Marketing is increasingly about tangible results. With this comes the option for companies to outsource the complete marketing function. As the quality of data and attribution of outcomes is getting better using integrated tools that track the complete Buyer’s- and Customer Journey, it now is a viable option to hold a SaaS Marketing Agency accountable to results.
Here are the main questions that we often get from B2B SaaS CEOs as they evaluate Kalungi’s services, and I wanted to share these with you. With the COVID-19 impact this year, many companies are experiencing how to do Marketing without “having your team in the office”. The additional pressure to rethink investments in a team of employees, vs. the flexibility of an agency, is leading Startup Founders, Investors and Board Members to consider options to minimize, right-size, or outsource services that are not seen as core competencies. For many SaaS Software Ventures, this is putting Marketing Execution, and sometimes Marketing Leadership, squarely into a “buy vs. build” trade-off.
So what do you need to know when you consider outsourcing you marketing? Here are the “Frequently Asked Questions” that we have gotten of the past years:
“We sell to a certain vertical industry, and their problems are unique and specific. Industry experience is critical here so how would a generalist CMO manage this?”
Pairing Industry Expertise, with the experience of a CMO who has built and led B2B SaaS Marketing teams is of course the ideal mix for most B2B SaaS Companies. This follows our deep belief that especially early start SaaS ventures need to “nail a niche” before they go broad, and a vertical focus is often part of that. B2B Solutions in for example Healthcare, Public Sector, FinTech, and Telecom all will have to adhere to specific requirements of those markets, be it policy or regulatory related, the way revenues could be dependent on a program like medicare, or just because the business models and language of a specific industry are key to success in the go-to-market, content and driving brand awareness.
We believe their is one level of “Market Expertise” that surpasses the value of Industry Expertise, and that’s the experience with marketing to an audience at a certain stage of the technology adoption curve. If your B2B SaaS Solution is all about creating a new market or product category, and you need to drive adoption through “innovators” and “early adopters”, a CMO who has experience with that is going to be more valuable then a CMO who has great industry experience, but has only done marketing in a mature category, optimized for “late adopters” and “laggards”. More on this topic in this article about market segmentation for early stage technology companies.
This question requires two answers for two different engagement types.
An Interim CMO (or Outsourced CMO) ideally has one engagement that they can focus on at a time. This works well for B2B SaaS Companies that are at least $10M in ARR (Annual Recurring Revenue). A full time Interim CMO is needed to manage a team of usually 5 to 10 marketing professionals, plus the agency resources. When Kalungi services companies in the “Scale” or “Profit” stages of their growth journey, this is a good fit.
We have found however, that most smaller B2B SaaS Ventures who are still in the “Start” stage of building their marketing function ($1M-$10M ARR), cannot afford to get the CMO with the right experience level in a full time engagement. The retainer fee for this level of experience would simply not leave enough budget to spend on the rest of the team, discretionary spend like media or content, and agency/freelancer support for things like design, website creating etc.
Kalungi thus has created a shared Marketing Leadership service, where a CMO-as-a-Service can manage multiple engagements, while sustaining a high quality level of service. We call this a Fraction CMO, our CMO as a Service (CaaS).
Ideally, a Fractional CMO (or Shared Service CMO) does not have more than two clients where they "run the marketing function". Typically one of these Customers is ramping up where the CMO is building the team and putting the infrastructure in place, while at the other client they are managing the team through it’s stages of improving output and performance, focused on the KPIs in the next Question and Answer.
When outsourcing marketing you need very specific KPIs that are based on meaningful outcomes to underpin an engagement. At Kalungi we go as far as making this part of a "pay-for-performance" compensation structure, if our clients outsource their complete marketing function to us. This is pretty unique, and can realistically only be done if an agency takes ownership of the complete Marketing function, and thus control most of the variables like content quality, data- and analytics, campaign management, online presence, product positioning and marketing strategy. The KPIs will change as the engagement matures and your outsourced marketing team get increased "control" over the outcomes. Here is an example blog on how to think about this.
