The Transaction

TT - 070 - Ray Rike & Dave Kellogg - Full Episode
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Dave Kellogg: [00:00:00] If you're talking about the metrics, instead of talking about the business, you're doing it wrong.

Dave Kellogg: I feel like there's a [00:00:05] pipeline crisis. Everybody's got insufficient coverage.

We're spending almost [00:00:10] $2 of sales and marketing to get $1 of new arr, a B2B SaaS company

Dave Kellogg: To me, [00:00:15] there's no substitute for hard work.

next year.

Organic search traffic will go down [00:00:20] by 30% 0.25and paid search traffic will go down by 15%.

Dave Kellogg: You can't [00:00:25] have sales pulling rabbits out of a hat every quarter. 'cause eventually it's like I told my board once I ran outta [00:00:30] rabbits.

The faster growing companies actually are spending more on brand than on demand.

Dave Kellogg: [00:00:35] Branding is marketing without a call to action.

Content is becoming so critical to how you [00:00:40] show up in the answer engines.

Dave Kellogg: Let's just see if we have the same definition of marketing CAC 'cause this could be our first [00:00:45] full, official fight.

What SaaS performance metrics does your board care about?

Dave Kellogg: I [00:00:50] think one of the more destructive metrics out there is annual pipe gen targets and rolling four [00:00:55] quarter pipeline.

Craig Rosenberg: we do try to be as free flow and conversational as possible. [00:01:00] Um, and so that's why Sam's like, Hey, should we just turn this on? So now, [00:01:05] uh,

Dave Kellogg: cool. We can do that.

Craig Rosenberg: all right. You're cool? All right, let's go.

Dave Kellogg: You've got the [00:01:10] script, right? Just kidding. Just teasing the guys.

Craig Rosenberg: Oh, and we got [00:01:15] it on recording. So that was a perfect lead in, Dave. See, you're, you're, you're getting [00:01:20] better at this.

Ray Rike: And I, and I've got it memorized and I passed a test you sent me.

Matt Amundson: [00:01:25] nice, very nice.

Craig Rosenberg: I love it. ​

[00:01:30] [00:01:35] [00:01:40] [00:01:45]

Introducing Ray Rike and Dave Kellogg, The Metrics Brothers
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Craig Rosenberg: all right everyone. [00:01:50] So the, um, by the way, this is a Ray Rike's, a two timer now, right?

Matt Amundson: two time [00:01:55] club.

Craig Rosenberg: Yeah. Sam, you should do, uh, an image for social on, uh, [00:02:00] repeat guests and their, their numbers. 'cause I think Albro's is at like [00:02:05] six. Uh, and then we have a whole bunch of people at two. So Ray, Ray will have [00:02:10] to, uh, come back on and take the, take second place.

Craig Rosenberg: Um, [00:02:15] so today we, we have actually, um, we have Ray coming back who[00:02:20]

Craig Rosenberg: is, in my opinion, the, the, the [00:02:25] current master of Go-To-Market metrics, uh, with his [00:02:30] partner in crime, podcast partner and business partner in [00:02:35] crime, Dave Kellogg, who is a idol of me and Matt's in terms of [00:02:40] marketing, thought leadership.

Craig Rosenberg: And he's one of the guys that writes, [00:02:45] keeps it real in the stuff that he writes and presents. See Dave, we knew more about you than you thought we knew. [00:02:50] Yeah, man. Like really hard hitting, um, stuff. And so when we, we [00:02:55] reached back out to Ray to get him back on, he's like, well, what about this? What if I got Dave [00:03:00] Kellogg to come back to come on.

Craig Rosenberg: And um, and so now we have [00:03:05] essentially a very special episode of Ray Rike and Dave Kellogg to come [00:03:10] on and likely dazzle us with metrics and what you should go do about it. So thank [00:03:15] you guys for coming on.

Dave Kellogg: Thanks. Thanks for having us. This is our first appearance as the Metrics [00:03:20] Brothers, by the way. So we, we've, we've never appeared at, well, we did one live, we did one [00:03:25] live presentation, but it's our first podcast appearance.

Matt Amundson: Nice.

Ray Rike: and just to plug that, that's [00:03:30] the SaaS talk with the Metrics Brothers podcast from. Gotta listen to it.

Matt Amundson: Yeah, [00:03:35] like

Matt Amundson: and subscribe.

Craig Rosenberg: I just gotta give you guys credit for guys who like, who are, who are, uh, [00:03:40] you know, OGs in the business. Metrics Brothers is edgy name. I love

Matt Amundson: I do [00:03:45] like that. I do like

Craig Rosenberg: Do you do too? as you will see.

Craig Rosenberg: [00:03:50] I,

Matt Amundson: Yeah.

Craig Rosenberg: by the way, if you don't bicker, then we got a problem. I'll blame Matt.

Ray Rike: [00:03:55] Yeah. Yeah. By the way, Dave is the big brother. I'm the little brother.

Matt Amundson: Oh.

Craig Rosenberg: Uh, is that, [00:04:00] is this, uh, is this a ageism comment or is this Oh,

Craig Rosenberg: okay.

Dave Kellogg: although Ray [00:04:05] Ray's, uh, Ray's a pretty tall guy, so I don't know. I got you my

Matt Amundson: Ray is tall. So [00:04:10] we had Ray on the podcast and then I met him in person for the first time and I was like, geez, you are tall.

Dave Kellogg: He's [00:04:15] a big, scary metrics geek.

Matt Amundson: yeah, exactly. Yeah. And then, and then Craig told [00:04:20] me his son is, is a monster. So I was like, oh

Ray Rike: is. Yeah. Troy's six, [00:04:25] eight.

Matt Amundson: Geez.

Ray Rike: Yeah.

Craig Rosenberg: Yeah, that's, I mean,

Matt Amundson: My [00:04:30] 13-year-old just pulled up in a size 14 and a half shoe, so I'm I'm expecting that, [00:04:35] uh, he's gonna be pretty tall as well.

Craig Rosenberg: That's awesome. Um, all right, so now that we've talked about [00:04:40] height, let's get going. So we got a lot to talk about here. So we'll, we'll move from, [00:04:45] um. Uh, from the beginning, chitchat we normally [00:04:50] do, and straight into asking the, the metrics. Brothers our [00:04:55] key question, which is, um, you know, what if, if for [00:05:00] you guys, if you had to talk about the one to three things, uh, that.

Craig Rosenberg: Uh, [00:05:05] organizations Go-To-Market organizations, uh, need to be thinking about and [00:05:10] doing today in today's environment. What would those things be? And we will add [00:05:15] in perens, please, please get in an argument live on this [00:05:20] show. And if you don't, we will blame Matt. Um, Amundson, who's the co-host

Dave Kellogg: We [00:05:25] might be all argued out. We've had plenty of arguments this week, so I don't know. Ray, do we got a couple more in [00:05:30] us?

Ray Rike: Yeah,

Craig Rosenberg: amazing.

Ray Rike: we're not gonna talk about [00:05:35] AEO versus GEO, are we, Dave?

Dave Kellogg: get there. We'll get there. Let me start with, let me start though, Ray. 'cause [00:05:40] um, I,

Draining the Metrics Swamp in B2B SaaS
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Dave Kellogg: I wanna start at a super high level because you said one of three things people should be thinking about [00:05:45] and, and the first one to me is gonna be kind of drain the metrics swamp. And, and I don't actually know [00:05:50] if Ray has a lot of experience with this, but when I go into companies, I'll often go to a [00:05:55] meeting that looks something like this.

Dave Kellogg: There there's eight marketing people, a few finance people, some [00:06:00] ops people. Uh, a lot of very quantitative people and there's a lot of tools open [00:06:05] and there's a lot of dashboards up and there's a lot of screen clips. Everyone's [00:06:10] having kind of parallel independent conversations and none of the data's footing.

Dave Kellogg: [00:06:15] And, and, and you're saying the SDRs generated this many opties last week and somebody else has a completely different number. [00:06:20] And it's kind of what I consider to be kind of screen clip, dashboard hell. [00:06:25] And, and that to me, that's the first thing I think people should do, right? The first [00:06:30] step at any problem is being aware of it.

Dave Kellogg: If you're attending that meeting, you gotta break the cycle. [00:06:35] those meetings, Ray?

Matt Amundson: okay.

