Hello, and welcome to episode 53 of B2B SaaS Marketing Snacks. I'm Brian Graf. I'm the CEO of Kalungi, and I'll be taking over for Mike going forward. Mike has done an incredible job of building this into the show that you know and love today, but he's off pursuing the next chapter of his career. So I'm stepping in, and I've got some big shoes to fill.
Try my best to do him justice here. Mike, if you're listening, thank you again for everything, and you're always welcome to come back and do an episode with us. Anyways, today, I'm here with Kalungi's cofounder, Stijn Hendrikse, who's a serial SaaS marketing executive and ex-Microsoft product marketing leader. And today, we're talking about how to make your marketing team successful at different stages of company growth. What you need out of marketing is vastly different when your company is a pre-minimum viable product versus when it's reached product market fit and when it's really hitting the gas and scaling its demand generation efforts.
As a result, you really need different team goals, KPIs, marketing team sizes to be successful in each phase, and it's critical for you to know as a founder, leader, or marketer where you are and how to best optimize your current marketing efforts for success. Let's get into it. Okay. So today, we are here to talk about a question that I get asked a lot in my experience as the CEO of Calangi. Whether it's directly or indirectly, really, sometimes it's CEOs and founders coming to me in sales calls and directly asking, and other times it's working with founders to detail out the right marketing strategy.
And they don't put it in these exact words, but a lot of the problems that they identify to me allude to this. So the question that I would love to talk to you today is, what should you really expect from your marketing team as the CEO or founder, and how does that change depending on how large or small your marketing team is? The expectations for our marketing team that is $10,000 a month should not be the same as the expectations for marketing teams that are a $100,000 a month. There's a lot of different priorities, a lot of different bandwidth, issues that need to be solved, and a lot of different focuses that that really need to be considered in all of these things. So glad to have you here, Stein, to talk about it.
So glad to have you here, Brian. It's been so amazing to do these shows with Mike. I also think Mike and I were sometimes guilty of being a little bit theoretical. And with Brian, the CEO of Kalungi, we have the one and only person who's lived through everything that Mike and I talked about multiple times. I've done a lot of that work, but sometimes with larger companies.
And what's really cool, Brian, about your experience that you've really done all this with smaller companies or some of those companies that were growing really fast, and hence, the topic for today is also there's no better person to speak to that. Like, how do you how do you manage expectations, not only from your stakeholders, but yourself when your budget is 10 times as small or 10 times as big? Can you expect 10 times the results or divide them by 10? Or 10 times as fast.
Stijn Hendrikse: 10 times as fast. Yeah. It's amazing to have this conversation with you. I love the topic. What is your kind of question that you get most when you get a challenge as a CMO, Brian, when someone is kind of doubting whether things are going fast enough or whether the results are good enough?
I've found that in almost all Kalungi engagements, there is an inevitable point around the 3 to 6 month mark where the CEO will come to me and say, hey, I know you're doing a lot of things. I know you've given me the plan, and I can see the activity, and the cogs are turning, but I really I'm making an investment in you as a marketing team, and I need so when are those gonna come? Right? And and no matter the CEO, and then well, if as long as they are a solid CEO, they will inevitably ask that question. The funny thing is is that usually shortly after they ask that, the results do start to come.
But it's just it's usually a month or 2 before. But the the thing with those well, as a CEO, you're really one of the one of the most frequent decisions that you have to make is where do you put your money in a way that's gonna be the most beneficial for your business. Right? And so it's very easy for CEOs to treat marketing like a dollars in dollars out investment, where they need to start seeing very quick returns. Right?
But but as I've said in other podcasts and other sales calls, and I will continue to say, marketing is a long term investment. And so you have to kind of rearrange your thinking in terms of what you're gonna be getting out of it. It's much less of a black box that immediately spits out dollars and more of a tree that you need to plant and nurture, and and it will grow. And if you do that well, then it grows phenomenally well. And if you don't, you'll never see the gains.
So that was a long answer. The short answer is is when am I gonna see the return on this marketing spend? But as we're talking about before, right, the that return varies quite a bit if it is a small marketing team versus a large marketing team. Right? The small marketing team might might return a $100,000 company or marketing team does the same thing, and it it doesn't move the needle at all.
It's an interesting question that is not unique, honestly, for an agency gets involved. I've been, of course, in the seat of the CMO plenty of times as the as the full time team member or leader of the marketing function. And the question comes around the same time, Brian. 2, 3 months into a new marketing leader being hired. Hey.
