by David Kirkpatrick, Reporter

CHALLENGE

Companies of all sizes and industries engage in marketing, even companies that serve the marketing industry. Marketo is best known as a "Software-as-a-Service" (often called SaaS) marketing automation company, and it defines its area of business as revenue performance management. However you want to describe the company, there's no debate that over the last two years its revenue has grown dramatically -- more than 700 percent.

Jon Miller, Vice President of Marketing and co-founder of Marketo, attributes this rapid growth to three elements:

1. Marketo offers a popular product -- the company has added over 1,100 customers in about three years

2. Marketo's business category is growing very quickly

3. Marketo provides its marketing department a very large budget line, and its extensive efforts reflect that level of internal support

Miller described Marketo's approach to integrating Marketing and Sales as viewing the entire process from a revenue performance management standpoint. He said, "There is a new way of selling and there are new ways of buying, and our customers are realizing that they have to buy and sell differently. We practice the same things internally."

CAMPAIGN

Marketo's rapid growth is built on an extensive marketing strategy and very aggressive goals for its sales team.
Here are three numbers that illustrate this commitment:

o Marketo spends $0.90 in marketing for every $1 it earns in sales

o 80% of its revenue is directly sourced by Marketing

o The company's sales reps are each responsible for a $1.2 million recurring revenue quota

The reason Marketo places such an emphasis on its marketing budget, and such a heavy burden on its sales team, is the company is reacting to the information-abundant marketplace.

Miller said that 13 years ago a prospective customer would have to speak with a sales rep to learn about the product, but now around 75 percent of the buying process is complete before the potential customer even engages with the company.

"That is why we spend more on marketing," he explained,"And that is why Marketing has a bigger responsibility for the overall revenue cycle."

Step #1. Define your Marketing and Sales process

The process might be called the sales cycle, or the buying cycle. Every B2B company is going to define its own process. Some companies will define a simple process with few stages, but often the complex B2B sale is going to demand more stages to handle the longer time frame of the sale.

Marketo calls its process the "revenue cycle" and breaks it down into eight parts.

o Awareness -- This opening stage is about creating awareness of the industry, product and company.

o Names -- Miller calls people who first enter the revenue cycle "names" rather than "leads." He believes rigor in terminology is important and someone has to have some meaningful interaction with Marketo to move beyond the "name" stage.

o Engaged -- Someone who goes to the website and fills out a form, or downloads content moves from "names" to "engaged." At this stage Marketing begins demographic lead scoring.

o Prospect -- A prospect is someone who is "the right kind of person at the right kind of company" according to Miller. They might not be ready to buy, but Marketo wants to build a relationship with them. Prospects go into behavioral lead scoring -- Marketo tracks how they are interacting with the company -- and also lead nurturing.

o Lead -- Once a prospect reaches a certain scoring threshold they become a marketing-qualified lead and move from being handled purely by Marketing to a sales development representative team that facilitates the transfer between Marketing and Sales. Only seven percent of leads move into the next stage of sales leads. The rest are recycled for further lead nurturing.

o Sales lead -- When a lead becomes a sales lead they are handled by account executives who determine when they move to the next stage of the pipeline.

o Opportunity -- An opportunity is someone now prepared to make a purchase. Marketing's quota is based on moving people down the pipeline and turning them into opportunities. Once an account executive moves a sales lead to an opportunity, Marketing "gets paid," so to speak.

o Customer -- Someone who has moved through the revenue cycle and has made a purchase from Marketo.

To feed this pipeline Marketo spends around $250,000 a month on various demand and lead generation programs. These create about 10,000 new names each month, and combining paid and unpaid sources, around 4,000 of those names move to the "prospect" stage. Miller said the average cost-per-prospect is under $55.

Step #2. Score your leads -- demographics

Miller stated, "My framework for the scoring is, first of all I think about fit versus interest. To me fit is 'am I interested in you? Are you the right kind of person with the right kind of company?' Interest, on the other hand, is [that] I need both sides of the relationship to be right. I need to be interested in you, but you also need to be interested in me."

