Transcript
Transcript of Video Excerpts
based on a data set of about 400 SAS companies cost of acquisition have have doubled and the growth has hared. hey there everyone this is Stu and you are listening to the Flow State podcast welcome back. uh today I’m joined by my old Palo ho. we are talking about SAS product marketing and how the shift from growth at all costs has now refocused everyone on team structure to support effective GTM. by way of a brief intro for those that don’t know you obviously for full disclosure you and I used to work together a few years ago um so we can try and you know just avoid too many weird in jokes and uh you know past references. but um it’d be interesting to dive into today obviously you’re going to talk about SAS and product marketing but also a bit of what’s changed in the world of B2B since we were working together what like four five years ago now. um so it’d be awesome to kind of dig into that and you know sort of chat through those things but do you know do you want to give people who don’t k now you or perhaps haven’t heard of your reputation a quick rundown of what you’re doing at the moment?
sure um thanks for having me good to be here. um my background by way of introduction is close to two decades in B2B SAS. um the first half of that is um through a company called ofx or as Forex um a payments business and then I spent the back half of our after that um in uh numerous fex but mostly within fex and ESG technology businesses uh which with with more of a thus orientation to them. so right now um I’m still in that world U doing some advisory and in between roles at the moment but um yeah that’s that’s what I’ve been up to at the moment.
awesome I like it and I know where you know since we were working together in in service World you’ve been back over client side in a couple of different industry sector so like how did how did you find the transition from uh doing work for other people’s Brands to kind of doing it for one one of your own?
extremely helpful. I think I think that um that five-year block that we spent together um on agency side yeah just really opened up um a lot of learnings. um and had kind of allowed us to cut through and see a lot of uh businesses um and the way that they operate. um and um take that and transfer that across to to client side. um so there are a whole bunch of learnings I think and interesting things that you just wouldn’t be able to attain if you were on client side the whole time. so just yeah just gave a really good um cross-section of how things what works and what doesn’t and I think that was the biggest takeaways like we get a really we had a really good sense of know what’s working and what’s not. um but that that transition um and those learnings were really helpful because you could essentially take those learnings and hone in on the the ones that that that worked and what what didn’t so you kind of had a lot of data points to to to work with so yeah I found that extremely helpful.
I like that and was it was it as easy as i t sounds just going and just working on one brand all the time instead of working on loads loads all the time or like was it just different different problems um that you found when you got in there?
I think it it just allows you to go deeper on one problem and to to solve that one problem rather than solve multiple problems. uh and not as not go as deep as you know in agency you’ve got a pretty clearly defined problem to solve um and and lots of them. but I I quite enjoyed uh enjoyed the the ability to then go deep focus on one problem but yeah really really go deep. and um so it’s not I wouldn’t say it’s better I just think it’s different but I do I have enjoyed that since moving across.
yeah that’s cool man. I think um you know obviously I’ve never really like done it for any extended periods of time so I’m always uh always interested in the experiences of people who work just on on a brand. um it’s kind of foreign territory beyond the ones that I’ve worked on myself. um so yes it’s like it um which is a nice segue into you know one of my favorite problems which is the sales and marketing Gap slash misalignment of sales and marketing. so I know that was one of the things that obviously you and I used to talk about quite extensively um when we were like Harry Potter style working in the the room under the stairs. so like how do you think like is that still the same now as it was you know five years ago is the nature of that issue changed?
I think some things have changed uh and some things haven’t. what comes to mind in terms of what hasn’t changed um is if you remember uh we did a lot of research and our approach was looking at B2B buyer behavior and how that’s significantly changed the path to purchase. um but sales and marketing um hadn’t and there was that big mismatch in between the two and that was a premise of um where the Gap was in terms of um buyer behavior and how do what what what what do Brands need to do differently in order to um align with that. I I stil l think that really hasn’t changed. there’s some there’s still a lot of catching up to do.
um in terms of what has changed I think just from observations over the last few years is and is that it’s not really a growth at all costs approach from a lot of um businesses U particular in in this SAS space. and um you know that’s um that’s kind of I think reflected in the fact that even VC um and valuations of of SAS businesses are are no longer high multiple of just Topline Revenue. it’s they’re looking for sustainable profitable growth now not just Topline growth at ridiculous multiple. so I think that’s probably one thing that’s changed quite significantly.
and like do you think um because I I totally agree like we’ve obviously seen like a you know pretty significant spate of uh cost cutting and firings across um particularly across like the technology world. so like do you like yeah do you think that’s um do you think that’s fed into that issue because obviously of those companies would have seen like cuts in their previous growth functions right? like if your marketing or sales team have uh have been chopped like um is that going to potentially make that problem worse or do you think less people would actually help companies to focus a bit more and you know actually zoom in on the the real stuff that’s sort of supporting their business?
