Category Archives: Startups

Aligned to Achieve: A B2B Marketing Classic

Tracy Eiler and Andrea Austin’s Aligned to Achieve came out today and it’s a great book on an important and all too often overlooked topic:  how to align sales and marketing.

I’m adding it to my modern SaaS executive must-read book list, which is now:

So, what do I like about Aligned to Achieve?

The book puts a dead moose issue squarely on the table:  sales and marketing are not aligned in too many organizations.  The book does a great job of showing some examples of what misalignment looks like.  My favorites were the one where the sales VP wouldn’t shake the new CMO’s hand (“you’ll be gone soon, no need to get to know you”) and the one where sales waived off marketing from touching any opportunities once they got in the pipeline.  Ouch.  #TrustFail.

Aligned to Achieve makes great statements like this one:  “We believe that pipeline is absolutely the most important metric for sales and marketing alignment, and that’s a major cultural shift for most companies.”  Boom, nothing more to say about that.

The book includes fun charts like the one below.  I’ve always loved tension-surveys where you ask two sides for a view on the same issue and show the gap – and this gap’s a doozy.

sm gap

Aligned to Achieve includes the word “transparency” twenty times.  Transparency is required in the culture, in collaboration, in definitions, in planning, in the reasons for plans, in process and metrics, in data, in assessing results, in engaging customers, and in objectives and performance against them.  Communication is the lubricant in the sales/marketing relationship and transparency the key ingredient.

The book includes a nice chapter on the leadership traits required to work in the aligned environment:  collaborative, transparent, analytical, tech savvy, customer focused, and inspirational.  Having been a CMO fifteen years ago, I’d say that transparent, analytical, and tech savvy and now more important than ever before.

Aligned to Achieve includes a derivative of my favorite mantra (marketing exists to make sales easier) in the form of:

Sales can’t do it alone and marketing exists to make sales easier

The back half of that mantra (which I borrowed from CTP co-founder Chris Greendale) served me well in my combined 12 years as a CMO.  I love the insertion of the front half, which is now more true than ever:  sales has never been more codependent with marketing.

The book includes a fun, practical suggestion to have a bi-monthly “smarketing” meeting which brings sales and marketing together to discuss:

  • The rolling six-week marketing campaign calendar
  • Detailed review of the most recently completed campaigns
  • Update on immediately pending campaigns
  • Bigger picture items (e.g., upcoming events that impact sales and/or marketing)
  • Open discussion and brainstorming to cover challenges and process hiccups

Such meetings are a great idea.

Back in the day when Tracy and I worked together at Business Objects, I always loved Tracy’s habit of “crashing” meetings.  She was so committed to sales and marketing alignment – even back then – that if sales were having an important meeting, invited or not, she’d just show up.  (It always reminded me of the Woody Allen quote, 80% of success is showing up.)  In her aligned organization today, the CEO makes sure she doesn’t have to do that, but by hook or by crook the sales/marketing discussion must happen.

Aligned to Achieve has a nice discussion of the good old sales velocity model which, like my Four Levers of SaaS, is a good way to think about and simplify a business and the levers that drive it.

Unsurprisingly, for a book co-authored by the CMO of a company that sells market data and insights, Aligned to Achieve includes a healthy chapter on the importance of data, including a marketing-adapted version of the DIKW pyramid featuring data, insights, and connections as the three layers.  The nice part is that the chapter remains objective and factual – it doesn’t devolve into an infomercial by any means.

The book moves on to discuss the CIO’s role in a sales/marketing-aligned organization and provides a chapter reviewing the results of a survey of 1000 sales and marketing professionals on alignment, uncovering common sources of misalignment and some of the practices used by sales/marketing alignment leaders.

Aligned to Achieve ends with a series of 7 alignment-related predictions which I won’t scoop here.  I will say that #4 (“academia catches up”) and #6 (“account-based everything is a top priority”) are my two favorites.

Congratulations to my long-time friend and colleague Tracy Eiler on co-authoring the book and to her colleague Andrea Austin.

