The shift to sustainable growth: how startup marketing leaders are embracing the change.
This November, we brought marketing experts from high-growth tech companies in our portfolio and community together to learn how they’re thinking about growth in this new environment. Read on to get our key takeouts on the market and our top three insights.
The market, marketing and marketers are changing.
Market conditions are shifting marketing leaders’ priorities across the startup community. Investment rounds are taking much longer, which is resulting in fewer raises - and less cash. That means sustainable growth - possibly even revenue-generating growth is now a top priority for startup leaders.
When budgets are cut, marketing is often the first for the block. But seasoned marketers know that it is possible to defend your budget and your activity. The key, according to our group lies in demonstrating real, long-term value. In the good times, marketers focus on acquisition. As budgets shrink, we see marketers shift their objectives further down the funnel - to long-term value.
The current investment environment isn’t just impacting marketing budgets either. It’s impacting how founders and investors actually define good growth. Lean, sustainable growth is top of the agenda and it’s not a one-department effort either. Revenue targets are shared across teams - but now, more than ever, marketing leaders have an opportunity to champion the customer experience and bring together different functions - from sales to service under a universal goal of revenue growth.
Read on to find how out how the roles and remits of marketing leaders are changing.
1. Marketers are shifting focus from acquisition to growth.
Handing off a high volume of low-quality leads to the sales team won’t cut it today. With tighter budgets, efficiency is key and marketing leads are putting their emphasis into quality acquisition and driving lifetime value from customers. This thinking has moved marketer’s remit from those first steps in the funnel - acquisition and activation to now prioritise revenue and retention. It’s powerful stuff too: increasing customer retention rates by 5% could increase profits by 25% to 95%, according to research from Bain & Company.
Many in our group talked to the changes this brought to marketing, as they sought to build deeper collaboration with sales, product and customer success teams. They now have the opportunity (arguably, the obligation) to be the cross-functional connector within a business. Within this new role, marketing has the opportunity to be the voice of the customer, influencing the experience from end to end to maximise the returns from every customer acquired.
Here’s a nice example in practice. A Forward portfolio company recently introduced PQLs (product-qualified leads) as part of a wider adoption of product led growth.
- In their old world, a lead would be defined by marketing as a fit (an MQL), then passed over to sales - usually based on some basic criteria outlined in a target persona.
- In their new world leads are defined by real-life product-usage criteria (defined by marketing and product teams). As a result, these prospects are better qualified when passed over to sales.
- The result? Better sales (a shorter sales cycle, and a higher conversion rate) and far higher efficiency (as less time is wasted and insights drive better marketing and product decisions).
If you’re growing a B2B SaaS business, product-led growth is a great framework to consider as you develop, as it brings marketing, sales, service and product development together to solve customer problems and create better experiences. Before you jump in, do consider whether this sort of growth suits your operating model, the stage of your business and your marketing maturity- i.e whether you really have product market fit (PMF) and have a route to finding product channel fit (PCF) to keep the leads flowing too.
2. Marketers need to be customer champions now, more than ever.
If retention and customer lifetime value are the new priorities now, caring about what your customer thinks and feels is more crucial than ever before in unlocking new, cost-effective growth opportunities.
Our group highlighted the importance of engaging more than just the happy customers. Though positive affirmation is great for morale, our group highlighted that often the strongest and most impactful insights they received came from those customers who didn’t have a great experience, even those who have left for good. We heard multiple accounts of how seeking out this negative feedback had unlocked valuable learnings that changed marketing and product approaches and in turn decreased customer churn. These customer-centred improvements were considered a key strategy for our marketers in driving customer retention and revenue in a cost-effective way.
In a world where marketers need to do more with less, good segmentation was seen as key to developing effective insights. Dividing groups into actionable segments can drive strategy and results quickly. Frameworks like RFM analysis (recency, frequency and monetary value) enable marketers to divide their customers based on their needs and behaviours. By targeting the right segments, with a view to pulling one or all of these levers, they are generating more revenue for much less budget compared to acquiring a brand new customer.
According to Forrester 34% of marketing decision-makers (who have management authority of customer engagement), plan to increase the budget for customer engagement headcount by 10% or more. We see customer engagement and retention becoming a core focus for businesses of all sizes as they weather the economic uncertainty over the coming months - and whilst increasing headcount may not be an option for all, increasing engagement is certainly achievable for most startups.
3. Classic marketing is making a comeback.
Today’s marketers are looking for the best bang for their buck. Many in our group felt overwhelmed by the number of emerging channels, particularly as they search for replacements to the ‘classic’ channels of paid social and search that has become more expensive and less reliable.
They felt that going back to basics and working more collaboratively with the sales team was important to drive the best outcomes.
ABM (account-based marketing), partnerships and conferences were highlighted as promising activities to drive strong, sustainable growth, particularly for B2B SaaS businesses. Though sales cycles can be longer than leads sourced through other digital acquisition channels, they were considered to often drive better deals with a higher conversion rate. Approaches vary, often with the organisational structure and operating model of the business. Some consider ABM to be an unseen hand of influence, boosting inbound enquiries and conversion rates by winning over influencers as well as the eventual decision-maker. Others see it very practically: one of our group is rolling up her sleeves and co-owning customer relationships campaigns to sale. We see benefits in both approaches and the importance of (i) working closely with sales and product to understand the customer journey and (ii) attributing the progress made and value that marketing brings at each stage of that journey.
Partnerships were also seen as an underrated, high-potential channel. Partnering can open access to communities and audiences almost instantaneously. The group saw that agreeing on terms for these deals could provide low-risk access without the expense of building an owned channel. Key to a great partnership strategy are the terms of commission. One member of our group outlined his strategy for starting low and slow, then negotiating better commissions once he had sales data to prove the partnership was working. As this partnership strategy grows across multiple channels, the economies of scale increase rapidly. We see this as a longer-term, strategic play, but raises an important point about what sustainable growth can look like in today’s market where every penny counts for most businesses.
Ultimately, our small sample set of marketing leaders indicated that they are embracing the shift to sustainable growth. They’re running leaner operations, with less budget and are more considered and purposeful in their decision-making. Justifying marketing spend will continue to rely on strong customer insights and data - and a view of lifetime value rather than the acquisition-oriented vanity metrics of old.
We see this as a period of transition and opportunity: our marketers are building integrated, collaborative and lean growth machines for their companies. As the markets open up, they will be very well placed to pivot to fast growth, utilising capital efficiently.
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