A CEO's Guide to Marketing with Dave Kellogg | SaaStr Software Community

all right good afternoon thanks for joining me today my name is dave kellogg i'm a principal of my own consulting firm i'm the author of a blog called kel blog and as we announced a couple of weeks ago i'm starting up in assignment as a eir and executive in residence at uh balderton capital uh a european-based vc firm uh based in london so today's presentation is a ceo's guide to marketing so so let's jump in and talk about the founder experience and you know most founders the story goes something like this that they're they're working

one day and they see this kind of unserved need in the marketplace and they think i'm going to build a product to fill that need and they get a team together and they build a product and congratulations it works and things are going well and many years later they've built a successful sas business maybe on a sunday night they're looking at their p l and they notice something funny they say wait a minute i'm spending twice as much on sales and marketing as i do on r d i thought i founded a product company and

they think well maybe maybe i'm abnormal right maybe those silver tongue folks in sales talked me into spending too much money or those crazy marketers that waste half the budget are wasting more than half maybe i'm abnormal so we go to meritech public comps and we start comparing ourselves to others and we find out now wait a minute i am normal the median enterprise sas company spends twice as much on sales and marketing as it does in r d sure you have folks like datadog that only spend as much on sales and marketing as r

d but that's literally the 90th percentile 9 out of 10 sas companies spend more on sales and marketing than r d 50 percent of sas companies spend more than double on sales and marketing than r d and it only goes up from there right if you look at some of the names up there kind of surprisingly folks like smartsheet and hubspot are coming in at 2-2 and 2-4 well salesforce they're a marketing juggernaut what do they spend well they spend three times as much on sales and marketing as they do on r d zoom four

times as much although off really small numbers monday.com the work os aren't they kind of a plg company product led growth doesn't the product kind of sell itself well they spend five times as much on sales and marketing as they do with r d so in my opinion the founder experience that happens a lot is you found a product company and one day you wake up and you're running a distribution company and you go what happened and you say it's okay i'm gonna be all right because this sales thing i don't know exactly how it

works but it's super measurable quota performance customer success that's pretty straightforward we know what they do we can measure it through renewals and churn or as we talked about last year net dollar retention the market there's this thing called marketing and i'll tell you what's the scariest thing a ceo can hear at a qbr the marketing sessions up next right now why is that right i've been i've been 25 years in the business probably literally a hundred different qbr's why is the marketing session always so scary right well think about it what's the session most

likely to take more than double it's a lot of time slot marketing right what's the session most likely to leave people dazed and confused at the end of it marketing what's the session most likely to generate a knock down drag out fight marketing right what's the session where people's careers can literally be ended like i've been in qbr's where after this session i said i don't know what that was but but but that can't happen again right we need to get a new head of marketing literally so the question is why is the marketing session

so scary and the answer particularly for product oriented founders and executives is first it's unfamiliar territory most founders didn't grow up in marketing second you get overwhelmed by a blizzard of buzzwords and acronyms you know them as well as i do marketing people love them you're buried in the sea of numbers conversion rates and funnels and web traffic and clicks you're confused by ill-defined terminology and process most marketers are not that rigorous in their thinking and you're drawn into conflict between sales and marketing right so this is why the marketing session is so scary and

the other reason is maybe just maybe you're a little afraid to admit that you don't understand all this stuff right and that makes it even harder so what do you do well you do what any good ceo would do you wait for the session to end and then you say with trepidation well that was great next session and you continue to leave you continue to leave a life of quiet marketing desperation right you don't understand it the session is terrible and and you just say it is what it is and i'm here to help change

that today so i'm going to be your marketing guide for the rest of this session my name is dave i bring a perspective that comes from three places one i've been a cmo for 10 years at companies with as little as 1 million in revenue and as big as a billion dollars in revenue so i've been a cmo across a broad range of sizes i've been a ceo in the zero to 100 million dollar range again for combined more than 10 years and i've been combined well more than 10 years experience serving as independent director

on startup boards so hopefully i'll be able to bring you this kind of marketing rooted but ceo vision ceo viewpoint on marketing so and the way i'm going to do that is we're going to talk about five things that every ceo should know about marketing and it's important that this is not a generic marketing 101 course this is not just some quick survey course on marketing this is rooted in my experience working with startups so it's biased towards the mistakes i see people make and the challenges that i think they face so that's where i'm