yeah I think it’s perhaps a growth at all costs which was never going to work has come to an end because it’s caught up to to them. um like we’re not making money how can we how can we problem? yeah I mean how long can you bleed for before and I think I think that was the way that a lot of SAS companies have have ridden but it’s now come to an end. so I think um yeah the the impact of that is that a lot of people have there even even now just looking in the market there’s a whole bunch of layoffs redundancies. um and a lot of it is coming from um that mentality of growth at all costs have gone too heavy on the head count too fast too early and then they’ve needed to trim that back. um and I was just looking looking at some data the the other day and I think it was it’s the tech sector that’s had the um biggest um uh trimming of employees um yeah Rel relatively. I think it was 25% of the whole Market. 25% of the whole Market its trimming back is coming from the tech sector which was the highest yeah yeah.
it’s pretty um it’s pretty EX hey. CU you think um obviously like all those companies who were I guess leaning into that like like you say the growth the growth at all costs model you would assume have shifted to something more useful now in terms of like building a more sustainable approach to it but um you know to to your point and again just to link to one of the other things that you mentioned um PR is jumping on today like that whole uh that whole kind of funnel or you know focus on just acquisition I guess drove drove a lot of that right which is partly driven by the VC stuff but um and he mentioned kind of looking at the full funnel model and how that kind of applies to the startup of the tech world. so like do you think like what you what your thoughts on how people should now be thinking about that if you again thinking about those use cases you’re like okay you’ve either sacked half your growth team or you’re in a small business and you’re trying to grow more sustainably. um what do you think the sort of most valuable way of thinking about growth is now versus that previous model of like just acquire new customers and keep hiring people and you know just you know know grow grow grow? like what how how would you approach that now?
uh well the way that I think about it um from a go-to Market perspective if that’s kind of what we mean here is is um how do you go about the the practice of um growing. um and the engine behind that growth is is a go to market from a B2B SAS perspective. and I think um getting that structure right and the operating model right um in line with who the audience is and how they want t o go to market that getting getting that right and not mix mixing and um co-mingling different go to market approaches um is trying to do a lot of things at once I think is is where where the issue um arises and and costs go up. I was just looking at um just for context. um the other thing is that um there was uh there was some stats by uh bench I think it was Bench sites saying that now uh based on a data set of about 400 SAS companies that um costs of acquisition have have um have doubled and the growth has halved based on right. I think I think there were mostly US us businesses but um you know and and and so that’s that comes back to the point around um being able to concentrate on sustainable growth. but I think a lot of it comes down to having the right operating model in in in place that’s right for for the stage of growth that the business is at. um and so yeah there there kind of yeah get getting that model right and we can certainly flesh out the details of what I mean by that as we delve into the discussion a bit more.
yeah well no I think it’d be really interesting to dig into that because we um we’re talking about this this morning in with the um uh with the the dev team you know like around this whole misalignment issue. because obviously we’re you know we’re still playing in that space now of uh you know you’ve got two two functions that often are very differently focused and differently structured or maybe you don’t have two function anymore if you just find everyone that was in them. but like you know you your business is kind of set up around like acquisition at all costs on the on the one hand and then just blurring out you know messaging and and you know promoting the brand on the other. um and that like you know I I still think that bucket is where like a lot of these issues come from right? because to your point that’s why people are like oh there’s a new tactic or someone’s subscribed to like a new tool or someone’s bought like a new list something and it all just gets like thrown into that like you know like a hole and in the hopes that someone picks it up. so um yeah I think um I think that’s definitely where there’s still a lot of problems and we’ve got um I should probably have these stats to hand but there’s some crazy like statistic about um the cost of misalignment which is also from the US which I’ll dig out and include in the notes on this episode. um it’s pretty remiss of me to forget but it’s it’s something huge it’s like 30 or 40% or something is a opportunity cost based there’s like hundreds of millions of dollars being left on the table so it’s a massive like pretty significant issue still.
yeah I I just was thinking about as you um mentioning that a lot of it comes down to poor execution. but what I mean by that is if you look at if you look at a go-to Market is there’s going to be depending on um the type of business that that you’re in. um broadly speaking low touch, no touch, low touch, medium touch, high touch and dedicated touch. so
[Stu’s Interjection/Explanation] hey everyone Stu here. I realized before we launched into this discussion that we didn’t do a great job of explaining exactly what the model is we are about to talk about. what Tino is referencing is a product marketing model that specifically sets high to low value accounts against specific go-to Market in business structure models. now in very simple terms at one side you have high value accounts that should require dedicated resource to win and keep and at the other end you have a higher volume of lower value accounts that should effectively be relatively self-serving and supported by uh easily available knowledge. now I’m sorry we forgot to explain that. we also use a ton of jargon and random acronyms. I will do my best to include definitions of all of those under this episode. please continue.