Thoughts on the Coupa S-1

It’s been a while since I dove into an S-1 and while I almost never get all the way through, here we go with another quick romp through a recent S-1.

Coupa, a ten-year old company that sells cloud-based spend management software and who pitches “value as a service” (ugh) recently filed its S-1.  Before diving in, I wonder if I should mention the potential irony in a company that sells “spend management” software running with a 40% operating loss.

But, remember the average SaaS business, per research from my friends at JMP, has negative operating margins at IPO time:  the median is -21% and the mean -36%.   So cheap jabs aside, Coupa is running a bit on the high side and, more importantly, in a time where I thought the markets were demanding better profitability than in the past.  That’s the interesting part.  From an operating margin perspective, Coupa is looking like a typical IPO in a market that was supposedly setting a higher bar.

Coupa’s most recent $80M private round put it in unicorn status (i.e., meaning that it was raised at a $1B+ valuation).

Estimating the shares outstanding after the offering is frankly quite confusing (e.g., share counts in the summary P&L seem to not include conversion of the preferred) and after spending 20 minutes trying to figure this out, I think there will be something like 180M shares outstanding after the offering.

Normally that might suggest a reverse split prior to IPO (as Talend recently did, an eight-for-one) but since I can’t find any evidence to suggest that, I’ll have to assume that Coupa and its bankers are bullish on valuation.  Otherwise, if I’ve got the right share count, any valuation less than about $1.8B will put them in single-digit stock price territory (which is the condition companies do reverse splits to avoid).

Highlights from the first pages of the S-1:

  • They connect 460 organizations (customers) with over 2M suppliers, globally
  • They estimate they have saved their customers $8B to date, on a cumulative basis
  • Fiscal year (FY) ends 1/31
  • FY15 revenues of $50.8M, FY16 of $83.7M, 65% YoY growth
  • FY15 net losses of $27.3M, FY16 of $46.2M, 68% YoY growth
  • 1H16 revenues of $34.5M, 1H17 of $60.3M, 75% YoY growth – accelerating

Now, let’s look at the income statement, which I’ve cleaned up and color-highlighted.

coupa1

Income statement comments:

  • Approximately 90%/10% mix of subscription to services, generally good
  • $83.7M revenues in last full FY is appropriate IPO scale by recent historical standards
  • 75% accelerating YoY growth in 1H17 over 1H16 is pretty strong
  • Subscription gross margins running 77% to 80%, pretty standard
  • Services gross margins of -89% in FY16 and -59% in 1H17 are horrific.  Happily it’s only 10% of the business.
  • Overall gross margins run around 60%, which strikes me as a bit low, but according to my JMP data, is roughly on target
  • 1H17 R&D of 25% of revenues, at the mean
  • 1H17 S&M of 58% of revenues, 7% above the mean
  • 1H17 G&A of 17%, 4% below the mean – but after running at a shocking 32% in 1H16
  • 1H17 total opex of 100% of revenues, about 3% above the mean
  • 1H17 operating margin of -39%, about 3% below the mean

They also present a non-GAAP operating loss which I can’t easily benchmark. They define it as:  operating loss before stock-based compensation, litigation-related costs and amortization of acquired intangible assets.  There was about a $12.9M delta between GAAP and non-GAAP operating income in FY16, which reduces to only $3.8M in 1H17.

Back to highlights from the S-1 body copy:

  • They typically do 3-year contracts
  • They say “we rely heavily on Amazon Web Services (AWS)” as a risk in the risk factors
  • 29% of revenues from international in 1H17
  • They had a “material weakness” in their FY14 audit, unusual
  • 25 pages of risk factors in total, normal
  • They’ve raised $165M in venture capital, and have $80M in cash
  • Almost $7M in litigation costs in FY15
  • They claim an estimated LTV/CAC that exceeds 6.0 in each of the past 3 years
  • They do an interesting analysis of their 2013 customer cohort concluding that its contribution margin was -249% in FY13, but 75% in FY14-16. (Page 53.)
  • Average ARR/customer up from $138K in FY15 to $183K in FY16

