In today’s macroeconomic landscape for B2B SaaS, in which valuations of public companies have plummeted 59% on average since 2020, funding rounds are taking 5-9 months longer, and cuts are being made left, right, and centre, companies are under scrutiny to drive revenue growth with fewer resources. This shift creates pressure across the business:
- Marketing needs to drive pipeline from verticals that come with high LTV:CAC
- Sales need to focus on closing those deals over others
- Customer Success teams need to prevent churn, upsell, and cross-sell
- Product teams need to make their offerings more valuable, less disposable
In this article we’re going to focus on that first point. We’re going to highlight how marketing can contribute by shifting from the old ‘lead gen’ game and start focusing on revenue generation.
Lead generation is what we’d consider the old way in which marketing contributes to the traditional funnel. Marketing teams are measured on the number of MQLs they can deliver each quarter, and performance is celebrated when their quota of MQLs is met. This is great… for the marketing team. Not so great for the sales teams, and ultimately the business.
What is evident, and we see this all the time, is that MQL growth does not equal business growth. MQLs can be considered a vanity metric. So much needs to happen once an MQL is generated in order to deliver true business value, that measuring success at that point in the journey is ludicrous. That MQL needs to convert to an SAL, then an SQO, then go through a few stages to become a Closed Won (CW) deal. It doesn’t stop there. That deal needs to be successfully onboarded and retained to prevent churn and encourage renewals, upsells, and cross sells. That long time customer needs to be encouraged to become an advocate for your brand. The earliest point at which success should be considered is at the CW stage. It’s at that point that the marketing and sales teams have successfully contributed to business growth.
Being measured on MQLs creates a disconnect between marketing and sales. Sales will be measured on the number of deals they close, and whilst being fed a large number of MQLs can support this, the focus should be on the quality, not the quantity. If quality is low, then the resources of the sales team are wasted trying to work leads who aren’t suitable and never likely to close. Why would the quality be low? Well, it’s likely that marketing is deploying tactics such as gated content in order to drive up MQL volume. What happens here is that someone who was simply interested in reading a report is now being passed to sales as someone in the intent or purchase phase but in actuality is still in the awareness or discovery phase.
Alongside gating content, other bad practices that marketers tend to fall into when measured on MQLs are:
- Content syndication: this is the practice of buying leads for a fixed cost. Content is distributed to a network of publishers in exchange for contact data. The contact data is unlikely to have shown any intent and is often a poor fit/ not the key decision maker. This leads to database growth, but doesn’t effectively warm up the database for future nurturing. In today’s world, data companies like Apollo, ZoomInfo and LinkedIn can provide contact data for much cheaper than the CPL you would expect from content syndication
- Display ads: trying to drive leads from cold display targeting is a huge waste of investment. Display banners often show on poor placements, are accidently clicked and do very little to create intent or motivation to buy. They are helpful in retargeting – though are limited, and should be used in awareness campaigns.
- Tunnel vision: being focused solely on hitting your volume quota, even in the face of overall poor lower-funnel marketing performance. Leveraging CPL as the metric to determine scale can often lead to high volumes of wasted spend. Yes, it may deliver lead growth efficiently, but if none of those leads/ MQLs progress to Opportunities, then you have wasted investment.
In the new world of revenue generation however, MQLs are not a key measure of performance. Marketing teams are instead tasked with driving pipeline and revenue, with the KPI’s becoming Lifetime Value (LTV), Customer Acquisition Costs (CAC) and LTV:CAC, which is the ratio that demonstrates how valuable a customer is over their lifetime in comparison to the cost conceded to acquire them. The higher the ratio, the more profitable the customer.
Using these metrics, Marketing teams can identify which verticals drive the most revenue over their lifetime as a customer and apply this to their go-to-market strategy which would now target these verticals.
Taking the new world approach, with the context of the current macroeconomic climate, will alleviate the pressure under which businesses find themselves as they’ll be able to do exactly what’s needed: deliver more, with less. With less funding and a slowdown in deal closure, it’s critical that the budgets that are available are deployed in the most efficient way.
Case study: When we supported a global B2B SaaS company in the Commercial Real Estate (CRE) industry in shifting the focus to LTV and CAC at the end of Q4 2022, we saw exactly why this approach is needed now.
- Closed Won deals grew my 93% QoQ
- Customer Acquisition Costs dropped 36% QoQ
- Pipeline grew 81% QoQ
In comparing the two worlds in the context of today’s macro environment and the impact we’re seeing on both public and private companies, it’s clear that this shift in mindset from Lead Generation to Revenue Generation is a no-brainer.
Companies need to align the strategies of sales and marketing so they’re both working towards the common goal of revenue. Marketing needs to work with sales (and customer success and product teams) to create the ICP based on the data – which deals come with the biggest contract values, which customer verticals have the lowest churn / longest lifetime – and then produce a go-to-market strategy that sets them up to attract and convert this ICP over and over again. This is how those businesses that are under immense pressure will win in today’s market. Revenue generation, not lead generation.