Welcome, everybody. Give us just another minute or two before I go ahead and get us started with John. Okay, I will go ahead and get us started. I know we’ll have a few more trickling in, and you guys will have access to this recording after the fact, so feel free to pass this along, you know, to other team members or if there’s anything you want to revisit. And then would also just encourage you guys, don’t be afraid to interact throughout. We can make this as conversational as you guys want it to be.

Obviously, you can drop questions in the chat, and Mary here will kind of facilitate with John, but you can also just come off mute and chime in as well with whatever questions you have. So I’m gonna go ahead and introduce our expert today, John Short, the CEO at Compound Growth Marketing, which is a demand gen advisory that helps high- growth tech firms build predictable and scalable growth.

So they’ve worked with Drift, Airtable, Robin, LogMeIn, and previously John served as the VP of demand gen at Workables, helps them grow 14x, and managed a paid search spend of around $ 700k, good ROI, and drove over a million and a half visitors monthly. So welcome, John. I will kick it over to you.

Awesome. Thank you so much for the introduction, and I’m really excited to get to do this talk today. Really love these, and I would encourage people to raise their hand, to ask questions in the chat throughout the presentation, just as that helps me kind of direct the content to be the most helpful.

From looking at Five Elms and just learning a little bit more about the firm, it seems like a lot of the companies we’re talking with today are between $ 5 and $ 20 million in revenue, and so I think this is a really great time to start thinking about how you turn paid acquisition programs into gear, and think about the ways that you’re going to be able to measure them.

Maybe you’re already inside the company and looking to build out the infrastructure and the tools necessary in order to be successful here, or it could be that you’re an executive trying to figure out, you know, how do we manage this team? What types of goals do we set? How do we think about the hires that we’re bringing in? And so I think this content should help for both those use cases. So when I think about paid acquisition, I think about acquisition as throwing gasoline on the flames of your marketing efforts.

So I hear a lot of companies, early stage companies, saying, you know, we have a really strong product, we have some customers in place, and all we need to do is turn on ads. And that’s going to, you know, ignite our company. And I think oftentimes, paid acquisition actually comes into play after you start to have a really strong understanding of who your customer is.

So I think, you know, between $ 2 and $ 5 million in revenue, you’re starting to get enough data to understand why companies are coming to and what the challenges that they’re having internally that are causing them to work with you. So it shouldn’t be this, like, you know, let’s scale from zero and start investing heavily in Google Ads, we want to already have some momentum in place, in order to make this effective, and some marketing infrastructure in place. I want to go through the pros and cons.

So the primary con, and why I think this should be thought of as gasoline that you can pour on and not kind of, the only channel is the impermanence, right? Last year, we saw budgets get cut across the board for marketing. And with that, the companies that had not invested in repeatable, kind of compounding channels like SEO or social, really felt the pain this year when they were over reliant on paid acquisition. So the impermanence is a challenge. But people love it because it’s scalable, it’s predictable.

And you have a lot of control over the audiences that you’re getting in front of. So when you have a very specific niche industry that you’re looking to acquire more customers through, you can make sure you’re delivering the right content to the right users at the right time. And then it can also be leveraged as a tool for content amplification and kind of building awareness through driving engagement with the content that you have on your site, build trust early in the funnel, and then over time, move people down the funnel.

So, when we think about leveraging ABM and we’re starting to build out the program, one of the key things that I start to look at is, what is the ACV of the company that we’re working with? So throughout my career, I worked in- house at five companies. Since then, we’ve worked with probably a hundred companies at compound growth marketing. One of the first questions that I’m always asking when I meet with a founder or when I meet with a CMO is, what’s the average deal size that you’re selling right now?

And there’s a European investor, Christophe Jans, who I got this graph from. I apologize. Oh, I have the source there. So Christophe Jans wrote an article on his blog, there are five ways to build a hundred million dollar company. You could sell a hundred million dollar, you could sell to a hundred million people a product for one dollar, or you can progressively sell more product and sell to less people. And so he kind of outlined this idea of elephant, deer, rabbit, mouse, and mosquito.

And I think this is a really good framework that we leverage to try to think about, okay, how are we going to go to market with companies? Typically, we see the go- to- market strategy start to shift around $ 50, 000 ACV, where the role of marketing is more focused on building awareness within target accounts, more focused on driving enterprise level leads, and they’re more deciphering on who the lead is and whether or not sales should talk to them.

So it’s usually more of an account- based approach where you’re going after a finite audience and you’re looking to build demand within that audience. Then there’s inbound. And I think about that typically as $ 50, 000 and below. And those would be companies where you’re selling into small to midsize businesses. You’re usually leveraging inbound tactics, like qualifying the leads as they come in, as they request demos, as they start trials.

