How do you know whether marketing is doing anything? What’s our model for marketing activity and whether it’s generating a return?IMO, the only way to do this is to know what the funnel looks like — or what we want it to look like.
In this post we’ll focus on Demand Generation: the top of the funnel and what it takes to fill it.
Programming notes: this post is n in a series of indeterminate length on GTM topics mainly for startup people, mainly leadership, mainly coming from non-GTM backgrounds. There’s a list at the end. I strongly recommend readingMarketing 103 as a complement to this post.
All About That ToFu
The top of the funnel is essentially when anyone first encounters your brand, company, or product in any setting and becomes sufficiently interested to make the effort to figure out what you do and whether it might solve a problem they have — even if they didn’t know they had it.
Getting people “into” the funnel starts at the “top”. The discipline and work that goes into this are called all kinds of things:
- Demand Generation
- Lead Generation
- Acquisition Marketing
- Performance Marketing
- Growth Marketing
- Growth Hacking
Pre-SaaS / pre-app / pre-cloud, marketing in tech is broken down into two or three broad functional areas: Demand Gen [DG], Product Marketing [PMM], and Communications/PR [Comms/MarComms]. These lines are completely blurred today. You’ll find that the scope of any given role is almost random from company to company, with a few different strains prevalent in specific sub-sectors of the tech world.
From the perspective of building and operating a marketing function, I still find this distinction extremely useful. Marcomms vs DG vs PMM — even when used to execute a single go to market strategy — involve different tactics and disciplines. Which usually means different people with distinct differences in finding, hiring, evaluating, setting goals for, and measuring results of, the roles.
Demand Gen Exists Within a Go To Market Context
All demand gen exists within some go to market [GTM] context. Who are you selling to? What industry are you selling in to? How much do they have to spend on you? How many deals do you need to close in a month, a quarter, a year? What is your (real and desired) sales motion? If you can answer these questions, you can go about figuring out how to find the right people and get yourself in front of them.
If you’re selling enterprise software that costs $250k a year at its cheapest, sponsoring the free-to-attend AWS Summits will get you precisely nowhere in terms of acquiring qualified leads who might have — or be within reach of someone with — that kind of budget authority.
This is what DG is all about.
Demand Gen Strategies
In my brutally honest opinion, talking about demand gen strategy is usually a waste of time. Most discussions about DG amount to “how do we get more leads?”. The only differences between them are about budget, ranging from “at the lowest cost possible” to “at any cost.”
But if you’re doing DG work, or building and running the team that does, you need some strategy. Here are examples of minimally viable DG strategies:
- Inbound, organic
- Events, paid
- Outbound, field marketing
- Inbound, organic and paid + events, paid (sponsorships)
Why? Because, for example, the people you hire (or contract) to create compelling content and optimize it for SEO are not typically the same people who know how to run a global events program that creates compelling presence and “activations” a dozen times a year.
In the long run, you will have to account for CAC and Payback Period.
Depending on the business you’re in and the kinds of investors you have, the long run might be next year or it might be “not until many years after an IPO”.
You should know roughly where your business lies on this spectrum and act accordingly.
Every successful acquisition strategy is subject to failure when your go to market changes. Or when the conditions under which it was conceived change.
This includes things like: a new pricing model, change in buyer persona, emerging competitors, ramped revenue goals from the board to meet the benchmarks set by a new funding round.
Even More Advice
No one can tell the difference between strategy and tactics, so you will receive pressure to abandon a given strategy when you hit the point of diminishing returns for a particular tactic. Whether you choose to die on this hill is.. up to you. :)
Demand Gen Tactics
Tactics are the specific things you do to execute your strategy.
Let’s build out one of the strategies above with tactics to see what this might look like.
Strategy: Inbound, organic and paid + events, paid
- SEO optimization across marketing site against search terms: aaaaa, bbbbb, ccccc
- Weekly cadence of blog posts (2–3) about aaaaa, bbbbb, ccccc interleaving the following: 1) commentary on industry development, 2) how-to or expert guide of a specific and practical aspect of the topic, 3) something that pitches the product, like a customer testimonial or case study or announcement or demo
- SEM inventory analysis, testing, and campaigns against aaaaa, bbbbb, ccccc primarily but also long tail adjacencies such as “aaaaa products” and “bbbbb as a service” leading to Landing Pages run on a marketing automation platform specifically for lead capture
- All inbound suspects are presented with one of two CTAs: 1) get a personalized demo or 2) start a 14 day free trial
- Sponsor 6 relevant conferences a year: 1 large per half, 1 smaller per quarter
- Where possible, pick booth position directly next to or across from competitor X OR directly next to or across from partner Y
- Submit one talk by each founder at each event, send whichever founder gets accepted (if any)
- Use end of founder talks to drive traffic to booth through on stage statement and by activity of staff in talk
- Position staff in each relevant talk throughout the agenda to engage with participants and speakers to drive traffic to the booth
- Use contributions to the Flint Water Fund instead of swag at the booth to draw and engage walk-bys, supplying branded evidence of donation like a badge sticker or flag
- Maximize demo-giving at the booths by having 1–2 large screens to give concurrent demos in a one-to-many format at the edges while maintaining 1–2 interior spots for custom/private demos
Every tactic has a half-life.
Many have long tails.
Always be looking for signals that you’ve hit the point of diminishing returns for a marketing tactic and have in mind how that it needs to evolve or how it will be replaced.
