5x is the New 3x
The status quo of pipeline coverage has changed drastically in the last six months. Hear how today’s top CMOs are increasing their pipeline coverage with tighter budgets and the levers they’re pulling to make it happen.
Hello and welcome to our pipeline summit session.
Bivex is the new 3X.
I am joined by a marketing legend in kind of B2B SaaS.
John Miller, founder of Marketo, founder of Engage Yo,
CMO of Demand Base.
John, welcome to our session.
Yeah, thank you.
Pipeline.
Great topic to talk about.
I applied.
Everyone needs more pipeline right now.
So today we're going to be talking about pipeline coverage.
How are you thinking about it?
How are you thinking about sales and marketing alignment?
How are you thinking about marketing spend?
This is a hot topic with everything going on in the world.
So let's jump right into it.
Here at Qualified, we've been talking a lot about the need for pipeline right
now.
Sales cycles have gotten longer.
There are more stakeholders involved.
Sellers are struggling out there.
And so we as marketers need to be giving them more pipeline coverage.
How do you think about pipeline coverage for your sales team
and has your mindset shifted at all with everything going on in the world right
now?
Yeah.
I mean, it definitely has evolved and changed.
I mean, I think before we kind of get into too much of the specific details,
it's worth kind of reminding ourselves that I think primarily we're talking
about new business
pipeline, not just expansion, not expansion pipeline.
Like five X might be what you need for new, but definitely I think when we see
cross-sell the coverage of the ratio is hard as bad.
How do we calculate it?
I mean, I think I calculated the same way pretty much every company out there
does.
Right. You know your bookings goals.
You know your sales cycles.
You know your win rates.
You can kind of do all that reverse waterfall math and come up with a number
kind of for what you need.
I will point out that I have seen marketing and sales people talk differently
about pipeline
coverage. And it's really important to be clear what kind you're talking about.
I.e. to me as a marketer, I tend to think about how much pipeline do we need to
create.
In order to get our future goals.
Whereas a salesperson tends to think about at the beginning of the quarter, how
much
open pipeline do I need to have?
Yep.
Make my goals for this quarter.
Yep.
They're both totally fine and valid numbers.
But you'll definitely get yourself into trouble if you are clear about which
kind you're talking about
and you realize you're talking about different ones.
Yeah. And so today we're talking about how much net new pipeline is the
marketing team or the
company generating for sales teams to put this nest.
The more marketing side definition of the view.
And then to your point about do we need more today than we used to?
Absolutely. I mean in many ways, as we just said, this pipeline coverage is the
inverse of your
win rate modified by your sales cycle times. And every piece of data out there
says, as we're in
this downturn, that sales cycles are getting longer when rates are getting
lower.
I would just add the pavilion CMO Summit a couple of weeks ago.
And they shared some really interesting data from some benchmarking done by a
company called EBSA.
I hope I'm pronouncing that right.
They said that in the most recent period, only 29% of reps made quota.
Wow. That win rates were down 15 percentage points.
Deal sizes were down 32 percentage points.
And sales cycles were taking 32% longer.
So that's some pretty sobering statistics, right? But if you do put all that
together,
and if you're committed to creating not a pipeline that's needed for the actual
win rates that you're business experiencing today, then yeah, you need more
pipeline created, no doubt.
And I think everybody in the audience right now is probably nodding their heads
Everything you're saying, longer sales cycles, lower average sale prices,
longer deals,
like that's what everybody's experiencing right now.
I think as marketers, it's an interesting time because we're asked to do more
with less, right?
This is kind of, I feel like the most commonly used mantra right now.
It's all about being a.
I also think those are like the four worst words in English language these days
And also that was going to be my question. I know we're going to skip ahead to
this later,
but like as marketers, how are you thinking about generating more pipeline when
sometimes
resources are strapped or cash is strapped? How should marketers be thinking
about that today?
Because there's more pressure than ever before to generate pipeline for our
sales teams.
Yeah. Well, you know, as I don't like the phrase do more with less.
I think it's just asking people who are already working really, really hard to
somehow work
even harder and somehow, you know, I mean, the definition of insanity is just
doing the same thing,
expecting different results. Even worse is do more of the same thing and expect
different results.
