One of the things I enjoy most about my role as an operating exec is the broad access I have to so many companies and the accelerated pattern recognition that comes from those interactions. Every day presents an opportunity to learn new strategies. So many times I’ve found myself picking up a trick from one company, only to adapt and apply it to solve a challenge at another company. In this way, I see my role as less of an all-knowing expert and more of a connector of people, ideas, best practices and data.
When I started to notice that more and more companies wanted to improve their conversion rates through the funnel and drive more efficiencies out of their marketing investments, I saw an opportunity to answer a lot of questions at once. So I reached out to my favorite podcaster, Chris Walker, CEO of Refine Labs and host of “The State of Demand Gen” to see if he’d join one of our events.
Recording of our Community Event for Marketers
I was thrilled to welcome Chris as the featured speaker at our June 22 virtual event on digital advertising. Take a listen to the recording here, and enjoy a summary of the highlights below. These are the big ideas shared by Chris in the session, with a few of my thoughts layered in.
Huge thanks to Chris and his amazing team for the opportunity to understand his provocative point of view and learn some of his battle-tested digital strategies. His generosity in sharing success “secrets” is proof that delivering value goes beyond driving direct, attributable revenue. For example, I never provided — nor did his team ask me for — the registration list for this event. In all my years as an operator, I can’t say that I ever took such a long view in my approach. I’m excited to be learning a new way of thinking and to share it here with you.
The Benefit of Unifying Brand and Demand Under One Leader
When we talk about brand, most people think of things like visual identity, PR & AR, organic social and blogs… maybe a podcast or Clubhouse session. Basically, the things marketers know they should do to drive awareness, affinity, and overall value for the business but that are not easily measured.
Then there’s demand gen, which people often think of as performance marketing. Demand marketers drive net new leads and MQLs, then track the conversion of those records through the funnel to drive revenue. If I think about the conversations I have with companies, both inside and outside of our portfolio, I see leadership leaning more into demand gen. It has become the sexier function of the two because there’s comfort in knowing you can invest in programs and measure the specific outcomes they drive. You put money in, you get money out. Or do you?
There are flaws in this thinking that Chris touched on throughout the session. First, conversion rates to revenue are tiny. Something like one in a thousand B2B “leads” will result in closed business, so the math quickly becomes unsustainable as you scale. Before you know it, you’ll need to put more than your total addressable market in the top of the funnel to achieve your ever-increasing revenue goal at the bottom of the funnel. Second, buying behavior has changed over the past several years, driven by the fact that people now have access to most of the information they need to make a buying decision and thus have less desire to engage with sales.
Marketing has an opportunity to play a bigger role than ever in generating demand by facilitating the education of buyers in third-party social channels that aren’t trackable using traditional attribution.
As I’ve heard Chris say several times on his podcast, let’s work to CREATE demand by investing in brand vs. relying on our ability to CAPTURE demand in a transactional way with performance marketing. By unifying brand and demand, we put ourselves in a position to scale faster and ultimately drive more business at a lower CAC.
The Danger of a Performance Marketing Mindset in Awareness Channels
There’s an alarming trend occurring today in digital advertising that is affecting B2B marketers, hitting them where it hurts. Chris sees it with the companies he works with and so do I. That is: spending is increasing in trackable, paid digital channels such as Google search and LinkedIn where marketers seek to generate MQLs with gated content. CPLs are going up because of intensified competition while conversion rates are going down as savvy buyers resist being chased by mercenary SDRs.
This is putting marketers in a tough spot. We try to solve it by applying the performance marketing approach that we ‘grew up with’ buying intent-based ads (on Google for example) and carrying that into non-intent social channels, such as Twitter, YouTube, and Reddit. We know that our buyers are spending an increasing amount of time on these channels, so we find them there and do what we’ve been taught.
That is, we adopt a transactional mindset, convincing ourselves that we can pull someone in with an ebook download or demo request and kick off a buying process as fast as possible. So we offer gated content on landing pages, not realizing that success in these ‘Web 2.0’ channels requires a different approach. This is particularly problematic in lower velocity, high ACV sales motions where the buyer’s journey is longer and requires deeper education.
How B2B Marketers are Handcuffed by Attribution
Intellectually, we know that buyers don’t want to get their education from sales folks; they want to gather information on their terms from people they trust. Yet we persist in our quest to drive leads down the funnel because we’re trained to drive business in ways that can be tracked and measured.
Marketers know they won’t get more budget unless they can say they generated X number of leads at a cost of Y and those leads converted to opportunity at an acceptable rate. Even if few or none of the leads turn into a closed-won business, we continue to focus on the upstream portion of the funnel that we’re accountable for.
Don’t get me wrong, reader. I’m not suggesting, nor is Chris, that we do away with the funnel and place all our bets on untrackable brand investments. Performance marketing certainly has a place in the mix. And I’m heartened that B2B marketers have become more focused in recent years on downstream metrics such as pipeline and revenue instead of vanity metrics like net new leads and MQLs. But I do think a shift needs to occur where we embrace brand as a driver of overall enterprise value and get comfortable with our inability to track it using traditional attribution.