Great activity. Yep. What about the outcomes? When I and I think just like in all performance based environments, which marketing isn't for very good reasons, it's the balance between how do you manage expectations, how do you show the right indicators that that give people faith that the things that they're betting on are are going to move the needle, you know, at the right sort of tempo in the right direction. I liken it a little bit to planning, like, a marathon or or any you pick pick a sports analogy, but when you or when you start working out, if you have never worked out and you show up to a CrossFit gym and you start doing your, you know, maybe 2, 3, 4 times a week workouts, you're gonna get some results really quick.
Right? You're gonna be surprised by how fast you can you're gonna first be surprised how hard some things are that you didn't think would would be hard, and then you're gonna get surprised by how by just repeating some of the exercise, how quickly you'll see results. But you're also gonna see that some things will will will level up really fast, and that it will be very hard to get to the next level. And the the challenge is that whether it's marketing or sales or customer success, they all have similar patterns that, you know, some things will will yield really quick returns. Like, I I love to talk about this from an SEO perspective.
When a digital agency comes in and they just add a little bit of metadata to some of the pages or they do a couple of URL changes in the website structure, you're going to see immediate response. Yep. 2 weeks late 2, 3 weeks later, you're gonna have a call with this digital agency, and they're gonna give you all these really cool numbers that went up. The problem is those are usually temporary effects. Right?
And they are very hard to keep, repeating or to scale. And the same goes for account based marketing. There, usually, the results come much later because the initial efforts are not about getting people into a sales call. With account based marketing, they're really the first couple of months about testing what resonates, testing what channel works, testing what part of the list building actually is useful and what list kind of attributes are not really that usable. And so that's where you kind of see the reels come in the 4th, 5th, and 6th months.
And a lot of problems exist in ABM and in outbound because people give up after 2, 3 months because they they didn't see sales calls convert yet. So I guess my question to you would be, when you go back to your initial question, like how does that all differ whether you spend $10,000 on marketing or $40,000 or $100,000 or how big your team is. Do you have any of those kind of patterns? You mentioned kind of the 3 month mark, right, and then 4 or 5 months when you What other patterns do you see, Brian, that both CEOs or other marketing leaders can learn from and kind of how to both manage expectations and how to plan around those?
The way that I like to frame this when I'm talking with founders or CEOs is almost half as much about how much you're spending on marketing as much as it is where your and where your company is in its maturity. So we're sitting in Stijn's office right now recording this, and Stijn has this T2D3 baseball diamond behind him, right, that has the the 4 bases on the path to hit a 100,000,000 ARR. Right? And and each company that exists exists somewhere in that in that base path. And so where you are in that base path really heavily affects what you actually need your marketing team to do and also what your expectations should be of that marketing team.
So starting with, you know, even just getting off the ground. Right? You your pre minimum viable product. Your goal for your marketing team and the expectations that you should set are really just to how it should be, how can we understand the market? Where do our ideal customers hang out?
What do they care about? Do we have a product hypothesis that we can test and get validated? Can we get beta users? Can we start to find a niche that we can start to occupy say, a, you know, Fortune 500 company, marketing goals. And in terms of say, you know, Fortune 500 company, marketing goals.
And in terms of the KPIs and thinking about what you can actually use to hold them accountable, Right? You're not to revenue maybe yet. But but you can look at what are the number of positive conversations we've had? How many beta users have we acquired? How many active how many of those users are actually active on the platform?
How many of those users actually share the product with others without you prompting? And how many have actually come back to you and said, I'm excited about this. I wanna be a part of the next development. Or what give me this improvement that will help me out. Right?
All of those things are are are really indicators that your product has legs in the market and that your marketing efforts are starting to attract the right type of customers for that product.
And with those KPIs then also, Brian, make you feel good about that conversation with the CEO 2, 3 months in, you say, hey, these are the things that are actually telling me the things I'm on the right track.
As a marketer, I would feel great about those metrics starting to move in the right direction. I would be constantly pointing my my CEO's attention that way. Not to distract from the fact that we haven't made revenue yet, but basically just to make the case that when we're ready to launch this product, that when we have a a, you know, a polished version that's ready to go to market, that I'm gonna have the right place to start pushing. Right? And I'm already making inroads, and I'm already starting to build relationships, and I already have messages tested.
I already know what's gonna work and what's not. Right? That allows us to make a bit nice big splash once we're ready to launch and really hit the ground running instead of trying to run a bunch of tests and figure out, you know, where we can sell, who we're selling to, and all those problems that a lot of companies have, right, but really mire their progress early on.
I love that you're using kind of the maturity model as as a frame. So let's stick with this, like, pre MVP one for a sec. So you shared some goals, some KPIs. What would a team kind of have to look like at that stage? I'm sure the CEO is not going to be as comfortable spending as much money and resources for these type of KPIs versus, for example, you know, our new MQLs into the funnel and things like that.
