Dear B2B Marketer: Are You a Cost?

Dear B2B Marketer: Are You a Cost?

4 Leadership Principles Modern B2B Marketers Should Consider When Attempting to Transform Marketing’s Reputation from a Cost Centre to Revenue Centre.


Date: October 9, 2018.

Act 1: My Story

About a year ago, two events occurred almost simultaneously which not only strengthened my conviction regarding the perceived reputation the marketing function needs to have in a B2B organization but, just as important, reinforced what a marketing leader must do to ensure it happens.

Event 1: “The Troublesome CMO”

The first event happened as a result of reading an article in the Harvard Business Review (HBR), which stated that according to a study done a few years back:

“Marketing leaders had the highest turnover in the C-suite.” [In fact, the study continued by claiming that] “more than 40% of these individuals had only been in their roles two years or less, whereas 57% had been in their position for less than three years.” [1]

Now for most marketers, this has become yesterday’s news. However, at the time, this was disturbing to me because when I first happened to come upon this stat I was the marketing leader of a B2B software or SaaS company and happened to be 2.4 years into my tenure, which meant I had made it past the 2-year mark but still had another eight months before hitting the infamous “3-year” milestone.

Since then, I’ve come to realize that a significant reason for this short tenure usually boils down to misalignment or a misunderstanding between what the marketing leader believes their role is (or should be) versus what the CEO thinks.

For example, a few CEOs still might perceive marketers as just being a bunch of “glorified brochure-makers” in the “arts and craft” department. In other instances, in addition to “making things pretty,” CEOs expect marketers to “bring in more leads.”

Finally, there’s the savvy CEO who understands modern marketing and, as a result, will most likely want to work with a progressive-thinking marketing leader who, among other things, wants to make an impact on the business as measured by revenue and returns being contributed by marketing versus just how many leads they generate. In this scenario, if there is still misalignment, it’s because the CEO has mistakenly hired the “brochure-maker.”

Bottom line, the marketing leaders that struggle are often perceived as a “cost.”

Event 2: “The Rise of the Revenue Marketer”

The second event, which also took place in the summer of 2017, was reading the book, “The Rise of the Revenue Marketer” [2] by Debbie Qaqish who is the Principal and Chief Strategy Officer of The Pedowitz Group – a Revenue Marketing™ firm that helps B2B companies and their marketing leaders transform marketing from a cost centre to a revenue centre.

Now despite being five years old, which in the marketing world is a lifetime, the topic of the book is still very relevant in 2018. As author Debbie Qaqish explains,

“The book was written for the B2B marketing executive who is responsible for answering the question, ‘What are you going to do about revenue?’”

[Since reading her book, I’ve had Debbie Qaqish on my podcast a few times to discuss the topic of Revenue Marketing. If interested, you can listen to one of the podcast episodes called “The Evolution of Revenue Marketing.”]

Before reading Debbie’s book, our marketing team had coincidently already begun the “revenue marketing journey” (as Debbie describes in her book) by looking at the estimated customer revenue data that was available to us in our CRM as a way for us to make better decisions on what was working and where to spend our marketing dollars.

The “makeshift” attribution model we were using wasn’t perfect and also took the good part of a week each month of living in “Excel-Marketing Automation-CRM, and PowerPoint hell” to pull our monthly reports. However, it was worth the effort because it helped us increase our customer acquisition growth by an average of 84% YOY and reduce our Customer Acquisition Costs (CAC) by 33%, which brought our CAC Payback Period under an acceptable threshold as determined by both the leadership team and industry standards. In other words, we produced a marketing ROI >1x, and it was improving.

From this point, however, we knew we still had an upward climb before we could easily show not only the revenue contribution from marketing over a previous reporting period but more importantly, the forecasted revenue contribution for an upcoming period. I also had a goal to reduce the number of days it took to run our month-end reports to two or less. However, as I mentioned before, we were moving in the right direction.

I also knew making this transformation would be difficult, but felt it was better than the alternative. As a long-time marketer, like some of you, I too had experienced the “we need more leads” conversation more times than I care to admit as both a marketing leader and as someone who had helped B2B clients over the years with their lead generation efforts in an agency partner capacity.