And the different strategies are going to have, or the audience you’re going after is going to have an impact on how you think about your marketing channel. So if a company comes to us and they’re looking to do account- based marketing, we’re typically looking to do an array of outbound LinkedIn advertising and really targeted placements getting in front of our audience. And when we’re focused on inbound, we’re focused first typically on Google search, Capterra, G2 Crowd, and then we’re expanding into LinkedIn advertising later on.

These aren’t mutually exclusive, but early on, I think understanding this ACV can help you focus in the right areas and really kind of understand if you’re going to be doing more of a ABM approach with a customer, with a finite customer base, or if you’re going after an infinite number of accounts and leveraging more of a kind of magnet strategy to drive users into your company. So I said earlier, companies can get into paid acquisition too quickly.

And so there are three things that I’m typically focusing on in order to help us understand if we think paid acquisition, if your company is even ready for paid acquisition. So one is an understanding of the customer. You want to know who they are. You want to know where they spend their time, what the trickers are for them to enter and come into market. And that’s all going to inform your creative strategy and your campaign goals.

But if you have like more than five personas, I think paid acquisition is going to be a really challenging strategy for you because you’re not going to understand how to kind of pinpoint and target the right leads to drive in. If you’re driving an inbound motion, you’re probably going to be qualifying too many leads for your sales team. And if you’re doing ABM, you’re going to be spending a lot of resources, time, and money on targeting a really broad audience where you need to kind of tighten them.

Second is related to understanding your customer. It’s how do we deliver our message at the right time? So aligning your offers and your creative with the customer’s journey, or with the customer stage in the buying journey is related. And so as we think about our understanding of the customer at Compound Growth, we’re not just building persona decks that has, you know, Facebook Freddy, who’s really into, you know, posting about XYZ on Facebook.

We create those persona profiles, but we also want to understand the inflection points in that person’s journey to get them to ultimately purchase. So an example of this is I worked at Workable. Workable is an applicant tracking system for small and mid- sized businesses. Within Google Search, we had three personas that we were going after. We had the hiring manager working in a small business who didn’t think about the hiring process, didn’t think about hiring as a process or something that needed to scale across the entire organization.

They thought to themselves, okay, we have a job opening, I need to get candidates. And so they would go to Google and they would say, free places to post a job online or post jobs online. And they would type those types of searches into Google and we would capture those. We’d understand the ACB and we’d understand the economics of those users. The next set of users were trying to think about recruiting on a more holistic level. And they would search for recruiting software, talent, acquisition software.

And the final group were in the larger segment of our customers. The average deal size was typically higher. And they were searching for applicant tracking system. They were in market and thinking about how they were gonna scale hiring across their organization. And so understanding those insights about the customer helped us to figure out what terms we should be bidding on in Google, what landing pages we should be driving to, how we should be talking to them and even whether or not we should qualify leads for the sales team.

The people who were just looking to post job, they needed to do a lot more for us in order for us to qualify them to talk to sales because typically they were a hiring manager and they would purchase a pay as you go plan versus the HR person coming in looking for applicant tracking software was typically more focused on talking to a sales team and rolling this out across the entire organization. So we created different metrics for success there. And then finally is the tracking. I find a lot of companies are saying, okay, we need to turn on ads.

We need to get this going. I know this is gonna be successful. They launch, they spend money for 30 days, but they get to this point where they’re able to see the leads that are coming in, but they don’t understand if those leads are converting down funnel. And so they get trapped. And the cost here is both the money you put into the campaign, but also the cost is the time, the 30 days that you’ve lost of your time and energy and not quite knowing whether or not this was successful.

So I think a powerful thing marketers can do is build a hypothesis ahead of time of what we expected to see, write that down so you can’t change it and come back after 30 days and understand, okay, were we successful by this criteria that we set at ahead of time? But I will talk a little bit more about this further in the presentation, but I also think it’s important to have full funnel economics set up.

So you can understand the leads that are coming in, what percentage of those convert to MQL, what percentage of those convert to SQL, then opportunity, then pipeline, then closed, and a true understanding of what those metrics mean. And I’ll get into that a little bit later. So these are the three criteria that we look to have in place. All right, so we’re talking with a number of companies that are five to 20 million in revenue. And one of the exercises that I’ve talked about is really important is that understanding of your customer.

And what I recommend doing for companies is building out an ideal customer profile that can be translated into a digital profile. That digital profile of company size, job title, the technology that that company is using, what industry they’re in, that can be leveraged for lead qualification criteria, audience building on LinkedIn, audience building on programmatic ads, can help you understand if you’re driving the right users in from search. It’s a really powerful tool for you.