Here are the quarterly numbers; things look pretty consistent except for 2QF15, where among other things, they had $7.5M in stock-based compensation expense.

coupa2

More highlights

  • Operating cash burn of about $4M/quarter (page 67)
  • The CEO made $660K in cash comp in FY16, $320K and $340K bonus
  • The EVP of sales made $497K in cash comp in F16, $250K base and $247K commissions

Let’s take a closer look at the unicorn round:

  • It raised $80M at $4.18/share (page 119)
  • The beneficial ownership analysis (page 121) is based on 162.8M shares outstanding as of 7/31/16, but I believe excludes 61M shares associated with granted and un-granted stock options (page 43)
  • 162.8M + 61M = 223.8M shares on a fully diluted basis x $4.18/share = $935M
  • Not a unicorn you cry! ($935M < $1B)
  • But remember these claims are usually based on post-money valuation
  • $935M + 80M = $1.015B
  • So the math appears to hold up, but it’s also pretty clear Coupa was holding out for a valuation that squeaked them into the club

# # #

Be sure to read my disclaimers.

Win Them Alone, Lose Them Together

It was back in the 1990s, at Versant, when my old (and dearly departed) friend Larry Pulkownik first introduced me to the phrase:

Win Them Alone, Lose Them Together

And its corollary:

Ask for Help at the First Sign of Trouble

Larry told me this rule from the sales perspective:

“Look, if you’re working on a deal and it starts to go south, you need to get everyone involved in working on it.  First, that puts maximum resources on winning the deal and if — despite that effort — you end up losing, you want people saying ‘We lost the Acme deal,’ not ‘You lost the Acme deal.'”

It’s a great rule.  Why?  Because it’s simple, it engages the team on winning, and most of all — it combats what seems to be a natural tendency to hide bad news.  Bad news, like sushi, does not age well.

Twenty years later, and now as CEO, I still love the rule — especially the part about “the first sign of trouble.”  If followed, this eliminates the tendency to go into denial about bad news.

  • Yes, they’re not calling me back when they said they would, but I’m sure it’s no problem.
  • They did say they expected to be in legal now on the original timeline, but I’m sure the process is just delayed.
  • Yes, I know our sponsor seemed to have flipped on us in the last meeting, but I’m sure she was just having a bad day.
  • Well I’m surprised to hear our competitor just met with the CIO because they told us that the CIO wasn’t involved in the decision.
  • While the RFP does appear to have been written by our competitor, that’s probably just coincidence.

These things — all of them — are bad news.  Because many people’s first reaction to bad news is denial, the great thing about the “first sign” rule is that you remove discretion from the equation. We don’t want you to wait until you are sure there is trouble — then it’s probably too late.  We want you to ask for help at the first sign.

The rule doesn’t just apply to sales.  The same principle applies to pretty much everything:

  • Strategic partnerships (e.g., “they’ve gone quiet”)
  • Analyst relations (e.g., “it feels like the agenda is set for enemy A”)
  • Product development (e.g., “I’m worried we’ve badly over-scoped this”)
  • Financing (e.g., “they’re not calling back after the partner meeting”)
  • Recruiting (e.g., “the top candidate seemed to be leaning back”)
  • HR (e.g., “our top salesperson hated the new comp plan”)

I’ll always thank Larry for sharing this nugget of wisdom (and many others) with me, and I’ll always advise every manager I know to follow it.

The Four Levers of SaaS

There are a lot of SaaS posts out there with some pretty fancy math in them.  I’m a math guy, so I like to geek on SaaS metrics myself.  But, in the heat of battle running a SaaS company, sometimes you just need to keep it simple.

Here’s the picture I keep on my wall to help me do that.

It reminds me that new ARR in any given period is the product of four levers.