What does that mean?
Right. We can't just be working harder. We're going to have to find ways to
work smarter.
You know, and that might mean doing less of a better.
And it might mean bringing more intelligence to everything that we do.
You know, I mean, obviously I'm a fan of account based marketing tactics, but
you know,
there's a reason why people do ABA, right? Because it focuses your constrained
resources on the best
accounts. That's going to help you generate more with fewer resources, you know
, but ultimately
by working smarter, no harder. Well, I think ABM is a good segue to the next
question,
which is all about sales and marketing alignment. I'm curious to hear how do
you approach making
sure that sales and marketing are aligned? You talked about this earlier. We
often have
different definitions of things. We're thinking about generation versus
coverage.
How are you thinking about sales and marketing alignment today as it pertains
to bringing in
more pipeline for the organization? Yep. Well, I think first off, we got to
remember that when
we're talking about sales and marketing alignment, there's a third team running
around here, which
is sales development also, which, you know, is that marketing? Is that sales? I
don't know. I don't
really care. Right. Ultimately, I believe that one of the most important
changes that need to happen
to support pipeline creation is to move away from the outdated views of
marketing source
pipeline, sales source pipeline, SGR source pipeline, and instead move to the
world of team-based
pipeline, which is sort of the total goal. You know, the sort of whole view of
like,
I sourced this, you sourced this, that might have worked 15 years ago when
deals had fewer
smaller buying committees and lower sales prices and shorter sales cycles. But
it doesn't work today
with much more complex and on linear sales cycles. You have marketing and SDRs,
touching accounts way before it's an opportunity. Right. And ideally, you've
got marketing
supporting deals after it's an opportunity and even after they're a customer.
You know, and I mean, I guarantee every marketer on this call has at some point
in their career
gotten into an argument over what was that sales source or marketing source and
like,
look at the data, they went to the website, they went to this event. Yeah, you
happened to be the
last one to email them, but you know, or like, you met them at a trade show. Is
that a marketing
source or sales source? All those arguments are stupid. We should just stop
having them and focus
on this idea of team sourced pipeline. That's what we do at demand base. We
have a number that we
all are aligned around hitting marketing and SDRs. Now it is, so this makes a
lot of sense.
I will say it does make it harder when you're missing the number, because not
as easy to say.
Yeah, you can't say, well, I did my job, but you know, you didn't do yours, you
know, like,
you just have to accept you're a team, you win or lose as a team, and avoid the
finger pointing.
Yep, all that said, though, it's not that this is not to say you can't still
measure
some of the more detailed things, but you're doing that not to prove value. You
're doing that to
improve results. You know, the analogy I like to use is if you're all playing
as a soccer team,
there's one scoreboard, you know, and that's all you care about. But that by
guarantee you,
the coaches are videoing every single player and tracking how many passes and
how many shots
on goal and all that. And they're doing all that, again, not to sort of say,
did we win or lose,
they're doing that to coach and improve performance. So focus on the team
source number, but that
doesn't mean you can't also measure individual teams or sub teams in order to
improve.
I love that the team sourced pipeline. We've tried doing that at qualified
where we just have one
sales and marketing goal because originally we had them separated and you
naturally end up
doing some finger pointing this person clicked on an ad, but they were being
outbounded to and
then they came to an event and then an A.E. reached out like you're always
tracking all of those
touch points that it can you almost get in your own way of generating pipeline
and closing a deal.
I'm curious that demand base you talked about kind of having these team goals,
but then also
having kind of running the camera and how other teams are doing within that.
How do you guys
think about like bonuses and compensation? Are you guys still tying everybody
to that one major
metric up top and not getting too complicated from a comp perspective? If you
met if you call
people on something different, that's what you're measuring them on. Yeah, so
compensation is 100%
tied to team source pipeline. SDRs get paid for opportunities that their sales
reps create
regardless of whether the sales rep created it or the SDR didn't because again,
the reality is
that SDR probably touched that account at some point. Okay. And so this brings
us I think into
the next topic, which is thinking about marketing investments. I saw in one of
your blog posts,
you're thinking you like to call them investments and not spend. But as we
break down how you're
approaching kind of the fiscal year in the marketing spend, you have a lot of
math and a lot of magic
numbers that I've seen on LinkedIn and I read in your blog post, how are you
thinking about
investments right now from a marketing perspective and how that ties to ACB and
has that shifted at
all with everything going on in the economy today? Yeah, I think this is super
important. I mean,
as you can tell, I'm pretty passionate about this idea of team source pipeline.