From these experiences, I’ve learned a painful lesson first-hand, which is this: the problem with committing to and even exceeding a “lead target” (versus a “revenue or bookings target”) is that, in many cases, it can have minimal or no impact on the business. It also makes it extremely difficult, if not impossible, to accurately measure and optimize return on marketing spend.

If that wasn’t a good enough reason to consider seeking a better solution, over time, everyone can become disillusioned and frustrated and wonders what marketing does. Yes, that’s right, the “cold war” or “misalignment” we all hear about or may have even experienced ourselves between marketing and sales is inevitable to some degree.

As Dawn Colossi CMO of FocusVision once put it in an article she wrote:

“The reason (for this possible misalignment) is that the word ‘lead’ has meant something completely different to the c-suite, sales and marketing. Moreover, there’s no way to give anyone what they want when you don’t all agree on what that is exactly. Leads to the c-suite are names marketing gives to sales to call. For sales, a lead is someone who is ready to sign a contract. No wonder we are all fighting all the time, and no one is happy.” [3]

If you think CMOs, like Dawn Colossi, are the only C-suite leaders coming to this conclusion, you’d be mistaken. Mark Lucas, CEO of Marketo once said in a SaaStr podcast that:

“CEOs who view their CMO as [just ‘lead generators’] are not only failing the CMO but the entirety of the marketing organization and frankly the world.” [4]

Strong words, perhaps, but to illustrate this point further, at the time, I was in a situation where the marketing-qualified leads (MQLs) my team produced had improved year-to-date. Moreover, in some instances, some of our marketing channels had shown promise based on both the customer acquisition and estimated customer revenue data we had been tracking, but top-line company revenues had not met the leadership team’s expectations.

As the marketing leader of the company, this concerned me. So with the Harvard Business Review study top-of-mind and “The Rise of the Revenue Marketer” in hand, during the fall of 2017, I spoke with key members of the leadership team several times to discuss the merits of why marketing should ultimately become responsible for a revenue goal versus a marketing-qualified lead (MQL) target. In doing so, over time, this would transform marketing’s reputation in the company from a cost centre to a revenue and growth centre.

Unfortunately, I was not successful in convincing my colleagues so, at the end of 2017 (approx. 2.9 years into my tenure), I left the company on good terms and decided to go on a personal sabbatical. Despite being “another statistic,” I take responsibility for the fact that I wasn’t able to make this transformation happen. At the time, I was only trying to do what I thought was best for the company and my team. Also, if I’m honest, accomplishing this would have also given me great personal satisfaction. However, looking back, one of the things I regret the most is the fact that in some small way, by leaving, I feel like I let down my team.

Act 2: Discovering My “12 Powers”

During my sabbatical, I’ve taken the opportunity to do some soul-searching and have often wondered what I might have done differently. After much retrospection, which involved doing research and talking with several other people whom I consider to be knowledgeable in these matters, I’ve come to realize that being good at “doing” marketing or even “leading” a team, unfortunately, isn’t “good enough” to become a world-class B2B revenue marketing leader and operator.

This insight became even more evident after reading the book: “The 12 Powers of a Marketing Leader” by Thomas Barta and Patrick Barwise, which coincidentally happened almost a year to the day after reading Debbie Qaqish’s book, “The Rise of the Revenue Marketer.” The book is the result of the findings the authors observed after conducting the most extensive global study ever done on marketing leadership to determine what makes a marketing leader successful. Before I “unpack” this any further, first, some good news.

Power #2 of 12 was:

“Deliver Returns, No Matter What.” (what the co-authors refer to as “getting inside the revenue camp.”)

According to their research, they found that “delivering returns was a big driver of a marketers’ business impact (12% contribution),” which ranked fourth highest under the category of “business impact.” [5]

Finally! I thought to myself, here was the ironclad validation I needed to prove to myself I was on the right track. However, as I continued to read my celebration was cut short. Despite being a big driver for the business, “being inside the revenue camp” only made a 3% contribution to a marketing leader’s overall career success.

