Marketing to the Enterprise
A good friend of mine asked me:
What can I read to learn the fundamentals of marketing to the enterprise?
While I could point him to a number of sources to answer specific questions, I don’t recall ever reading a comprehensive overview on modern marketing in the enterprise, so here’s my version of one.
It’s worth noting that very little about this article is original thinking — I will cite references where applicable, but most everything else draws on the content I’ve consumed, my direct experiences, and the experience of the exceptional people I’ve worked with and for over the course of my career.
My most substantive thinking comes from these 3 books:
- Traction: How Any Startup Can Achieve Explosive Customer Growth
- The Challenger Customer: Selling to the Hidden Influencer Who Can Multiply Your Results
- Revenue Engine: Why Revenue Performance Management is the Next Frontier of Competitive Advantage
This document is about marketing expensive products to large businesses. The bulk of my experience is in software, but the principles outlined here could apply to any high margin industry. Why high margin? Because there is very little product cost to incremental sales, so those organizations can invest heavily in effective marketing and sales and still maintain profitability.
An extreme example of this is Microsoft. They make Windows and Office, among other things obviously, but these are their two most ubiquitious products. The cost of making this software is beyond comprehension, but once it’s made, future production costs are nothing more than hosting the software for download and generating activation keys. The money to make the product itself is already spent — so the cost driver becomes getting it in the hands of users and then supporting those users.
That’s a differentiator in software, but there are other high margin, sales-centric, industries with similar economics where the methods discussed here could also apply. I’d not be surprised to see someone you’ve never heard of apply these principles to their niche and quickly become the dominate player. Examples:
- Commercial Real Estate Leasing and Sales
- Pharmaceuticals (to Healthcare Providers)
- Enterprise Financial Services (Banking and Insurance)
- Professional Services (Accounting, Legal, Business Consulting)
- Others (I welcome additions)
Defining marketing success
Not long ago, I had a client whose senior leadership decided marketing should no longer optimize their efforts to generating qualified leads for the sales team (qualified leads) but should instead own opportunity creation (qualified opportunities) as their primary metric. In their case, an opportunity created meant an initial meeting had been set with a person with the ability to purchase the product (seniority, job function, company size) and that person expressed a need and an interest to address the pain their software solved.
This turned out to be problematic. In their case, marketing had direct ownership of the process from lead generation through lead development (inside sales). Once the prospect was deemed able to purchase the product and willing to learn more (take a call with a commissioned salesperson) the prospect was passed to the sales team (different org, different VP) for further vetting and selling.
Since marketing had effectively no influence over the process beyond qualification, inside sales stopped spending their days qualifying leads and instead started spending their days on developing qualified leads into opportunities. The pipeline quickly dried up, but because this company’s marketing organization was well tooled and well staffed, the problem and more importantly — the cause — was quickly discovered and corrected.
The lesson here is that you can only own a metric where you can control (or at least greatly influence) the outcome. Pipeline is the early goal and revenue is the ultimate goal, but marketing’s primary KPI depends on the level of ownership and influence of the senior marketing leadership.
Measuring success (and failure)
The following four principles drive our thinking on metrics and KPIs:
- Our ability to collect data exceeds our ability to respond to it. Therefore, all KPIs must have thresholds where volatility within the threshold is ignored.
- All metrics must inform a business decision. Therefore, those decisions – the levers – must be discovered before the KPI is created, not after.
- Metrics that do not map to a business decision should not be tracked.
- Operational effectiveness metrics do not overcome the fundamentals outlined in 1 through 3. In the case of operational effectiveness metrics (number of rivets per hour per person on the assembly line) must map to an operational decision.
With those fundamentals applied to marketing, your measurement values should look something like this:
- Reach: Are we engaging with enough people?
- Conversion: Are we talking to the right people?
- Velocity: Are buyers acting with urgency?
- Value: Will we meet our bookings target?
- Return: Which investments drive revenue?
KPIs will then map to these buckets, along with how you plan to have a meaningful impact on them.
