind of talking about this started to come up in conversations that Stijn was having with some of his coaching clients, and essentially to make decisions about where you deploy your teams, your time, your money, your effort, you have to be able to answer the question: Where does our pipeline and revenue actually come from?
So we kind of think of attribution sources as relating to three main buckets, which is sales team relationships, inbound, and outbound. And the ideal mix, I'll give a little spoiler, is about one-third contribution from each of those categories. But obviously, those numbers are kind of aspirational, what you should be aiming for, and it looks very different when you're early-stage just getting started, and it can change a lot depending on your market maturity and your product maturity. So in this episode, we share our thoughts about how to benchmark those numbers, how to get started with attribution, some of the common pitfalls that marketing sales and leadership teams fall into when they start to have that pipeline contribution conversation.
And yeah, that was a good one. Before we get into it, I just want to make one quick announcement really excited about something that we've launched over on T2D3 pro. It is a Masterclass that our team is working on led by Stijn. So if you like the content of this podcast, I would highly recommend at least giving it a look. Essentially, the way that we've set it up is that starting in Q4, it will be a complete program with 18 lectures ranging topics of how to kind of become a B2B SaaS CMO, the complete SaaS journey, how to manage your marketing strategy, tools, frameworks for prioritizing growth, managing marketing tactics, positioning and messaging personas, SEO, market segmentation, building your ICP, writing killer testimonials, account-based marketing, growth management, building your first team basically everything that you could hope to learn when building, executing, and managing a complete go-to-market for a B2B SaaS company.
And for now, we have it set at a major discount for early access as we finish up the last few lectures. So if you're interested in that, we'd love to have you at least give it a look. And if that's maybe something that's a little bit out of reach, there's always the T2D3 book, which contains a lot of the same content. If you think of the book as if you think of the book as a textbook, the program is the college course where the book, the course goes deeper and gives you examples, takeaways, hands-on learning exercises and quizzes. And we've also launched a free certification over at the T2D3 site that you can take just by reading the book. And you can actually get a complete certification link. You can add it to your LinkedIn as a way to signal to your leadership team and to the world that you're serious about your go-to-market chops. So if you're interested in checking that out, you can go to t2d3.pro/masterclass or go to the T2D3 Pro homepage and navigate to resources and you'll see it in the navigation there. All right. Thanks so much again for choosing to spend your time with us. We really appreciate it. Let's get into it.
How are you doing, sir?
Lovely, how are you?
Very good, very good. I've had a lot of conversations the last couple of months as I'm coaching leadership teams, and especially with the challenges that some companies have with funding in the current economic climate, sort of who's responsible for what in the leadership team. And it's really usually part of a very mature approach to using OKRs. I think that's really getting better and better. I see so many companies doing that in a really good way, but it also leads to the leadership teams now having to answer very specific questions around who owns what part of the revenue contribution. And marketing is, of course, always very front and center in that conversation. There's an interesting spectrum of sometimes you meet companies that have never done marketing at all, or they don't have a marketing leader. They basically say they haven't done marketing, but of course they have.
They just haven't officially named it. But they usually have a website, they have a communication that they do, etc., but they don't have an official marketing leader. They do not have a marketing function marketing team, but they've grown to sell multiple millions in ARR, reach product market fit. So they have somehow generated leads and closed deals, etc. And then you have companies where they're completely at the other side of the spectrum where the whole sales team and the founders and the executive team is looking at marketing to drive complete funnel, that every single piece of growth has to start with how many leads are marketing able to bring in? And of course then how many of those can convert at what rate to what side deals, etc. And the reality is, of course, that neither of those is usually very sustainable, and there's usually a mix. Revenue comes from many different sources, and so does the sales funnel. So yeah, I thought maybe it's an interesting topic to talk about.
Yeah, absolutely. I think there's a lot of mechanics that play into that specifically, and it requires, in order to have this conversation, you almost have to set the foundation of having some sort of way to track and understand and define each of the stages that a prospect would be at in your funnel, and a clear alignment across your teams marketing if you have a rev ops team sales basically of what specifically those prospects are, what they look like and what actions they've taken, what kind of intent signals they've given at each of those stages. And I think that's where we tend to see it kind of go awry or wrong. And where you see those disagreements and arguments happen between sales and marketing is sales will say, "Hey, these leads kind of suck, or these marketing qualified leads suck." And marketing will say, "Well, they fit the definition that we have over here." But that definition was never really decided on as a consensus. It was kind of built over in the spreadsheet and never really saw the sales team's eyes or whatever. So I feel like that's an important topic to talk about before we can go into some of the things that you were mentioning there.
