Marketing Targeting: It’s Not Just Where You Fish, It’s What You Put on the Hook

Back in the day I was taught that marketers do three things, memorized via the acronym STP:  segment, target, position.

  • Divide the audience into different segments.  For example, dividing consumers by demographics or dividing businesses by size or industry.
  • Select the segments that the company wishes to target for its marketing.  For example, choosing small and medium businesses (SMB) as your target segment.
  • Position the product in the mind of the consumer, ideally in a unique way, providing differentiation and/or benefit [1].  For example, positioning your offering for the SMB segment as easy to deploy and inexpensive to own.

I’ve always thought of targeting as the answer to the question, “what list do I want to buy?”  Do I want buy a list of marketing directors at SMBs or a list of chief data officers (CDOs) at Fortune 1000 companies?

The list-buying metaphor extends nicely to events (what shows do these people attend), PR (what publications do they read), AR (to which influencers do they listen), some forms of digital advertising (e.g., LinkedIn where you have considerable targeting control), if not Google (where you don’t [2]).

For many people, that’s where the targeting discussion ends.  When most people think of targeting they think of where on the lake they want to fish.

While an angler would never forget this, marketers too often miss that what you put on the hook matters, too.  Fishing in the same part of the lake, an angler might put on crayfish for largemouth bass, worms for rainbow trout, or stinkbait for catfish.

It’s not just about who you’re speaking to; it’s about what you tell them — the bait, if you will, that you put on the hook.

Perhaps this is too metaphorical, so let’s take an example — imagine we sell financial planning and budgeting software to businesses and our target segment is small businesses between $0M to $50M in revenue.  Via some marketing channels we can communicate only to people in this segment, but through a lot of other important channels (e.g., Google Ads, SEO, content marketing), we cannot.  So we need to rely not only on our targeting, but our message, to control who we bring into the lead funnel.

Consider these two messages:

  • Plan faster and more efficiently with OurTool
  • End the misery and mistakes of planning on Excel

The first message pitches a generic benefit of a planning system and is likely to attract many different types of fish.  The second message specifically addresses the pains of planning on Excel.  Who plans on Excel?  Well, smaller businesses primarily [3].  So the message itself helps us filter for the kind of companies we want to attract.

Now, let’s pretend we’re targeting large enterprises, instead.  Consider these two messages.

  • End the misery and mistakes of planning on Excel
  • Integrate your sales and financial planning

The first message, as discussed above, is going to catch a lot of small fish.  The second message is about a problem that only larger organizations face — small companies are just trying to get a budget done, whereas larger ones are trying to get a more holistic view.  The second message far better attracts the enterprise target that you want.  As would, for example, a message about the pain and expense of budgeting on Hyperion.

I’ll close in noting that marketers who measure themselves by the number of fish they catch [4] — as opposed to the conversion of those fish into customers — will often resist the more focused message because you won’t set attendance records with the more selective bait.  So, as you perform your targeting, always remember three things:

  1. It’s about where you put the boat
  2. It’s also about the bait you put on the hook
  3. It’s not about the number of fish you catch, but the number of the right fish that you catch.

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Notes

[1] The decision to emphasize differentiation or benefit is covered in The Two Archetypal Marketing Messages:  “Bags Fly Free” and “Soup is Good Food.”

[2] In a B2B sense, at least.

[3] Amazingly, a lot of large and very large businesses also plan on Excel, but let’s not confuse the exception for the rule or the point of the example — different messages attract different buyers.

[4] Either literally by putting KPIs on high-funnel metrics such as MQLs or, more subtly and more dangerously, by getting too much inner joy from high-funnel metrics (“look how many people came to our webinar!”)

Should Your SDRs Look for Projects or Pain?

There’s a common debate out there, it goes something like this:

“Our sales development representatives (SDRs) need to look for pain: finding business owners with a problem and the ability to get budget to go fix it.”

Versus:

“No, our SDRs need to look for projects: finding budgeted projects where our software is needed, and ideally an evaluation in the midst of being set up.”

Who’s right?

As once was once taught to me, the answer to every marketing question is “it depends” and the genius is knowing “on what.”  This question is no exception.  The answer is:  it depends.  And on:

  • Whether you’re in a hot or cold market.
  • Whether your SDR is working an inbound or outbound motion

I first encountered this problem decades ago rolling out Solution Selling (from which sprung the more modern Customer-Centric Selling).  Solution Selling was both visionary and controversial.  Visionary in that it forced sales to get beyond selling product (i.e., selling features, feeds, and speeds) instead focusing on the benefits of what the product did for the customer.  Controversial in that it uprooted traditional sales thinking — finding an existing evaluation was bad, argued Bosworth, because it meant that someone else had already created the customer’s vision for a solution and thus the buying agenda would be biased in their favor.