So first, we look to listen in on sales calls and formulate a hypothesis about our target industry. And we’ve probably done this, but I think from the companies that I’ve seen that have scaled from one to 200 million in revenue, we’re always kind of adjusting the ideal customer profile and learning from where our sales team is getting the best outcome.

So the second place we go is to analyze the CRM for desirable outcomes. When we drive a lead in and they’re from X industry and they have this job title, what’s the velocity at which they convert through the funnel? What’s the conversion rate through the funnel? And then what’s the ultimate lifetime value of that customer? So we look at those, we identify the characteristics that correlate with those outcomes.

So it could be when you talk to a CEO who’s in the construction industry, the conversion rate through the funnel is much quicker when you’re speaking to an HR manager, that you’re gonna hit a lot more roadblocks. And it may be that the sales and marketing strategy should be to get quicker, more focused on getting in front of that CEO. Then we wanna build a digital ICP using enrichment tools. And at this point, I often get asked what enrichment tools we recommend. A majority of our clients are using Zoom Info. Some clients are using Sixth Sense.

We have seen success with Clearbit who just got bought by HubSpot. And then we’re seeing more and more Apollo in the industry. But I would recommend if you’re looking at these enrichment tools, you go to those four, you scope out the pricing, you understand what you can get, and then you get a sample of the data to see what percentage of your database they’re gonna be able to match against.

Anyway, so step two is identify the CRM data, build out an ideal customer, build out a list of your best customers, looking at how quickly they converted through the funnel conversion rate and ultimate lifetime value. Then you layer on these characteristics about firmographic, demographic, and technographic data using the data enrichment tools.

And you identify, okay, what is the correlation between that demographic, firmographic, and technographic data to help you build your digital ICP? The next step is alignment, getting sales and other customer- facing teams on board to kind of poke holes to see if you’re missing anything and help you there. And also start to understand what are the inflection points that are driving these high- quality leads into market? What channels have they traditionally come from?

And based on what we know about the pains that they’re having, what is the messaging we wanna leverage? And what are the signals that we can pick up on in order to figure out how to target them?

At Yesware, for example, a sales software tool that did email tracking that I used to work for, we found that when companies raised 30 million plus in funding, that was a great opportunity for us to get in front of them because typically that was series B, typically they were starting to scale up their go- to- market team, and we would look to target those companies because they were growing their sales team quickly and were looking to spend on software in order to help their team be more effective.

So that was a publicly available signal that we were able to leverage to focus our targeting. And then we combine the qualitative and quantitative data to finalize that ideal customer profile and look at them on what the matched ICP is, and then what the intent is of those customers to help us identify how we were going to qualify leads coming in. Here’s just a rundown of some of the factors we look at for developing that ideal customer profile. So there’s quantitative data, there’s the customer conversations.

We love Fathom, Gong, Chorus, all great for listening in on sales conversations and understanding their pain point. Internal conversations, getting buy- in from sales is critical for this. And then the satisfaction data around MPS.

All right, so we have the ICP. The next step is building out the buyer’s journey and thinking about the awareness stage, the pain stage, the in- market stage, and the customer stage of the journey. So customer, that is, I’m gonna skip over talking more about that one, but that is after a customer comes on, how do we get them to spend more with us and what channels are we leveraging?

So whether you’re using Mural, Miro, or an Excel document, I would map these out in columns across the top, and then I would create rows for the persona we’re targeting, the channel, the inflection point that moves them from the awareness stage into the pain stage, the KPI we’re gonna measure against, and what offer or creative we wanna leverage based on what we know about the pain or inflection point that they’re having. And so this is a great brainstorming exercise for the demand marketers in the audience.

This is a great way to get on the same page with your more creative counterparts in product marketing and creative. Oftentimes, depending on what the personality type is of your CEO, I find this to be a really great way to kind of educate them on how we’re thinking about LinkedIn versus Google search, what demand creation is versus demand capture. The stage I love the most here is the pain stage.

When customers are starting to have a challenge, they don’t quite know what the solution is, and we wanna get in front of them to start to educate them with minute intent content funnel and push them into wanting to test out our product and talk with our sales team. But I would do that. I’d create the awareness, pain, and in- market stage and think about the channels, the personas you’re going after, and the KPIs that you’re going to use to leverage this. So typically, search is at the in- market stage.

You’re targeting competitor terms, you’re targeting non- branded terms, and you’re targeting your brand. You’re also retargeting to folks there. The pain and awareness stage, typically you’re leveraging Google search in the pain stage plus paid social programmatic display. And in the awareness stage, you’re usually more focused on the paid social and display channels in order to start to build demand and start to drive alignment with the customers you’re looking after.