Yeah. Absolutely. So the team for these types of, you know, pre MVP companies, and this does depend heavily, right, of of whether you're you're an entrepreneur or maybe an intrepreneur within a larger company that's that has funding. Right? But, you know, I I typically think about marketing budget being about 10 to 20% of the ARR of the the company or the product that it's supporting at this stage. And it it depends. Right? You could over-leverage if you're really trying to grow fast, or you could under-leverage if you're trying to be conservative with your spending. We also, by the way, have a budget calculator that you can use on our site, Kalungi.com, that we'll leave in the in the notes to to show you how and where you should spend your marketing dollars, depending on how large you are and how old your company is.
So if you're interested in that, go check it out. But, you know, if you're if you're less than $1,000,000 in in revenue, then you're probably, you know, give or take, less than $85100 a month for your marketing budget. So you don't have a lot of you don't have a lot of money to spend. What that means is that you really are probably employing 1 or 2 Jacks of all trades for your marketers. They're people Jacks-of-all-trades. And these are people that can do, you know, anything, really. They can write. They know a little bit about your CRM. They can run a campaign for you.
They can go out into the market and talk to people. They kind of just do whatever it takes to test the market and get some initial results. But, often, also, the founder and CEO is typically, I like to say, wearing the hat of the CMO. Right? They're making a lot of the strategic decisions.
They're deciding what are the main messaging points that we should be using, how are we differentiated, right, what markets do we wanna pursue, etcetera. All those strategic decisions are really coming from them and being passed down into the marketing team.
I'm always challenging, of course, when they're debating how much to spend, I was challenging them to also think about their own time as as an important part of the investment, which is not to say that that's a bad investment. I think even if the CEO realizes or the founder that their own time is extremely expensive, it's also critical for them to be really involved early on because the amount of market kind of feedback that you get, and that is really helpful to happen for the CEO or the founder themselves, is really useful. But this is an important part of the budget, right, the amount of time that they spend on this because at some point, it will be better for them to hire someone to do that. You you mentioned the number there, 85100 a month. Is there kind of a minimum?
Because some of these PMVP companies have no ARR at all. Right? But at what point do you say, well, then just don't do it.
I mean, it's in terms of hiring a team, right, there there is absolutely a point where, you know, maybe it's less than $5 a month where it's not worth hiring new people on. But it's absolutely I would say it's critical to be running those tests, even if in a very small and controlled environment. Right? There's no point in the best product hypothesis would be nothing without market testing. Right?
Like, there's no there's almost I'm biased because I have a marketing background, but I think that there's no real point in building a product if you don't have a market that you're building it for. So it's really important to get out and run those marketing experience, even if it is instead of running a holistic SEO strategy or a paid per click campaign, it's going out and having conversations with people in the market to test hypotheses, to see where the rest of the market sits, to see how you can differentiate yourself, etc.
We call this podcast the B2B SaaS Marketing Snacks, so I'm gonna move this along because I feel these we have almost one full episode that talk about each stage. What about getting so you're now almost at MVP or you've achieved MVP, Brian. What is kinda next set of goals to think about?
Well, if you've read T2D3, then you know that once you hit minimum viable product, your next step is to go to product market fit. Right? So your goal after reaching MVP is to reach PMF, which is what we what we like to call product market fit. And so, really, what you wanna do, your goal with your marketing team at this point is to get the demand flywheel spinning. Right?
How do you carve out your niche? Right? You've you've done exploring in the previous, phase of the company. Right? And you've identified where you can where you can niche down, but how do you carve that out?
How do you get people to switch from paying with you with their time, right, as in the beta users, to paying you with their money and really paying you because your product directly adds value to them? How do you attract the right people, Zion likes to say, who pay, stay, and refer others? And then, of course, this is where you'll really start to get your traction. You'll get your first initial customers. And as you're starting to generate that first core cohort, you will personas to start to pursue a beachhead?
And once you've and your personas to start to pursue a beachhead? And once you identify those, you really wanna become their champion. Right? You wanna be you wanna care deeply about what they care about and focus with everything that you have on solving those problems, every problem that you have or every problem that they have that you can solve. Finally, you really wanna become a thought leader in this niche, and you really want to use this time and this traction to identify a few key channels that you can produce consistent demand generation and pipeline results in.
So this, you know, result in the in marketing qualified leads, opportunities, and revenue.
But how would you measure those goals, Brian?
So measuring those goals, this is when the list starts to get quite a bit more tactical. Right? And we've already we've already actually done a podcast episode on how to diagnose product market fit. So you can listen to that if you wanna go into more depth. But we we have built this list of 10 10 checklist items to reach product market fit.