  • The MQL to stage 2 opportunity conversion rate (MTS2CR), the rate at which MQLs convert to stage 2, or sales-accepted, opportunities.  Typically they pass through a stage 1 phase first when a sales development rep (SDR) believes there is a real opportunity, but a salesperson has not yet agreed.
  • The stage 2 to close rate (S2TCR), the rate at which stage 2 opportunities close into deals, and avoid being lost to a competitor or derailed (e.g., having the evaluation project cancelled).
  • The annual recurring revenue average sales price (ARR ASP), the average deal size, expressed in ARR.

That’s it.  Those four levers will predict your quarterly new ARR every time.

Aside:  before diving into each of the four levers, let me note that sales velocity is omitted from this model.  That keeps it simple, but it does overlook a potentially important lever.  So if you think you have a sales velocity (i.e., sales cycle length) problem, go look at a different model that includes this lever and suggests ways to decrease it.

So now that we have identified the four levers, let’s focus on what we can do about them in order to increase our quarterly new ARR.

Marketing Qualified Leads (MQLs)

Getting MQLs is the domain of marketing, which should be constantly measuring the cost effectiveness of various marketing programs in terms of generating MQLs (cost/MQL).  This isn’t easy because most leads will require numerous touches over time in order to graduate to MQL status, but marketing needs to stay atop that complexity (e.g., by assigning credits to various programs as MQL-threshold points accumulate).

The best marketers understand the demand is variable and have designed their programs mix so they can scale spending quickly in response to increased needs.  Nothing is worse than an MQL shortage and a marketing department that’s not ready to spend incremental money to address it.

The general rule is to constantly A/B test your programs and nurture streams and do more of what’s working and less of what isn’t.

MQL to Stage 2 Opportunity Conversion Rate

Increasing the MQL to stage 2 opportunity conversion rate (MTS2CR) requires either generating better MQLs or doing a better job handling them so that they convert into stage 2 opportunities.

Generating better MQLs can be accomplished by analyzing past programs to determine which generated the best-converting MQLs and increasing them, putting a higher gate on what you pass over to sales (using predictive or behavioral scoring), or using buyer personas to optimize what you say to buyers, when, and through which channels.

Do a better job handling your existing MQLs comes down ensuring your operational processes work and you don’t let leads fall between the cracks.  Basic activity and aging reports are a start.  Establishing a formal service-level agreement between sales and marketing is a common next step.

Moving up a level and checking that your whole process fits well with the customer’s buying journey is also key.  While each step of your process might individually make sense, when assembled the process may not — e.g., are you irritating customers by triple-qualifying them with an SDR, a salesrep, and a solution consultant each doing basic discovery?

The Stage 2 to Close Rate

Once created, one of three things can happen to a stage 2 opportunity:  you can win it, you can lose it, or it can derail (i.e., anything else, such as project cancellation or “slips” to the distant future).

Increasing your win rate can be accomplished through better product positioning, sales tools, and sales training, improved competitive intelligence, improved buzz/aura, improved case studies and customer references, and better pricing and discounting strategy.  That’s not to mention more strategic approaches via improved sales methodology and process or product improvements, in terms of functionality, non-functional requirements, and product design.

Decreasing your loss rate can be accomplished through better up-front sales qualification, better sales tools and training, improved competitive strategy and tactics, and better pricing and discounting.  Improved sales management can also play a key role in catching in-trouble deals early and escalating to get the necessary resources deployed to win.

Reducing your derail rate is hard because project slips or cancellations seem mostly out of your control.  What’s the best way to reduce your derail rate?  Focus on velocity — take deals off the table before the company has a chance to prioritize another project, do a reorganization, or hire a new executive that kills it.  The longer a deal hangs around, the more likely something bad happens to it.  As the adage goes, time kills all deals.

ARR ASP

The easiest way to increase ARR ASP is to not shrink it through last-minute discounting.  Adopt a formal discount policy with approvals so that, in the words of one famous sales leader, “your rep is more afraid of his/her sales manager than the customer” when it comes to speaking about discounts.