What? I thought to myself; this can’t be right. Unfortunately, after reading it a few more times, it was. You see, throughout my career, I had always thought that if I could produce “results” for a client or company than all else would be forgiven.

However, after reading “The 12 Powers of a Marketing Leader,” I realized that, unfortunately, this isn’t the case. In fact, according to the co-author’s findings, to be a world-class marketing leader, it takes more than just having one or two “powers.” To be an effective “change agent” and to “get inside the revenue camp” you must also have the ability to mobilize and inspire both your CEO and your colleagues.

In other words, it’s important that people both perceive and understand that what you are doing or plan to do will eventually help the company grow as a result of transforming marketing from a cost centre to a revenue centre.

As Thomas Barta, one of the co-authors put it in an email he wrote to me:

“For career success in marketing, visibility matters too. Deliver returns, no matter what” (Power #2). — AND ensure people see you are driving that success (Power #6).”

The 4 Marketing Leadership Principles

Based on the gap I had noticed between the contribution “Power #2” has on a marketing leaders’ ability to impact the business versus their career success, I decided to individually rank all “12 powers” from highest to lowest in each of their respective categories. I then ran a “rough” 80/20 analysis to destruct, select, and finally sequence each power according to their impact. As a final step, I then compressed all “12 powers” into a set of 4 core marketing leadership principles I could use for my purposes.

While I don’t believe in “static” marketing playbooks since the marketing profession and landscape is always changing, I do think principles, mental models and frameworks can be beneficial. I also feel that, for the most part, what you study is far more important than how you study. The material always beats out method. However, before we get to the principles, let’s begin with some definitions to provide context.

Leadership

In my mind, a simple definition of leadership is the art of motivating a group of people to act towards achieving a common goal or mission by inspiring and empowering them to “want” to follow your direction.

Now, let’s look at principles.

Principles

Principles are a fundamental truth or proposition that serves as the foundation for a system of values, beliefs, behaviours or goals. I have found that establishing a set of principles creates a compass to which you can refer to whenever something is in doubt, or you need to take a stand or evaluate any particular opportunity, problem, or situation. To quote Ray Dalio from his book Principles,

“I believe that having principles that work is essential for getting what we want out of life.” [6]

Below are the four principles I came up with after reading the “12 Powers” book. I realize that if you haven’t read the book, then some of these principles might not make sense at first. Therefore, after reading them, I’d recommend going to marketingleader.org where you can download a free PDF summary of The 12 Powers of a Marketing Leader.

The 4 Principles

1) Mobilize the CEO by “tackling only big issues” (Power #1) and “delivering returns, no matter what.” (Power #2)

2) Mobilize your colleagues by “walking the halls” (Power #5), “going first” (Power #6), and “hitting them in the head and heart.” (Power #4)

3) Mobilize yourself by “falling in love with your world” (Power #10), “aiming higher” (Power #12), and “knowing how you inspire.” (Power #11)

4) Mobilize your team by “getting the mix right” (Power #7) and “letting the outcomes speak.” (Power #9)

[Note: Powers #3 and #8 were the only powers that didn’t “make the cut” due to their low contribution percentages in both the business impact and career success categories.]

As I’ve already mentioned, I will use the principles above as beacons to help guide my actions as I move forward in my professional career. Perhaps they will also be useful to you.

The Final Act: A B2B Marketer’s Call to Adventure

As I draw to a conclusion, I think now would be an excellent time to establish or reinforce the fact that in sharing my story and points of view on the matter my intent is not to tell others what they should or shouldn’t do. In fact, up until recently, I had kept this to myself in my personal notes and thought sharing it with others might be perceived as being presumptuous or inappropriate – or both.

However, through this process of documenting my thoughts and insights as a way to analyze and learn from my situation so that I can improve, I thought that sharing this might also be beneficial to others. I’m also at a stage in my life where I’d like to contribute more to the marketing profession and community as a whole to the best of my ability.