Right? And they all have 10 in them. So 10 unique visitors, 10 non branded keywords with 10 monthly searches, 10 subscribers. Then moving down the list, 10 repeat users, 10 sharers, 10 customers, 10 testimonials, and then 10 new customers for referrals. That that last one is the hardest one to do.
Right? And that is really what will show you that the organic demand flywheel has started to spin, which is basically your product is so good, and you your positioning and messaging and, market choices are so good that the market is starting to take hold on its own. Right? And you don't need to push it for it to spin. Obviously, the more that you push it, the faster it will spin, but it's it's starting to get momentum on its own.
Yeah. I remember that I think it was episode 45, how to get the how to diagnose product market fit. And I remember I'm a lot much older than you, Brian. That product market fit used before the world of SaaS was defined as a certain, like a more of an absolute number of clients. I think 1,000 was a number that you often heard, and of course, it was dependent on, are these, like, $1,000,000 customers or customers who pay you $20 a month, right?
That's a very different product market fit question. So if you sell someone an airplane, then maybe 4 customers give you product market fit kind of credibility. And when you sell hot dogs, maybe you need at least a 100 people to buy your hot dog before you know. Did they come just because there was a game in town and I happen to be on the right corner of the street, or did they come because they like my hot dogs? Right?
So that's a personal nuance there. But what's really important about this model that we discussed in episode 45 is that the end state is not anymore, you know, you have to have a 1000 customers or a 100. It doesn't really matter what the number is. It's much more about do those customers find so much value that they help you find new clients. Right?
Because that is not just a proxy of having your flywheel opportunity because one client will get you another one or multiple. It's also a proxy for people being probably so loyal to your solution that they will not churn, right? And those are, of course, the 2 fundamental growth drivers of a high scale SaaS business, monetizing your clients that then stay that you can retain and that help allowing them to help you find new ones. Back to the budget, talk we had a little bit about pre MF. How do you think about that at this stage, Brian, kind of the team size, the dollar amount that you spend on marketing?
This is when the variance really starts to kick in for the team size and the budget, I think. I think you could theoretically reach PMF with a couple million, a million, a couple million in ARR. You could also if your if your, average contract value or your annual contract value is is high enough. Right?
By the way, both are fine. I think people use these things. You know?
But let's just say for product market fit, you are around your or for let's just say for a minimum viable product, you're around 5,000,000 in ARR. That means that you can spend around 4040, $45,000 a month on your marketing team. Right? And so this means that you can probably spend you can probably hire around, I don't know, 3 to 5 marketers to really start to put some some juice into the machine. Right?
And in order for that team to work, it depends on the team size, but I would recommend starting with your marketing leader or a heavy product marketer. Right? You need somebody that has the strategy that is really focused on positioning, looking at the bigger picture, making sure that that the team is rowing all in the right direction altogether. But past that, right, you need a really strong copywriter who knows the industry, who knows all the terminology, who can become who can leverage the subject matter expertise in your company, but also become a bit of a subject matter expert themselves and really establish you as thought leaders in the industry. You need a growth hacker, which is kind of an amalgamation of a few roles that we like to see.
And if you can find them, then hold on to them. But if not, maybe you need to break this rollout. But really somebody who can own the CRM, but also own a lot of the the pay per click channels and tactical optimizations that need to happen in a in a go to market effort. Right? And then you need kind of the creative side of things, which is kind of a designer and a video editor, somebody who can really put the put the visual elements behind the copy.
And, of course, this sometimes goes into the growth hacker, but you need a web dev specialist to be able to to support the site as well.
Yeah. That's cool. When you have a team of 2, 3 people, you're at the point where you can have the art and the science both represented in that group of people, right? Especially if there's a 4th person, which is you as the founder or someone still very involved in the the marketing leadership. Hiring 2, 3 people allows you to sort of have just enough digital skill.
Right? It goes to the growth hacker with the auto marketing automation, the optimization of campaigns, and things like that. And kind of the art, which is whether it's the writing or the designing some of those parts. I I I don't know if I ever told you this, Brian, but, of course, you know that the Colombian model is very geared towards this stage. Right?
And also the pricing of Colombian is very much aligned with being an alternative to hiring 2, 3 people. Right? And now getting a team of 10 people that kind of does a lot of these things a little that are not like an inch deep mile wide, but maybe a mile wide, but also a couple more inches deep or or very deep in some cases. But I I think I never told you that before I started, and you came on board relatively early, that I I went through this journey multiple times in exactly the way that you described it, where we hired 2, 3 people as the first marketing team for an early stage b to b SaaS company. And some of that worked out really well, and some of it didn't because you have to kind of hit a home run on on 2 out of 3, because you don't have time.