While I think Bosworth made an interesting point about the potential for wired evaluation processes and requests for proposal (RFPs), I never took him literally.  Then I met what I could only describe as “fundamentalist solution seller” in working on the rollout.

“OK, we we’re working on lead scoring, and here’s what we’re going to do:  10 points for target industry, 10 points for VP title or above, 10 points for business pain, -10 points for existing evaluation, and -10 points for assigned budget.”

Wut?

I’d read the book so I knew what Bosworth said, but, but he was just making a point, right?  We weren’t actually going to bury existing evaluations in the lead pile, were we?  All because the customer knew they wanted to buy in our category and had the audacity to start an evaluation process and assign budget before talking to us?

That would be like living in the Upside Down.  We couldn’t possibly be serious?  Such is the depth of religion often associated with the rollout of a new sales methodology.

Then I remembered the subtitle of the book (which everyone seems to forget).

“Creating buyers in difficult selling markets.”  This was not a book written for sellers in Geoffrey Moore’s tornado, it was book for written for those in difficult markets, tough markets, markets without a lot of prospects, i.e., cold markets.  In a cold market, no one’s out shopping so you have no choice but find potential buyers in latent pain, inform them a solution exists, and try to sell it to them.

Example:  baldness remedies.  Sure, I’d rather not be bald, but I’m not out shopping for solutions because I don’t think they exist.  This is what solution sellers call latent pain.  Thus, if you’re going to sell me a baldness remedy, you’re going need to find me, get my attention, remind me that I don’t like being bald, then — and this is really hard part — convince me that you have a solution that isn’t snake oil.  Such is life in cold markets.  Go look for pain because if you look for buyers you aren’t going to find many.

However, in hot markets there are plenty of buyers, the market has already convinced buyers they need to buy a product, so the question sellers should focus on is not “why buy one” but instead, “why buy mine.”

I’m always amazed that people don’t first do this high-level situation assessment before deciding on sales and marketing messaging, process, and methodology.  I know it’s not always black & white, so the real question is:  to what extent are our buyers already shopping vs. need to be informed about potential benefits before considering buying?  But it’s hard to devise any strategy without having an answer to it.

So, back to SDRs.

Let’s quickly talk about motion.  While SDR teams may be structured in many ways (e.g., inbound, outbound, hybrid), regardless of team structure there are two fundamentally different SDR motions.

  • Inbound.  Following-up with people who have “raised their hand” and shown interest in the company and its offerings.  Inbound is largely a filtering and qualification exercise.
  • Outbound.  Targeting accounts (and people within them) to try and mutate them into someone interested in the company and its offerings.  In other words, stalking:  we’re your destiny (i.e., you need to be our customer) and you just haven’t figured it out, yet.

In hot markets, you can probably fully feed your salesforce with inbound.  That said, many would argue that, particularly as you scale, you need to be more strategic and start picking your customers by complementing inbound with a combination of named-account selling, account-based marketing, and outbound SDR motion.

In cold markets, the proverbial phone never rings.  You have no choice but to target buyers with power, target pains, and convince them your company can solve them.

Peak hype-cycle markets can be confusing because there’s plenty of inbound interest, but few inbound buyers (i.e., lots of tire-kickers) — so they’re actually cold markets disguised as hot ones.

Let’s finally answer the question:

  • SDRs in hot markets should look for projects.
  • SDRs in cold markets should look for pain.
  • SDRs in hot markets at companies complementing inbound with target-account selling should look for pain.

 

Unlearning As You Scale: Presentation from a VC Portfolio CEO Summit

The good people of Costanoa Ventures invited me to speak at their summit where they gather portfolio company CEOs to participate in an impressive set of sessions related to building and scaling startups.  I was honored to be in the company of friends and respected colleagues like Nick Mehta and Rob Reid as presenters at the conference.