Craig Rosenberg: I was gonna say, [00:06:40] but yeah, the metrics brothers coming in with, uh, coming in hot on the, [00:06:45] the metrics. The overwhelming metrics problem anyway, Ray, go ahead. Let me hear what you got to [00:06:50] say on that.

Ray Rike: Um, I, I would definitely, when I do these bench SaaS metrics [00:06:55] assessments and benchmarking reviews, one of the big things I make sure I do, I always [00:07:00] talk to the head of marketing, the head of sales and head of customer success [00:07:05] independently. Also the CFO. And what I find is a little bit like you Dave, [00:07:10] they bring up all their metrics.

Ray Rike: They talk about how well they're doing,

Matt Amundson: Mm-hmm.

Ray Rike: [00:07:15] you know, head of marketing. It's like, Hey, here's the pipeline I generated. Here's the number of [00:07:20] MQLs here's my conversion rate, but here's what sales isn't doing. I cannot [00:07:25] tell you how many times I still see that bifurcation when I get 'em in separate [00:07:30] rooms, different metrics, different dashboards, different motivations and goals.

Ray Rike: So [00:07:35] I still see that going on Dave.

Ray Rike: Okay.

Dave Kellogg: Yeah, and, and one person's tracking new a RR pipeline. The other [00:07:40] one's tracking new logo pipeline and, and it's. That's [00:07:45] the thing. I think, so the first thing I wanna say is too much of a good thing, right? Like, we've [00:07:50] got too many people with too many tools, with too many metrics. And if you wanna run a business, somehow we need to [00:07:55] reconcile all that.

Dave Kellogg: Um, and so that's the first thing I think people should think about is you, [00:08:00] you gotta, if you're going to these meetings, we're basically, here's the symptom I use. If you're talking [00:08:05] about the metrics, instead of talking about the business, you're doing it wrong.

Matt Amundson: Yeah. Yeah. [00:08:10] Well, as an operator who. Sits in meetings like this. [00:08:15] And this was one of the first, you know, I'm, I'm eight months into the job that I'm currently in. [00:08:20] This is one of the first things I was trying to clean up. Uh, and in a lot of cases it [00:08:25] just had to do with, you know, getting everybody aligned on like a sort of Go-To-Market [00:08:30] dashboard as opposed to like, Hey, marketing has a dashboard, sales has a dashboard, CS has a [00:08:35] dashboard, finance has a dashboard.

Matt Amundson: Let's all agree on one sort of universal GTM [00:08:40] dashboard. That was my solution. It was painful. It took a long time. It's probably not the [00:08:45] best strategy. So for, for you guys, when you're working with companies and you find that they're [00:08:50] in a situation like this, how are you coaching them out of it and what steps are they [00:08:55] taking to get out of it?

Dave Kellogg: You wanna go first? One me.

Dave Kellogg (Video): [00:09:00] me?

Ray Rike: Um, Why don't you go first and I'll Alright. Ray needs to think about his answer. I [00:09:05] know this is how we work. This is how we roll.

Craig Rosenberg: Metrics

Dave Kellogg: I'll buy his

Dave Kellogg: [00:09:10] time. So, uh, I used to have a guy, I'd go on sales calls [00:09:15] with him and when somebody asked me a question I didn't know the answer to, I'd look at him and say, go buy me time. [00:09:20] And I'd have him talk for a while and I can think of a really good answer and then come back with it. [00:09:25] Um, so, so look, I like your approach. Um. [00:09:30] To me, there's no substitute for hard work. Like the only thing I know to do is we need to sit down and [00:09:35] agree on what we're gonna look at in the meeting. And we all have to understand it and we have to agree on it.[00:09:40]

Dave Kellogg: And, and I think people vastly underestimate two things. One, the change [00:09:45] resistance you get, like, I don't wanna look at that. And the passive aggression and the undermining, like [00:09:50] getting people to do this is like really hard. Um, so, so the change resistance is [00:09:55] one. Um. And the other one is the iterations required.[00:10:00]

Dave Kellogg: People think they can do that. Hey, next week can we fix the marketing dashboard or the CEO? They'd say, [00:10:05] no, it's gonna take months. And every time we have a meeting, we're gonna discover a new [00:10:10] problem. Right? And it's gonna be, you know, we might be eight weeks into this and, and [00:10:15] up found another one up found, and we gotta fix

Dave Kellogg: it, but we gotta change the dashboard. And, and it, to me, [00:10:20] it's a commitment. The commitment is actually to the dashboard or the template. I like to do it in templates, but, you [00:10:25] know, just Excel sheets. But because I like numbers, not charts, but it doesn't matter, whatever you like. Put it up in [00:10:30] front of the team, and we all agree that we're gonna keep grinding at it until it's [00:10:35] perfect.

Dave Kellogg: And then one day, one day we're gonna find ourselves in a meeting where we're talking [00:10:40] super fluently about the business and we're never talking about the metrics. And we need to actually go back and like, [00:10:45] celebrate that moment and go, oh my God, we did it. We got here. Right? Because, because we're not fighting [00:10:50] about how this is calculated or what this means, or does this include big deals or not?

Dave Kellogg: Or, or, or all [00:10:55] those, you know, corrections people do. To get you enough time, Ray you in.

Ray Rike: you did. And [00:11:00] I, I, and you know, it's funny, even though I thought about it, I'm gonna say exactly what I would've said upfront, [00:11:05] and that is when I go into an engagement.

Which Metrics Matter to Your Board
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Ray Rike: The first thing I always [00:11:10] do is saying one of my key deliverables is gonna be a SaaS performance metrics framework. [00:11:15] And you know, Dave and I have talked about this, and I don't know if we're a hundred percent in alignment, but I [00:11:20] asked the CEO and CFO, you know, does everyone know what are the top financial [00:11:25] metrics?

Ray Rike: You're reporting to the board in our, your kind of corporate measurable [00:11:30] goals and what SaaS performance metrics does your board care about and you're [00:11:35] presenting to 'em. Is it net revenue retention? Is it cac, payback period? Is it [00:11:40] whatever, right? And then once we get that, we sit down with the [00:11:45] Go-To-Market leaders and say, okay, let's talk about your measurable goals and how are they.[00:11:50]

Ray Rike: Directly aligned. I used the word causal to those performance metrics being reported to [00:11:55] the board. So I try to cascade this SaaS performance metrics framework [00:12:00] from the C-E-O-C-F-O to the Go-To-Market leaders. And then I take it one LA layer [00:12:05] down. 'cause a lot of these metrics I talk about are lagging indicators.

Ray Rike: They're the [00:12:10] outcome. But it's the input metrics that the operational leaders really need to understand. [00:12:15] How does your pipeline generated and your pipeline coverage ratio going to impact [00:12:20] your new a

Matt Amundson: Yeah, and and

Ray Rike: we'll talk a lot more about that, but that's what I do.

Matt Amundson: [00:12:25] Yeah,

Matt Amundson: I think that's a really smart point, Ray. I mean, I can't tell you how many times I've been in smaller [00:12:30] organizations that, you know, they sort of look at metrics that they wanna look at, and then [00:12:35] when it comes time for the board meeting, they're like, oh, I gotta put together these metrics for the board meeting [00:12:40] and reality.

Matt Amundson: Those are the metrics you should be looking at at a weekly basis because you can't show, [00:12:45] you can't show up to your, Hey, let's craft the board deck together meeting three weeks before your board meeting and [00:12:50] say. Oh shit. You know, the one thing that we forgot to think about over the course of the last 10 weeks was [00:12:55] these metrics that we showed at the last board meeting.

Matt Amundson: Right? Like that's a, that's [00:13:00] like a really nice cheat code for what should we talk about and discuss as a [00:13:05] weekly, in a weekly ELT is what we're probably gonna end up presenting at the board meeting [00:13:10] anyways.

Dave Kellogg: Yeah, I like the reverse look. I, I sit on a bunch of boards, so, so I [00:13:15] like the idea of starting with the board in mind and the key company, company performance metrics. [00:13:20] I'm slightly less sanguine on the cascading idea. I, I like it conceptually. [00:13:25] Where it's like, Hey, how does what we're doing tie to what matters to the level above us?