An Uncommon Approach Reveals the Secret to Advertising Success
One of the most compelling stories Chris shared in his session was an experience in 2017 when he worked for a venture-backed company called Vapotherm. He was selling to ER physicians and nurses and discovered that many of them were spending time on Facebook and Instagram.
To engage buyers on these platforms, he started running content, not ads, such as videos and clinical trials highlighting the company’s products that people could consume without leaving the social feed. He discovered a correlation between well-targeted content on these platforms and increased (high-converting) demo requests on Vapotherm’s website. His hypothesis was that the ads were driving the boost in demos but he couldn’t prove it since he wasn’t capturing leads via forms.
Fast forward to 2020 when his team at Refine Labs started using custom conversions on Instagram, Facebook, and LinkedIn. With this approach, he was able to prove the effectiveness of ads in driving high-converting leads that drove closed-won business.
Here’s the clincher: he found that 80% of the people that eventually converted on the demo from the ad, never actually clicked on the ad. Or they clicked and converted later from a different device. It proved that when more people are consuming content by remaining in the social feed vs leaving to view a landing page, marketers win. As Chris said, “you’re knocking it out of the park if you have 1% click rate, but I’d rather deliver content to 100% of people in the feed vs the 1% that go to my landing page.”
Attribution in the Wake of iOS 14
The best part is: Chris and his team now have valuable data that gives them confidence in the viability of their social strategy over time. Even though they now have reduced visibility into user behavior due to iOS 14, he and his team have run their experiments and have the data to prove that their approach is working. The desired outcomes are still being driven despite the reduced attribution from the deprecation of IDFA.
In Chris’ view, attribution is about understanding how people actually discover, get information, and make purchase decisions. (Psst: it’s not by being forced into a sales funnel while still in the education phase of their journey). As marketers, we sometimes cling to a desire and an old belief that people buy this way — and sometimes it works — but to create a long-term competitive advantage we have to lean into the way people want to buy and change our behavior accordingly by investing in brand. Again, this doesn’t mean we invest in brand at the exclusion of demand gen; it’s more about making the two functions work together.
Why a Decrease in MQL Volume Can Be a Good Thing
Last week I interviewed a candidate for a VP of Marketing role at one of our Growth Equity portfolio companies. When I asked her to walk me through her KPIs, I was impressed that she pulled out a chart showing metrics and trends over time. Imagine my surprise when she pointed out a declining volume of MQLs with a hint of pride in her voice. “Notice how our MQLs are falling, while our conversion rates are rising down-funnel and velocity is increasing…and I’m happy with this trend.”
Um, excuse me, I don’t think I’ve ever had a candidate celebrate a decrease in MQLs, and I appreciated her willingness to shift out of a volume mentality to focus on business drivers. Needless to say, I voted to hire her.
In his talk, Chris touched on the concept of decreasing MQLs and referred to analysis showing that many of the investments his clients were making before he engaged with them were a waste of money. If you look at the path between leads and revenue — conversion rates, win rates, sales cycle length, ACV — the data will tell you which of your investments are paying off and rarely does a volume play drive desired outcomes. The trick is to find ways to scale the high-converting leads because quality wins the day and also earns you the trust and respect of your sales team.
Trust and respect will take you far. You also need empathy. I loved hearing how Chris used to call leads himself to gauge their quality and gain insight into what motivates buyers to move forward in a sales cycle.
How Brand Greases the Skids for Sales and Drives Measurable Outcomes
One of the important insights that came out of the time Chris spent calling leads himself was understanding the interdependence of demand gen and brand. He had been running ads promoting gated ebooks at the time and when he would get ahold of people that had submitted forms, he invariably got responses along the lines of “I’ve never heard of you, I don’t remember downloading anything, and I don’t want to talk to you.”
He needed to figure out what lead sources were most likely to generate sales-ready leads. He wondered, what are the lead sources that will bring higher conversion, better win rates, and shorter sales cycles. Turns out he identified three — demo, pricing, and “contact us” CTAs — and he realized the one thing they all have in common: declared buying intent that aligns with how people want to buy. When you see that 80% of revenue is coming from 4% of leads, you realize that your volume-based demand model is wrong.
And Chris provided the proof by sharing a case study of one of his clients, a series E company in B2B SaaS. After deciding to work with Refine Labs, the company saw these results:
- MQLs went down 96% YOY, from 36,000 to 1,200
- SQOs generated by marketing went up by 181%, from 180 to 506
- Qualified pipeline increased by 180% (near equivalent to SQO increase, indicating deal sizes had remained steady)
- Sales cycle length went down by 60%
- Win rates increased from 22% to 31%
- Marketing CAC decreased by 34%
And Now for the Audience Questions
Check out what was on the minds of attendees by catching the Q&A session that begins at 38:22 in the recording. In a generous, post-event gesture, Chris included in his podcast answers to the remaining questions that we didn’t have time for. You can get those answers by listening to episode 157 of The State of Demand Gen.
Have more questions? Chris welcomes ongoing engagement because it deepens his understanding of what buyers want and helps him deliver that to his audience. Message him on LinkedIn with whatever’s on your mind. And connect with me to share what additional topics you’d like to hear at future events.
Lisa Ames is an operating executive with Norwest Venture Partners. She leverages her more than 20 years of B2B SaaS marketing experience working shoulder-to-shoulder with portfolio companies to help them thrive.