Two others I’d recommend, if you’re not already on for the in- market is Capterra and G2 Crowd. And I’ll go into that in a little bit more depth but I’ll go into it right now. So when I’m looking at the mix, these are the channels that we’re typically looking at to see if our customers are on. So the review sites such as G2 Crowd and Capterra are going to drive in users who are in- market and looking around.

And there’s a lot of valuable data that you can capture from these channels, but I view it very similar to search where you’re capturing demand, but not necessarily creating the demand. Google search is typically the highest scale channel that I find companies can go to and identify a kind of dollar in dollar out type ROI on. And then before you go to display, before you start investing in YouTube or programmatic display I would look at paid social.

I think paid social is a fantastic channel where you get direct response when you have a good offer for users. But the recall is also really strong on paid social. Whereas display is often next to the content people are reading paid social ads show up in the middle of their feed. And oftentimes people are not aware that this is a paid advertisement, but they’re going to see the message. And so it’s a really engaged opportunity for them. When I’m starting out paid acquisition, I’m focused on Google search.

I’m focused on demand capture channels, driving in more leads, understanding what terms they’re looking for and testing out the messaging. Then I’m moving to review sites because they’re demand capture. I can get results quickly. I can improve the budget. And then I’m leveraging the learning to help inform how I go to market with a paid social strategy.

All right, so I talked about the building of the ICP and building that digital profile in ZoomInfo, Apollo, and augmenting the data in your database to understand how customers are segmented, how many of these leads are qualified to your ICP and whether or not they’re fitting the intent criteria that you’re targeting. But I think this data can be really useful for helping you build audiences on ad networks, helping you think about segmentation and messaging for email campaigns to your database, and then also qualification.

So let me see, I’m gonna skip down here. So when we look at the lead qualification, I view, there’s been a lot of hate towards the marketing qualified lead over the last couple of years. And I don’t think it’s been warranted, I just think people are looking at what a marketing qualified lead is incorrectly. If a marketing qualified lead is a lead that you’ve identified as ready to talk to sales, then I think it should have two criteria. What is the match to ICP? I keep doing this because I have a graph I look at.

What’s the match to ICP, a two by two graph? And then the bottom axis is how much intent have they shown? Have they filled out a demo? Have they done chat on the site? Have they come in through the pricing page? Have they filled out a trial form? And so when we identify that someone has high intent and someone who has a really strong match to ICP, that to me is a qualified lead and the point at which somebody should pass that lead to sales.

From what a marketing qualified lead is, there should be a pretty consistent conversion rate of how those leads turn into customers. In this example, I see 50% of marketing qualified leads turn into an SQL, which in this case is an opportunity and from SQL, 25% of those leads turn into customers. And so we see fairly consistent conversion rates. But the reason why that marketing qualified lead is so important is it builds a really quick feedback loop that you can use to train algorithms on Facebook ads, on Google ads and on other ad networks.

It’s also a great feedback loop to the humans who are managing those campaigns so they can understand what campaigns are most successful. And so I highly recommend understanding your ICP so you can build out the lead qualification criteria so that you can build a feedback loop that passes data back to Google that says, hey, Google, we really liked this lead. We qualified it to talk to our sales team.

You can put a value against it of how much you think that lead is worth and you could even test out ROAS bidding on Google ads to kind of prove ROI and show Google how much you’re willing to drive.

And so that’s why that’s such a critical metric and one of the key ways that you can leverage this digital ICP information for Google because Google will look at that and they look at data on the backend to say, okay, the leads that they really like tend to come from the US, from major cities, from all of Google’s data on the backend and they can understand what that person’s interests are. They probably know what their job is. They probably understand what company they work for. They know if that person has done other similar searches or not.

There’s thousands of criteria that Google’s looking on the backend. And so one of the downsides of Google has historically been we can’t segment our customers and only drive in the types of leads that we want to. And with CPA bidding and passing offline data about marketing qualified leads or sales qualified leads back into Google Ads, back into Facebook, it starts to unlock the ability to really be focused and precise with the message and the types of customer you’re going after on those channels. All right, so how to approach attribution.

Actually, I wanted to check in. Have there been any questions that have come in so far?

No questions in the chat, but if anyone has any questions, feel free to chime in.

All right. All right, so I’m going to keep going. So how should you approach attribution and paid acquisition?