Dave Kellogg: I [00:13:30] don't like it as a religion. Uh, and I first noticed this with cascading goals. Like when, you [00:13:35] know, OKRs got big, everyone's like cascade OKRs through the whole organization, and sometimes it's just [00:13:40] really hard to link them and something might be important to marketing. Like, uh, my favorite example of [00:13:45] a cascading OKR was I had an OKR for the team to improve copywriting.

Dave Kellogg: Right. And, and it's very [00:13:50] hard for me to link that. I suppose I could make some tenuous link, but I just thought we were putting out bad copy and [00:13:55] I wanted to have better copy. And, and the, the, the exec, you know, the marketing C level team agreed. The marketing exec [00:14:00] team agreed. Um, so I like cascading, but not as a religion.

Dave Kellogg: I think it's really important to [00:14:05] remember. But, but if, because you find all these tenuous links and I, and I don't buy [00:14:10] that.

Craig Rosenberg: I think that's good to remember. By the way, the one other thing I noticed, [00:14:15] um, in my travels at Topo was like, you know, we'd always [00:14:20] went in and everyone was arguing over the metrics, but then there was a [00:14:25] second issue on the Go-To-Market metrics more so than the top level sort of, uh, [00:14:30] SaaS metrics, uh, was.

Craig Rosenberg: We had like [00:14:35] where we had to decide where the data was gonna come from [00:14:40] together, because that was the other one I noticed. And this was like part of [00:14:45] like when we started talking about Rev ops in conjunction with [00:14:50] alignment was that I would say, well, you know, well look guys, like someone [00:14:55] you know has to lead us through, this is where the data will come [00:15:00] from.

Craig Rosenberg: You know, like it or not. Because the other thing I would see is [00:15:05] sales would bring in their data against the same numbers and say. [00:15:10] They would go and we would, I would go and view a meeting, which was, let's [00:15:15] say an hour. And they spent the whole time on the validity of the data. [00:15:20] Right? So, and that's just not productive.

Craig Rosenberg: And it goes back to what, [00:15:25] uh, Dave said before is if we're talking about the metrics and not about the business, that we got a [00:15:30] problem. So they had sort of said, well, here's what you're gonna look at. I wanna mention one other one, [00:15:35] which is, uh, when it comes to the Go-To-Market metrics. [00:15:40] Uh, you know, one of the things, the other thing that was happening at the time during TOPO was [00:15:45] ABM account based.

Craig Rosenberg: And there was a whole, we, you know, there was this movement to look at [00:15:50] metrics differently, like in particular, like MQL versus just pipeline, [00:15:55] uh, and marketing was in. But nobody, they didn't tell anybody else. Like I, I, [00:16:00] even today I'll go in and it's like, you know, we're looking at somebody, it's like, well look like, you [00:16:05] know, that, that's great, but like this, this is a sell job to the board, to the executive [00:16:10] team, to the sales, to cs.

Craig Rosenberg: It was just another example [00:16:15] of, uh, the sort of metrics misalignment. Um, that one's a [00:16:20] little different than where it's from. The, where it's from was like to me, that [00:16:25] second fight that. Was not productive in tech companies. And that was [00:16:30] one of the reasons why I was like, rev ops can't be glorified sales ops if they're [00:16:35] gonna be, if like, they should be looking at all the metrics and workflow across the customer [00:16:40] lifecycle and bringing those things to the table.

Craig Rosenberg: And it's like, if they're just [00:16:45] representing sales, we're just gonna be in another fight right in the room. So [00:16:50] that, I would just add that to the, to the conversation. You know,

Dave Kellogg: I think it's a super [00:16:55] important point. 'cause part of that process of getting out of the swamp, of talking about the [00:17:00] metrics instead of the business, it it, it's not just the definitions of the metrics, right? It's what they mean. Um, [00:17:05] it's also where the data come from, right to your point. Um, huge believer in [00:17:10] top-down leadership there just saying, we're gonna agree on the one truth and we're gonna pull it from here and that's the truth.

Dave Kellogg: [00:17:15] And if that system's wrong, fix that system. The other. Piece of dogma I [00:17:20] have is no corrections. Like one of the things that drives me nuts is when people go, well, if we [00:17:25] didn't have that really big deal in the pipeline, the pipeline would be really small. Or if we do, or, or even if we close it, if we didn't [00:17:30] close that really big deal last, we would've missed the numbers.

Dave Kellogg: But it's like, well, we did close the deal and I [00:17:35] hit the numbers right? So now I understand. It messes up your pipeline analysis if you've got big lumpy [00:17:40] deals. But, but let's not correct for that in some arbitrary way [00:17:45] if we need to, let's segment by deal size and our pipeline analytics, right? But the, there's no corrections.

Dave Kellogg: There's [00:17:50] no one of, one time the system says this, but I dropped it in a spreadsheet and cut it [00:17:55] differently, right? And, and that happens a ton in these meetings. So we need to kind of institutionalize those [00:18:00] corrections, if you will, and make 'em process, not correction.

Ray Rike: Yeah. [00:18:05] You know, I, one of the things I wanted to do, Dave, I know you and I have talked about this a lot, and that [00:18:10] is how important pipeline generation is and some of the pipeline [00:18:15] performance, dunno. If you wanted to talk a little bit about kind of those metrics and perspectives you have [00:18:20] on the Oh, godly pipeline.

Dave Kellogg: Sure. I mean, look, [00:18:25] we, we kind of, kind of backed into it there by using pipeline as an example, but why not? Um, you know, one, one of [00:18:30] the other things I think people should be thinking about, so the first one was just please, you know, step one. On drain your metrics [00:18:35] swamp. Right. Um, step two,

Overcoming The B2B SaaS Pipeline Crisis
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Dave Kellogg: I think the biggest thing I, people I'm working with mine right now is [00:18:40] pipeline.

Dave Kellogg: I, I feel like there's a pipeline crisis. Like everybody's got insufficient [00:18:45] coverage and, and you know, my, my thing is marketing's job is to give [00:18:50] sales a chance to make the number and how do we give sales a chance to make their number by giving them sufficient [00:18:55] pipeline sales job to go make the given sufficient pipeline, comma, go make the number right.

Dave Kellogg: But, but if [00:19:00] you don't have sufficient pipeline. You know, maybe you can pull a rabbit out of a hat with a big deal or [00:19:05] accelerating, but, but, but it's hard. You can't have sales pulling rabbits out of a hat every quarter. [00:19:10] 'cause eventually it's like I told my board once I, I ran outta rabbits. Right? Like, you, you can't do it.

Dave Kellogg: So, [00:19:15] so how do we. How do we deal with this situation? Because we got a [00:19:20] lot of things driving it, right? We have budget pressure. We've been slashing sales and marketing budgets. We're just trying to kind of [00:19:25] slash them faster than a RR growth is drinking. That's been the pattern for the last couple of years, hasn't been [00:19:30] super successful.

Dave Kellogg: It's resulted in a lot of pipeline shortages. Uh, two, we have the whole search traffic [00:19:35] thing that your, uh, last week's guest talked about, um, how a AI and other [00:19:40] forms of search traffic front running. Right. Uh, is reducing traffics to underlying [00:19:45] websites and publishers. Um, well we have AI eating the budget, so there's fewer shoppers [00:19:50] out there.

Dave Kellogg: A point Ray likes to raise. So, so I, I think we're at a pipeline crisis. Ray, what do you think? [00:19:55] I.

Ray Rike: Oh, I totally agree. And you know, sometimes I go down the [00:20:00] metrics in benchmark Rat Rat hole. But Avan Kuch, who I really [00:20:05] like, he was the chief kind of analytics evangelist at Google for many years, and then the [00:20:10] chief digital marketing, um, evangelist. And he's got a weekly newsletter. And what he put [00:20:15] out today, and it just came out today that he predicts next year that [00:20:20] organic search traffic will go down by 30% and paid search [00:20:25] traffic will go down by 15%.

Ray Rike: And that's on top of some of the negative impact we've [00:20:30] already

Dave Kellogg: Yeah, it is already off 30%. Right? Uh, for a lot of people. Yeah.

Ray Rike: Yeah. So, so [00:20:35] that's one big thing. And then since I always look at efficiency, I look at this kind of new [00:20:40] a ARR CAC ratio, that's how much sales and marketing investment we're making for every dollar of new [00:20:45] ARR

Ray Rike: And during this period of efficient revenue growth, it [00:20:50] went up last year, another 14%.