[Tino continues] look product led growth for small ACV amounts where you could see that as low touch. um verse um a product that you might need need um that has an ACV of um $10,000 to $15,000 or up to $50,000 where yo u’ve got an SDR um and then you got a BDM or or an account executive that’s needed to take that to Market. vers something that’s more Enterprise and of the spectrum um and you need a senior BDM an inside sales or sales engineer. so depending on the um um what end of that spectrum that you operate in and it might be one or multiple um the cost base is really different. so for instance for product led growth um you don’t need to pay the salary and wages of an SDR and an account executive. and as you move from left to right up that Spectrum those costs could increase by two to five times. um and so where the mistake I guess by my observation from what I’ve seen is trying to um trying to co-mingle the operating model to serve the other. I.E you might be a product led growth business you’ve got all of the resources behind that and then you start to stack on um going after mid-market and Enterprise but you don’t have the operating model the resources behind it to support that. or you you mix and matc h you let me give you a tangible example. you might have done really well on an inbound channel to drive umme um sort of fast sales cycle opportunities and then you use that same team or resources to try and T Target um higher up the chain going after larger ACV deals your Enterprise into the market but it’s it’s it doesn’t doesn’t quite work that way. I think there um yeah when you start to co-mingle it it kind of fall Falls over.
yeah okay I get you. so um I think just to just to replay that back. like so what we’re what we’re kind of said is you know on the um on the one hand you’ve got your you know you’re running a like a SAS business product business you want to reach large volume of like low you know kind of low value accounts. the classic like Mass Market approach of try and get as many as you can but you know kind of low low transaction volume sorry low transaction value High transaction volume um which should all be like structured around content self- serving you know kind of cust omers just onboard themselves right? whereas at the other end you’re saying like okay we’ve got like really high value high touch you know like your classic the stuff we used to work on together it’s like the B2B sales approach of like you know buying groups long decisions long sales Cycles lot of handholding. um so if I understand you correctly are you saying that you know if you’re a product business those D put words in your mouth what what I’m hearing is like that those two models if you can’t do both like you got to pick one right? that’s that’s what we’re saying like because the resourcing around those is is incompatible with the other one is that is that correct?
yeah well exact exactly. I think focus on one first scale that and then he stack on another um um. so for instance the if you start right at depending on the maturity level of the businesses as well and if you use the amount of Revenue that’s been generated as a as a marker of that. um maybe the first two to three million is founder Le um to get product Market fit. um whether that is um at the low end of the product led growth um growth no touch vers or if it’s Enterprise whichever one of the those operating models it is um to get that first um to get past that first hurdle it might be found a lead and then um to get to the next stage um it you you may want to use other um operating models if that makes sense as you move up rather than trying to do two or three in one go. and I think that’s where the problems happen and the costs go up is that yeah we you’re trying to yeah trying to do two or three in one go. and usually um in in past that I’ve been in normally you’ll find that um where the what I’ve seen is the first to get to the first 10 million there’s generally one go to Market operating model that’s worked really well but it Taps out Taps out and hits a threshold um um up up to a certain point. let’s say that’s arbitrarily from what I’ve seen around about 10 million. and then after you hit that threshold to break through that then there’s another go to market approach that um you might need to stack on. so you might inbound using just SEM might get you to the first 10 million if you’ve started to um scale that out. uh but then you might want to then go after um stuck on another um go to market approach which might mean hiring a whole bunch of SDRs and BDMs and switching on outbound um to St and then that at some point that will um um hit a bit of a ceiling as well.
I think that’s um quite an interesting like way to think about this as well because the um in uh in previous conversation we had actually the the episodes that are coming out now I was talking to um Jen Arnold about like she’s she’s does a lot of uh work with customer advisory boards and bodies and you know voice of voice of the customer deep diving um and just in connection with that and what we were talking about a bit ago on the sales marketing Gap I think what’s interesting about what you’re saying is like you know functio nally obviously we we came at this from a very functional perspective way like marketing works this way sales works this way that’s where problems would go which is one you know one specific way of looking at that that problem and solving it. but what I think is interesting about what you’re saying is like there’s actually you know sort of um broader business repercussions that sit around this which is you know what staff are you hiring who’s hiring them how’s the actual product development structured? and like you know if I’m hearing you correctly like if you’re running sticking with the SAS business example you’re like right a product road map is uh you know for example like the one we’re currently building original view is like we’ll go you know high value accounts going to take a while to sell them. you know to your point going to be very driven by that whole consultative sales approach which is you know the model was structured around because that’s what we know how to do. um but you know I haven’t really sort of started to consider the whole who do you hire next what are the resourcing implications around that yet? which um obviously if you’re a more established startup you’re going to be kind of locked into some of that right? like do do you think that’s where um some of those uh problems are sort of starting to bleed across other areas of those businesses and is that like a because yeah I know advised a few businesses as well is that something that you see people actually thinking about from that perspective? like you know because a lot of people talk that I talk to talk about doing product product marketing but again I think they’re just looking at that purely from a we’re building this here’s how to sell it to people perspective. they’re not thinking about it like it here’s how our whole sort of company should be engineered around growing sustainably. um that wasn’t really a question but like is that you know is that like is that something you’ve come across as wel l I guess is is what I’m asking?