coming from and these are the five things i think ceos and c-level execs need to understand about marketing to work effectively with marketing now there's two underlying themes in this one is use market research in this day and age we have so much data from our systems that there's a tendency to only want to analyze that data and back before we had these systems we used to rely on market research and now we almost don't and the problem with only relying on our data is it's kind of naval gazing right we're only analyzing that portion

of the market that founded into our crm so one underlying theme i'll give you numerous examples is here's a question you should use market research to go figure out the other underlying theme is keep it simple don't get sucked into the complexity stay high level so i'm going to give you some high level models that you need to come back to that if your marketing person is kind of pulling you down in the details you can step back and pull things right back up so let's jump in here are five principles the first one is

that you can reverse engineer all of marketing from buyer empathy right if we just think about the buyer and we think about what marketing is trying to do we kind of figure out marketing's job and in effect you can derive marketing from these two things if i only knew two things i could derive marketing one the state of mind of the buyer in terms of what question they're trying to answer and in my mind there's two fundamental questions why buy mine or why buy one and and why by mine is kind of exemplified by southwest's

bags fly free right bags fly free answers the question why should i buy a ticket on southwest it doesn't answer the question why i should go see my uncle in toledo right it does say if i'm going to see my uncle in toledo why should i use southwest because bags fly free right that is a differentiation message the other state of mind the buyer can be in is a value message which is why should i buy one at all and for early stage startups this is often what you face you've made the first thing and

they don't know whether they should buy one and in that case you need to sell value right here's the value of the thing i exemplify this with a old campbell soup campaign called soup is good food right here's why you should buy soup because soup is good food it will make you healthy bags fly free versus soup is good food so answer incorrectly at your peril right just say i work with a company called elation they sell data catalogs and say when you listen to the gong calls which i recommend that everyone do the whole

e-staff as a group should do it once a week and you listen to gong calls are you hearing things like i'm going to buy a data catalog i called up gartner and they said to evaluate you and competitor b and c and i'd like to know why i should buy yours if you're hearing that and your salesperson gets on the phone and goes i've just been to value selling i know that people buy solutions to business problems let me tell you why you should buy a data catalog what's going to happen the customers would be

like do you have like stuff in your ears i just told you i've already decided to buy a data catalog i want you to tell me why i should buy yours and you're telling me why i should buy a data catalog you're not listening to me right so don't get these things wrong and the easiest way to figure out what situation you're in is listen to gone calls market research can help also just looking at category formation if the category hasn't formed yet you're probably in a why by one mode hey i know there's a

thing you never heard of let me tell you why i should buy one if there is a category and there's five vendors in it and there's a magic quadrant you're probably in a why by mine mode right and the buyer is probably trying to figure out which one to buy so that's the first question we can derive marketing from understanding where the the question in the buyer's mind the second is the consideration level of the purchase and i put this one in because there's some things two things confuse it one is plg and the other

is lazy marketers um and the concept of marketing is simple we have two types of purchases low consideration and high consideration low consideration you're checking out the supermarket you see that pack of gum you grab it and throw it on the conveyor belt right that's a low consideration purchase you didn't think much about it buying a car is a high consideration purchase right you might spend weeks thinking about it comparing models going to consumer reports right you put a lot of energy in now you might think that price is the only factor that drives consideration

level but it's not how about you want to buy tires for that car and you're going to put your whole family in that car and drive to lake tahoe in the snow is that high consideration or low consideration they're only a thousand dollars ah it's high consideration right because you're putting your family in potential peril driving on those tires so we need to understand which question the buyer is trying to answer and then how much energy they're putting into getting that answer because lazy marketing people will tell you the following no one has time to

read these days we should only make short content nothing should be longer than a paragraph everything should be short and that's wrong because if this is a high consideration purchase right if i'm betting say i'm buying a financial planning system and i'm gonna i'm gonna bet the year's financial plan on it i'm going to get all kinds of managers through the company to use it i have to set it up i don't care how much it costs to buy the cost of owning it and deploying it is high and if it fails i look bad

that's a high consideration purchase so we have to understand how important the purchase is the buyer plg confuses this that little trial of a collaboration system with three people in your department that might be low consideration it's free who cares if it works no harm done to deploy that same software package to a thousand people in your engineering organization that's high consideration right so we need to understand first consideration level varies and second to quote one of my favorite traditional marketers david ogilvy long copy sells right and nobody says this anymore these days but the