Selling value and product differentiation are two other discount reduction strategies.  The more customers see real value and a concrete return for their business the less they will focus on price.  Additionally, the more they see your offering as unique, the less price pressure you will face from the competition.  Conversely, the more they see your product as a cost and your company as one of several suppliers from whom they can buy the same capabilities, the more discount pressure you will face.

Up-selling to a higher edition or cross selling (“fries with your burger?”) are both ways to increase your ASP as well.  Just be careful to avoid customers feeling nickled and dimed in the process.

For SaaS businesses, remember that multi-year deals typically do not help your ARR ASP (though, if prepaid, they do help with year-one cash).  In fact, it’s usually the opposite — a small ARR discount is typically traded for the multi-year commitment.  My general rule of thumb is to offer a multi-year discount that’s less than your churn rate and everybody wins.

Conclusion

Hopefully this framework will make it easier for you to diagnose and act upon the problems that can impede achieving your company’s new ARR goals.  Always remember that any new ARR problem can be broken down into some combination of an MQL problem, an MQL to stage 2 conversion rate problem, a stage 2 to close rate problem, or an average sales price problem.  By focusing on these four levers, you should be able to optimize the productivity of your SaaS sales model.

 

 

On Hiring: Promote Stars, Not Strangers

“Well, he’s never been a sales development rep (SDR) manager before, but he has been an SDR for 3 years at another company. The chance to be a manager is why he’d come here.” — Famous Last Words

I can’t tell you the number of times I’ve heard something akin to the above in hiring processes.

Of course he’d come here to get the chance to be a manager.  The question is why his current employer won’t make him one?  They’re the ones who know him.  They’re the ones who’ve worked with him for three years.  What do they know that we don’t?

As a general rule, startups are not the place to learn how to do your job.  At startups, you should hire people who already know how to do the job.  Running the startup, in a high-growth, frenetic environment, is hard enough; you don’t need to be learning how to do your job at the same time.  A key reason startups offer stock options is precisely this:  to incent people who already know how to do the job to do it again by participating in the upside.

This is not to say, reductio ad absurdum, that startups should have no entry-level jobs, never take a bet on inexperienced people, and never promote anyone into management.  That’s a recipe for losing your best people when they decide the company has no interest in their personal development or career path.  The best startup teams are a mix of veterans and up-and-comers, but since — particular for management hires — you need to have a mix, you need to be very careful to whom you give that first-time in-the-job slot.

This is why I made the Star/Stranger Promotion Quadrant.

star promotion

The two axes are simple:  is the person a known star (at this company, i.e., do we all known her and do we all think she’s a star, here) and has the person done the job before (i.e., the actual job, SDR manager in this case, not SDR).

One of the easiest things you can do is to appoint known stars.  This means the person works today at your company in a different role, but wants to do a new job that’s opened up, and has already done that exact job before.  It doesn’t happen that often, but sometimes your director of product management has been director of product marketing before and wants to get back to it.  Awesome.  I call this “appointing” known stars because while the move may involve a titular promotion, in reality it’s more of an appointment than a promotion.  It’s great to let people move around the organization and there should be no shame in ever wanting to move back to something that someone particularly likes doing (or that the company really needs).  I shade this green because it’s low risk.

One of the nicest things you can do is to promote known stars.  For example, take a top-performing SDR who has management potential (an elusive concept, I know, but a whole post unto itself) and give them the chance to run a piece of the SDR team.  I prefer to do this — especially for first-time promotions into management — on a reversible basis.  Since neither side is certain it’s going to work, I believe it’s best to make someone a “team lead” for six months and then assess how it’s going.  If it’s going great, promote them to SDR manager and give them a raise.  If it’s not going well, you haven’t burned the ships on making the person a regular SDR again, working on some skills, and trying again in the future.  I shade this purple because there is some risk involved, but it’s a good risk to take.  People in the organization want see others given the chance to succeed as well as to safely fail in taking on new challenges.