Costanoa asked me to speak about un-learning at this year’s un-summit and, as a (sometimes, some might say frequent) contrarian, I was only too happy to do so.  The slides from the presentation are below.  I focused on 4 topics:

  • The sensible application of the popular Silicon Valley adage, “the folks who got you here aren’t the ones who will get you to the next level,” and how to reconcile it with an older, even more popular adage:  “dance with who brung ya.”
  • Generalizing the next-level adage beyond people to systems, processes, and operational strategies.
  • Things to do and pitfalls to avoid in recruiting next-level executives, with a particular focus on avoiding very successful people caught in the lather/rinse/repeat trap.
  • Critically thinking whether you have been successful because of, in spite of, or independent of a list of your company’s practices, values, and deeply held beliefs

This slides are here and embedded below.

Thanks to Greg Sands, Martina Lauchengco, and Rachel Quon for inviting me and giving me such a great topic to work with.

What Exactly Do You Mean by Anal? Thoughts on Leadership and Self-Awareness

I remember one time having an argument that went like this:

Dave:  I don’t think you’ve thought through the details on this one.

Joe:  I think there’s enough detail in there.

Dave:  No, there’s not.  There’s no underpinnings, there’s no rigor in the thought process.  Remember, David Ogilvy always said “good writing is slavery” and ergo you need to dive deep and —

Joe:  Oh, you can be so anal.

Dave:  I don’t think I’m being anal.  I’m just being rigorous.

Joe:  Yes, you are.

Dave:  Well, what exactly do you mean by anal?

I always try to listen to myself talk and once in a while I have a did-I-just-say-that moment.  Did I just say, “what exactly do you mean by anal?”  Oh shit, I did.  Isn’t that kind of the definition of being anal?  Oh shit, it is.  Heck Dave, you may as well just have replied:  what I really want to know is — is there a hyphen in anal-retentive?

The actual issue here is one of leadership:  being aware of your strengths and weaknesses, trying to avoid over-doing your strengths and working to compensate for your weaknesses.  It’s critical that all leaders focus on this because, by default, most folks will over-play to their strengths (to a fault, effectively turning them into weaknesses) and ignore their weaknesses.

It’s not hard to be self-aware when it comes to most strengths and weaknesses.  Most folks know, for example, if they’re great at public speaking and bad at financial analysis, or great at individual problem-solving but bad in groups.  Or high on IQ but low on EQ.  People usually know.

Sometimes we euphemize with ourselves.  For example, while others might say I’m:

  • Detail-oriented, I prefer “rigorous”
  • Blunt, I prefer “direct”
  • Contrarian, I prefer “critical-thinking”
  • And so on

But at least you’re circling the same pond.  You have awareness of the area –though you might soften how you think about it to protect the old ego, relative to how others might more bluntly, or should I say directly, describe it.

But some weaknesses are harder to self-assess.  For example, I’ve taken assessments that basically prove I’m low on flexibility.  But I never knew it.  In fact, I thought I was supremely flexible because I was capable of moving.  Think:  OK, we’ll move a bit in your direction.  You see, I’m flexible!  Voila, QED.  Bravo Chef!  I was, however, blind to the fact that one person’s mile is another’s inch.  When you’re inflexible you risk self-congratulation for a tidbit of demonstrated movement when the other party thinks you haven’t moved at all.

As another example, because communication is one of my strengths, I always thought I did better in groups, when in fact I do better with people one-to-one — which was a key strength of which I wasn’t even aware.  Some of these things are just hard to see.

My advice on this front is three-fold:

  • Be aware of your strengths and beware your natural tendency to overplay to them.  If one of your strengths has become a running joke (e.g., at one point one of my staff handed out “Captain Anal” pins), it could be time to think about it.
  • Be aware of your weaknesses and, while you can work on them if you want, use building a complementary team as your primary way to compensate.
  • Attend programs like LDP (managers, directors) or LAP (C-levels) to build a deep understanding of both.  These programs aren’t cheap, but they will give you self-awareness, in a kind of data-driven and ergo virtually undeniable way, that few other programs will.

(And can somebody please spell-check this thing to make sure there aren’t any errors.)

Foreword to The Next CMO: A Guide to Marketing Operational Excellence

The folks at Plannuh, specifically Peter Mahoney, Scott Todaro, and Dan Faulkner, asked me to write the foreword for their new book, The Next CMO:  A Guide to Marketing Operational Excellence.  (Free download here.)

Here’s what I wrote for them.

CMO is a hard job. Early in my career I worked for CMOs, in sort of an endless revolving-door progression, at one point having 7 bosses in 5 years. I have been a CMO, for over 12 years at three different companies. I have managed CMOs, working as CEO for over a decade at two different companies. And I have guided CMOs, serving as an independent director on the board of five different companies.  Let’s just say I’ve spent a lot of time in and around the CMO role.