So I’m of the thinking that attributions pretty complicated in B2B. We’re usually selling to a buying committee of five plus individuals inside a company. And so while we may know where the lead came from, there’s a whole conversation going on in the background that our CRM will never get access to. And I think that there are many really good attribution models for marketers to leverage, but I think none are perfect. So we think about attribution as a data triangulation problem. You can have self- reported conversions, which are great.

Ask people how they hear about us. You can have your sales team ask leads, how did you hear about us? You hear a little bit more of the emotion behind the decision to come and try you and why they were interested. When you just ask on the form, you usually hear about one channel and usually customers are hitting multiple channels. And then web analytics is really strong at kind of an unbiased view of where these users came from, what campaigns drove them in, but it doesn’t capture any of the emotion of it.

And it also doesn’t, if they heard your ad on TV, on the radio, if they saw your ad, but didn’t click on it and they ended up coming to your site later, it doesn’t capture that type of information for you. So we think all, many attribution models are good. None are perfect. For web analytics, I am typically looking at a first touch attribution model. I don’t want to overestimate the value of brand by using the last click.

Usually people are clicking on an ad on LinkedIn, reading some content on our site, leaving the site, coming back later, remembering us, going to Google, typing in the branded search and hitting our site. We don’t want to over- index on the value of that because we know that something happened before they searched for brand. They didn’t just magically think about our company, type it into Google. And so I think first touch is oftentimes the best way with web analytics to understand, okay, what was the initial touch point? What drove that user in?

And how did we initially come into their consciousness? To do this, we use a number of tools. At early stage, if you’re sub, you know, 70 million in revenue, I wouldn’t overthink the tools. And I wouldn’t go out and try to find some perfect attribution tool. I’d look at your web analytics. And I think HubSpot, a lot of the marketing automation solutions have a fine solution for being able to understand the impact of campaigns and where leads are coming from.

We look to pass that data into the CRM. So on a CRM level, we are able to understand where leads came from and thus be able to have a full funnel understanding of what campaign drove how many leads, MQLs, SQLs, and customers from those campaigns. All right, all right. So I talked about the bidding algorithms. There are two ways that we can leverage bidding algorithms in Google Ads and Facebook.

Basically about five years ago, Facebook was behind Google in terms of ad spend and Google had really valuable data because people were going to Google and telling Google what they were looking for. Whereas on Facebook, they were telling Facebook what they were interested in, but they weren’t indicating what they were in market for. And it’s really difficult to show the return on investment when you’re focused really high on the funnel.

And so Facebook built the first bidding, the first cost per acquisition bidding model where you would say, I want to drive more leads like this lead and I’m willing to spend $ 100 for it. And Facebook would go out, they’d identify criteria, they’d see people who are more likely to click on those ads, they’d see people who had purchased from LinkedIn or Facebook ads previously. They leveraged that all in the CPL algorithm. Google then saw the success of that and started to do CPL bidding itself and it leveraged offline data.

First, it’s pretty easy to connect HubSpot and Marketo to Google Ads. I’m less sure about Pardon, but a lot of CRMs are pretty closely integrated with Google Ads these days to make that connection so you can pass offline data back.

But there are two things to think about here. One is CPL bidding, which I think is probably a majority of the time the most functional, usually if you’re driving 20 plus conversions a month from a campaign. There’s enough volume there to train Google on where to be spending money and how it should be done most effectively. And then there’s ROAS bidding, which is return on ad spend bidding. And this is where you need to identify the value of an MQL so that you can pass data into Google to say an MQL to us is worth $ 2, 500.

Please go out and get us more at a 4x return on investment or 1x return on investment or whatever it may be. And it will algorithmically go after those terms. You can get fancy with it. You can identify based on size of the company that’s coming in or matched ICP, you could give an MQL a higher value or a lower value if it’s a smaller business. So there’s a lot of ways you can go.

But if you have enough volume to justify it, I would highly recommend starting to do test out CPL bidding and connecting your marketing automation system or CRM with the ad platforms to train them on the types of customers that you want to drive. I already talked about this lead funnel economics, but I just kind of dipped into understanding the value of an MQL. So what I’ve built here, and this is a spreadsheet that will get sent around to everybody after the call, is we look at the MQL, SQL, and the conversion rate to customer.

And then we understand the average deal size of the customer. So we can start to say, okay, 30, 000 divided by 1267 is, an MQL to us is worth around $ 3, 700. An SQL to us is worth around $ 7, 500. And so you can leverage this to help you with ROAS bidding and you can also get an early indication if you’re spending too much for the leads that you’re driving in, or if you’re coming in under where you need to drive. It’s up to you to decide if a MQL is worth $ 3, 700 to us, because they converted X rate down the funnel.