Right? Time is not your friend. So you don't really you cannot afford to hire a growth hacker who you then are going to allow to learn on the job, and then maybe heavier in our year end to conclude that it's not gonna work. You basically then are set back for a full year, not like a half year, because you now have to go find a person, etcetera. And it's one of the reasons why Calumio, for me, felt like a good solution for that problem, and not for every client or every company, right?
There's many companies who do have people in their original starting team that are such a good fit that they don't necessarily need to go outside. But if you don't have that luxury, then that's that's kind of why when you guys even started.
Question for you on that, actually. In your experience, I'm I'm thinking through the transition between an MVP marketing team to one that is pushing for product market fit. And as the team expands from those Jacks and Jills of all trades to a more specialized, you know, 3 to 5 person team, have you experienced that those the Jacks and Jills have to find the right spot? Because I feel like sometimes those Jacks and Jills can go into management positions because they're broad enough that they can be they can be generalists and manage teams, and they they've been there since the beginning, so they know the company and the industry really well. But I feel like also one of the specialties of a jack and jill of all trades is that they like to be the individual contributor.
They like to get their hands really dirty, and they can struggle as the team starts to scale with delegating and expanding themselves as the the needs of the business change and evolve. Have you seen that, or is that just in my head? No.
I think it's a great question. I think you see there's, like, 3 scenarios that play out. Either you sometimes you have someone who's a real generalist or a t shaped marketer, if you will, who's not necessarily just a generalist and could be really strong in 1 or 2 areas, who is also a great candidate to become the the leader of the team over time. And that's the person who would be comfortable starting to let go and and and loves the opportunity to level up and become a manager, etcetera, and and they feel comfortable hiring a team around them that maybe are more specialized. Right?
So that's one scenario. The second scenario is that you hired really good t shaped marketers who are not really comfortable going deep in any area. They just don't maybe want to. They're they're gonna get bored. Right?
And those are the people who actually leave your team as it becomes larger and you require a little more specialization, and they often go to the next early stage start up that does need their skill set, which is kind of the mile wide and an inch deep in a lot of areas, which is extremely valuable for companies that are just one stage earlier. And then yes, managing through that process where people either leave or you coach them and provide them opportunity to go find something else is a very, very important step. And then the 3rd scenario is that you actually have people in this t shaped marketer role who were not really a good fit for that, who actually are really good in 1 or 2 areas, and they just were reluctantly doing the other things and maybe not even doing very well. And then you're kind of ripping off the Band Aid. Finally, you're giving them an opportunity to go deep in an area where their skills will be far more appreciated and far more also useful for the company.
And that's where I think I see the most of success stories where you get suddenly like, you get 1 on 1 of 4 or 5 effects. You get so much more out of the same resources than you did before. But yeah, you kind of see all those things, and that's where having a CMO early on who is comfortable with dealing with anticipating and then dealing with multiple scenarios there is helpful, Someone who has done it before. And and and, yeah, I think having a partner like like Klumia who can kind of fill in some gaps, Sundar also helps where you say, hey, maybe not everybody has to become a specialist right away because we can find those temporarily. We can find the person who's done a Gartner Analyst deck or the person who's done a Capterra marketplace optimization project or the person who's done an EBM project.
All these things that you need as you get to product market fit and you now wanna scale, but you're not necessarily gonna invest in someone who's never done it before to go learn all that on the job.
Yeah. Helps you leverage strengths of your team while filling in the gaps that that also exist.
So, yeah, I think that's a great sort of rep for the MVP to product market fit kind of journey. So now we're at product market fit. What's next, Brian? Now we're going to scale up.
Now it's time to scale. Yeah. So you've gone from minimum viable product to product market fit. And in doing so, hopefully, your marketing team has been able to do research on the market, identify the right market for your product or company, identify how you can position yourself in that market, and started to show traction both from a beta user and initial user standpoint, but also from a paying, staying, and referring user standpoint. So tactically, from a marketing standpoint, what that means and what the initial signs of success are is really this demand generation.
Right? Like, how how can we support a few channels that will consistently bring in that demand generation? So now that we are in product market fit, it's time to pour some gas on the fire and try and scale. Right? So we need to focus on scalable but also sustainable growth.
We can't we can't I think that the days and you can tell me what you think. But I think the days of growing like wildfire without thinking about ROI are over. Everyone can agree. And so it's how can we do that in a scalable way or in a sustainable way that's healthy for the business. So what this means really is how can we double down on the channels that work, right, the few channels that you focused on in the last phase, But then also, how can we run smart tests to continue to diversify demand generation?