In the past two decades, no executive suite role has changed more and more quickly than the CMO. Marketers of yesteryear could focus on strategic positioning and branding, leaving such banalities as lead generation to sales-aligned field marketing teams, managing scraps of paper in cardboard boxes.

Sales and marketing automation systems changed everything. Concepts like pipeline, conversion rates, and velocity were born. From lead generation sprung lead nurturing. Attribution emerged to solve one of the world’s oldest marketing problems.

Artificial intelligence (AI) arrived at the scene, helping with areas like lead scoring and prioritization. The demand for analytics followed suit. Marketing ops arose as the cousin of sales ops.

Digital marketing changed everything again. Spend became even more accountable. Pay-per-click replaced pay-per-view which replaced just-pay. Targeting became more precise both via search and the rise of social media. Content marketing emerged to supplement declining traditional public relations. If yesterday’s marketing was leaflets dropped from airplanes, today’s is A/B-tested, laser-guided, call-to-action missiles.

Technology came at CMOs faster than they could keep up. Software could power your website, run your resource center, generate your landing pages, test your messaging, drive repeatable SDR processes, identify your ideal customer, drive account-based marketing, and even record and analyze prospect conversations.

What’s more, as CEOs and boards knew that entirely new classes of questions were becoming answerable, they started asking them.

  • What percent of the pipeline are prospects within our ideal customer profile?
  • What’s the stage-weighted expected value of the pipeline?
    Forecast-category weighted?
  • What’s our week 3 pipeline conversion rate for new logo vs upsell opportunities?
  • What’s our cost per opportunity and how does it vary by channel and geography?
  • What’s marketing’s contribution to our customer acquisition cost (CAC) ratio and how are we improving it?

And dozens and dozens more.

The hardest job in the C-suite got harder. Today’s CMOs need to be visionary strategists by day and operational tacticians by night. Operational marketing has become the sine qua non of modern marketing. If the website is optimized, if the demand generation machine is running effectively, if marketing events are executed flawlessly, if quality pipeline is being generated efficiently, if that pipeline is converting in line with industry benchmarks, and if and only if all that is being done within the constraints of the marketing budget — spending neither too little nor too much — then and only then does the CMO get the chance to be “strategic.”

Operational excellence is thus a necessary but not sufficient condition for CMO success. So it’s well worth mastering and this book is the ideal guide to building and managing your own integrated marketing machine.

There’s no one better to write this book than the leadership team at Plannuh, Peter, Scott, and Dan. With their experience running marketing teams from startups through multi-billion dollar public companies, teaching and mentoring generations of marketers, and now building a platform that codifies their thinking into a scalable SaaS platform, this guide is certain to raise the IQ of your marketing function.

– Dave Kellogg

Video of My SaaStr 2020 Presentation: Churn is Dead, Long Live Net Dollar Retention

Thanks to everyone who attended my SaaStr 2020 presentation and thanks to those who provided me with great feedback and questions on the content of the session.  The slides from the presentation are available here.  The purpose of this post is to share the video of the session, courtesy of the folks at SaaStr.  Enjoy!

 

Churn is Dead, Long Live Net Dollar Retention! Slides from my SaaStr 2020 Presentation

I just finished delivering my presentation at SaaStr Annual 2020, dubbed Churn Is Dead, Long Live Net Dollar Retention.  The presentation is about understanding SaaS businesses:  how to think about them, how to value them, how to use unit economics like CAC and churn to measure them, all with a particular focus on measuring the health of the annuity portion of a SaaS business, the installed base.

While the session is title is perhaps dramatized, if churn isn’t dead I think it’s at least wounded because there are too many ways to calculate it — and the downstream metrics based on it.  That, in turn, lends itself to gaming.  As I said in the presentation:  “there’s a reason PE firms recalculate all your metrics!”

While I generally think public company SaaS metrics are inferior to private company ones, I think the public company way of measuring churn/retention — i.e., net dollar retention (NDR) rate — is superior to LTV/CAC and similar metrics, and thus that private companies should start tracking NDR, too.

If NDR is going to be measured, it can be managed and I suggest both a good and a bad way to think about that.  I wrap up with a quick introduction to RPO (remaining performance obligation), another public company SaaS metric that I believe should and will catch on with private SaaS companies.