Just a quick post to share the slides I used at a recent SaaStock member workshop on Rising to the Challenges of US Expansion. Thanks to those who attended — everyone had great questions and feedback. My favorite was roughly: “listen to Dave, I literally have made every one of these mistakes!” (From someone who happily got it right in the end and now gets 40% of ARR from the US market.)
This material is based on the series of posts I wrote for the Balderton Build site on US expansion, the first post of which is linked to here.
The plot of so-called backstage musicals usually centers around the production of a show, often created to avoid imminent financial peril, as you’d find in many of the depression-era Our Gang movies. Invariably, as the characters realize their predicament, someone shouts the solution, “Hey, we can put on a show!” (The ticket sales from which presumably generate enough money to save the day.)
The purpose of this post is to discuss one of the more serious forms of software marketing desperation, which I refer to variously as a backstage musical, a bake sale, or what one might more contemporaneously call crowdsourced marketing.
Backstage musical. Think: “Jimmy can tap dance, Mary can sing, and John plays the trumpet. We can put on a show!”
Bake sale. Think: “You make the brownies, I’ll make the cookies, and Anne can make the cupcakes. We can have a bake sale!”
Crowdsourced marketing. Think: “We can have a Sales town hall, set up a Slack channel, and call a meeting with Product to figure out how to generate sales. We can crowdsource marketing!”
In all three cases, the presumption is basically, if only we had professional performers, bakers, or marketers, they’d know what to do, but since we don’t – well, let’s throw it together the best we can. For the Our Gang financial dilemma or the classroom fundraiser, that might be good enough. For your marketing department, it’s not.
I’ve spoken to CEOs who ask:
If we have all the performance data and conversion rates by (marketing) channel, and we understand that things aren’t purely linear but opportunity generation happens over time in response to numerous touches, and we can test the effectiveness of a various messages used in various segments, then how are we supposed to take all that information and decide what to do?
If only, I think, you had a strong head of marketing. That is their job. In most marketing organizations, it’s not their only job and they may have delegated a lot of it to the head of demandgen, but wafting through all that data and all those ideas, building a plan, getting buy-in to that plan from sales, selling it to the CEO, and maybe the board — well, that’s what of head of marketing is supposed to do.
You can’t hire an agency to decide it for you. You can’t decide it in a board meeting or a call. The CEO can’t decide it after looking at some reports. The CEO and/or board can and should question any proposed plan, but making that plan is the head of marketing’s job.
And, let me be clear, it’s hard. Which is precisely why no one else can really do it. It’s a mix of art and science. It’s a mix of re-running proven campaigns while testing new hypothesis. It’s a mix of proven messaging and new messaging to address new trends, products, or partnerships. It’s knowing the channel performance data cold, but also knowing the limitations on its interpretation and the scaling opportunity and cost per channel going forward (think: exhaustion of low hanging fruit). It’s hard.
Believe it or not, I’m actually a big believer in crowdsourcing certain aspects of marketing – but not the plan. The plan needs to be made by someone who understands the market and who is immersed in the data of the business. If you don’t trust your marketing head to make the plan, you need a new marketing head. Period.
When it comes to crowdsourcing and marketing, I believe there’s a time and a place for it.
It is extremely effective for review. Share a draft logo and you might learn it’s too close to an indirect competitor’s. Share a draft name to learn it’s a bad word in another language. Share a draft webpage to find errors. Share a draft white paper to get your arguments torn apart. Many marketers (and most agencies) are afraid of this because such feedback can interrupt your timeline. But it can also help you catch mistakes, before they go live. The great thing about marketing is that everyone is going to get a chance to review your work anyway. You may as well find problems before the launch, not after. Don’t be an unveiler.
It’s great for brainstorming. It’s great to sit down with a bunch of sellers and say, “tell me what would make your lives easier.” Or, “I noticed we’re having troubles with our demo-to-close rate, what can we do to help improve that?” Be ready for the usual answers and bring data to address them – e.g., “no one’s ever heard of us.” Whip out your recent awareness study to present the actual state of relative awareness and then describe your plan to address it. Some marketers develop a fear of ideas because they see each new idea as work. Don’t be that person. Love ideas. Get as many as you can and then pick the best ones.
It’s great for guerilla marketing. We’ve got no more budget, but we still have a problem. What can we do, on the cheap, to help solve it? This often comes up in the context of field and/or regional marketing. It’s arguably a form of brainstorming, but not the kind where you are at the start of an exercise, generating ideas. Here, you’re in the middle of it, things aren’t going according to plan, and people need help. What we can we do (given our constraints)? The best marketers will go sixty minutes after the official end of the day, wringing brains, asking: any more ideas, anything else anyone can think of? Sometimes you get the best ideas on the third wring.