Say, for instance, if you had SEO as your main channel to get you into your product market fit and then Google changes its algorithm, you you can't afford to take a 50% hit on marketing qualified leads while you while your SEO specialist figures out how to re optimize your site. You need multiple channels that are consistently firing so that you can continue to have a stable, base for you know, as a CMO, I I wanna start looking for those tests. Those can be across account based marketing, SEO, pay per click advertising, partnerships, events, you know, you name it. This is kind of where the tests start to fly in because you have a little bit more to invest and you have a solid base so that you can, you know, know when to take your your risky bets and when to, when to play it safe and and double down on what you know. This is also where we really start to see, one of the first exercises that we will take a company through is Ansoft's matrix, which is basically how do we really want to strategically, how do we wanna grow as a company?
Right? Do we want to we have certain ARR goals for this year, the next 5 years. Right? Are we gonna get all that from just continuing to penetrate the same market, or are we gonna have to make some larger strategic bets to reach those goals? Are we gonna have to go after a new market?
Are we gonna have to invest in product r and d to, you know, better facilitate our current market? Or are we even gonna have to develop a new market or a new product for a new market? Right? This is where some of these decisions really start to be made to continue facilitating that growth. We also like to to really start to point at this thing that we like to call the t 2d3 formula built by Stein himself, which which basically looks at the main factors of growth.
Right? And in order to grow, in order to reach t two d three, you need to increase your marketing qualified leads while decreasing your customer acquisition cost. You need to increase your conversion rates down the funnel and your average revenue per unit or user while also decreasing your churn. Right? And if you can do all those things, then you will grow as a company and you will start to scale quite rapidly.
If one breaks in a big way, it can really be a huge hamper or a huge detriment to the growth of your company. Those are all the goals that I could think of. Anything that I missed?
No. I think it's a really good model. I think this stage is where you find a lot of marketing leaders struggle with growth delivering expectations because to your point, I think the market has reset expectations a little bit. It's not anymore growth at all cost in any way. It's like healthy growth, growth that can support a profitability goal over time.
So all that is helping both manage expectations and focus on the right things. But you still have a situation where the CEO or the stakeholder, hey, okay, we need to increase 10%, like, every month or 100% this year. And and then if you were the marketing leader or the go to market leader, if you include sales and and customer success kind of in the same frame, it is easy at this stage of a company to get overwhelmed. Like, deer in the headlight could type of either spinning activities without really thinking before doing, coming up with all kinds of explanations for either results that are not really easy to explain or or challenges that are not really being addressed, whether just are being pointed at and without, okay, what's the plan here? And here's how I think about that.
Another framework, the 4 f's by a new framework. So there's 3 ways to grow at this stage of a company. 1 is you you have to kind of reshape the funnel more into, like, a fuel line. If you think of a car analogy, the funnel being where you pour in the oil, or you don't want to you don't want anything to spill because it so there's the funnel shape. But the fuel line is a little bit different.
It's not about necessarily going from a lot to a little. It's about not losing any. You know, you don't wanna lose the fuel on its way to the engine. Right? Because it's not going to help your, fuel economy of the car.
So you have to turn this funnel, where it was okay for it to be really large at the top and getting smaller and smaller, to become a little more straight. Like, where do you lose things in the funnel? Right? Why is it that a lead that filled out a form in the website did not necessarily show up for the meeting, or we have this all the time ourselves, Brian. You and I, we do some of these sales calls for Columbia, and when they don't convert from a form fill into a actual meeting that has happened, discovery call, there can be 12 reasons for that.
It's not because they were not a good fit. It could be, oh, when they clicked on the form, they didn't. The email that said, here now you can schedule a call may not even been have been delivered. It may have gone through a spam filter. If it was delivered, they may have clicked on it, and the link may not have worked.
If they clicked on it and the link worked, they may have come to an agenda, you and me have this problem both, but there's not enough open slots. 5 weeks from now is where we have time for you. Right? Or the slots are not in the time zone that these people are in. Right?
I've I've just given you in literally what happens within a second after someone fills out a form, four reasons why the form field could not lead. And there's 12 other reasons. Right? Like, hey. My, water pipe broke right before the meeting started.
The Zoom link didn't work. I came to the Zoom, but I was a little early, and I didn't and and I left because I didn't pay attention of my there can be so many different reasons. So when you think of turning the funnel shape into a fuel line shape, conversion optimization, I think what happens when you get into this product market further, you get to the scale challenge, there is hundreds of ways to optimize conversion. And people are so tend to give up so quickly after they looked at, oh, I did these 3 checks on conversion optimization, and now I've concluded that there's nothing else to optimize for. If you didn't check 100 different things, you probably have some more things to check.
Mhmm. Right? Because another one could be the speed. Right? If if if people don't get the email after they fill out the form within 3 seconds, but it takes 3 days for the email to arrive.
