In my recent blog post “What PLG means to marketing” I proposed a growth formula that I have implemented in my almost four-decade long marketing career:
Growth = Δusers x Δuse-cases x Δprice
Furthermore, I proposed that marketers need to take a long-term view of demand that is rooted in scientific reasons rather than nostalgic ones, and their programmatic efforts need to fall into these categories:
- Drive more pre-acquisition use and lower friction;
- Drive more and faster conversion to paid use;
- Drive more and faster expansion to more users;
- Drive more and faster expansion to more use cases; and
- Drive more premium platform value
In practice though, many marketing programs, and the assumptions they’re based on, turn out to be repetitious implementations with perhaps a click or two of deviation from past ones. Demand can and needs to be managed scientifically today, with a more nuanced approach to parsing pipeline.
So, let’s dive in. But first, let’s get two topics out of the way.
First, I have been very vocal in my career about leads. I’ve used choice words for them and continue to believe that they’re a metric that makes marketers feel good about themselves and sales dissatisfied. Rather, I have used the principle of interactions, which represent a measurable and tangible touch point with a human being. Those interactions over time become nodes in a (neural) network of interactions that not only relate to said individuals but also their relationships to others in their organization or sphere of influence. As these networks get richer, logical next-best actions start to become clear, one of which is to push the organization and its representative(s) to the status of “sales qualifiable.” Of course, the criteria that we put into such a model are fully aligned between the sales and marketing organizations and should go far beyond simple BANT (Budget, Authority, Need, and Timing) signals.
Second, I have always maintained that marketing is responsible to get to 100% of the company’s pipeline targets. This serves two purposes: it aligns sales and marketing in a way that is not open for interpretation or success on one side and failure on the other, and it creates an unambiguous metric for marketing to perfectly align with corporate financial goals. Even more nuanced, the target for marketing is to get the pipeline to 100% of the sales productivity targets for ARR. So, rather than assuming an artificial contribution target (one-third sales, one-third marketing, and one-third channel comes to mind,) marketing needs to implement a strategy and activity portfolio that can flex at any time to make up for any gap in pipeline performance regardless of source.
Modern approaches such as PLG (product-led growth) and DLG (developer-led growth) augment our models to create and manage the demand required to achieve our goals. I purposely use two verbs in this sentence: create and manage. Too often, I see marketing efforts solely focused on creation of pipeline. Rather, I propose a “VAP” (value-added pipeline) approach that is a function of the ending pipeline and the total bookings in a given quarter. In that approach, marketing is focused on managing six elements of pipeline: starting pipeline, new pipeline, pipeline value change, closed won opportunities, closed lost opportunities, and ending pipeline. It also creates perfect alignment between sales and marketing in that there is one target, one win rate, and one pipeline target number.
In that same spirit, marketing needs to expand from driving pre-acquisition interactions (form-fills, downloads) to driving conversion through use and expansion.
Driving pre-acquisitions goes together with lowering friction. As marketers, we have a propensity to want to profile potential buyers by gathering as much telemetry upfront as possible. This, in turn, creates friction that results in low conversion rates and dissatisfaction, or even rejection by potential buyers. A better approach is to use incremental profiling where one starts with gathering the absolute bare minimum telemetry (often times, just an email address) to draw someone in and then use every next interaction to further profile them. Also know that these days, many of the answers to questions we used to ask through forms can now be obtained through web and social-listening technologies – from tried-and-tested tools such as LeadLander and StatSocial, but more and more so from the product you offer itself.
I am convinced that the latter is where the early magic happens. Thus, the goal is to get prospective buyers as quickly as possible into the product experience and start collecting telemetry there. No more pesky web forms with qualifying questions, no more interview-style onboarding, and no more artificial barriers to the product experience in terms of length, scope, or depth. In other words, the exact opposite of what we used to do. And while there may be an argument that there is cost involved in provisioning a tenant, it would actually be very telling if the cost of acquisition is highly impacted by it as it foreshadows a much larger issue with the platform.
Is marketing done once it gets more and more potential buyers into the product? No! It’s a great start but it’s just where the work starts.
Combined product telemetry, prospect interrogation and behavior, and demand-generation signals coming from additional tactics become the source of actions proposed to the prospective customer. Unlike in the past, we now can serve these next-best actions (NBAs) up through the product. That’s not to say that the product is the only channel, but it should be the default channel.
An example of this would be a best practices webinar program. Broad product telemetry and interrogation tells us there’s a need for it, and specific user behavior tells us who should be attending. The goal for such a program is to both “nudge” prospective customers to being ready to move to paid use and also “nudge” existing customers to expand what they already use the product for to more users or expand to an additional use case. Invitations for such a webinar can be served up through the product. Discussions about the reasons for attending can be done through the product. The webinar can be run from the product. Post-event feedback can be provided through the product. These activities can be initiated and managed through the product context rather than through out-of-band channels such as emails or phone calls.
Hence, a significant number of demand-centric programs that marketing creates can be done for scientific reason rather than nostalgic ones. I say that because so many programs turn out to be repetitious implementations with perhaps a click or two of deviation from past ones.
Modern demand management is about alignment, (data) science, and instrumentation. In working with our portfolio companies, I have observed three effects of that approach.
- Marketing’s contribution to corporate and pipeline targets is fully transparent and predictable and the alignment with the sales organization is far better than in lead-focused models that have artificial hand-offs;
- Marketing’s portfolio of activities is shifting to activities that are scientifically proven to increment engagement and propensity of conversion, which in turn has the potential of driving down the cost of acquisition and expansion;
- The prospective customer’s experience and NPS are significantly better, and the time it takes for them to place their initial purchase and follow-on expansion is less than in asynchronous outside-product marketing execution models.
If these topics intrigue you, please know that I’ll be writing more on these topics and hope to hold online “office hours” in the future to discuss modern marketing with our current and future portfolio companies—stay tuned for details.
In my next blog, I will elaborate on Value-Added Pipeline and its six elements.
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