In this post, I’ve tried to convince CEOs to not turn their marketing into a bake sale. If you’re a CMO and you feel like your CEO or CRO is trying to do just that, then you need sit down and have a talk. You are a professional, you’re immersed in the data, and you understand the business. Ask them to work with you to make a plan, explain in detail why you’re proposing what you’re proposing, and listen carefully to their ideas and concerns.
Then, as depression-era Grandpa Kellogg would say, “plan your work, and work your plan.”
If everyone else nevertheless insists on a bake sale, you probably have a bigger problem.
DK: How’s the relationship with your CRO going? CMO: Solid. We collaborate really well. DK: I’ve heard you’ve had some trouble hitting sales targets. CMO: Yes, well you know the targets are pretty aggressive and we just had some major turnover in the sales force. But that’s all settled now. The new CRO joined 6 months ago and things are pretty stable now. DK: So when you say you’re collaborating does that just mean you’re working together without incident or are you deeply collaborating — e.g., joined at the hip? CMO: Deeply collaborating. We’re not just going through the motions. We talk about the hard problems. We answer each other’s calls on the first ring. The CRO always tells me that we have each other’s backs. DK: So what are those problems? By the way, the CEO told me they think it’s a top-of-funnel issue. CMO: Well, yes, it’s certainly part top-of-funnel, but our close rates are pretty grim as well. DK: How grim? CMO: We close about 5% of our opportunities. DK: You close 5% of your sales-accepted opportunities? CMO: Well, we’re actually closing 5% of our post-demo opportunities. That’s stage 4. The CRO thinks it makes more sense to calculate the close rate from the demo stage . DK: I see. What else? CMO: The slip rate is bad, more than half of deals slip out of the quarter. No-decision is our top loss reason code in the CRM. DK: Sounds to me like a pretty standard emerging space problem. Everyone’s trying to figure out the market. Nobody has budget in the category. People aren’t sure what it is. But a lot of people are interested. CMO: Yes, a lot of tire kickers. DK: Are any of your direct competitors crushing it or are you all dealing with the same issues? CMO: As far as I can tell, we’re all largely in the same boat. DK: So is this a top-of-funnel problem or is it broader? CMO: It’s broader. Both the CRO and I agree that we have two problems: we are not closing enough of the pipeline we have and we need more pipeline. Because of the second problem, we’ve raised our pipeline coverage goals to 4x. Originally the CRO wanted 5x but I negotiated it down. DK: What’s the budget situation? CMO: Well, in order to improve efficiency in CAC ratio, we’re holding the marketing budget basically flat over last year. The sales budget is going up 50%, though, in order to pay for those hires needed for growth. DK: I see. DK: Last question, who spends more time with the CEO, you or the CRO? CMO: Oh the CRO does. They spend a lot of time together, working on board slides, financing decks, and operating models and such. The CEO leaves me pretty empowered to run marketing.
There’s Something Happening Here. What It Is, Is Actually Clear.
Paraphrasing Buffalo Springfield, there’s a ton in this all-too-common scenario to chew on . Before addressing the key point of this post — about the CMO/CRO relationship — let’s take a quick minute to discuss the business situation, because I’m guessing that Kellblog readers can’t wait to tackle that first.
My Take on the Situation
Given that conversation, here’s what I think about the business.
It’s in a new space and they haven’t figured out the model yet.
Everyone in the space seems to have the same challenges — lots of interest, but few deals, nobody has budget, lots of slipped deals, and few purchase decisions.
They likely need to segment the space better, to try and find a subsegment where the pain is high enough to do something now and where the company can build out a whole product (aka, cross the chasm).
They need to be very aware of premature scaling. While the financing model may say to hire 12 reps this year, the empirical indicators do not. See my SaaStr Europa talk on this topic.
That’s it, in my opinion. No more, no less. Like any Silicon Valley startup with top investors, the company  likely has a founder who knows the space, a qualified management team , and has built a product that delivers against the initial vision.
The reality is that once in a while you land in the exact right place at the exact right time and everything takes off. Pretty often, however, you don’t. It doesn’t mean your vision is wrong or your product doesn’t work or your team sucks. You just need to debug your model, refine your focus, and give yourself some time.
If the CEO has hired a strong CRO and a strong CMO, the worst thing they can do at this point is start a blame game. What you want is a Three Musketeers team with an all for one and one for all spirit. The CEO, CRO, and CMO all working together to solve the company’s fairly obvious if also fairly challenging problems.