Marketo's lead scoring is based on two types of information: Explicit information provided by the potential customer; and inferred information based on Marketo's tracking. Miller said he really doesn't trust explicit information. Too many people provide false information on forms, so he is most interested in behaviors such as watching video on the website or visiting pricing pages.

Demographic and firmographic information that triggers positive scoring at Marketo includes visitors with the right job title. Interns or student consultants will lose points. Target industries and larger companies also get positive scores. Marketo tracks IP addresses, and a non-corporate IP will lose points.

- Demographic scoring
Vice President or Director: +5
Intern/student/consultant: -10
Marketing or Sales: +5

- Firmographic scoring
Target industry: +5
CRM = "Salesforce": +10

- Inferred from IP scoring
Geography based on country and zip code: -6 to +5

- Data quality scoring
Good first and last name: +5
Personal email address: -5
Compete profile: +3

Step #3. Score your leads -- behaviors

Miller said one issue some companies have with behavioral scoring is over-weighing people who like content, but might not be looking to actually close a deal. Marketo runs a report that lists different behaviors and looks at the correlations between each behavior and if that behavior correlates to someone becoming an opportunity in the pipeline.

Behaviors that Marketo scores highly include:

o Visiting detailed pricing pages
o Watching detailed demos
o Searching for the word "Marketo"

Someone who is deemed "engaged" will get a consulting follow-up explaining the value of Marketo's solution, whereas someone who is exhibiting buying behavior will get a follow-up that asks questions about their project, the timeline to make a purchase, budget and other sales-oriented inquiries.

- Latent behavior scoring (engagement)
Early stage content: +3
Attend webinar: +5
Visit any Web page or blog post: +1
Visit careers pages: -10

- Active behavior scoring (buying intent)
Visiting pricing pages: +10 regular, +15 detailed
Watching demos: +5 overview, +10 detailed
Mid-stage content: +8
Late-stage content: +12
Searching for "Marketo": +8

One point Miller made about lead scoring is the threshold can be lowered to generate more leads or raised to generate better leads. He said lead scoring is an art and a science.

It's cheap to call someone, and expensive to miss calling somebody who might become a customer, but at the same time if the scoring is too loose you will be annoying people who aren't ready for that level of engagement with your company.

Miller prefers to send only very good leads to Sales, and he avoids changing the scoring threshold very often because changes make it difficult, if not impossible, to compare metrics from month-to-month. A suddenly looser threshold will likely lead to a drop in conversion.

Step #4. Make content marketing the cornerstone of lead nurturing

Lead nurturing at Marketo consists of emailed content and carefully timed phone calls, and content is the key component of its nurturing. Miller cited relevance as the key to the lead nurturing effort. He said Marketo has to be relevant in how it "talks" to possible buyers, because if there's no relevance the buyer will actually opt-out, or more likely emotionally opt-out and stop paying attention to Marketo's message.

What do these prospective customers find relevant? Miller quoted a MarketingSherpa chart, "There is a survey that asked what content do people find most relevant to them, and 82 percent of people said content specific to their industry is much more relevant."

With that in mind, Miller's nurturing has a growing focus on industry-specific content.

The nurturing content is dripped around every two to three weeks depending on where the person is in the revenue cycle, and once they have engaged with enough content to get their score above a specified threshold, that person receives a phone call.

Miller breaks his content marketing strategy into three categories: early, middle and late stages.

o Early-stage content -- This content is never put behind a registration form and includes items like whitepapers, guides, and best practices webinars. Miller said this content is never gated because he wants it to "go wide." He wants readers to share this content socially and ensure it’s indexed by search engines.

o Middle-stage content -- This content includes buyer's guides, a ROI calculator, RFP templates and independent analyst research. At this stage Miller does want to know who is interacting with the content because they are exhibiting potential buying behavior, so viewing this content requires a form registration.

o Late stage content -- Late-stage content involved a mixed strategy with some content requiring registration and some not. Miller provided an example, "You can watch a regular demo on our website without registering, but then if you really want to watch the 20-minute demo, I definitely want you to register yourself because I definitely want to contact you."