In doing so, I’m well aware of the fact that currently I don’t know everything and, in many respects, still have a lot to learn (the truth is, I’ll probably always feel that way). I also realize that a lot of what I’ve shared with you has come mainly from ‘standing on the shoulders of giants’ most notably but not limited to Debbie Qaqish, Thomas Barta and Patrick Barwise for their efforts to write and publish their respective books. All I’ve done is rearrange the information that was publically available into a set of principles and assumptions that are useful to me so perhaps they’ll also be useful to some of you.

That said, they are nowhere near from being complete. In fact, like me, these principles are merely a draft and will continue to evolve, as I do, as I learn more about what it takes to become a world-class B2B revenue marketing leader. With that in mind, I welcome any feedback any of you might have as a way to help stress-test these principles and ideas. Overall, I’m merely seeking the truth because I believe “truth,” or more precisely, the accurate understanding of reality – is the essential foundation for producing good results.

As Mark Twain, once said,

“It’s not what you don’t know that kills you, it’s what you know for sure that ain’t true.”

Keeping this in mind, I have some assumptions, but they may not be true. So since I don’t know everything, I need to stress-test my ideas by getting feedback from others as a way to come to a valid conclusion.

In this case, what I believe to be true is this:

1) If a B2B marketing leader can “get into the revenue camp” by visibly showing how marketing contributes to revenue growth while delivering acceptable returns then not only will the business improve, but so will their career and quite even possibly lengthen the duration of their tenure. It would also, as a by-product, transform the marketing team’s reputation in the organization from a cost centre to a revenue centre. Of course, to do this correctly, marketing leaders and their teams will also have to work at improving all aspects of their “marketing engine” – not just pipeline. Those areas include team culture, operations, technology stacks, enablement, brand and creative, storytelling and content, and much more. They have to be both creative and data-driven. Be a mad scientist and artist. In other words, they must be category-driven, content-based and revenue-focused.

When #1 is realized, then my assumption is that the following will then occur:

2) CEOs will feel marketing leaders are now in alignment with the company because they can visibly see how marketing contributes to revenue growth and delivers returns. As a result, if they can see it then, hopefully, so will their stakeholders, which could include a board and investors.

That all said, it’s not the CEO’s or even the sales leader’s job to see or do this. They have a right to run the company and their respective areas the way they see fit. The onus then is on us – the marketers. It’s up to the marketer to lead this transformation or at least bring this to the attention of the CEO and the leadership team. We must show the company how marketing can become a revenue centre and growth engine because there is no going back. We must burn the boats. We must learn and adapt. The only way is to move ahead. To move forward and embrace this new “revenue marketing” reality once and for all.

We must “go first” (Power #6).

Time to Choose: Are You a Cost or Are You Revenue?

“This is your last chance. After this, there is no going back. You take the blue pill and the story ends. You take the red pill and you stay in Wonderland and I show you how deep the rabbit-hole goes. Remember that all I am offering is the truth. Nothing more.” — Morpheus, Scene from The Matrix, 1999. [7]

Just as the character Neo faced a hard choice in the movie “The Matrix,” B2B Marketers are now facing a similar situation. The choice? Do they remain a cost centre or do they become a revenue centre? Hopefully, what comes next will help those who are still on the fence make answering this question a bit easier.

In July 2018, the State of Pipeline Marketing Report came out. Now in its fourth year, the report is based on survey responses from over 400 B2B marketers most of them being marketing leaders. Coincidentally, a new question that was asked this year was:

“What is marketing’s perceived reputation in your organization: Cost centre or Revenue centre?” [7]

Of the 400 who responded to the survey, 53% answered cost centre while 47% said revenue centre. Because this question wasn’t asked in 2017, there’s no way to compare its results from last year to determine a trend, so the “jury is still out” regarding which reputation will ultimately win out, but the report made a compelling case for joining “team: revenue marketer.” My prediction for 2019? More than 50% will answer: “revenue centre.” here are just a few reasons why I think this will be the case.

The survey showed that B2B companies that were able to map marketing spend to revenue were 212% more likely to have a YOY revenue growth higher than 20%. Also, they were 121% more likely to have made revenue plans versus lead/MQL plans. Also, the B2B companies that planned based on revenue were 85% more likely to have a “revenue centre” reputation.