Ray Rike: So we're spending almost $2 of sales and [00:20:55] marketing to get $1 of new ARRs, at B2B SaaS company. So [00:21:00] whatever we're doing. And Dave's more of the expert on process, and I love the metrics. [00:21:05] Um, it's not more efficient, it's less efficient, and the question is not only why, but then [00:21:10] what to do.

Dave Kellogg: Yeah, so, so, so I think we can agree we're in this crisis. I [00:21:15] think there's a lot of different data points about. Basically sales and marketing [00:21:20] inefficiency. Ray's got the one about CAC ratios going up, I think from 1 76 to $2. [00:21:25] Um, altimeter, germine Ball published, uh, CAC payback [00:21:30] periods. I think the median is now 57 months, which is mindbogglingly [00:21:35] long, um, for a CAC

Craig Rosenberg: That's, yeah,

Ray Rike: Yeah,

Dave Kellogg: six years [00:21:40] to

Craig Rosenberg: I, I get, hold on, let me pick myself up off the floor everyone.

Dave Kellogg: that's the [00:21:45] correct response to that number, by the way.

Dave Kellogg: Right?

Ray Rike: Yeah. I do wanna double click on that just for a [00:21:50] second, Dave, though, 'cause that's for public companies and the way they calculate cac payback period's a little bit different, [00:21:55] right? They use sales and marketing expenses for a quarter divided by net new [00:22:00] ARR, which includes down sells, excuse me, churn and upsells and [00:22:05] new.

Ray Rike: So it's a little bit different, but it's still terrible. 'cause if you look at that like three plus months [00:22:10] ago it was like, I think it was like 28 or

Dave Kellogg: A couple years ago, it was in the low twenties, right [00:22:15] back, back around 2020. So, so it's more than doubled to get where it is today. So, so [00:22:20] we're seeing that of a, a massive drop in sales and marketing efficiency. [00:22:25] Um, and, and I guess I think we, we know why, right? It's the budget [00:22:30] pressure. It's a search traffic crisis.

Dave Kellogg: It's AI eating the budget. I guess the question, Ray, I know you, we can [00:22:35] talk about how to measure it, Ray, or we can talk about what you wanna do about it. Where do you want to go?

Ray Rike: Let's go with what to do about it. I think [00:22:40] that's what the audience is gonna

Craig Rosenberg: Yeah.

Craig Rosenberg: Yeah.

Dave Kellogg: Go, go for that Ray, then you, I know you, you have some thoughts on [00:22:45] that?

Ray Rike: Okay, so, and I'm not gonna do some of this standard SDRs need to be [00:22:50] more tailored research and personalized outreach

Craig Rosenberg: Oh, well thank the good

Craig Rosenberg: Lord, [00:22:55] Ray, Jesus Christ.

Dave Kellogg: I've never heard that before, Ray.

Matt Amundson: yeah,

Ray Rike: yeah. [00:23:00] Oh, wait a minute. I just got paid a hundred dollars to say that by clay.ai.

Dave Kellogg: An angel got its [00:23:05] wings 'cause you said SDRs need to do research. There we go.

Ray Rike: Yeah, so, so here's some [00:23:10] macro level things that, um, I'm, I'm recommending, and I must admit [00:23:15] that my clients in the first six months don't see a lot of short-term return, but it's [00:23:20] still, um, people who do it for four quarters in a row are seeing it. Number one, [00:23:25] invest more in brand building.

Ray Rike: In non-direct [00:23:30] demand gen budgets, things like have more original [00:23:35] research, have invest more in events that [00:23:40] are personalized for your economic buyer, executive dinners.[00:23:45]

Ray Rike: Um, round tables, et cetera, in fact, and [00:23:50] Benchmarker. If you guys know Omar, and he, he's been doing for the last three years, just real [00:23:55] deep marketing benchmarks, like he, he'll show that the faster [00:24:00] growing companies actually are spending more on brand than on demand. [00:24:05] And, um, the data, and we can definitely share the links, but the data's [00:24:10] out there.

Ray Rike: So I'm like, wow. But the CFOs are saying, how do I really measure [00:24:15] the effectiveness of brand investments? And one of the things we talk [00:24:20] about is you're gonna see an increase in the number of, um, opportunities from [00:24:25] inbound hand raisers.

Ray Rike: And

Ray Rike: Then you gotta track how quickly do they [00:24:30] close, what's the

Ray Rike: ACV

Ray Rike: of those, and what's your run rate compared to those from your [00:24:35] outbound targeted outbound.

Ray Rike: So that's one of the things I recommend, Dave.

The Difference Between Search Engine Optimization & Answer Engine Optimization
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Ray Rike: And then the last thing I'll say on that, [00:24:40] if you listen to all these AEO experts, right? And that's kind of a, an.[00:24:45]

Ray Rike: an

Ray Rike: Non-existent today. 'cause we're all learning, right?

Matt Amundson: Yeah.

Ray Rike: [00:24:50] Content is becoming so critical to how you show up in the answer engines [00:24:55] because they'll look at 50 different sources and they don't put 50 links.

Ray Rike: They [00:25:00] pick the top two or three, and that's what's in the response, right? So you've gotta have your [00:25:05] content distributed widely and it's gotta be novel and unique. It can't just be [00:25:10] more same old pontification, do more research as an SDR.

Matt Amundson: I, I [00:25:15] agree. I think the one thing that is very true for, uh, content that [00:25:20] AI or LLMs like to pick up is use case specific content. Part of that [00:25:25] has to do with the way people prompt AI versus the way they search with Google. [00:25:30] Right? We, we talked about this a couple episodes back, which is like, if you're looking for, uh, [00:25:35] you know, marketing automation, like, hey, uh, I, I, [00:25:40] you know, I go to Google and I say.

Matt Amundson: What are the top three marketing automation vendors or, you know, [00:25:45] best marketing automation vendor for B2B SaaS company? You don't go into ChatGPT or [00:25:50] anthropic or, or perplexity and use terminology like that. Generally [00:25:55] speaking, you'll go in and prompt it and say, Hey, I have a problem that looks like this.

Matt Amundson: I wanna solve it. Can you [00:26:00] recommend technology that's best? You know, can you recommend two or three vendors that would be, uh, [00:26:05] that could help me solve this problem? And so it. Generally, they then are going out and they're [00:26:10] looking for content that's use case specific that can match to the prompt that's been entered by [00:26:15] the user as opposed to, you know, like a search query that that we used to use when we were [00:26:20] using Google more frequently.

Dave Kellogg: So I think frequently asked question format works pretty well for that [00:26:25] too. They, they, they feed well into answer engines or generative engines, but one of the ways, you know, this is an emerging [00:26:30] field, by the way, is we don't know what to call it. Ray likes to call it AEO. I call it GEO or [00:26:35] LLM o, right? Uh, I don't know what you guys call it, but, but it's definitely an emerging field and there's plenty out there [00:26:40] written on it.

Dave Kellogg: Um, I, I think one of the. bitter [00:26:45] ironies here is that one of the best GEO strategies is pr, [00:26:50] right? Because the references in authoritative media, brand references in authoritative media are [00:26:55] very important. So go get that article in Forbes, get that article in Fast Company. [00:27:00] I mean, this is a huge turnaround for pr, right?

Dave Kellogg: 'cause PR basically kind of fell off a cliff for 20 [00:27:05] years and all of a sudden if you say, well, how can I improve my. ChatGPT PT Inclusion. [00:27:10] The answer is basically go get some top line PR in major media.

Ray Rike: Yeah.

Ray Rike: [00:27:15] And, and even some of the, um, social networks, you wouldn't think of great B2B marketing [00:27:20] channels before Reddit. Some of the LLMs love Reddit commentary, right? So [00:27:25] the more you can moderate certain boards, the better off you are.

Matt Amundson: [00:27:30] Yeah.

Dave Kellogg: And the other thing I'd say, just in terms of what to do about it, I'm gonna try, so Ray said, you know, [00:27:35] more, more brand spend, which I think includes a lot of things, including the PR was talking about, uh, as [00:27:40] well as others, obviously proprietary content, uh, going with that first party audience.