Maybe that's the reason. Right? So there's 10 reasons just at that starting point of the funnel. So now you expand that to the full funnel, all the way to someone becoming a customer. Yep.
There's probably 500 things you can optimize the conversion for. So that's step number 1. From a funnel to a fuel line, all the things you can do to optimize conversion. And and this is the order you need to do it. You need to do this first because unless you optimize the conversion, it doesn't really help you to try to add more things in the top of the funnel, which is what I call making the funnel fatter.
So just the the next f, right? So we go from funnel to fuel line, and then try to make the funnel bigger or fatter, if you will. Go do that by all means, but don't do it before you make sure that those things convert at the best possible rate. Right? And then the last thing, which is often forgotten, the speed of the funnel.
If you get 5 leads to convert in 5 weeks, you have twice the results, and then those 5 leads convert in 10 weeks. Right? So so just speed, which sometimes is a function of your automation. It could be a function of the capacity of your team to handle the discovery calls. It could be a function of you able in your automation system to kind of have the right amount of meetings scheduled on a calendar.
Right? So there's all these things that could impact speed. But it's all those three things. Right? Turning the conversion optimization funnel to fuel line, making the funnel bigger, fatter, and then also making it faster.
But so now back to your goals and your KPIs. I think that's a great way to make that specific. Right? But I I think this is kind of my way to frame. When I have a conversation with a marketing leader, and they're throwing up their hands in the air and say, oh, Stein, I gotta get from 3,000,000 to 30, and the clock is ticking.
It's relatively easy to go almost down this list of did you look at all the conversion optimization opportunities? Did you took a look at the feathering of the funnel is all about all the demand gen diversification. Right? It's not just pay per click or organic. You can do demand gen optimize you can launch a podcast.
Right? You can do analyst relationships. You can optimize, the way people do referral marketing in your team, you can build some kind of upsellcross sell campaign. There's all these other demand gen opportunities. Unless you've explored all of them, there's a way to free to make the funnel fatter.
And then the speed is probably the has the least options, but there's always a couple of things there as well you can do to just increase the speed.
Yeah. One of the kind of counterintuitive things about what Stein is saying, but absolutely right, is that sometimes it is best for marketing not to focus on demand generation right away. Maybe it's something that, you know, marketing needs to first support customer success and making sure that churn doesn't, you know, is drastically reduced. Or support sales and making sure that sales speed and sales efficiency both go up. Right?
And then really starting to juice demand generation. It's something that most CEOs don't it's not what they would think of. And, you know, when they think about marketing, they think about demand generation. How do we build the pipeline? Which is true.
Right? But if you're building pipeline for a leaky bucket, it's not gonna work. We have found ourselves in situations where we have built we've built the funnel, right, and we've we've built the pipeline. But those those leads haven't converted in the sales process because the sales process wasn't set up, and the outcome was the same. Right?
It was it was the same as if, you know, marketing had been done poorly because those leads don't close.
And the two examples you gave, both customer success optimization, right, both churn reduction or retention optimization, and also then monetizing those clients, right, living, making them use more. Right? Buy more, etcetera, etcetera, etcetera. But then also the support of your sales organization with sales enablement through marketing materials, automation, email automation of sequences during the sales process, all those lead to both conversion optimization of sales and increasing speed. And with a lot of and a lot of these things have exponential effects, Brian, because when you increase the speed, let's say, you can close an opportunity in 4 weeks instead of in 8 weeks, you haven't just increased your conversion rate and your win rate, etcetera, by 2.
You also 2 x the capacity of your sales team.
Yep.
So now you can do actually do twice as much.
Yep. Yep. No additional hires. Yep. There's also I mean, I'm sure we could do a whole other podcast on how to properly incentivize marketing and sales teams and CS to make sure that everyone's on the same page and rowing in the same direction.
But that's gonna be our next topic there.
This is where you really need all 3 of those teams to be really aligned. And if you can do it well, then then it's a beautiful, beautiful thing. But a lot of companies struggle with getting all of those 3 teams to have the same priorities and to not finger point when things start to break.
So do you wanna talk about what comes after scale?
I kinda wanna flip that to you. You have much more, experience in the t two g three to 100000000 ARR realm than I do, and so I would honestly I would love to hear your thoughts on what do you think the goals are for that profitability stage in the search for the unicorn status, and what do you think the teams are that need to be built to achieve those?
No. It's a it's a great point. I I think the playbook and the relatively straightforward, although not easy, but mechanics that get you to scale become a lot after you get to 30, 40, 50,000,000. But what usually happens after this sort of scaling phase is that you almost have to rethink your go to market strategy. The category probably is now a lot more mature than it was when you started.