Marketing and sales funnel
In the business of selling very high value products to the few, there’s an unfortunate downside in terms of optimization: there are very few sales to measure. Because of this, it is important to measure investments (time and money) against a predetermined goal.
That’s to say, when you send a promotional email to 5,000 prospects, the success of that email shouldn’t be incremental sales, but rather against the goal of the specific campaign — which could be anything, but most often getting someone to engage further down the marketing and sales funnel which will look something like this:
- 10%: Inquiry (INQ): Suspect fills out a form on the website.
- 20%: Automation qualified lead (AQL): Suspect is a real person and is ultimately reachable.
- 30%: Marketing qualified lead (MQL): Suspect has the ability to purchase the product (works for a comapny in your total addressable market and has as a title likely to at least influence the buying decision).
- 40%: Sales accepted lead (SAL): Inside sales agrees to work the lead (Suspect becomes prospect).
- 50%: Sales qualified lead (SQL): Prospect has a desire to purchase the product (Prospect agrees that the software will likely address an existing need at the account). Agrees to meeting with a commissioned sales person.
- 60%: Qualified active opportunity (QAO): Prospect agrees to explore a trial or pilot period.
- 70%: Trial/Pilot Period: Prospect agrees to the pilot period.
- 80%: Business value agreed (BVA): The trial produced a positive ROI and/or the prospect otherwise agrees your product will produce the desired results and is generally in the price range.
- 90%: Contract terms agreed (CTA): Prospect verbally agrees to the contract terms.
- 100%: Closed won (CW): Contracts executed. (Prospect becomes customer.) Account is (thoughtfully and comprehensively) turned over to customer success team.
- 0%: Closed lost (CL): This can happen from time to time for a variety of reasons. Record the specific reasons and enforce their usage. (too expensive, didn’t see value, champion left the company, selected competitor X/Y/Z, went dark, etc. etc.)
These are obviously malleable to your own needs, but I’d strongly encourage you to define them well and early, whilst avoiding too much nuance. Benchmarking conversion and velocity through these stages is how you will measure your performance for years to come, and having this as static as possible will provide needed consistency.
Annual Contact Value (ACV, sometimes said as “Year 1 ACV”)
ACV is the projected revenue that a customer will generate on an annual basis. A simple example looks like this:
- The average value of a new customer up for a 3 year subscription of your software which costs $5,000 per month or $60,000 per year.
Lifetive Value (LTV)
LTV is the projected revenue that a customer will generate during their lifetime, less the projected customer churn (or plus the negative churn2). A simple example looks like this:
- The average value of a new customer up for a 3 year subscription of your software which costs $5,000 per month or $60,000 per year.
- Your retention rate for new customers is roughly 90% (per year), meaning you lose 10% of your customers every year.
- Leaving you with $54,000 in year 1; $49,000 in year 2; and $44,000 in year 3.
- So your approximate LTV is $147,000.
2 As you might expect, negative churn has the opposite effect of the above example. It counts on an effective up-sell strategy to more than make up for any lost customers, so instead of discounting your contract value over time you can expect the value of a customer to be greater than the sum of contract value.
Customer Acquisition Cost (CAC)
CAC = Sales and Marketing Costs / New Customers Won.
CAC is the summation of all marketing and sales expenses required to acquire a new paying customer. This includes loaded marketing and salespeople salaries, commissions and spiffs, tools and advertising costs, and so on.
Using our example above, assuming a total monthly sales and marketing expenses of $300,000 and acquiring 10 new customers in a given month, the calculation would look like this: $300,000 / 5 new customers = $60,000 CAC.
LTV : CAC Ratio
The Lifetime Value to Customer Acquisition Ratio measures the relationship between the lifetime value of a customer and the cost of acquiring that new customer.
A generally accepted rule of thumb for a target LTV:CAC ratio should be about 3:1. The value of a customer should be three times more than the cost of acquiring them, and even more generally your marketing and sales programs should be at least as effective to recover the cost of acquiring a customer within the first 12 months.