If you lack existing team members with management potential or if your current team has too many first-time (and too few experienced) managers, then your best move is to hire qualified strangers.  While the stranger might want a career step-up, the reality is that most companies hire new people to do jobs they already know how to do.  Cross-company promotions are rare and candidates offered them should be somewhat wary.  Why again are these people willing to make me a CMO for the first time?  Sometimes the reasons are good — e.g., you’ve been a divisional marketing VP at a larger company and move into a startup.  Sometimes the reasons are bad.  Think: why won’t any qualified CMO (who knows this space) take this job?  But, moving back to the employer perspective, I shade this square purple because external hiring is always risky, but you can minimize that risk by hiring people who have done the job before.

This takes us back to the start of this post.  While depending on the kindness of strangers may have worked for Blanche Dubois, as a hiring manager you should not be extending such kindness.  Hiring qualified people is risky enough.  New hires fail all the time — even when they are well qualified for job with lots of relevant prior experience.  Don’t compound the risks of cultural fit, managerial relations, attitude/urgency, and a hundred other soft factors with the risk of not knowing how to do the job in question.  What’s more, do you have time to teach one of your managers to do their job?  Especially when what’s needed is teaching in basic management?  As I often say, VCs are risk isolators more than risk takers, and hiring managers should think the same way.  That’s why you should almost never promote strangers.  (And, as a corollary why strangers should be wary of those willing to promote them.)

That’s why I’ve colored this square red.  Companies should hire outsiders to do jobs that candidates already know how to do.  Promotions are reserved for promising insiders.

Put differently, and from a career planning viewpoint:  “rise up, jump across.”

How I Got One Marketing VP Job: A Quick Lesson

I think great learning can come from studying what cost your predecessor his/her job (on the assumption they weren’t promoted out of it onto greener pastures).  While such matters are invariably complex (“oh, there were a lot of factors, boss relationship, objectives attainment, sales confidence, …”), if you poke around hard enough you can almost always find a high-level, simple explanation of what went wrong (“in the end, it all came down to this.”)

Studying those simple explanations can teach you a lot.

How I Got One Product Marketing Job

I remember my first day at the company.  It was two weeks before my official start date, but I was invited to attend the quarterly business review, so I did.  The team was great.  The company was doing well.  The vibe was positive.

Then the marketing guy stood up to deliver his quarterly update.  The crowd turned aggressive.  They hit the presenter with rapid-fire questions.  He appeared off-balance, under-attack, and at times a bit deer-in-the-headlights.  It wasn’t pretty to watch.

I remember thinking that no matter what happens here, I don’t want to be that guy.  I never want to be in that situation.  I never want to be attacked by sales, put on the defensive, and bobbing and weaving for answers.  I want to be data-driven, confident, and educational.  I want to inform sales of our plans, up-front, get their buy-in on the program, go execute it, and then clearly share past results and future objectives.  Sales considers itself the most accountable corporate function.  If I show accountability before them, they will respect me.

After the corporate lynching ended, I figured this dynamic was what caused his downfall.  But when I went asking around, it wasn’t.  The performance may well have been a symptom of the problem, but it turned out the last straw was simple.

We launched version 6 of the product and a month later all we still had was version 5 data sheets.

Boom.  Basic execution.  That’s what will get you knocked out.  While you may be so busy doing 1000 things — and most marketers are — it’s not the bad article or the average presentation or the blown objective that will get you killed.

It’s the basics:  if the company launches version 6 of the product and a month later marketing is still only providing version 5 content, there’s a problem.  It’s black and white, de facto, proof that something is wrong.  It’s like handing sales a loaded gun and daring them to fire.

The moral:  prioritize your work.  Use a Maslow pyramid or concentric circles to understand what is core, what is next layer, and what’s after that.  And never miss on core.

Lead Nurturing, Fast and Slow

I’ll borrow the title of one of my favorite books (Thinking, Fast and Slow) to make a few important points about lead nurturing in this post.

While there is a strong argument that buyers should be nurtured before, during, and after the initial sale, I’m going to speak in this post about pre-sales lead nurturing, the purpose of which is to turn prospective buyers into marketing qualified leads, or MQLs.