Next level tactitioning would be to think about why a tactic is losing efficacy.
For example: if SEM against jobs-to-be-done oriented search terms in your primary market aren’t working well anymore..
- Maybe your brand has achieved maximal power and people are searching for it directly because that’s how they talk about the JTBD […congrats, you’re the “Kleenex of ___”!]
- Maybe you’ve hit inventory limits and it’s time to [additionally?] run ads against competitors
- Maybe you’ve acquired (or burned) all the leads there are to acquire but only in NA and this tactic should get deployed in LATAM
A tactic that has leveled off is not the same as one that’s on a downslope.
A flatlined tactic may represent something that generates run-rate [but not growing] business. It’s the thing which enables you to try other things, like a first product that provides the revenue base for your next product or round of funding.
And a tactic that’s on the downslope is not a tactic that’s useless. It may still generate incremental lead volume for a long time to come.
Think about your tactics as a portfolio of investments. Rebalance your portfolio in proportion to results.
Demand Gen Metrics
Demand gen is generally measured in leads driven into the funnel [volume] or delivered to sales [volume x coversion]. As a business becomes more sophisticated, what really matters are things that show the contribution of marketing spend to revenue.
Some key metrics that will help you understand the dollars-in-marketing to dollars-out-revenue:
- Raw leads, Marketing Qualified Leads, Sales Qualified Leads, Closed/Won [C/W], Closed/Lost [C/L]
- The conversion rates between stages above
- The change in those conversion rates over time
- The proportion of C/W to C/L
- Pipeline/Lead , PIpeline/MQL, Pipeline/SQL, Revenue/Lead, Revenue/MQL, Revenue/SQL, LTV
- Cost/Lead [CPL], Cost/MQL, Cost/SQL, Customer Acquisition Cost [CAC]
- The change in the above $ numbers over time
- Payback Period
- The change in the above number over time
Some heuristics for making sense of the numbers:
- The higher the conversion rates between lead types and sales stages, the more qualified [better!] the leads
- The higher the C/W to C/L ratio for any cohort, the more qualified [better!] the leads
- The lower the CPL and CAC, the more efficient your marketing spend is in generated leads and revenue (respectively)
- The lower the Payback Period, the better the business is at paying off your CPL and CAC and the more efficient marketing spend is in generating revenue
Funnel Template [Fork at will!]
You probably noticed that you don’t have control over a great many of those metrics and/or what you do only has a fractional impact on the ultimate business metric that matters.
You need to be conversant and interested in everything that happensdownstream of demand gen to make sure that you are 1) getting adequate feedback on lead volumes and quality and 2) able to see when the problem is actually due to a strategic or tactical issue further down the funnel.
For example: sales development reps [SDRs] getting better at qualification and account execs [AEs] getting better at pipeline forecasting is not a function of more/better leads.
- Measure as much as you can
- Do it consistently on a fixed schedule
- Be explicit about assumptions and methodology
- Report much less than you collect
Demand Gen Levers
The way you model and measure the funnel should tell you how to improve it.
Let’s sketch out a very simple example:
If we have a five stage funnel with 10000 leads a month coming in the top and 10% conversion rates between each stage with a 30 day sales cycle, then for each cohort starting at day 0 and ending at day 30 we only end up with 1 paying customer [10000 → 1000 → 100 → 10 → 1].
How do you think about improving this funnel?
There is only one goal: increase the numbers.
There are only two ways to do that: more volume or higher conversion.
More volume at the top should result in more customers and revenue at the bottom. If it doesn’t, you have a capacity or efficacy or execution problem somewhere downstream.
A better conversion rate at any stage should result in more volume at the next stage, which should result in more customers and revenue at the bottom. If it doesn’t, you have a capacity or efficacy or execution problem somewhere downstream.
Note: Bits of the above are repeated from Marketing 103 for Engineers: Roughing Out a Funnel. If you’re really interested in this topic, go read it.
Posts in this series (and templates)
- Marketing 101 for Engineers: A Functional Introduction
- Marketing 102 for Engineers: Roughing Out a Funnel
- Marketing 201 for Engineers: Messaging & Positioning
- Marketing 202 for Engineers: Launching
- Marketing 203 for Engineers: Sales Enablement
- Marketing 204 for Engineers: Generating Demand
- Marketing 301 for Engineers: Strategy & Planning
- Marketing 302 for Engineers: Hiring Marketers
- Marketing 303 for Engineers: Pricing Frame
- Marketing 401 for Engineers: Stages of GTMSales 101 for Engineers: A Functional Introduction
- PR 101 for Engineers
- Analyst Relations 101 for Engineers
- Basic Messaging Template [Google Doc]
- Basic Funnel Metrics Template [Google Sheet]
- Basic Launch Timeline Template [Google Doc]
- Basic Battlecard Template [Google Doc]
- Detailed Battlecard Template [Google Doc]
- Basic Marketing Calendar Template [Google Sheet]
- Basic Marketing Ladders Template [Google Sheet]
Reading List and Resources
- Bob Tinker’s GTM Fit Talk and Slides
- Tomasz Tunguz’s Blog
- Growth Hackers Community
- Kissmetrics’ BlogHubSpot’s Blog
- Optimizely’s BlogStartup Marketing Playbook
- Aha! Marketing Strategy Templates
- Aha! Marketing Plan Templates
- Shot the Curl Marketing Templates
- Ogilvy on Advertising