fact of the matter is if you're talking to your buyer and it's a high consideration purchase they will have time to read a 12-page white paper they will have time to go to a one-hour demo right instead a lazy marketer who doesn't understand this will be saying no the demo has to be 20 minutes the white paper has to be a two-page e-book right so the action here that i recommend is one make sure your marketing is thinking about this issue produce a mix of long and short tools and if you're an early stage startup

write what i call the seminal white paper which tells your story and eight to twelve pages to your buyer they will have time to read it if you're thinking about the right buyer and almost nobody does this the best one i've seen lately is from a friend of mine who runs a company called skyflow and i suggested i suggested this idea to him and he wrote a banging white paper you can get it off their website i think it's gated so those are the actions there the other way to look at this is just imagine

you were the buyer where would you go for information what process would you use who would you want to speak to as references important point the answer is always people like me so the question is what's like you mean your industry your company size your age your seniority your risk tolerance and profile right people want references who remind them of themselves so this is a large part of the whole crossing the chasm book is you can't take a you know technology pioneer and reference them against the pragmatist it doesn't work what process would you use

to make the final decision and what criteria would you make the final decision so to me you don't have to just imagine this you could ask customers about it i think you know if we have 60 minutes with a customer we spend all 60 talking about their problem and our solution i'd actually say to carve off eight to ten at the end to say that was great can i talk to you about how you buy this stuff how do you think about this purchase process it's gonna make me more effective it's gonna help my company

and ask them these questions to understand how they think about the buying process not just about buying your software so that's our first point we can reverse engineer marketing from buyer empathy the second point is that marketing is all about funnels and this to me is the only funnel you need to know there's a lot of funnels out there we'll talk about some of them but this is the one i always come back to when things get confusing awareness consideration trial purchase have you heard of a product yeah i've heard of a ferrari i've heard

of a subaru i've heard of a buick have you considered buying one no i've not considered buying a ferrari why they're too expensive and i don't fit in them okay have you considered buying a subaru no not too much i mean i would have have you tried driving a subaru well no actually because you know what happened when i was making that purchase i didn't have time to test drive every car so i decided to test drive three and i tried the bmw the mercedes and the volvo so i i was aware of subaru i'd

considered buying a subaru but did i try one no right and this this is it are you aware have you considered buying and those are the reasons why you may or may not consider buying have you tried it right how easy in software example is it easy to use your trial right do i have a free download or a free trial does it take a lot of time to set up do i have to speak to a salesperson big impediment usually and if i do do they call me back promptly even bigger right so and

then finally did you purchase and if you didn't did you buy a competitor did you did you just defer the whole thing and stick with the status quo so i was looking at buying a financial planning system i considered buying three vendors i tried two of them in the end i stuck with excel and again gonna be a continued theme you can and should use market research to understand this funnel you can't find this funnel in your crm it's not there right because it's a lot of people who never made it to you all the

people who never heard of you all the people who never considered you won't be there so that's the first funnel come back to that when things are confusing if you go to a qbr this is the funnel you're more likely to see marketing will present the funnel on the left web traffic names responses to campaigns leads marketing qualified leads sales will present the funnel on the right sals sequels i did a blog on this but i always call sals s1s and sequels s2s and i use as my definition the safe deposit box two keys have

to turn if a bdr or sdr thinks it's an opportunity they turn their key if a quoted sales person thinks it's an opportunity they turn their key so you have to turn two keys to get into the pipeline um which is appropriate if you think about how valuable the pipeline is it needs to be protected by two keys so sales and sequels we talk about conversion rates from there solution fit demo which i hate as a stage but a lot of people use it so i put it up there vendor of choice legal one you're

gonna see these funnels the mistake i see people make is they forget about these funnels which is in reality you have four pipeline sources in your business marketing which gets a lot of attention sdr outbound which you should be using in a named account strategy alliances which can easily account for 10 to 30 percent of your pipeline usually that closes faster and with a higher rate and then sales outbound with a targeted strategy so the first mistake i see people make is they forget to think of all four funnels and they forget to allocate a

target and a target not for arr pipeline dollars but a target for opportunity count to each of those pipeline sources now to me the best practice here is that marketing should be the quarterback of the pipeline because if you think about those four funnels the only person they all report to is the ceo so either you're gonna be the quarterback of the pipeline or you're gonna delegate it to somebody who doesn't run all four i think you should delegate it to the cmo and say i know you're only one of those four sources but i