Dave Kellogg: Building your own [00:27:45] audience, right? So, so, your own newsletter. Your own podcast. Um. [00:27:50] I think answer engine optimization important. Uh, I think [00:27:55] this is more of a meta answer, but I do think it's important joining a marketing community because marketing is [00:28:00] changing so quickly right now. Like just this morning I saw that LinkedIn thought leader [00:28:05] ads are apparently on fire.

Dave Kellogg: So, so you, you, your CEO posts something and then you [00:28:10] go double down on it, right? If it's starting to work and it feels good, you run a promotion on it. I don't know if they're [00:28:15] working right now. Let's assume that person was correct, but will they still be red hot six months from now? [00:28:20] Probably not. Right? So it, I think stuff is changing so fast that, that I [00:28:25] would want to be in a community of marketers.

Dave Kellogg: You know, I'm a member of Exit five. I don't know what communities you guys are [00:28:30] in. Um, but just trying to talk to people on the ground in the trenches. I'm [00:28:35] like, what's working like right now?

Craig Rosenberg: All right. I was gonna say something, but you guys [00:28:40] need to keep talking 'cause I think I have the data Dave's talking about. So gimme a moment while [00:28:45] you guys keep going. Actually, let me prompt, can I prompt you guys?

Matt Amundson: we talked about [00:28:50] prompting. Let's prompt.

Ray Rike: Oh,

Ray Rike: Rosenberg

Dave Kellogg: it search [00:28:55] style. Say like three words.

Dave Kellogg: Just give us three key words.

Craig Rosenberg: I was gonna say, wait, people, people ask, use [00:29:00] cases. 'cause I just went on buying a truck and I went, Hey, what truck should I buy? So that [00:29:05] I'm still doing search, didn't say for off-road mudding or anything. Yeah, because nor [00:29:10] normally people would add the use case. Yeah.

Craig Rosenberg: no, I ended up, yeah, I ended up talking to it. I'm, [00:29:15] I'm learning, I'm learning. Uh, but, but I still think, uh, [00:29:20] so my issue is I've, I've believed.

Craig Rosenberg: For even, you know, [00:29:25] this has been years actually. I think when Matt and I, so Matt and I first started sort of, [00:29:30] he was an EIR here for, at three years ago. And it was like, we, we, the, [00:29:35] the realization that brand was critically important, I. Uh, [00:29:40] was obvious then, and it, I guess it's always been, but we did forget about it because we [00:29:45] were able to just send out emails and get a thousand people to a webinar.

Craig Rosenberg: Uh, but I [00:29:50] still don't know. I, I, I mean, we've said some [00:29:55] things here, but like could, like if you could put, if we could put it in some. [00:30:00] Coherent playbook here for brand because I just [00:30:05] like, that is a big word. So it's like you did a billboard on 1 0 1. [00:30:10] I'm working on brand. You know what I mean? I think we've, we've said some things like, I [00:30:15] do think new media, like podcasts, et cetera, getting, [00:30:20] you know, but like.

Craig Rosenberg: Is it like we're in a new world? So like if I [00:30:25] went and read David Ogilvy, would that, is that what I'm trying to do [00:30:30] here? I just wanna make sure, like when we dig in here and we talk about brand, that [00:30:35] we know what we need to talk about here, especially in this environment. So I'll throw that to you while ago.

Craig Rosenberg: Search for [00:30:40] Dave's, uh, data point.

Dave Kellogg: Okay, great. You wanna start out or you want me to?

Ray Rike: [00:30:45] No, I'd like for you to start on this one because you're the marketer in the brothers family.

Dave Kellogg: [00:30:50] So look, you can think, and I think you're right, which is how did we get [00:30:55] here? And we got here because. This desire to make marketing measurable. Right? In the old [00:31:00] days, we, marketing wasn't measurable. Half my, you know, the famous John Wannamaker quote, half my marketing budget is [00:31:05] wasted that I don't know which half.

Dave Kellogg: And, and then, you know, Google came along and pay-per-click advertising and [00:31:10] marketing got real measurable, right? Um, and. I think we kind of [00:31:15] overt, rotated to the measurable marketing side of things and we kind of, because it was kind of [00:31:20] almost like instant gratification, right? Whatever it's called. The uh, the marshmallow test or whatever [00:31:25] for children, right?

Dave Kellogg: Like, ooh, I spend money and I get back leads. Um, and, and, and we ran [00:31:30] that really hard, I don't know, for the last 15 years. Um, and I think branding did suffer.[00:31:35]

Dave Kellogg: Um,

Dave Kellogg: branding to a certain, I mean, I'm gonna give a, I'm, I'm making this up in real [00:31:40] time, but we'll see how you feel about branding Is marketing without a call to action.

Dave Kellogg: [00:31:45] I don't Right. Like, I mean, billboards almost. I mean, they can have a URL or a phone number [00:31:50] on 'em, but they're, they usually don't, they usually just have a message. Right. So that's marketing without a call to action appearing in a [00:31:55] news story. PR is marketing without a call to action. Analyst relations to me is actually branding [00:32:00] too, right?

Dave Kellogg: Getting written up and having good people talk about you. Um. [00:32:05] What, what else, uh, would qualify as brand spend to me, obviously, [00:32:10] um, you know, I used to try and split the cost of trade shows between demand and brand

Dave Kellogg: [00:32:15] value, so I'd just look at the number of leads I got and get an equivalent demand gen value, and the rest was brand.[00:32:20]

Dave Kellogg: So I did it in a subtractive way, which is the way they measure big companies, brand equity. They look at [00:32:25] the market cap and they subtract everything else. And what's left over is brand. So I would try to back into [00:32:30] trade show brand value, and then I could at least compare 'em amongst trade shows and say like, here, [00:32:35] here's how we compare the trade shows.

Dave Kellogg: Um. What else? I mean, sponsorships like [00:32:40] people do, like they, you sponsor a race car, right? So a lot of the tech companies do that now, or [00:32:45] a tennis and, you know, your, your logo is there either under the ice of the sharks or on the wall to tennis [00:32:50] match or, or on somebody's head in a, in a F Formula one race.

Dave Kellogg: Right? That's branding. [00:32:55] A lot of those forms of brand spend, by the way, have events, value branding and events often overlap, right? [00:33:00] Because if you're sponsoring a race, you're bringing customers, you've got a VIP suite somewhere, so [00:33:05] you're bringing 20 customers to meet, you know, some drivers and participate in the event. [00:33:10] Um, I'm sure I've missed things here. Uh, just straight display advertising is [00:33:15] obviously brand, but, but that's what I think we're talking about. It's kind of marketing without a call to action. I mean, I, I, I [00:33:20] just stumbled into this, but I actually really like this definition. It, it, it's marketing where I'm not just trying to [00:33:25] get you to click here and gimme your contact information.

Dave Kellogg: I'm trying to have you learn about our company, hear [00:33:30] our story, see our name.

Ray Rike: know. [00:33:35] Just to add to that, um, because I do like to measure everything, right? [00:33:40] So a lot of people, and by the way, just a little pitch here, um, [00:33:45] I'm doing a brand versus demand benchmarking research program that kicks off [00:33:50] on Monday with Carilu Dietrich, John Miller, and Bill Masita [00:33:55] to ask a lot of these questions, right?

Ray Rike: But a lot of times people are trained to measure [00:34:00] brand. With things like share a voice or sentiment analysis, right? Et [00:34:05] cetera. Um, even branded keyword, you know. But what I've [00:34:10] seen and what I really like is if you do a good job of building your [00:34:15] brand and Udi at Gong said this on a podcast I did with them, you're gonna see a [00:34:20] dramatic increase in the inbound leads.

Ray Rike: [00:34:25] And in the latest marketing benchmarking we did, we found the companies that had [00:34:30] 40% or more of their qualified pipeline coming [00:34:35] from inbound hand raisers were the highest correlation to [00:34:40] 30% plus growth rates. So I think inbound leads and [00:34:45] what percentage of pipeline in new AR coming from those inbound leads is another great [00:34:50] way to quantify the ROI of brand investment.

Ray Rike: I dunno what you think about that, [00:34:55] Dave.

Dave Kellogg: So there's a number of ways to measure it. Uh, let's talk about a measuring brand. One, I'm a massive [00:35:00] believer. In measuring brand, uh, I personally recommend everybody I work with do their own proprietary at least [00:35:05] once a year. Demand funnel, market research, and just basic questions. Have you ever, you know, [00:35:10] name three providers of category.