Speaking of reputation, to close the loop on this, the B2B marketing team’s that were perceived as a revenue centre were 54% more likely to have a YOY revenue growth of 20%, were 159% percent more likely to be aligned with sales, and had a 72% chance of generating an ROI higher than 1.5x.

If that wasn’t enough to stop you in your tracks and consider changing teams right here and now, in another similar report published in August 2018, called the State of Revenue Marketing:

Revenue Marketers not only generated more revenue than their Demand and Lead-Focused Cohorts but did so by generating fewer leads. This is because Revenue Marketers didn’t just focus on marketing-sourced revenue from new customer acquisition or accounts. They also grew revenue “throughout the entire customer lifecycle, through upsells and cross-sells.” [8]

Oh, and they also spent only two days a month on average, pulling data and preparing Revenue Marketing reports, compared to 5 days a month on average for Demand and Lead-Happy Marketers (sound familiar?).

Now, the parties who were behind the reports had something to gain by publishing these findings, but I also feel they were probably trying to help, just as I am in presenting this information.

But in an effort to be evidence-based, if I used these reports as merely a litmus test and triangulate their findings with the research I have done then one could assume that if you are a successful B2B revenue marketing leader, then you might already be in the “revenue camp” and perceived as a “revenue centre,” not a cost.

However, if you’re not, to begin the journey, you must be willing to take the first step. You must be willing to fail, and you must be willing to be a change agent and go first. As Don Draper once put it,

“If you don’t like what’s being said, change the conversation.”

That’s all I’m trying to do. As I continue my journey towards becoming a better B2B revenue marketing leader, I want to help companies adopt a revenue-focused marketing approach. However, just as important, I want to in some small way inspire other marketers to do the same within their organizations.

I first got into marketing, over 15 years ago, because I thought it would be a good outlet for my creativity in business. However, as my career evolved, I realized I had a passion for data, numbers, and analytics. Specifically, spotting the opportunities in them. I also enjoyed helping members of my team grow both personally and professionally. I’m at a point in my career where I still enjoy doing all of the above, but now I also want to enjoy the feeling I get when I walk into a leadership meeting with a specific report – one that holds the truth and the metrics that matter to everyone in that room.

This report will also show the actual revenue/booking contribution from marketing over a previous reporting period, which also happens to show we hit our revenue target. However, more importantly, I want to be able to show the forecasted revenue/booking contribution from marketing for an upcoming period along with how our team expects to increase Pipeline Velocity. Oh, and I almost forgot, this report took less than two days to pull.

I know it won’t be easy and might even mean that others will have to change their perspectives and also how they do things but as the 1997 Apple Think Different advertisement goes,

“Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently.” [9]

Here’s to the B2B Revenue Marketer.


 

References

[1] “CMO Impact Study,” 2014 AND 2015, By Kimberly A. Whitler, hbr.org/2017/07/the-trouble-with-cmos

[2] “The Rise of the Revenue Marketer,” 2013, By Debbie Qaqish, amzn.to/2Ro4mku

[3] “My First 90 Days as a CMO,” July 31, 2018, By Dawn Colossi, CMO of FocusVision, linkedin.com/pulse/my-first-90-days-cmo-dawn-colossi

[4] “SaaStr 182: Marketo CEO, Steve Lucas on What Makes a Truly Great SaaS CEO Today…”, 2018, bit.ly/2P5VOx4

[5] “The 12 Powers of a Marketing Leader,” 2017, By Thomas Barta & Patrick Barwise, a.co/3HDlssZ

[6] “Principles”, 2017, By Ray Dalio, principles.com

[7] “The Matrix,” 1999, imdb.com/title/tt0133093

[8] “2018 State of Pipeline Marketing Report,” By Bizible, bizible.com/blog/introducing-the-2018-state-of-pipeline-marketing-report

[9] “2018 State of Revenue Marketing Report,” By Heinz Marketing and CaliberMinds, calibermind.com/state-of-revenue-marketing-report-2018

[10] “Think different television ad,” 1997, Apple Inc., youtube.com/watch?v=YBJAvi3A0H8