What you don’t want is a simplistic explanation and a circular firing squad that results in one, two, or even all three of those musketeers getting shot while the company struggles. That’s what is likely happening in our scenario, and because it’s somewhat subtle, let me spell it out.
The Blame Game
The first rule of being a CMO: if you look up and see this, you’re under the bus.
The view from under the bus
The CMO is squarely under the bus here. How do I know?
“It’s a top-of-funnel problem.” If the CEO thinks it’s a top-of-funnel problem, that is definitionally a marketing problem because marketing typically has the most top-of-funnel responsibility. There are fifty things going on, but when we net it all out: it’s a top-of-funnel problem. Hum. I bet the board thinks it’s a top-of-funnel problem, too.
The CRO has likely shaped that perception. Remember when I asked who spent more time with the CEO? That’s because it’s usually a great proxy for who more shapes their opinions and worldview .
The deal conversion rate is quite low and somehow that’s not included in the reduced problem statement. A typical close rate in enterprise software is 15% to 25%. This sales team is closing 5%. The company may be light on top-of-funnel, but it can’t close deals either. Yet somehow, the second problem gets eliminated from the reduced form .
The conversion rate is off the wrong stage. This is a real tell-tale. Sales doesn’t even want to calculate the close rate off stage 2 opportunities, where stage 2 is usually defined as sales-accepted opportunity. There must be a handoff point from marketing to sales where an opportunity is accepted or not and, after acceptance, sales takes responsibility for a close rate. By the way, closing 15% to 25% of them means you can not close 75% to 85%, so it’s not exactly a high bar. I increasingly see companies push the close rate calculation further into the sales cycle (e.g., demo to close) which has the effect of pushing more responsibility onto marketing .
They increased the pipeline coverage target to 4.0x. This further transfers the problem to marketing. First, note that the CRO tried to increase the target to 5.0x and only “dropped” it to 4.0x after negotiation. How kind. The effect of this is to further say, it’s a marketing problem; we don’t have enough pipeline. To do a reductio, I once worked with a company that had 100x pipeline coverage. Guess what? They still missed their number. Because there was zero accountability around pipeline.
The CRO never signed up to increase the close rate. The company seemed quick to increase marketing’s pipeline generation targets, but never got around to setting a goal to increase the 5% close rate. Hum.
Bookings capacity is not part of the conversation. Sales turnover means ramp resets means ramped-rep-equivalents is potentially a lot lower than total reps. How much of this problem is due to turnover-driven sales booking capacity shortfalls? Nobody seems to be asking.
The CMO is getting ratioed, but not in the social media sense. By default, the sales and marketing budget should scale together so the ratio between them should stay constant. Unless, of course, there’s some bottom-up reason for why the ratio changing, why we think it’s possible to feed 50% more sales on flat marketing, and why potentially 100% of the CAC efficiencies are being demanded of marketing. Here, the sales/marketing expense ratio is increasing 50%, without much of a reason except that “sales needs it.”
The CRO does not have the CMO’s back. Real partners in problem-solving don’t let the boss think it’s the other person’s fault, let alone lead them to that conclusion. Especially when they seem to actually know otherwise.
What To Do Instead
While I’ve touched on it above, solving the company’s strategy problem is worth a book if not a full post, so here I’ll focus on the CMO/CRO relationship.
Real collaboration is hard. You need to drop the us vs. them relationship and truly work together to solve problems.
For the CEO, it means creating a safe space where the CRO and CMO can do that. Think: “Look, I think you’re both great. We’re just working on some hard problems. Let’s work together to solve them.” Don’t point fingers. Don’t encourage finger pointing. Don’t tolerate it, whether blatant or subtle.
If the CEO has hired well in the first place, the odds are not great that a replacement will do any better. Make it about success and teamwork, not accountability in the form of termination. (Exception: if you didn’t hire well in the first place, go fix that problem.)
For the CRO and CMO, it means admitting weakness to each other. Yes, we generated less opportunities than plan. Yes, the 5% close rate is unacceptable.
It means doing what you can do to help, regardless of who’d be blamed if you fail. Think: CMO — what can I do to help that close rate? Sales training? Tools? ROI calculator? What? Think: CRO — how can my team help us hit the opportunity generation goal?
It means holding each other accountable. This is really hard. Think: I’ve been listening to discovery calls on Gong and we need to train our AEs to do better discovery. Or, we need to cut AEs 1 and 4. Or think: I attended our webinar demo last week and the presentation started late and failed to demo the admin side of the product.