yeah I I I think the thing that I’ve come across a lot although as simple as this may sound um and in theory it’s like well yeah that’s easy actually doing it committ undoing it and and that is for instance uh just going back to what I said before like if if you’ve got a product um and you know the audience um it’s it’s a Medi let’s say it’s a medium touch um midmarket audience that you’re going after yeah. um there’s a certain operating model that’s needed to uh go after that. um and and and I think the cost base to and the resources needed for that um are pretty defined. but where the mistake happens is I guess shining new object syndrome trying to chase different things. you you get you can get easily drawn into other go to market approaches so you might say well let’s invest in let’s heavily invest in SEM to drive inbound growth and let’s Also let’s of um an AE and an SDR to drive mid Market before even validating and getting some traction um in that in um because they’re quite there’s a different amount of investment that goes into SEM as an in if you want to use that as the inbound approach as well and then you know hiring an outbound team. and I think um where the mistakes that I’ve seen is trying to you do all of those things at once before ging Traction in one. and once you get Traction in one it should in theory were of work really well. is it should be able to get up to the first 10 million with a a a um go to market approach with one of them and before you start to stack on others if if that makes sense.
yeah no that makes that makes perfect sense to me. and I think um it’s I know we’re jumping around a fair bit here but like just um you know on on your point on um execution being poor or poorly organized should we say or both um a lot of the time like I think that uh as I’m sure you all remember as a you know personal bug bear of mine it’s like Channel you know Channel planning is like to your point there’s a you know there’s t he SAS go to market road map that everyone’s like oh well this is how you take a software product to Market and you know there a journey everyone goes on. but a lot of the wastage in you know advertising comes from that where you’re like oh you need to start doing you know to your point there’s there’s channels that work that are very determined where you can very closely manage your spend but then everyone just starts chucking money down like the you know display toilet or just on random brand advertising stuff or they don’t have the correct measurement framework in place. they don’t understand the impact of what they’re doing. so you know that side of things I you know as you well know have many many many complaints about. but I think that you know it’s an easy mistake to make right? and then to your point around resourcing you’re hiring the wrong people you’re spending money you can’t afford to two years down the track as all those companies have found out you’ve just burned through like maybe a few million dollars and you don’t really have a lot to show for it. so um I think that’s you know you’re totally right super important to interrogate this stuff properly before you start.
yeah absolutely. I totally agree with you. it’s and even as you know you you rightly know is that uh each um audience across that Spectrum has a different message. there’s different content that’s needed. um and the more different combinations you have the more complexity that creates the more resources you you need. and and so I think um yeah there’s something to be said about that as well just keeping it simple and then going deep once once you can find the channel that you can scale. so yeah.
yeah no I mean obviously I know it’s you not to just agree about everything but I think we we definitely obviously the less is more approach was uh you know one of the things that I think we we’ve always agreed pretty firmly on. and I think um this is slightly off off topic but I’ve noticed with a lot of conver sations I’ve been having recently like there’s a both on the marketing and the sales side there’s this sort of tacit agreement that there is a lot of like busy work in bigger maybe less less of an issue in sort of smaller startups or or SAS businesses where everyone’s pretty like on the tools if you want to think about it that way. but even in those companies you start to see that you know creeping in to you know as you mentioned like shiny thing syndrome or like people just doing stuff just for some random reason that isn’t really aligned around the sort of the overarching business strategy. and it’s where you sort of start to see those um just like in a product where you start to see feature creep it just creates busy work that doesn’t really generate much value for the business. um so I was I was quite surprised at seeing that in a few obviously we don’t work with a huge about of startups but I’ve been speaking to a few recently and it’s I was like you know having not many people and b eing quite focused I wouldn’t have expected to see it much there but it actually is quite prevalent as well. I don’t know whether it’s just because people are exploring things they don’t necessarily know what they don’t know or whether they’re just like trying to look busy. but um yeah that was a bit of a surprise. I thought everyone would be a bit more like you know kind of laser focused on what they were doing.
yeah yeah I mean it can happen at any um any size of Team whether it’s early stage ever present. I hope that wasn’t too traumatic a note to end on. uh thank you very much for listening. hope you enjoyed the conversation. join us again next time when Tino and I reconvene to conclude our discussion on the ins and outs of go to market for product businesses.