So there might be a couple of winners, and you hopefully are one of them, require you to redo your kind of differentiation strategy. Are you still able to bet on the first same positioning as you start? Do you have to rethink that? Where maybe when you got to product market fit and you wanted to scale up, pricing being relatively straightforward and simple was your friend. Now maybe price complexity becomes your friend.
Because if you want to get from 30, 40,000,000 to 100,000,000, you want if you have an enterprise sales motion for you, you want to hand your enterprise sales people a lot of extra tools to optimize around your contract value. Give them a lot of leverage. So maybe you wanna introduce complexity into your pricing, which is another way of me saying the type of CMO you need, the type of executive leadership, the type of team might need a dramatic makeover almost because the type of specialties you need, the way you think about, growth is just is just really, really shifting. Another aspect is that if you wanna go global or not. When you get to product market fit, and even when you're gonna scale to 20, 30, 40,000,000, focus is your friend, right? And focus will always be your friend, but focus is your friend as in not too many markets, not too many personas, not too many, you know, activities, initiatives, etcetera, types of campaigns.
The reality is once you hit that 30, 40,000,000 mark, now you have to kind of do a lot of those other things as well. You have to maybe think about a channel program, where before I would not recommend early stage companies to get into channel marketing too early because I have this kind of rule, unless you're you have a relatively dominant market position. As soon as you partner with someone else, if the other partner is the dominant one in the relationship, you're gonna end up holding the bag of all the work that needs to be done. Right?
Although it's very tempting when you're 2, 3, 4,000,000 ARR companies. Oh, let me go partner with Microsoft, because then I get all these free leads and all these free go to market capacity. The reality is they're gonna let you jump through 45 hoops before you get that that ROI, which is not necessarily gonna work out well. But now that you're €30, €40,000,000, you got to get to the T2, D3 kind of motion, you got to learn how to do all those things.
And channel marketing is just one example, really in-depth analyst and influencer marketing, right, really understanding that. I mentioned going global, doing things not necessarily in other languages but in other parts of the world where business is done differently, where people buy in a different way, right? The personas have to be updated. So that's, I think, where we're getting from the 30,000,000, 40,000,000 kind of post product market fit scale journey to real T3 growth that gets you to the 100,000,000 mark. Is just a different different different exercise.
You also have to start, catering to some of your stakeholders who might want you to think about optimizing the company for some form of an exit. Right? Is there a transaction that is desired by maybe some of your stakeholders? Right? Whether that's an exit where the valuation of the company gets made liquid with some sort of private equity money or start reading an IPO in your future, because those things will really change what you optimize for, right?
What type of profit is good, right? What type how does that balance with things like churn reduction? So I don't know, Brian. Is that a good oh, and then the final one, maybe before I forget. Up to now, it was fine to focus on customer acquisition cost as you kind of below the line optimization metric.
Everything above the line have revenue, growth, and profitability, etcetera. It's all basically a function of, at what cost can you acquire new customers? When you hit 20, 30,000,000 error, your cost to servers will become a really big part of your profitability. So having a a good mastery of, hey. It's not about signing up every client.
It's signing up the clients that are gonna be too costly to serve us with an army of customer success managers, etcetera. That becomes a really important additional additional dimension. Of course, the rule of 40 now becomes a thing, right, where that used to be unique for this stage of growth. It's actually now already relevant earlier. I think even when you go from product market fit to scale, a lot of investors will not allow you to do that anymore unless you also have a key profitability in mind.
Doesn't have to be the rule of 40, it could be the rule of 30, but some form of balance and and being aligned with your shareholders and stakeholders on that, okay, at this rate of growth, we're allowed to to spend this much on that Yeah. I think that's a really important aspect of of this strategy as well.
Awesome. Yeah. Well, there you have it. Those you know, hopefully, that's helpful. As as you're looking at your company, thinking about what, you know, what you can get out of your marketing team, what you should be expecting from your marketing team, right, and where you wanna point them.
Hopefully, this is helpful as you make those decisions.
Thank you. And I think, yeah, just having a framework here to also manage expectations, like, when you spend 10,000 a month on marketing versus 50 or a 100, what is kind of the right way to to to define success? Right? And then, of course, measure that. Thanks, Brian.
This was really good. Thank you.
Thank you to Adriano Valerio for producing this episode and the Kalungi team for helping us make this whole thing work. And, of course, you for choosing to spend your time with us. As a reminder, all the links we mentioned in the episode can be found in the show notes. And if you wanna submit or vote on a question you'd like us to answer, you can do that at kalungi.com/podcast. Every time we record, we take one of the top three topics and jam on it.
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