No, absolutely. It is so interesting to look at the early stages of growth of a company and the amount of data that's missing when they actually got to a couple million in revenue. So they did not have real marketing automation or a sales CRM, so you don't actually know how did the founder get a lead through one of the investors, and that turned into maybe the best client, the ideal customer, how did that sales process evolve, etc. So I think first of all, we are always, when we talk on this podcast, we're focused on B2B, right? B2C of course is a little different,
But then B2B, and whether that's in the public sector or in a certain industry, I think what you find is that, so buying behavior is complex, right? In B2B, you typically have multiple decision makers, or at least multiple people can potentially say no, and usually only one or two who can actually say yes. So when you ask the question, who are the people both in our own team who influenced this deal and what did we do with the customers who were actually there, the decision-makers, especially in the early stage of the company where you don't have that in CRM, it's pretty tricky to resurface some of that data.
But what I found is it's super helpful to kind of start with, "Hey, what is the list of top 10 or top 50 [customers], depending a little bit how large you are now of customers that you really like? Where did they come from? And look at the ideal customer list and say, Hey, how did we get these customers? How many of these can we trace back to have been people who filled out a form on the website or who we met at a conference and we had not met before or were introduced to us, or we hired a salesperson or we hired someone in our team, doesn't have to be a salesperson who brought some relationships with them from their previous network. And just doing a quick analysis, especially when your CRM is not that mature yet, where the data is not that accurate.
To kind of see where your best 10 or best 50 customers came from is a nice kind of baseline. And what you then typically find is that there are really, there's hundreds of ways to detail this, but if I break it down in three major sources of revenue, when you think of where did the revenue originate, how did the funnel get filled, so to speak, I'd like to say there's really three big buckets. One is relationships from if you're getting a little more mature, you would say relationship from your sales organization, your executive sales team, the people they know because they worked somewhere before they sold to them, before the people they know because they were introduced to them when they have a sales conversation, maybe someone says, "Hey, you should actually talk to this other person." So all these kinds of relationships that evolve from the team itself, usually your sales organization. So let's call those sales-generated leads, right? And sales also including maybe your founders or other people in your team who are selling, because everybody, honestly in your team could be a potential salesperson, right? Bucket number one. And bucket number two would be an actual concerted outbound effort where people in the company are actually using whatever techniques, an email or phone call to reach out to people who they think might be a potential fit.
This is usually called BDR work or prospecting or some kind of an outbound campaign. Account-based marketing is sometimes also done in an outbound fashion, so it would be bucket number two. So generating leads with a concerted outbound effort, using a list, buying ZoomInfo, and just go try to contact those people or LinkedIn sales navigator. And then the third bucket would be real inbound, as in people who are looking for something, and they find you, right? They find you because they go to a certain event, and you happen to be there, a trade show for example. They find you because they search for something online, and they find you either through an organic search position, through an ad that you have in Google Ads, for example, or on a social network. But I think those three buckets—the sales team or anybody else in your team generating the lead, an outbound prospecting effort, or an inbound lead—typically all those three happen in most companies that have more than 10, 15 clients. You'll find that all of those have happened. So knowing what the distribution of those is is a nice starting point to think where do we think our revenue in the future could come from?
Yeah, absolutely. And what's interesting, I think when you're talking about CRM, one of the, and we'll talk about this in another podcast episode, it deserves its own, but one of the things that we've found through our own independent research is that most companies that are in early stage, even up to a few million in ARR, tend to lag behind when it comes to having funnel discipline and a clean, secure CRM where you can accurately track those three buckets that you're talking about, even those three, let alone even deeper when you say specific, this came from this paid search campaign, or this came from this outbound campaign, or this sales rep, which is something that I think we'll get into. So one component is essentially just getting a good handle on your three buckets. Where did the lead come from? Relationships, outbound or inbound?
And then I think this other big component to the whole funnel discipline conversation is around what stage are because there are so many different ones. They can be completely kind of unaware, you've touched them once, and then that's at the very top of the funnel. And then at the very bottom of the funnel, you have a closed-won customer, and there's all this stuff that happens in between, and you need to keep track of that in order to make sure that whenever you're having touches with them, whether it's a salesperson or marketing emails, retargeting, etc., that they're getting the right communication at the right time, depending on lifecycle or their buyer's journey, so to speak. And that ties into this topic that you mentioned, which is this concept of you the fish. And so maybe do you want to explain what that is and we can talk about funnel discipline, or do you want to talk about each of the funnel steps before we get into that?