want you to make sure that we start every quarter with enough pipeline coverage so i want you forecasting pipeline coverage i don't want to wake up on the first day of the quarter and go oh my god we don't have enough pipeline right i want you to forecast a quarter in advance or more if we're going to start next quarter with enough pipeline coverage and i want you to work with the other four sources to make sure we have enough if we don't and you're the quarterback of the pipeline so and in general look for

these rates mql to s1 5 to 10 percent s1 to s2 60 to 80 stage 2 to close 10 maybe but 15 to 25 percent those are all and the ranges can be much broader these are only rough benchmarks but these are sample rates for these rates now as soon as we talk about funnels that leads to models and we can build these amazing models where we have sales bookings capacity that starts with hiring and a rep ramp an attrition that generates a booking's capacity number that we shave to get the plan number for new

arr maybe i'll cut 20 percent of that off to account for expansion so that i get a new logo ar target i divide that by an asp to get the number of deals i need 21.3 i phase shifted three quarters to say if i need 21 deals now i need 107 stage two opportunities three quarters prior and then i said well if i need 171 stage 207 stage two is that i need 1641 mqls a quarter before that right we could build this awesome model they're all over my blog i love these models but don't

ever forget reality which is that's not how people buy enterprise software flat full stop period no right and this is gartner's buying models for enterprise software it'll be 15 contacts four roles nurturing people across two different companies across two years well i used to work at company and i moved to company b um right enterprise software buying cycles are complex and the question is what what do we think about all that the answer is pretty simple this quote all models are wrong but some are useful right and and that's the way i think about this

of course that model's wrong should i not build it because it's wrong in my opinion no you should build it anyway but you should understand its limitations so we need to use models as guiding abstractions we need to use them as tools of enlightenment not oppression i think the number one mistake i've seen founders make is they hold people's feet to the fire on all those cells and i think that's wrong i think it's demotivating i think it it doesn't reflect an understanding of the fact that the model deviates from reality people don't like it

so i think as ceo you should hold people accountable for the two things that matter pipeline coverage basically are we giving ourselves a chance to hit the number because if we don't have pipeline coverage we're not giving ourselves a chance and then actual sales did we hit the number that's it those are the only two things that matter everything else in the model is just helping to guide us so i'm going to skip the pro tips for now but i have two actions i suggest strongly on this which is because often particularly product oriented founders

are very quantitative people they kind of fall in love with these models and they get kind of model myopia and they start using them as tools of oppression everybody hates the models and they forget the reality of the underlying business because the model's so simple and so clear the way to solve that is two things one quarterly win loss analysis at your qbr right hire a third party firm to analyze wins and losses to bring reality back into the room and second this is done far less often but i think even more important a win

touch analysis take three to four deals you closed last quarter and have marketing present every single touch made over the last several years and when you're done with that you're gonna be like oh my god that model i mean it's useful for making the budget but it's so far from reality right so it kind of keeps you humble it keeps you grounded in reality so about messaging now so we're three-fifths of the way through messaging is a term marketers use all the time and i want you to think of messaging simply as a structured fact

so a frequently asked questions document and it's just simply standard answers to commonly asked questions they teach journalists in journalism school that for any story it's about 5w plus 2h right who what where when why are the 5ws how and how much of the 2hs i add a third h for how different because in tech differentiation matters so much like so it's not just enough to have the 5w plus 2h we should also have the how is this different from the other people doing it so your messaging should address for a product launch for a

company announcement it should address all those things and that's not to say you can't tell stories as part of those answers because i'm a big believer in storytelling but still the story is in response to a question now messaging should be simple you should be able to tell your story on a paper tablecloth that's my test whenever i test people on messaging i never do it with a deck i do it on either a whiteboard or a tablecloth and i start asking them questions about the company and i want them drawing pictures on on the

tablecloth because i want the messaging in their head because it has to be simple right and i like the message to be black and white particularly when we're on offense we want to be black and white only we have this when we're on defense we want gray right well you of consolidation well they have consolidation you don't well actually we just introduced a consolidation module last week it's kind of thin but but it's out there and when you do that all of a sudden you've taken the other guy's black and white claim and made it