But the other big
flaw of it is, you know, it makes it reduces that direct connection between
marketing investment
and output, you know, because you can kind of say, well, it's all us kind of
working together.
And in some ways, that makes it harder to set and defend your marketing budget.
I think too many
CFOs now have been kind of trained to think of the marketing budget like a gum
ball machine.
We're like, well, if I put this quarter in, I'll get a gumball out. And if I
put two quarters
in, I'll get two gumballs out. If only it was that easy, John. It doesn't work
that way. But
that's off. But that's exactly how we've trained the CFOs, but we're setting
our budgets, you know,
historically. And so I think what we need to do is we need to instead start
relying more on
benchmarks, you know, for our budget setting, you know, we can look at things
like what marketing
is a percentage of revenue, you know, which is not a bad way to look at it.
Although I like
even better looking at marketing as a percent of the total sales and marketing
spent or
or investment, I should say. And that's where you see some really interesting
data
where, you know, companies with sort of smaller deal sizes, marketing ends up
making a reasonable
split of the total spend. But then as deal sizes get bigger, marketing, you
know, obviously takes
up a smaller fraction of the total sales and marketing investment. For what's
worse, some great,
you know, insight partners makes the publishers amazing data on this. And you
know, a pretty good
rule of thumb is that marketing should be about 25% of the total sales and
marketing, you know, number.
And that's down a little bit from say more like 33% a few years ago is what I'm
saying.
And then within that marketing number, how do you think about the breakdown of
program versus
personnel spend? I know this is something as CMOs, we're always trying to make
sure we have the
right balance. And it's our perspectives may have shifted recently to make sure
that we're not
spending too much on either of those. But do you have a kind of a breakdown
that you like to do
between those two metrics? Yeah, so sort of the people program ratio. You know,
so I think it
depends a little bit on your company size. You know, typically, I'd say for a
smaller company,
you know, I'll see a ratio of almost like 50 50 between marketing, investment
and people
investment. And as you know, companies get really the big enterprise, it starts
looking
more like 60 programs, 40 people, because there's more agencies and more kind
of, you know, big
programs going on. But you know, generally, that's a pretty good kind of place
to see, you know, to
kind of, you know, to kind of target, you know, 50 to 60% of the total budget
on programs versus
people. Okay. And for my next question, I'm curious, and those are great
benchmarks.
When it comes to pipeline generation, how are you thinking about making sure
that the pipeline
you're generating is quality pipeline for your sales team? We've talked about
needing to generate
more pipeline for our sales team. Yeah, good result in just getting a bunch of
okay leads and
flipping things over to sales that aren't so great. But we're kind of just
desperate to hit our
bigger pipeline number. How do you ensure that quality is consistent as you
kind of stretch your
pipeline targets? Yeah, this comes up and we have these conversations ourselves
internally,
you know, where the reps sort of complain about the quality of pipeline
sometimes.
And my first reaction was like, you created the opportunity, right? Like, I
think I don't
create opportunities. Like you have to hit the button Mr. This is salesperson.
Yeah, right. So,
like, like, if it's not quality, don't create it. You know, it's a little bit
of my first reaction.
So I think it's better when you have a really hard, defined definition for when
that opportunity
needs to be created or not. At Marketo, we had a pretty simple rule, which I
liked.
You know, we sort of said, you know, a sales rep is like an attorney. Your most
valuable
resource is your time. You know, and so you get to take one meeting with a
client, you know,
non-billable. But then if you're going to have any additional meetings, you
know, with them,
you're going to have to create the opportunity to make it billable against your
time.