Yeah, no, that's a whole topic in itself. Let's do that. Can I say a couple more things on this? Let's call it the boardroom version of this topic. Where does our revenue come from? So this is a group of leaders who sit and they do their annual plan or their OKRs, and they say, "Hey, the marketing leader, the sales leader, the CEO, the product leader, who should own what part of the revenue pipe customer success when it comes about revenue expansion and ARPU expansion for product?" If you think about the market you're in, so let's say you do the first exercise, you look at your top 10 customers, top 15, it's kind of, okay, these came from inbound, these come from outbound, these came from relationships. Great starting point. Now the second question you can ask yourself: How mature is our category?
Because if you are in a relatively new category, you're making the market, as we'd like to say, you have to do a lot of probably educating the market on the problem that they could solve with your solution, making people problem aware, et cetera. In a market like that, it is a little more likely that you have to depend on outbound prospecting, rainmaking, so to speak, or even maybe driving inbound with a lot of content marketing because you actually have to educate the market. The chances that you get a lot of your business in a market that you're creating a new category from relationship is smaller, right? If a market is more mature, I love to use this example. So my first sales job, Mike, I ran sales for Microsoft in the Netherlands for a certain part of the enterprise market. I owned sales for public sector, for education, for healthcare, for a couple of industries, and this was the enterprise sales for Microsoft.
So this was about selling to governmental entities, right? Big hospital organizations, large organizations, big universities. We knew who those were, right? It's not that you have to go build a list to find out what are the top 10 departments in the Ministry of Justice, the Ministry of Agriculture, you know who those are. So when you build a sales plan for that and a marketing plan, you kind of start with, okay, what are my top 50? Let's call 'em enterprise accounts that I have, and I have a set of salespeople, and I assign them an account. And now you say, "Hey, you go work that account. You built your account strategy, your account plan, and that includes going to meet with all the relevant people in this organization, etc." It's a very different, it has nothing to do with inbound marketing or waiting for leads to come in. You have a disciplined, targeted approach to go win a certain set of target accounts. So this is an enterprise market segment, and this was of course, a mature category. Everybody at that point was aware that they needed Word, Excel, and PowerPoint and Windows, and so there was no educating to do.
So that's a very different situation from when you, for example, the company that I've started a couple months ago, Amy, a very modern way to do customer service for small business, a chatbot for small business. And chatbots maybe are not necessarily new, but the way we're doing is very new. So we need to do a lot of education, a lot of inbound marketing. We're knocking on doors, we're trying to find the dentists and the brewers and the yoga instructors and such to say, "Hey, we can help you do customer service better. "And that's a complete inbound demand gen plan, right? Product-led growth, right? There's no sales team. The size of the ARPU is also far too small to be able to afford salespeople—big extremes. So you can have a software company where you can argue that all your leads, all your business, your pipeline contribution needs to come from your sales team. That's the Microsoft enterprise sales example in the Netherlands that I used. Or when you're on the other side of the spectrum, you're selling to small businesses, your ARPU is maybe a couple thousand dollars a year. You don't have any way to do sales or even outbounds. You have to do everything in product-led growth.
So I think answering this question in your leadership team, your executive team, where does the revenue for the funnel come from? Whether it's from inbound, outbound, or relationships, changes based on how mature your category is and changes based on the type of market segment and go-to-market that you deploy.
And I have a kind of rule of thumb that, let's say, the baseline would be you get a third of your demand gen or your funnel needs to come from inbound, a third from outbound, a third's from relationships. And then the more you are in a mature market, and you are more towards the enterprise segment and larger ARPU, larger ACV, then it skews more towards relationships all the way to the extreme that I gave with the Microsoft sales team where almost a hundred percent of the revenue of the funnel came from the sales team generating those leads themselves all the way to small business or almost close to prosumer, where everything has to come from inbound or even more extreme product-led growth where nothing can come from sales organization, you cannot afford a sales organization. So this distribution between these three buckets I think will change based on your type of go-to market, the size of your ACV, but also the maturity of the category.