gray and now they're obliged to explain why they're better which is hard right black and white is much easier than gray the other thing about messaging is you got to follow the rule of threes which is the answer to every question is three points this is well known i do have my own little spin on it which is what if you have more than three things to say what do you do then how do we how do we build messaging that we can remember that we have more than three things to say example this is

an approximation of relations messaging alation's a leader in data intelligence and this is not their exact messaging but it approximates it what makes elation different from its competitors well three things glad you asked three things intelligence collaboration and guided navigation i can remember that i could let the customer pull the thread what do you mean by intelligence glad you asked i mean we have query log ingestion we have a behavioral analysis engine we have expert identification and for each of those features i should be able to do feature benefit right i won't do it now

for time but when i name a feature i should instantly be able to go expert identification is great because it helps you identify the right people to govern your data which means your data governance program will be successful right i can go feature benefit for each of those the other fun thing i could do the same thing for collaboration and the same thing for guided navigation here's a demo hey only we have guided navigation we have an intelligent query editor that features real time suggestions so it helps you build your query and in real time

it's suggesting where you should go to find the answer you want and it's got inbuilt data governance it will literally guide you towards thing you're supposed to use and guide you away from things you're not that's interesting tell me about real-time suggestions glad you asked three things it could suggest tables joins or filters i got 27 things now i got a two-level ternary tree right i can pack 27 things into this right so this is the key to building simple memorable messaging i still i launched business objects version 6 in 1996 i still remember the

messaging pde why because it's a ternary tree right so i firmly firmly recommend using ternary trees to structure complex messages finally last thing you need to know about marketing relates to hiring your next cmo because cmos last one and a half two two and a half years you're going to be hiring one soon whether you just hired one or not and the number one mistake i see people make in cmo searches is you get down to the last three candidates which is when they call me they say hey dave we've got three candidates love you

to meet all three of them i say great and i meet the three of them and i go apple pear orange they're completely different you're a demand gen person you're a product marketing person and you're an sdr leader or a comms person or a brand person apple pear orange and i say how is it that we ran this process and we paid a recruiting from a hundred thousand dollars and we're at the end of it and we have one apple one pair of them on orange right and you may not want to admit to yourself

that you do this because a lot of people are in denial um but that's wrong if you get to that place you screwed up right because you never at the start of the search said we need an apple for a head of marketing or we needed a pair for ahead of marketing or we needed an orange for our head of marketing and at the end i had three oranges and then i got to pick the best orange right what do i mean by that marketing people come in different flavors you can think of marketing as

having four pillars product marketing launch messaging content demand gen digital programs events marketing comps pr stories and brand sales development inbound up on hybrid note the rule of threes apply to the pillars by the way so in any case marketing pillar well there's four pillars but sometimes there's only three sometimes sdrs work in sales uh but at least each pillar has three sub points um and the issue here is marketing people like they don't make five five any there's nobody who's a 5-5 god doesn't make them right you either grew up in product marketing or

you grew up in demand generation right you also don't get 20 pointers i think 15 is the maximum number of points you can get on this scale so the first thing you have to do is be realistic and say what does the market have to offer me and you only get 15 points across the four pillars and then you need to decide what you want and then go tell the search firm and then find three of them and that's the way to avoid ending up with a search that results in you on the last day

of the search deciding whether you need somebody stronger at demand gender product marketing which is really not a good place to be you don't want to be there personally i'm a 5352 i think it's very not only i mean god doesn't make five fives i'm not sure he or she made maybe five fours or four fives right those first two pillars it tends to be five three or three five there aren't many people who can honestly say i'm a four four or four five so think about the pillars you can map your candidates out like

this you can just put the four pillars up there and put each candidate's score and in this case i think we need to restart the search because the first bar is what we're looking for and nobody really approximates it so those are pillar profiles so to wrap this thing up odds are you're spending double on sales and marketing as you are in r d welcome to running a distribution business distributions about sales success and marketing marketing does not need to strike fear into the hearts of you and the e-team by the way great marketing people

make it easy they love to teach marketing bad ones observate and if you remember these five things it'll be much easier for you to work with your marketers going forward first reverse engineer marketing for buyer empathy second marketing is all about funnels third marking use models as guiding abstractions fourth messaging is a structured fact and five use this notion of pillars to hire your next cmo so thanks very much i'll post the slides on my blog and thanks for attending the session [Music] you