Other terms to be familiar with:
- MRR: The Monthly Recurring Revenue (or run rate) at the end of each month.
- ARR: Annualized recurring revenue for the coming twelve months.
Warning: vanity metrics
Wouldn’t it be interesting if…
If this comment isn’t immediately followed up with the question, “why?” or “what action will we take knowing that?” then your focus can and will quickly get misdirected. You can spend a huge amount of time setting up dashboards and reporting on metrics that provide very little value.
When building a data driven marketing organization, it’s easy to pay attention to numbers simply because someone once asked about it, or just because they’re easy to get, but resist this temptation.
Here’s a quick list of metrics to largely ignore at the executive level:
- Website visitors: The goal of marketing and sales is revenue and the quantity of website “hits” has nothing to do with that. An anecdote for this is focusing on rates: “If 100% of our website visitors turned into customers then 25 visitors a month means we’re blowing our revenue targets out of the water.”
- Impressions and click through rates: This will be important to whomever is managing your advertising because click through rates are often how ad networks define success, but it’s nothing to focus on at an executive level.
- Time on site and bounce rates: These metrics can be indicators of content quality and your content marketer or writer should spend time looking at them to determine whether or not people are engaging with what you’re producing, but again, at a high level these should be ignored.
- Followers: Having spent my time in b2b marketing, I’m not an advocate for social media as anything more than a paid advertising channel. Not to say there isn’t value in it, I’ve just never seen a correlation of Twitter followers to new opportunties.
Instead, focus on “cost per”, conversion rates, and velocity. A few examples of what’s important and why:
- Cost and quantity of qualified leads: It’s the growth marketer’s job to deliver and develop qualified prospects so producing them at a predictible rate and at an acceptable price is a leading indicator of future success.
- Customer acquisition cost: It’s important to not only understand what leads cost, but how leads of various sources, demographic differences, etc. perform in the funnel from start to finish.
- Time from lead to opportunity: Is your inside sales team and outside sales team working together with urgency across all lead types? Or are they focused on the easy ones and ignoring the hard ones?
- Lead to opportunity rate: Are your salespeople converting marketing sourced leads at the same rate or better than sales developed leads? Do some sources or pieces of content perform better than others?
Buyers of your product are looking for a solution to a problem they’re experiencing, but instead of thinking about how to shoehorn your solution into their problem, align your thinking to theirs and build a marketing and sales process aligned to the buyer’s perspective. Something roughly like this:
- Awareness: The buyer realizes they have a problem.
- Consideration: The buyer defines and socializes the issue, researches options to solve it, and gains consensus that it must be solved and suggests solutions.
- Decision: The buying committee agrees to the right solution.
Prioritize buyers that are active in a buying journey. Build trust by participating in the buyer’s research journey through content like blogs, case studies, whitepapers, solution studies, and other various pieces of helpful advice. (Much more on content shortly.)
Begin the first conversation by developing rapport.
Then transition from advice into problem-solution exploration when there is something of substance to talk about. The Challenger Customer uses the phrase, “lead to the solution, not with it.” Understand your buyer’s timeline and adjust the sales process to match. You want to deliver the right educational content to your prospect at the right place and time.
A successful sales cycle will often bear these elements:
Buyer-Centric: Base the entire sales process on the buyer, rather than the seller. Sales conversations provide advice on the buyer’s challenges.
Personalized: Tailor your sales content to the wants and needs of your prospect. As you learn more about your leads over time, you can better personalize your messages to their specific needs.
Advisory: Inbound sales is about building trust with your prospect. Salespeople should help people make buying decisions, instead of just focusing on making a sale.
Sometimes, even often, your ideal customers don’t even know they have a problem yet. If that’s the case, you can still find them, but that buying cycle is longer as you need to introduce yourself by solving problems that they do know they have.