If you’re willing to spend $ 3, 700, if you’re only willing to spend 50% of that, if you’re looking for 5X return, I’m going to leave that up to you. Hopefully this gives you the kind of tools you need to kind of build some funnel economics exercise for yourself, to understand where you should be focusing your budgets, and how you can start to understand early in the funnel, whether or not you’re driving enough value, whether or not you’re acquiring leads at a rate that are likely to return the amount of revenue that you would like it to.

One of the other reasons why I focus on MQL is it typically happens instantaneously. Usually you find out within a day after a user converts, whether or not they are a qualified lead. And usually the sales process in B2B can span between 14 days, all the way to 12 months plus. And so if you are a company that has a 6 to 12 month customer sales cycle, you’re probably going to know pretty early on about who your MQLs are. But the process of identifying whether or not that’s an opportunity, and putting a dollar amount is going to take longer.

And Google’s algorithm of kind of taking in offline data, has a decay that really goes down after the first seven days. So the MQL, I wouldn’t recommend passing other offline data into Google, like an SQL or an Opportunity or Pipeline. We prefer companies where it takes longer than seven days to get that information, because Google won’t train its bidding algorithm as well, against those kind of metrics that take longer to get in the door.

The other piece here is not all funnels, not all leads are equal. So, when we do funnel economics exercise, we’re typically looking at the landing page users came in from, the channel users came in from, the campaign users came in from, and then the funnel offer that people converted on. And we can see different funnel economics and conversion rates based on where users came in from. So, ebooks for us tend to have a lower conversion rate through the funnel to becoming a customer, and the average deal size is oftentimes higher.

Demo requests convert quickly through the funnel with relatively good conversion rates, but it’s tougher to get users to fill out a demo form. And then trial typically comes in somewhere in between from a conversion rate standpoint, but it has a lower average deal size.

And so, this is just an example, but I would run this exercise for the different funnels that you’re working with, the different channels, the different campaigns and the different ad groups to understand if there’s differences in behavior based on how users are finding out about you and how they’re converting with you. And this is going to help you kind of, you know, focus more of your effort towards certain conversion funnels and double down in the areas where you get the most efficient return from campaigns.

How much should you spend on paid acquisition marketing? So, we have seen since 2010, I’ve been looking at the KeyBank survey of privately held SaaS companies. And so, there are a couple of key data points there. One, it breaks down go- to- market strategy for companies based off average deal size, which is kind of what I talked about in that initial slide showing the elephant versus the mosquito. But what we’ve seen is the average money spent per new dollar of revenue has gone from around $ 1 to about $ 1. 50 over the past 10 years.

So, as SaaS has matured as an industry, it’s gotten more competitive and the cost to acquire customers has gone up significantly in that period. Companies, I think, are willing to spend more because they have a stronger understanding of how long they’re going to be able to keep those customers. But one thing to keep in the back of your mind is the average cost to acquire a new customer is about, last year was about $ 1. 50 for every new dollar of ARR that was brought in to a company. And that’s of total sales and marketing spent.

Then the marketing team usually gets about 34% of the total sales and marketing spent. So, in the spreadsheet that I send, it’s going to have some calculations that you can build off that to understand what the average SaaS company’s sales and marketing budget is. And it can help you start to identify how much you should be spending. And I think here it’s about tolerance and opening up the conversation with your executive team to understand what they’re comfortable spending.

I would not recommend saying, hey, the average SaaS company spends $ 1. 50 for every new dollar of ARR. That’s how much we’re going to spend. It changes based off of the risk profile of the company, based off of the turn that a company faces, etc. But I think this is a good benchmark to help you get a swag of what other similar companies are spending. I see a question coming in. Do you have any acquisition marketing benchmarks for spending by ACV? I don’t. I’d recommend checking out the KeyBank SaaS survey.

They have some breakdown of customer acquisition by ACV that I think can be helpful. And I will be looking to build out research on that over the next year. What percentage of ARR LTV does this equate to on average spend per dollar ARR?

I’m not sure the question.

Yeah, so if you think about a customer from a lifetime value, you’re looking at it saying, hey, for every dollar of ARR, we spend $ 1. 50. And there’s different retention rates, different NRRs that companies have. If you’re looking at just the first transaction here, $ 1. 50 of that, do you guys look at it based on how many dollars of ad spend per dollar of lifetime value? Does that make sense?

Yeah. Yeah, so I mean, the gut rule that I’ve always followed is we’re looking, it depends on what the margins are of the business, but 3 to 5x return on lifetime value of a customer is typically what we’re looking for. So marketing and sales would be like 20% of that kind of customer value. But I prefer the dollars spent per new dollar of NRR. And then the other one I oftentimes I’m looking at is months to pay back on acquisition spend. Because lifetime value is always changing, right?