Dave Kellogg: So unaided awareness. Aided awareness. Have you ever heard of these five [00:35:15] vendors? Positive opinion. Do you have a positive opinion of this company consideration? Have you ever [00:35:20] considered buying their product trial? Have you ever tried buying their product purchase? And if you get a big enough sample and run that [00:35:25] repeatedly over time in multiple geos, you generate a ton of data about how people feel about [00:35:30] you.

Dave Kellogg: Now that's obviously not just driven by your brand campaigns, it's driven by everything, right? It's driven by your [00:35:35] product quality and your support quality, um, and, and everything else. But I think that's a very important way [00:35:40] to measure it. Uh, Ray you reminded me of how consumer people measure it, which is they go put [00:35:45] ads up in a city and see how it changed relative to another similar city that [00:35:50] didn't have the ads.

Dave Kellogg: Right. Um, so, so you can do that. That's how consumer does it. [00:35:55] So you're kind of getting the indirect effect with a control group in effect. Right. Just saying, Hey, we're gonna put [00:36:00] buses, we're gonna put ads on New York City buses, and we'll see how much it does an uplift relative to either [00:36:05] New York City before, which isn't great.

Dave Kellogg: Or to another similar city that didn't have the bus ads. [00:36:10] Um. So,

Ray Rike: say that Dave. 'cause um, bill Masita, who was the [00:36:15] CMO at Slack, that was one of the exact tactics he used. He [00:36:20] would do that, recall and unaided recall and the sentiment. And then that's [00:36:25] where he would put his demand generation spend and especially his paid media spend [00:36:30] was in those studies.

Dave Kellogg: By the way, I love share of voice. I mean, I love all the metrics we talked about there and I [00:36:35] think people should measure them. 'cause you wanna watch these needles move over time. I, I, I measure [00:36:40] share of voice just, just like anybody would. But, but I, I think that [00:36:45] notion of measuring the, I just call it the high level outside in funnel, is very powerful for two reasons.

Dave Kellogg: [00:36:50] One, well, actually there's one key reason, which is the thing I always press upon people [00:36:55] most of the time. Companies are navel gazing. We're looking at the data. We're looking at [00:37:00] all the data in our systems, which definitionally is about the people we found. And what about the [00:37:05] people we never found? What about all the people who'd never heard of us?

Dave Kellogg: What about right? What about the other people? [00:37:10] Right? So, so it's another reason I'm a huge proprie, uh, proponent of market research is we [00:37:15] have so much data in our own systems. We could spend hours and hours and hours navel gazing, right? [00:37:20] Just looking at ourselves, you know, these are the deals that we found.

Dave Kellogg: What about all the deals we've never found? Right? [00:37:25] What about all the people who won't consider us? 'cause they don't like us, right? Like, you can't find them unless you do kind of [00:37:30] outside end market research.

Craig Rosenberg: All right, so hold on. I've got Dave's metrics. Now these [00:37:35] are from LinkedIn, so, all right, so thought leadership ads. So [00:37:40] you promote posts from individuals, founders, et cetera. [00:37:45] Um, and they look and feel like organic posts, right? Um, so the, here's some of the results they [00:37:50] talk about.

Craig Rosenberg: So 1.5 x higher CTR. [00:37:55] Right. Two x follower growth, 45% more demo requests from [00:38:00] retargeting audiences. Um, for startups, the impact's even bigger. It's [00:38:05] 7.6 x more engagement, so than any other [00:38:10] paid format. So, and then I think the quote that David heard was [00:38:15] that, um, uh. S start. [00:38:20] Oh no, this is different. Sorry. That was a different thing.

Craig Rosenberg: So yeah, so that was the thought leadership [00:38:25] ads data that you just brought up. Sorry to bring that back, but I spent all the time looking for it, so I figured I'd bring it [00:38:30] up.

Craig Rosenberg: Um,

Craig Rosenberg: yeah, I'm good at that. I could do that. So, you know, I, [00:38:35] but there is this re so, so I do, I'm, I'm, I'm good with [00:38:40] the, uh, inbound, you know, the inbound [00:38:45] hand raiser or inbound demos.

Craig Rosenberg: Uh, as like, one of the thing in [00:38:50] my opinion, like if you're doing well on brand, then they're coming to you and I, I don't [00:38:55] know. And that's the, I think that's the whole point that we're trying to make here. Right? Or [00:39:00] is it also when you have brand, they're more likely to come to your events and do those things?

Craig Rosenberg: Is that, is that what [00:39:05] we're talking about when we're talking about brand,

Craig Rosenberg: is that it

Dave Kellogg: the, the, the, oldest measurement of this to me was [00:39:10] just direct traffic. How many people typed, right? How many people typed your exact name into their browser and came to you? [00:39:15] That's the way we used to measure it. Um, so I like your definition, which is brand is [00:39:20] when they come to us. By the way, the other thing people forget to do in measuring this is on [00:39:25] all your call to action forms.

Dave Kellogg: How did you hear about us? Right? I, I, we could never have too much data, [00:39:30] but like the simplest way is just to ask. Um, so, so I like complimenting all these other [00:39:35] measures with that one,

Matt Amundson: Yeah.

Ray Rike: you know, you know what, you know what, you know what KA is really [00:39:40] saying? He believes in self attribution, but, but attribution, I'm not so sure [00:39:45] of.

Matt Amundson: on our inbound, on our, on our, uh, our demo request forms. We have [00:39:50] an optional, you can, how'd you hear about us? Uh, you know, very old school restaurant [00:39:55] style or I think it's fantastic because this is, because we know how hard the actual attribution problem is. [00:40:00] Uh, I I would love to know how they think, think they heard of us.

Dave Kellogg: Uh, last two, last [00:40:05] two that came inbound for us were, uh, one was perplexity and the other was ChatGPT. [00:40:10] So.

Dave Kellogg: other favorite button, this is an older one. I don't know if it still works, but I always used to [00:40:15] put, I want to, I want to talk to a salesperson, right? And if anybody [00:40:20] checks that button, God bless. There're gonna be an opportunity. I know that, right? Because everyone's like, no one's ever gonna [00:40:25] check that button.

Dave Kellogg: But think of that. People who do.

Matt Amundson: Oh man. [00:40:30] Yeah,

Craig Rosenberg: I love that.

Ray Rike: I would just say the, the other thing, and I do have [00:40:35] kind of two customer stories here, where they invested more in brand and they increased the number of [00:40:40] inbound hand raisers, their actual marketing CAC ratio. [00:40:45] Marketing CAC ratio for me, I measure it as your marketing investment over,

Ray Rike: [00:40:50] pipeline generated in dollars, and I also do it as sales and marketing over new [00:40:55] ARR from inbound hand raisers.

Ray Rike: It went up by 22% [00:41:00] in three quarters. When I said went up, it improved. MA marketing CAC [00:41:05] ratio goes down, that means it improves. So I also think ultimately you're gonna see a [00:41:10] much lower marketing CAC ratio with well executed successful [00:41:15] brand investments.

Dave Kellogg: Do you guys wanna talk about how we measure this stuff? 'cause uh, or, or no, I dunno how much [00:41:20] time we have.

Craig Rosenberg: Yeah.

Dave Kellogg: Alright, so, firstly Craig, let's just see if we have the same [00:41:25] definition of marketing CAC. 'cause this could be our first full, official fight.

Craig Rosenberg: Yeah. I mean, there's like [00:41:30] 10 minutes left. Could you guys get in a fight? I may, we may, have Now

Dave Kellogg: what are you

Matt Amundson: don't seem like [00:41:35] real brothers.

Dave Kellogg: Um, I hope you [00:41:40] said sales, not the traditional CAC is sales and marketing expense [00:41:45] divided by new ARR. Sometimes it's net new, but let's just say it's new. New ARR [00:41:50] usually includes expansion and new logo. Both types of new ARR ray may differ there, but, but [00:41:55] hopefully all you did Ray was just put marketing expense over that or did you do something else?

Ray Rike: [00:42:00] Yeah, I have two versions. Yes I do do marketing expense [00:42:05] over new ARR generated.

Dave Kellogg: that would be the correct version. Okay.

Ray Rike: And then [00:42:10] I do one which is marketing expenses over qualified [00:42:15] pipeline from inbound hand raisers. And the reason I do that is if they're [00:42:20] investing more in brand and more in non direct demand [00:42:25] capture type initiatives, how do you measure it?