For a widely used term, you’d be surprised how hard it is to find a good definition of MQL on the web. HubSpot’s definition, while a tad self serving, isn’t bad:

A marketing qualified lead (MQL) is a lead judged more likely to become a customer compared to other leads based on lead intelligence, often informed by closed-loop analytics.

An MQL is someone judged to be more likely to buy than the rest.  That works for me.  Typically, MQLs are defined by a set of rules like:

  1. New
  2. A predictive lead score of A, B, or C
  3. Correct geography
  4. At a company bigger than some threshold
  5. “Raised their hand.”  Took activity that indicates interest (i.e., they are not just  a name on purchased list) or increasingly, took multiple actions that accumulated points in a behavioral tracking system that exceed some threshold.

The first point (the newness criterion) was a trap that I slipped in to see if you were paying attention.  While some marketers will argue that MQLs need to be “new” (and there are some good reasons for this) others will increasingly question — in a lead nurturing world — what “new” actually means and why “new” matters.

After all, what should matter is that we have found a person more likely to buy than the other people.  Whether they’ve been in our database 2 hours, 2 weeks, or 2 years shouldn’t matter.  Or should it?

I think it does matter because:

  • Marketing needs to watch its image in front of sales.  Declaring someone who’s come to our last 3 annual roadshows an MQL strikes me as a “Kick Me” sign, regardless of whether she’s just accumulated 50 points.  There is a difference between someone who is new and someone we’ve been recycling for several years.
  • Marketing needs to track how many are new vs. recycled (1) to avoid a seemingly in-built tendency to be new-obsessed, (2) because few companies actually want 100% of either, and (3) because new and recycled MQLs will likely show very different downstream conversion rates, which should not be averaged away.

That’s why, in my view, a “new MQL” is a contact who has become an MQL for the first time (i.e., they are not necessarily new to our database, but they are new in hitting the MQL criteria).  After that, if they don’t buy on the first round and if they later come back to life again (by accumulating enough points in the nurture system), they are a “recycled MQL.”

MQLs = new MQLs + recycled MQLs

When I first heard the term “nurture” about a decade ago, to me it was all about recycling.  Nurture was what you did to people who were interested in your stuff, but who weren’t ready to buy now.  The purpose, then, of nurture would be some combination of (1) maintaining awareness and positive opinion so that the customer would call when they were ready to buy, and (2) attempting to accelerate the customer’s buying timeframe by marketing the benefits of acting sooner rather than later.

Nurture, then, was a process that should take quarters or years — not days or weeks.  Nurture could include emails, but it wouldn’t be limited to them.  We might invite nurtured leads to local events, mail them schwag (aka, “dimensional pieces“), and even call them from time to time.

I now call this path “slow nurture” because marketers seem to increasingly define “nurture” as the process by which you take a new inquiry (or name) and turn them into an MQL.  It becomes largely about email and is a speedy process that executes in hours, days, or maybe weeks.  I now call this “fast nurture.”

Both types of nurture should involve point accumulation, use tracks, and be A/B tested.  But there is a fundamental difference between fast nurture and slow nurture, related primarily to frequency.

This is what fast nurturing all too often feels like:

That’s why I also call fast nurture speed-bagging.

If you speed-bag someone who plans to buy in 12 months, what happens?  You irritate the heck out of them.  “Hey, I just wanted to read that white paper and you’ve emailed and called 4 times in a week.  Go away.”  Then they  hit unsubscribe or junk-sender.

And that’s it.  You’re done.  You spent real money finding someone, they were the right person, they even have plans to buy — just not now — and you speed-bagged them into blocking your communications.  Epic fail.

That’s why marketers need to think about Nurture, Fast and Slow.  They need to never fast-nurture slow-nurture prospects.  And they need worry about just how much they are speed-bagging even the fast-nurture prospects.  Particularly in markets where the challenge is more finding the right buyer at right time than simply finding the right buyer, matching the pace of the nurture to the pace of the buyer is everything.