Companies start to upstream, you’re going for a new segment, you have a strong hypothesis that lifetime value will extend. Or you launch new products that enable to grow revenue per customer. And so I always have kind of viewed that lifetime customer value metric as it’s an estimate. Because it’s always evolving. Does that make sense?

Yeah.

Yeah.

Is it the right way to think about that? Then it’s almost like an 18- month payback is what you’re looking at. It’s $ 1. 50 per dollar. Yeah.

Yeah, and so yeah, it depends on the company. But I’ve seen anywhere between 9 and 18 months. Typically private equity backed company. I showed this actually to a partner at a private equity company one time. And he was like, well, I think we want our companies to spend $ 0. 90 for every dollar of new revenue they bring in. So it depends on what stage the company is at and where you are in your growth.

And that’s just ad spend, is what you’re saying? Or is that? No, no, no.

That’s total sales and marketing.

Yeah, that’s what I thought. Yeah, when I saw that, how much do you spend on paid acquisition marketing? Yeah.

Oh, I see, I see. Sorry. Yeah, so the $ 1. 50 is sales and marketing spend. That includes headcount, technology spend, and promotion spend. Usually marketing is about 30% of that. So for marketing, your cost to acquire a new customer should be about $ 0. 50 for every dollar of new revenue that’s brought in. Any questions?

John, I can share one of the pre- submitted questions.

All right.

So how to best optimize for vertical software as a service companies with end customers who are not heavy users of internet search or digital tools?

OK. So vertical, I think there are a couple of ways you can go there that are typically, so they’re not leveraging. So there’s been a lot of ways that we’ve gone with this in the past. Online isn’t always the best answer for everyone. And so finding conferences specific to your industry can be valuable. We’ve seen that in ag tech, where it’s just not a very online forward community, and most of their time is spent offline. But for most customers, we can start to identify where those customers are hanging out.

If they’re not on Google Search, it’s likely that we’re expanding a market opportunity and growing an actual market versus creating a market. Or sorry, we’re creating a market versus capturing demand of an already existing market. So when you’re looking to create demand, I would look at channels where you can get in front of that customer proactively. I think paid social is a great opportunity for that.

I think thinking about SEO, I know it’s not paid acquisition, but thinking about the channel, thinking about the other problems they may have that they’re going to Google with. They may not be searching for your product, but what upfunnel or challenges that they’re having that they may go to Google for. But yeah, I think it’s looking at those prospecting channels like outbound, email, paid social, programmatic display in order to build demand and start to get them interested in your product. That’s where I’d go from a paid acquisition standpoint.

Thanks, John. Did anyone else have any other questions that you wanted to ask John? I guess I have one question if I can jump in here. Yeah, go for it. So currently we’re using LinkedIn quite heavily for sort of like an integrated ABM marketing like campaign structure. So we’re integrating platforms, something like Sixth Sense, which we use to pull targeted account lists, import that into HubSpot and also LinkedIn to sort of sync that data.

Now, one of the things that I’ve noticed is quite frankly, I’ve had an absurdly high cost per booked demo request, you leveraging sort of direct book of call advertising, whether that’s images, videos, conversation ads, sort of in- mail marketing efforts there. I’ve personally had a hard time driving people to just make it in a cost effective effort. I’ve tested, I don’t know, about a couple hundred different creative variations at this point.

So I’ve exhausted a lot of creative aspects, but wanted to see if you had any input on things that might’ve helped you start to move the needle there. Reason is, give a little side pieces, because of that not working as effectively, I’ve really heavily focused on mid and top of funnel scaling for lead gen, so that outbound can then sort of follow up on those touch points.

It’s like, it’s not bad, but when you’re looking at the efficiency of a platform, it makes it also really difficult to sometimes build confidence with the internal team because they’re going, you’re not driving booked calls directly from that channel. So why would we wanna keep doing that, right? Cause it’s not like a direct correlation at all times. So does that make sense?

Yeah, yeah, a hundred percent. And I don’t know if you’ll love my answer, but one, I think on LinkedIn, you can look to build up audiences by getting them to engage in upper funnel content and then re- targeting those to get them to come back. So I think the mistake a lot, or the challenges is we’re always measured on demos. And so we focus on kind of using that CTA, but oftentimes we need to introduce ourselves first, get companies to understand who we are before they’re willing to click off LinkedIn and request a demo.

So when you look, it sounds similar to what you’re talking about, where we run top of funnel engagement campaigns to drive people into non- gated content. Sometimes we drive them into gated content, but really introduce ourselves, start to build up audiences. And with some of that gated content, we put them down a nurture flow to eventually get them to convert, raise their hand and talk to sales. We also re- target those users with demo messaging to try to get them to come in.