Ray Rike: So that's how I do it,

Dave Kellogg: I just wouldn't call it a CAC ratio. It's an [00:42:30] interesting metric. It's not a CAC ratio in, in any way, shape or form, brother Ray. [00:42:35] Um, but, but it's a good ratio. Um, I thought you were headed to kind of a pipe to spend [00:42:40] that, that's where I thought you were going, which is one of my favorite metrics, which is just pipeline [00:42:45] generated, divided by demand gen spent.

Dave Kellogg: That is a, a lovely, simple [00:42:50] metric. And there's only one metric I like better than that. But, but back to you, Ray.

Ray Rike: But Dave, I think it's [00:42:55] really important. You, you mentioned it's the pipeline generated divided by [00:43:00] demand gen spend, Correct. I don't like putting the cost of the CMO or the [00:43:05] cost of the product marketing person in there precisely for this reason Ray, which is, if you want to know what our [00:43:10] overall marketing efficiency is, see CAC ratio, right? We have that metric already. It's called the [00:43:15] marketing cac, and it's got the CMOs salary and the PR firm and the website and everything else.

Dave Kellogg: [00:43:20] But if we want to compare relative demand generation programs, we should do pipe to spend and it should be based on [00:43:25] demand gen spend. I'd agree.

Ray Rike: And, and Dave, just a couple questions clarification. For my own purpose, would you [00:43:30] include paid media, paid search and demand gen? And then what about events?

Dave Kellogg: [00:43:35] Yes, yes. Yes.

Ray Rike: Okay.

Ray Rike: Okay.

Dave Kellogg: [00:43:40] Um, yeah. What I wouldn't include, and this one's more controversial, is the demand gen people's salary. [00:43:45] I wouldn't do that. I, I look at it as a variable expense. I'm trying to compare the relative efficiency of an incremental [00:43:50] dollar. So

Dave Kellogg (Video): Right. So

Dave Kellogg: basically if sales comes to me and says, I need 10 million in pipeline.

Dave Kellogg: I [00:43:55] want to be, tell 'em how much I need to spend to get it. And I'm not gonna hire another demand gen person. I'm not gonna hire another PR [00:44:00] firm. I'm not gonna hire another CMO, right? I am gonna go spend money on programs.

Matt Amundson: Yeah. Yeah. It's a [00:44:05] matter of can you dial up, can you turn the knobs, dial up the spend and increase. Yeah.

Dave Kellogg: [00:44:10] Right. And, and there are stair steps there, right? At some point we, we can't, we can only absorb so much more [00:44:15] money. I mean, that's another very important marketing metric if you want to keep your job, which is [00:44:20] basically percent spent, right?

Dave Kellogg: Because a lot of times companies are gonna have a pipeline crisis, [00:44:25] and if you're the CMO of a company with a pipeline crisis and you haven't spent your budget. Oh my. It [00:44:30] should be a very bad day for you. And sometimes, I mean, I see it happen. People are too busy right now to spend the [00:44:35] whole budget so

Dave Kellogg: that that's the job preservation metric.

Dave Kellogg: Make sure that number is a hundred [00:44:40] percent.

Ray Rike: Hey, hey, hey, Dave. There's an something else you and I have talked about a couple times, so let's [00:44:45] air it here on The Transaction. That is

Craig Rosenberg: Ooh, is

Craig Rosenberg: it, wait, hold on. Is this a [00:44:50] break? Are we breaking something right now on the Transaction? Breaking

Craig Rosenberg: news?

Sam Guertin: [00:44:55] exclusive.

Dave Kellogg: He did

Craig Rosenberg: Oh man. Yeah, sorry to interrupt you, Ray, but that's a big deal. Like, [00:45:00] um, you know, uh, I will just say everyone, Transaction [00:45:05] audience, we have some breaking news, Ray.

Ray Rike: I don't know if it's breaking news, but [00:45:10] well,

Ray Rike: is, SDR should

Dave Kellogg: do personalized research. No, I'm

Ray Rike: yeah. And, And, and, [00:45:15] And, and one of the things, and one of the things I know is I don't wanna speak for Dave, so I'm gonna do it through a [00:45:20] question. So Dave,

Why B2B Marketers Need to Measure both Opportunity Count & Cost Per Opportunity
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Ray Rike: I believe that number of opportunities generated [00:45:25] and then kind of cost per opportunity are to your favorite metrics.

Ray Rike: Is that [00:45:30] correct?

Dave Kellogg: yeah. This is a bigger topic, but, but, so here's the way I measure pipeline Ray. I think you know this, but, but. [00:45:35] I like to look at both count and dollars, right? So, so, 'cause if you only look [00:45:40] at one, there's problems, right? Because if you only look at dollars, you could have one mega opportunity skewing [00:45:45] everything.

Dave Kellogg: If you only look at count, you could miss dollars and dollars matter, right? In the end. [00:45:50] What we're trying to get is sales to start business. I said earlier we're trying to give sales a chance [00:45:55] and how do we give sales a chance by letting them start quarters with sufficient pipeline coverage.[00:46:00]

Dave Kellogg: Uh, and by the way, we can hit our pipe gen goals and they can still not have sufficient pipeline [00:46:05] coverage. So I like marketers to very much keep an eye on what's developing in the pipeline coverage front. [00:46:10] But, but short answer to your question, Ray is. I like to look at both. [00:46:15] When it comes down to cost, I prefer cost per opportunity to pipe to spend.

Dave Kellogg: [00:46:20] Um, and when it comes to coverage and pipe gen, I like dollars. Basically, it it, here's the, [00:46:25] the way I think of it. I'd rather lead a marketing team going, let's generate 220 opportunities this quarter [00:46:30] than let's generate this many dollars in pipeline for a bunch of reasons. One, I think it's more tangible, more visceral.[00:46:35]

Dave Kellogg: Two, those dollar figures fill in over time. So I might not know for opportunities generated in the [00:46:40] last week. They may all count at zero. So if I'm leading a team of people to go, let's take Park Chop [00:46:45] Hill and Park Chop Hill is 220 opties, I want to go generate 220 opties [00:46:50] now. So that's the way I look at it.

Dave Kellogg: In that world, you're looking at cost per opti, let's generate [00:46:55] 220 opties at this cost. Now, as soon as we turn to our, our brothers [00:47:00] and sisters in sales, they care about dollars in coverage. So, so that's where I like to say. [00:47:05] Basically, if I could only have two things, it would be opti count for [00:47:10] pipe gen and it would be coverage for pipeline.

Dave Kellogg: Because, because I don't actually care if I hit my [00:47:15] pipeline target if I really care about sales making their number, the only thing I care about is did sales [00:47:20] start with sufficient coverage and, and I don't care if alliances came up short or SDRs came [00:47:25] up short. I, I, I wanna watch that number and be working all quarter to try and make sure we land in the right [00:47:30] place.

Ray Rike: thank you for doing that. And the other, and by the way, I've come around to Dave's way of thinking. I really like that [00:47:35] simplification of how many qualified opportunities we need to generate.

Why Pipeline Coverage Ratio is so Critical for B2B SaaS Startups
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Ray Rike: And then there's the other thing [00:47:40] that Dave and I have talked a lot about, and that is pipeline coverage ratio and the importance of [00:47:45] that.

Ray Rike: So, and I love the way Dave explains that. So if, if wouldn't mind talk about why you think [00:47:50] that's so important, especially I think you look at it from a forecasting perspective. Correct.

Dave Kellogg: [00:47:55] Yeah, I mean, look, the, if you care, here's the way I say it. If, if you care about marketing, you [00:48:00] care about pipe gen. Most of the companies I work with, and Ray has data on this, but they care [00:48:05] about pipe gen. If I say, what's your number one metric? Pipe gen. Pipe gen dollars. [00:48:10] And I understand why they think that way.

Dave Kellogg: It's not entirely wrong, but we have to understand it's [00:48:15] parochial. Right? What's parochial about it? First, marketing's not the only pipe gen [00:48:20] source, right? We have alliances. We have AE outbound, we have SDR outbound, you have [00:48:25] PLG. You have community, right? You've got a lot of different sources out there, so's.