Okay, like, I've never seen a simple rule. Like, yeah, are there any follow ups
? If so,
boom, you create the opportunity. That worked really, really well. I think what
you got to watch
for it every scenario, though, whether it's a hard rule like that or not, is,
you know,
a rep who's kind of, for lack of a better word, fat and happy and has lost a
pipeline,
always going to be more restrictive about what they create. Yep. You know, and
a rep who's
quote unquote really hungry is probably going to be more overly ambitious in
creating their
pipeline. And I think you got to, you know, there's something you got to watch
for. And as marketers,
I think it's our job to know which reps quote unquote are hungry. Yep. And give
them more time
and resources because they need them more. The one other quality metric that I
like to look at for
pipeline is for special companies that have an account based program in place
is the percent of
your total pipeline created that comes from your target named accounts versus
your non target
named accounts. Yep. And just because all the bias almost by a sub assumption,
like,
you've named these accounts for a reason. Yeah. If more pipelines coming from
those,
it's probably something that are going on. Yep. You know, those are the people
who you want to
sell to. Yeah. So that's a good kind of segue to our last question, John. So we
've talked about the
fact you helped build the inbound marketing playbook as a founder of Mercado.
You helped create this
playbook that every single marketer in B2B SaaS has adopted. What is your take
on the modern
playbook that B2B marketers should be adopting? What are kind of your plays for
generating quality
pipeline right now? And how is that evolved over the years? Yeah. I mean, it
starts with
a heavy, I have these conversations with CMOs and other folks. And they're,
yeah, the general
feeling out there is that it's hard to do. You know, and yes, a big part of
that is the economy,
as we talked about at the start of this conversation. But I don't think that's
the only thing going on.
I think that we've all been running the same kind of playbook for a while. You
know,
if like I have content, you know, and events and I generate leads that, you
know, I score and some
get past the sales and others get nurtured. Eight and whole. Eight all of the
content. Yeah. You
know, rinse and repeat. And I think what's going, I think there's two things
going on. One,
I think our buyers have frankly gotten indifferent to a lot of these
traditional tactics.
And Mercado, I could write a definitive guide, these like big ebooks I create.
I could get 10,000
people to download in the first week. At demand days, I have a definitive guide
to ABM, which is a
really good piece of content. And frankly, it's hard to get people to want to
download a 200 page
book, which is I think buyers have changed as a result. So I think a lot of
tactics were used to
use are becoming less effective, you know, email, like email used to really,
really work to reach
people. You know, today, you know, if I want to talk to my family, I'm texting,
if I'm talking to my
coworkers, I'm using Slack, emails, what people use to sell me stuff. You know,
and so all these
things that we're used to are changing. I think that's one big change that's
happening that's
making things harder, not just economy. But the other one that's a little bit
more subtle
is I think that, you know, you know, the traditional approach, marketing as a
gumball machine
has caused all of us as marketers to sort of put more of our investment into
the things that are
measurable, particularly demand capture programs and relatively less investment
into things that
are hard to measure, like brand and awareness building, you know, things that
hit the reptilian
emotional brain, not the logical brain. And, you know, as a result, over time,
that's going to make
all the traditional demand generation things just less effective. You know, so
I do think there
needs to be a little rebalancing of how we think about our budgets. Well, I
think that's a hot
take, like, you can't just invest, not just spend, but invest in the things
that are going to give you
direct ROI, that gumball tomorrow, you need to create that halo because that
might be intangible,
but that's going to kind of propel your demand generation forward. John Miller,
oh, wait, go
ahead. No, I was going to. Yeah, yeah, all these things are connected, like
team source pipeline
versus marketing source pipeline and budgets and benchmarks and brand versus
demand. I mean,
there's a fundamental rethink about how we sort of think about the role of
marketing in creating
pipeline that needs to occur. I feel like we could go on for a very long time
because you have so
much knowledge around this topic. We're going to wrap today, John, but thank
you so much for
dropping all of this knowledge on us. It's so interesting. You have such a rich
background in
marketing and leading marketing teams and founding teams and to see how you're
kind of evolving your
take on pipeline generation, marketing investments, team sourced pipeline. I
know everybody's taking
a lot of notes right now. So thank you for joining us at Pipeline Summit, John,
and we will see you soon.
Thank you.