If you’re not leveraging Sixth Sense intent data, I would look at that too, to understand who’s in market and actively looking at you and others. And then I’d look for third- party signals as well to identify customers who could be in market because some exterior signal, like they raise funding, they just hired a CIO, whatever it may be. So I think that can be powerful, but I think it is challenging to drive demos directly from prospecting LinkedIn campaigns because oftentimes you’re just introducing yourself to the customer.

It’s basically a lighted on fire ecosystem at times.

Have you tried any in- mail campaigns?

Yeah, so that’s part of that. So I do in- mail based off of activity and engagement with websites, Sixth Sense intent data, as well as that sort of video engagement. So it’s a part of retargeting, not a part of cold traffic because it’s generally been too high of a touch point. When doing so, I get like 75, 80% open rate, 50% click- through rate on all of my stuff across the board. At this point, I’ve spent like well over the cost of an average customer value on this type of campaign. And I’ve received two demos, demo requests.

So you’re looking at like $ 3, 000 per booked call request. And I’m like, holy shit, right? Let’s just be frank here, right? It’s certainly expensive to even make that efficient. And I’ve done a lot of testing within it. It’s far beyond the level that we normally want to run that campaign for, but you gotta do thorough testing.

Right.

So, yeah.

Yeah.

So, I mean, that, it sounds like you’re doing the right things there. That, that typically is a formula that works for us. Build an awareness through in LinkedIn feed ads and then look to drive engagements. So, you know, I just say, test out that messaging with the ad and be open to trying to get responses rather than click throughs on those and try to drive that.

The other place you can be successful there is if you have an event or something coming up, you can leverage those in- mail ads to get in front of people and look to set up conversations when they’re going somewhere. That, that can be a really effective strategy. Like if they’re going to be in Vegas at whatever conference that could be.

Yeah. Yeah.

Okay, cool. I appreciate that. Do you, I mean, I didn’t know how many other questions anyone else had. I figured I’ll ask you if you want, I can ask you one more question. That’s okay. All right. Second question isn’t about advertising itself, but it’s about improving the follow- up of the sales team within timeframe, right? Within that five minute timeframe to ensure that you get a better response rate from leads and opportunities, et cetera, that come through.

So currently we use HubSpot as our primary ecosystem, sort of like our source of truth of everything. And the one thing I’ve sort of been tasked with is trying to help them create automated outbounded messaging to LinkedIn via email and maybe something across text, which is probably like the last piece that might be added. What is, do you have a flow or a process that you usually try to embed people into to ensure that sales is getting a touch point on any new leads that come through as efficiently as possible without being overbearing?

Yeah, so sequences are key and kind of the prospecting that you can set up in HubSpot. Is HubSpot the CRM your sales team uses?

Yeah, it’s a CRM. The, it is, yeah. It’s the primary ecosystem for that.

When a lead comes in, you can trigger an automated email that comes from their inbox, and then you can create a to- do for them to follow up and call that prospect. But, so there’s some automated efforts, but I think the SLA with your sales team is critical. So like you signing up for the number of leads that fit certain qualification criteria on a monthly basis that you’re going to pass over to them, and they’re signing up for the speed at which they’re going to follow up on that lead and the number of times they’re going to follow up on that lead.

And so that is like the most basic SLA. And I’ve even printed that out and had my sales counterpart on that. But I think that, and then reporting on that data and having a weekly call where you’re going through the pipeline and you’re going through the new leads that came in and report average time it takes to follow up on a lead and average number of touch points. Just, you know, the SLA creates this non- personal.

I would actually have a question on that if I jump in real quick. So let me add one extra layer of clarity so that I realized I didn’t add in, is I’m going to be doing all of this using integrations via say Zapier or Make, which allow me to use OpenAI’s API. And so I’m layering in sales rep data and target like ICP information to help me create automated, like unique automated outbound emails, as well as LinkedIn messages.

Have you done anything in that realm where you’re leveraging AI to help with the uniqueness and efficiency of your outbound messaging? I know there’s fancy tools you could use, but it all changes so fast, right? So.

Yeah, no, I like where your head’s at. We’ve done some testing there. We haven’t seen huge results yet, but I think that’s where the industry’s going.

Okay, I’ll stop. I keep jumping in. Sorry guys.

Don’t be sorry. We love the questions.

Great.

Well, I know there’s only a few of us left on the call. You’ll get a recap email with the recording of this event, as well as the slides and a few additional resources from John. Thanks everyone for coming.

Thank you so much. Thanks guys.