If you outsource your Marketing to one agency and want to hold them accountable for results, you typically need to let them manage all the resources. Especially your “Outsourced CMO” needs to have autonomy in the selection and management of all marketing resources. At Kalungi we split our retainer in the Marketing Leadership part (your "outsourced" CMO) and the Marketing Agency Services. Clients who hire us for both services can benefit from our offer to take accountability for results. This allows clients flexibility once they hire an in-house full-time leader, or have internal team members who would do some of the execution.
When outsourcing your marketing leadership, or your complete marketing function, 6 months is a good timeline to commit to and see tangible results and ROI. 3 months is the minimum to get going with the Marketing infrastructure, put the team in place, have content start to flow and get the online presence up-to-date. This initial 3 month period also allows to set benchmarks for KPI performance like Marketing Qualified Leads, Conversion rates, Brand Awareness indicators and ROMI (Return on Marketing Investment) goals like cost per lead, customer acquisition cost (CAC) and MarTech infrastructure expenditures. A Kalungi SaaS CMO usually stays around a couple more months to help hire a full time, in-house CMO and help our clients train- and onboard this permanent marketing leader. Some clients opt to keep the Outsourced CMO on for longer as their company grows fast and the needs for a CMO change. This flexibility allows them to delay the commitment to a full time hire who might not be the best fit for where the company will be a year later.
We recommend that every CMO or VP Marketing has very specific targets that the work towards. At Kalungi we like to use OKRs (Objectives and Key Results) as they align well with how most of our clients manage their business to a quarterly rhythm. Here is an article with example OKRs for a Marketing Leader and her team. This article shows how OKRs can evolve as a Marketing Function matures.
When you compare the typical cost of hiring a full time CMO vs. an outsourced CMO-as-a-Service, and combine it with the average cost of various Marketing projects and functional specialty resources, it is possible to outsource your Marketing Function for a cost that is not much higher than hiring full time employees. The advantages are flexibility to adapt to changing needs over time, and the minimal long term commitment, or even equity compensation that comes with hiring full time Marketing employees.
This article lays out the various components that a typical B2B SaaS Company will spend money on in their first years of Marketing growth, and can help size the budget you need.
In this study you can estimate what the cost of a typical CMO should be for a B2B Saas Company.
We also wanted to point you to this article: Three Qs to Answer for a Great B2B Saas Marketing Budget
Ideally your agency of choice allows you to hold them accountable results. When you “pay-as-you-go” you can of course just cancel the engagement at any time. This usually does not work well though, since good quality marketing takes time to build. From creating good positioning and doing A/B tests and implement the results, to getting content marketing and brand awareness investments to turn into outcomes, can take months and sometimes years.
We recommend you implement a quarterly pay for performance structure, for example based on OKRs, as described in this blog.
You can commit to 3-month or 6-months of engagement, and even pre-pay to secure some savings. Make sure to ask for an initial 30-day “no questions asked” out-clause, and you should be fine. This will allow you to make a solid assessment of the agency you are going ot depend on for a large part of your growth.
While an Interim CMO is Full-time, a Fractional CMO is a shared services who you are sharing across usually two clients. Your CMO should however always be available, just like a full time team member of your executive team. A shared model is not the same as part-time. When a PR crisis hits, or a team member needs support, your CMO should be available.
This article describes the work for a SaaS CMO. It's an overview that will be different per engagement but gives a good initial indication.
At Kalungi we believe that an outsourced CMO should be part of your Management Team, and potentially join for critical executive engagements like meetings with your Board of Directors.
Your Fractional CMO is a "normal" CMO who you can count on to be 100% part of your executive team, including all the obligations that come with that expectation. They can be presented on your website, and participate in your leadership team and board meetings as appropriate.
In short. Yes. Your CMO acts as a normal staff member on your team and manages the marketing function completely, including making personnel decisions.
If the current economic downturn is requiring you to cut cost, and potentially staff, an alternative to building things back up could be to outsource your marketing function, even if it’s temporary. You are now in a position to assess how well you can work with your marketing team being remote.
Finally, here is an article that compares the benefits and challenges of hiring a full-time CMO vs. an outsources Fractional CMO or Interim CMO.