Content and Storytelling
The best sales conversation presents the customer with a compelling story about their business first, teaches them a new perspective, connects this with their reality, and then leads to how it can be realized via unique differentiating capabilities.The Challenger Methodology
Types of content
Content that helps close deals addresses this challenging buying environment and falls into one of four identified types:
- Prescriptive content eases the customers’ buying journey by helping to identify and address common buying obstacles.
- Connecting content helps customers in complex buying groups identify and overcome points of disagreement and reach consensus on a purchase.
- Motivating content encourages the most likely supporters of your solution to fight on behalf of you as a supplier within large and diverse buying groups.
- Disruptive content breaks through the noise surrounding customers by showing them how to compete more effectively in a way that a supplier’s solution uniquely enables.
- Best practices guides
- Third party analyst reports
- Case studies
- White papers
- Make SlideShares out of Everything
- Create Shorter Gated Assets
- Make a Podcast from a Blog Post or Make a Blog Post from a Podcast
- Create a Blog Series
- Make an Infographic
- Turn your eBook into an Audio Book
- Share Stats Via Social Images
- Create Quick Video Tips
- Stream a Webinar
- Write a Guest Blog
- Republish on LinkedIn
- Tap the Discussion around Your Content
- Roll Blog Posts into an eBook
- Gather Top Tips for a Newsletter
- Write an Online Course
- Create a Book Review
- Print Physical Copies
- Write a Quiz
- Compile an Expert Roundup
- Create a Tips Post
Search Engine Optimization
The most important measure of a search engine is the quality of its search results.“The Anatomy of a Large-Scale Hypertextual Web Search Engine” by Sergey Brin and Lawrence Page
Here’s a link to Sergey Brin and Larry Page’s thesis paper. It is an excellent view into the minds of the founders of Google and how they sought to fix what was then a not so obvious problem.
For our purposes, creating a search optimization strategy with a positive return on investment will ultimately include tactics from the following four buckets:
- Research: Determine which keywords strike the right balance between:
- Volume and trends – Does they keyword have sufficient traffic to make a long term commitment to it? Is that traffic trending up, will the investment get better, over time?
- Relevancy – If someone were to click on a search result for their term, are they going to find what they’re looking for?
- Intent – Does the keyword convey buying intent, or are they just looking for free information?
- On-page: Create content that users want to find and ensure the keywords that have been uncovered in your research important to you are contained in places like title, description, alt tags, body copy, etc.
- Performance: Constantly improve the user experience for your site’s visitor, and even if your page is not often visited from a mobile device work to make the mobile experience better. This means faster load times, mobile optimized content,
- Off-page: Increase in inbound links to the site’s content from high quality sites. This can often be an extension of a press outreach effort, focused more on industry related blogs.
Inbound demand generation vs. outbound account based marketing methodologies
Generically speaking there are two methods of marketing software today: Outbound Account Based Marketing and Inbound Demand Generation:
- Outbound account based marketing targets only your ideal accounts, often with little regard to their preparedness to buy your product.
- Inbound demand generation attracts those with buying high intent, but also people who you may not want to sell to.
If you read Seth Godin’s book Permission Marketing: Turning Strangers into Friends and Friends into Customers (from 1999) you’ll immediately recognize the term “interruption marketing” to describe outbound marketing and selling.
This is an unfair moniker and it not only reduces the legitimacy of the tactic, it also minimizes its perceived effectiveness. Both strategies can coexist and a balance should eventually be sought to fully take advantage to maximize both inbound and outbound channels.