It means going to the CEO with a single message. We’ve been working on this together, we think the root cause is we are early days in the market, we are going to focus marketing on generating opportunities in these specific areas, we are going to focus sales on pipeline discipline, we are going to track MQL-to-S2 and S2-to-close as our key conversion rates, and we are working together on sales hiring profiles and onboarding training to ensure we can better close what we get.
This doesn’t always work. Sometimes the company is just in a rough position in the market. However, sometimes it does. And when it does, it skips an entire executive replacement cycle, allowing the company to answer its key questions faster, and gain important time-to-market advantages, not to mention avoiding costs related to momentum and morale.
 Perhaps the better lyric to borrow is: “there’s battle lines being drawn, nobody’s right when everybody’s wrong.”
 As with any Kellblog post, all examples are derived from reality but ultimately not any one company, but a hybrid of scores of companies and situations I’ve seen over three decades in enterprise software. Everyone always seems to think it’s about them!
 As I have actually said to VCs who took no comfort in the statement: “it’s improbable that our off-plan performance is due to our own incompetence; we are all hiring the same SDRs, reps, and managers, all from the same hiring pool, giving them roughly equivalent marketing support hired from the same marketing pool, and paying them on the same compensation plans.” Standardization of the model and labor pool serve as risk isolators in Silicon Valley. VCs know that, which is why in general they prefer hiring veterans to up-and-comers. They still hated the statement and I wouldn’t recommend saying it, even if you might think it once in a while.
 You might argue that I’m a partisan former CMO contriving an example against sales, but remember I was also CEO of two startups for over a decade. More importantly, as a consultant / director / advisor, all I want to do is solve the problem. That perch makes it easier to see what’s actually happening. I don’t care whose to blame. If I met someone I think is incompetent I’ll say so. If I think it’s a bunch of good people in a tough situation, I’ll say that, too.
 Some would instantly blame this weak conversion rate on marketing: “see, the 5% conversion rate proves the pipeline is junk.” Marketing could fire back: “but sales accepted these opportunities, that means definitionally they were qualified, and sales couldn’t close them.” In my balanced view, I’m not assigning blame to anyone. I’m simply saying the company has two problems: light pipeline coverage and a weak conversion rate. Saying there’s only one is what’s partisan.
 To be clear, this means that marketing is not just responsible for creating sales-accepted opportunities, but for ensuring they reach the demo stage (typically two stages later). Sales then become responsible for closing say 20% of those, instead of 20% of stage 2s, which have been subjected to two additional layers of filtering. The lowers the bar for sales and raises it for marketing. Most important, it renders effectively meaningless the notion of sales-accepted opportunity.
Just a quick post to publish the slides from the talk I gave today at SaaStr Europa in Barcelona on the top 5 mistakes in scale-up. Thanks so much to everyone who attended, stuck around for the AMA session afterwards, and gave me feedback or asked me questions at the conference.
If you have trouble accessing these, please let me know and I can try to switch file sharing platforms. I like Slideshare for the embed capability, but I’m told they now paywall off my stuff and I haven’t fully researched how and if I can fix that. Leave a comment if you have troubles so I’ll know to go look.
I’m Dave Kellogg, advisor, director, consultant, angel investor, and blogger focused on enterprise software startups. I am an executive-in-residence (EIR) at Balderton Capital and principal of my own eponymous consulting business.
I bring an uncommon perspective to startup challenges having 10 years’ experience at each of the CEO, CMO, and independent director levels across 10+ companies ranging in size from zero to over $1B in revenues.
From 2012 to 2018, I was CEO of cloud EPM vendor Host Analytics, where we quintupled ARR while halving customer acquisition costs in a competitive market, ultimately selling the company in a private equity transaction.
Previously, I was SVP/GM of the $500M Service Cloud business at Salesforce; CEO of NoSQL database provider MarkLogic, which we grew from zero to $80M over 6 years; and CMO at Business Objects for nearly a decade as we grew from $30M to over $1B in revenues. I started my career in technical and product marketing positions at Ingres and Versant.
I love disruption, startups, and Silicon Valley and have had the pleasure of working in varied capacities with companies including Bluecore, FloQast, GainSight, Hex, MongoDB, Pigment, Recorded Future, and Tableau.
I currently serve on the boards of Cyber Guru (cybersecurity training) and Scoro (work management).
I previously served on the boards of Alation (data intelligence), Aster Data (big data), Granular (agtech), Nuxeo (content services), Profisee (MDM), and SMA Technologies (workload automation).
I periodically speak to strategy and entrepreneurship classes at the Haas School of Business (UC Berkeley) and Hautes Études Commerciales de Paris (HEC).