So anyway, it's just super cool to see how leadership teams talk about this. And the one thing if you're coming in as a marketing leader or a marketing consultant that you immediately have to debunk is if there are people who think that all the leads need to come from marketing by definition, and unless you ask a couple of questions like, "Hey, what market are you actually going after? What's your go-to market model? What's the deal size? How mature is this category?", there's no way you can actually say that that would be the case. So yeah.
Can I add one concept here? Because I've been in a scenario like this where a lot of companies will start, let's say you're in the messy middle you talked about. It's a little bit more clear when you have a product-led go-to-market or an enterprise, sales-led go-to-market. In the middle, it gets a little bit messy. Or sometimes what happens often what we see is that companies will build a sales team to sell, let's say a $10,000 ACV product, and they build a sales team to get their initial momentum going, and then they'll say, "Okay, now we need marketing." And so then marketing will kind of get spun up, and oftentimes the expectation from founders, leaders is that marketing will start to immediately contribute 30% to the funnel. So I think it's also important to acknowledge that there's a ramp there.
And there's also a need to our earlier point, I think be able to attribute these different attribute revenue to different portions of the funnel. One way to do that is have a clean CRM. We like to use HubSpot because of all the things that it allows us to do. You can use it extremely deeply, or you can set it up to do the basics and still get a lot of the data that you would use to actually segment out that information, which is phenomenal.
A simple way, the simplest way if you don't have a really secure CRM, is to just ask in let's say a sales call, "Hey, how did you hear about us?," or, "Where did you find us?" Right? That can give you a lot of insight into, because there's a lot of talk now, especially if you're in the demand gen space or you follow demand gen thought leaders on LinkedIn about this concept of dark social, which is basically this idea that a lot of modern purchase decisions happen behind closed doors in ways that are not attributable in your C R M.
So let's say I buy a product and I'm in a group, let's say Dave Gerhard's marketing group, now Exit Five, and someone asks for a recommendation, and I recommend something. That's not something that's going to show up in your CRM, but it will show up if you ask them in your sales call, "Hey, how'd you hear about us?"
"I heard about you through this other person."
And then suddenly, you now have a touch point to be able to say, okay, this was through marketing maybe, or I don't know how you want to attribute that at some point. The other caveat is that at some point, all of your revenue as a goal should just be shared between the three teams. It's almost like you use the attribution of outbound relationships as kind of a benchmark, but at the end of the day, shouldn't all the teams kind of be shooting for, like here we have a shared revenue goal that we are trying to hit as a team together as opposed to fighting for, this belongs to sales, this belongs to marketing, this belongs to whoever else. I mean, there's a lot there.
Yeah, no, you're right. When you walk into a leadership team discussion or just an organizational culture where there's that kind of siloed behavior, like marketing is pointing to sales because they don't follow up or sales is pointing to marketing because they don't get enough leads, that's just not a very productive way of working together because none of the revenue will ever be or can ever be attributed just to one of those functions. There is always a combination of factors that determines how you get a new client. But I mean, in the end, it's about where people focus their energy. And for a leadership team to understand that some of the revenue has to come from salespeople making calls with their relationships and following up with their LinkedIn profiles and marketing, making sure that the inbound engine cranks on all cylinders and that the follow-up on whoever comes to the website, that they get cookied correctly, and that they can be nurtured correctly with the right advertising or the right email nurture, etc. Especially to the point where you just made Mike, I think with Web 3.0, right, the new kind of discussion last year, everything becoming so much more anonymous and harder to track, whether it's with blockchain and with distributed platforms and where for many good reasons people want to get a little bit of the power away from the Googles and the Facebooks and all these tracking mechanisms and get back some of our privacy, it'll make it even harder to do these things.
So getting genuine insights from your own sales team, from your own marketing team, from the clients, from your prospects, by asking them "How did you find it," is going to be very, very important, and that when you get that information that you actually do something with it. You store it in a useful way and you use it appropriately.
Yeah, so great. We have an article on this, actually a blog on the Kalungi website. You may want to link to it on how you think about the distribution of where the funnel contribution comes from, but I thought it was just an interesting topic given where we are in the year. People are thinking about: How do we make our 2022 goals with the economic outlook being a little shaky? So you can see some of the finger-pointing happening between marketing and sales and having a very data-driven and productive conversation about, "Hey, where did our revenue come from the last couple of years, and how do we build on that?" Much easier, much better than making it a black-and-white kind of sometimes even a blame game. Great.