The ultimate measure of quality marketing at high margin companies is revenue.HBR.org, October 2012
A mix of ABM and Inbound is almost always the right strategy, but as your audience grows more and more specific, the mix will tend to skew towards ABM.
|Inbound Demand||Account Based Marketing|
|Methodology||Tactics and channels combined with inside sales alignment.||A company wide, strategic decision to align all efforts against specific companies.|
|Audience||Large. Anyone who can benefit from, and afford, your solution is part of your addressable audience.||Small. Generally less than 1,000 companies at any given time across a long sales cycle.|
|Challenges||Fishing with a net. Potential customers come to you to for a solution, but you’ll often find extraneous fish in the net.||Fishing with a spear. You’re hunting only your customers but you have to hit each one with custom everything – and they may not be ready to buy.|
|Targeting||Individuals who are actively looking for your solution or information related to your solution.||Accounts you have determined most likely to gain value from your solution.|
|Required Investment||Incremental. With inbound the initial investment can be as simple as hiring a blog writer and making SEO improvements.||Substantial. ABM is a company-wide commitment that requires close coordination and management across all disciplines (marketing, sales, customer support, executive, events, public relations, etc.)|
|Resourcing||A team of exceptional functional marketers that can be applied across multiple disciplines. Paid search, content development,||A dedicated team whose skills encompass strategy, writing, editing, design, development, analysis focused on nurturing specific accounts.|
|Usable Channels (link to targeted vs. intent slide)||LinkedIn, Paid Search, Organic Search, Display||All of them. Events, Direct Mail, Demandbase, LinkedIn, Retargeting|
|Measurement||Conversion rate and velocitybetween each phase of the sales cycle – from leads through closed deals. Observable impact can be near immediate in lead quantity and sales.||Account activity, closed accounts. Because mpact can be difficult to measure and will take time to see results. Requires sophisticated multi-touch attribution systems.|
Just like marketing, sales processes are different depending on how the prospect reached you.
Inbound Sales Actions
- IDENTIFY — Strangers > Leads: Identifying the right business opportunities from the start can be the difference between a thriving business and a failing one. It also helps salespeople create a predictable, scalable sales funnel.
- CONNECT — Leads > Qualified Leads: Legacy salespeople focus their prospecting efforts on cold emails and voicemails. These types of cold outreach highlight the same generic elevator pitch and entice the buyer with a discount or promotional. Inbound salespeople focus on nurturing the relationship. (legacy: hunters; inbound: farmers)
- EXPLORE — Qualified Leads > Opportunities: In the “Explore” stage of the Inbound Sales Methodology, you need to guide an exploratory conversation so that you’re in control, but your prospect feels like they are being empowered to.
- ADVISE — Opportunities > Customers: Inbound salespeople advise prospects on why their offering is uniquely positioned to address the buyer’s context. By sticking to a generic script, legacy salespeople fail to represent their strategy.
A repeatable set of steps the sales team takes with a prospect to move them from early stage to a closed customer.
- Stages are the buyer’s process, not the seller’s steps
- Each stage is self-explanatory and easy to understand
- As the stages advance, meaningful progress is made toward a purchase decision.
- There are identifiable differences between each stage, and there are objective exit criteria for both the buyer and the seller
- Some amount of flexibility in order based on the buyer’s needs?
- Based on and driven by data
About the author
I’m a US Navy submariner, turned construction manager, turned capital controller, turned fund manager, turned marketer. It’s admittedly an odd path to take, but there’s a common thread: spreadsheets. But beyond a fondness for math, I’ve a long standing passion for technology and automation. Case in point, I hosted a bulletin board system (BBS) in the early 90s on an IBM PCjr. (Feel free to email me if you want to talk Trade Wars.)
I left the fund management world for a variety reasons, but mostly because there’s very little room for creativity or dynamism in investments and especially real estate. I also recognized that marketing was just beginning to undergo a change from fluff to facts and the world was presenting me with an opportunity to flex my creative muscles while still feeding my number crunching tendencies.
High margins and increased competition for business’s attention brings increased marketing and sales investments, which creates a need to measure and optimize those investments. All of which is far removed from the traditional way of thinking about marketing (i.e. buying blue pens).
Here is a link to a comprehensive resume.
I reserve the right to wake up smarter tomorrow.
This is a living document and it’s bound to change periodically. I wrote it partly to answer my friend’s question, and partly to collect my thoughts in a single place. If you want to talk marketing, let me know in the comments or drop me a line: [email protected].