Dave Kellogg: It's parochial [00:48:30] in that way. I'm only looking at marketing and it's parochial in the sense that if we want sales to make their number, [00:48:35] the only way that happens is if they start with sufficient coverage. So I do encourage CMOs to [00:48:40] forecast starting coverage. It's actually very hard to do that. So I only say you should do it three times a quarter.

Dave Kellogg: [00:48:45] 'cause if you do it every week, it's, it's hard. But, but, but I think in weeks three, six, and nine, [00:48:50] you should make an official forecast for all sources. Like, so it means you need to have a [00:48:55] pipeline model that models across all the pipe gen sources. It means you need, you need to talk to the [00:49:00] owners of the other sources to know how they're doing.

Dave Kellogg: How are things shaping up in SDR land? [00:49:05] Oh, shoot, five guys quit. We're gonna be short. Oh, that's not gonna be good [00:49:10] for coverage, right? How's alliances going? Oh, we, we hooked into some amazing new partnership. Fantastic. [00:49:15] Right? So it means they need to look across the sources, do a lot of math and [00:49:20] say, I think we're gonna start next quarter.

Dave Kellogg: With only 2.3 x coverage [00:49:25] and do that when it's early enough to do something about it. If you tell me that in week 12, I can't do [00:49:30] much about it, if you tell me that in week one or week three, there's, you know, [00:49:35] actions can be taken. So, so that, I think the best CMOs do that.

Ray Rike: And the [00:49:40] other thing, it's so important, and I can't believe that not all companies do this, but have a good [00:49:45] definition for historical looking at your pipeline coverage ratio, [00:49:50] what stage does it start at Stage two opties versus stage one, right? to me, [00:49:55] that's one very important thing.

Ray Rike: And number two, that it's commonly measured between sales and [00:50:00] marketing. Because sometimes I've seen sales say, well, I really kind of think it's [00:50:05] stage three, so here's what I think the pipeline coverage ratio, um, needs to be and it's not gonna help [00:50:10] marketing at all. And then Dave, the other thing, and, and this is very important to me and that [00:50:15] is timing, is pipeline coverage ratio for those deals that you [00:50:20] have, um, projected to close in that current quarter,

Dave Kellogg: You may have [00:50:25] noticed I do this automatically now and I forget that not everybody does, but to me.

Dave Kellogg (Video): I,

Dave Kellogg: I [00:50:30] detest. So what's my least favorite SaaS metric? Rolling four quarter pipeline. [00:50:35] Why? Because I, I don't have rolling four quarter sales targets, right? I have quarterly [00:50:40] sales targets that I need to hit. I live and die by quarters.

Dave Kellogg: This is if I'm CEO. [00:50:45] So I, I don't care about rolling four quarter anything. I want to know quarter by [00:50:50] quarter am I gonna start with giving sales a chance to hit the number. So yeah, Ray, [00:50:55] when I talk about pipeline, I'm automatically quarter-izing it. I'm saying what's my this quarter [00:51:00] coverage? What's my next quarter coverage?

Dave Kellogg: Um, I, I might look at all quarters, but I won't use a coverage ratio [00:51:05] there. But, but, but I will go out quarter by quarter for as many quarters as I look at, to look at coverage [00:51:10] ratios because I think one of the more destructive metrics out there is [00:51:15] annual pipe gen targets and rolling four quarter pipeline, because if they're rolling, four quarter pipeline [00:51:20] can be great, but it's all four quarter,

Examining Tantalus & The Cultural Impact of Ambrosia in All of Its Forms
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Dave Kellogg: it's like Tantalus, you know, he was punished.

Dave Kellogg: I can't remember what he did, but he got [00:51:25] punished by the gods and he was neck deep in water. He had fruit right above him and every time we [00:51:30] went down to drink the water, it would disappear. And every time I tried to grab the fruit, it would disappear. And that's [00:51:35] the way I feel about rolling Four Quarter Pipeline.

Dave Kellogg: Like it's always out there, I just can't [00:51:40] grab it.

Ray Rike: Right. And, and I would also flip that to make sure that everyone knows [00:51:45] their in quarter pipeline, um, that ends in a close. 'cause if you have a less than a 90 day sales [00:51:50] cycle, right, a lot of times you're gonna generate 10, 20% of those inbound [00:51:55] hand raisers came in and week three or week six, and you get it closed by the end of the quarter.[00:52:00]

Ray Rike: So you should at least know historically what type of end quarter pipeline that [00:52:05] results in your AR that you're generating.

Dave Kellogg: Yeah, for velocity business, just substitute the word month every time I say [00:52:10] quarter and the system should generally work 'cause you should be running on a monthly cadence.[00:52:15]

Dave Kellogg: Tantalus stole Ambrosia from the gods. That's what he got punished for by the way,

Craig Rosenberg: I, [00:52:20] I, I just, that was probably the biggest learning for me, uh, was about Tantalus. [00:52:25] Um, the, uh,

Matt Amundson: Well, and I'm inspired to go listen to Ambrosia after [00:52:30] this, so.

Craig Rosenberg: By the way, isn't Ambrosia defined as a feast fit for the [00:52:35] gods? I think so.

Matt Amundson: I mean, I, I've like you just read [00:52:40] that

Craig Rosenberg: like, no,

Craig Rosenberg: I didn't. I did not. I did not, dude, [00:52:45] because someone brought Ambrosia to a party and I didn't like it.

Matt Amundson: there's an ambrosia [00:52:50] salad that's ambrosia salad. Man,

Craig Rosenberg: it's terrible.

Dave Kellogg: Food

Dave Kellogg: or drink of the [00:52:55] gods. Yeah. Ambrosia salad. Yeah. Yeah, you're right. Ambrosia Salad. Not good. Uh, the, the other Ambrosia food and [00:53:00] drink of the Gods, presumably. It was good. I've never had it,

Dave Kellogg: but Sounds like it was better.

Ray Rike: Hey, but.

Craig Rosenberg: [00:53:05] Probably,

Ray Rike: But Dave, Dave is a big fan of the Grateful Dead. I like Ambrosia, [00:53:10] which is a 1970s rock

Matt Amundson: Yeah, that's what I'm talking about. Yeah.

Craig Rosenberg: Oh [00:53:15] man. Uh, all right, well you guys, thank you so much for this. I'm, I'm glad this worked out [00:53:20] and we're able to do this. These are the, yeah, these are the kind of things. I mean, we just [00:53:25] listened to the, the metrics Brothers. Go, go for it. Here, I'm gonna say a couple [00:53:30] things. One is I'm pretty sure that was not breaking news, Ray.

Craig Rosenberg: That was false advertising, but that [00:53:35] was hugely valuable. Number two, uh, we, we [00:53:40] will listen to the Metrics Brothers for more boxing matches. Uh, but you [00:53:45] guys, the way you interact is really great. So like you guys set each other [00:53:50] up in a, in a sequence, like a lot of people, when they argue they, [00:53:55] or, you know, even if it's for fun, it sends the conversation, it derails it [00:54:00] from ending up in a storyline.

Craig Rosenberg: You guys still manage a really great [00:54:05] storyline and you could tell that in this show. It was great. We just kind of. Followed along and it, [00:54:10] and, uh, each sort of section had its own storyline, which was awesome. So [00:54:15] I really appreciate that.

Dave Kellogg: Thanks. Well, thanks for having us.

Ray Rike: Yeah, really [00:54:20] appreciate it. And, and David, I, you should see what it's like when we're talking off camera.

Dave Kellogg: Yeah, we'll, we'll share the emails with [00:54:25] you.

Craig Rosenberg: That's what, that's when the things go off the rails. Okay. I get it. I get it. All right, guys. Well, [00:54:30] that's the trick. Yeah. Sorry Matt. Go

Matt Amundson: I was just gonna say, uh, you know, thanks for being on our [00:54:35] show and make sure for if you're listening to the show, you're still here, uh, make sure you subscribe [00:54:40] to, to sas, talk with the metrics brothers.

Sam Guertin: There will be a link in the description.

Dave Kellogg (Video): Awesome. right. for [00:54:45] having us. right, guys.

Craig Rosenberg: All right, buddy. Yeah, you

Matt Amundson: bet. I.

Craig Rosenberg: That's the transaction. See you guys. [00:54:50] [00:54:55] [00:55:00] [00:55:05] [00:55:10] [00:55:15] [00:55:20] [00:55:25] [00:55:30]