Through testing, Miller found that short forms works better, and prefers to use them in tandem with a cloud lead database to fill in the details. He believes registrants often lie on forms, and that it is actually cheaper to buy the demographic data than to ask for it on a longer form. Once someone's email is in Marketo's database, none of its content is presented with a form.

An area of content marketing Miller is placing his focus on is online video. He believes online video is going to transform marketing. This opinion is based on informal research he does when he speaks at events. Miller asks the crowd if they've watched a video on a mobile device or iPad in the past month, and he said he's seeing 60 to 70 percent of the room raise their hands.

For people in the lead nurturing program who aren't moving forward, Marketo offers "accelerators." These people will be sent an offer to take the demo and receive a $50 Amazon gift card. Miller states the company has sent about 30,000 offers with 713 people taking about 90 demos.

This spend of less than $5,000 in gift cards has led to 36 opportunities and 16 won deals.

Step #5. Create a business unit to smooth the hand-off from Marketing to Sales

Miller offered two suggestions for achieving far-reaching marketing goals. He said, "One piece of advice would be to invest in content, and the second piece of advice would be to make sure you have a sales development function that sits between Marketing and Sales."

He added the largest area of operational inefficiency is the hand-off between functions.

"If you know the biggest place where (the revenue cycle) can break is in the hand-off, why not have a whole group that is focused on making the hand-off work efficiently?"

He cited research showing fast, consistent follow-up with qualified leads makes a marked difference in conversion.

Marketo has a role called "sales development representatives (SDRs)" who report to Miller at Marketing, and when an active lead has visited the pricing page and watched the demo, the SDRs are tasked to reach out to that lead within five minutes.

Miller explained, "I know they (the leads) are at their desks. I know they are thinking about us. If I had to pass that lead to an account executive there is no way I could guarantee you a five-minute response."

Although the career path for SDRs is to be promoted into Sales, they report to Marketing because, as Miller put it,

"I get paid when opportunities for Sales get created. SDRs get paid when opportunities for Sales get created, so it makes sense that we should be part of the same team, as opposed to sales people who get paid when deals are closed."

SDRs' activity is tracked to ensure they are meeting the five-minute response, and other required timed touches found in their service level agreements.

Step #6. Analyze and utilize your metrics

It's great to create all this business information with form conversion rates, scored leads moving through the pipeline, lead nurturing touches and more. What's important is actually learning from these metrics and using them to improve the business and have tangible proof of contributing to the bottom line.

About metrics, Miller asked, "How do I get that information? What do I do with that information?" Getting the information goes back to how people are handled as they move through Marketo's revenue cycle -- from awareness to name on down to lead and opportunity. Business logic is built into each stage and that person's activity within each stage: Web pages visited, content downloaded, webinars viewed, etc.

Using this information, Miller looks at four key metric areas:

o Balance
o Flow
o Conversion
o Velocity

Balance is simply the number of active prospects in the database, and this number is used as a leading indicator of future performance.

Flow tells Miller how he is doing in generating new leads for Sales month-over-month. Conversion is someone becoming a customer. And velocity tracks how fast someone moves through the revenue cycle.

Metrics from all four areas are used to make a chart used for budgeting and for making forecasts.

Miller uses these figures to determine what he needs to spend in marketing efforts at the present to deliver a revenue impact in the future, and seeing how people move through the revenue cycle provides business intelligence for forecasting. In Miller's case, he creates forward rolling three-month forecasts each month.


RESULTS

The key result of Marketo's extensive marketing efforts and large budgetary spend on marketing is it's ability to continue a very rapid growth within a growing industry. The rigorously mapped out revenue cycle gives Miller a great deal of oversight and insight into who his prospective customers are and what they do in engaging with Marketo.

This information allows Miller to justify Marketing's huge budget line by showing how those efforts directly impact revenue, and also lets him keep up with future growth through accurate forecasting.

Miller said, "Where this stuff becomes really powerful is when you do things such as an end-to-end revenue process that lets you make those budget and process decisions. And tradeoff decisions such as hiring another sales person versus doing a trade show."

o Marketo's revenue grew more than 400% from 2008 to 2009

o Revenue grew by 315% from 2009 to 2010

o Marketo passed the 1,000 customer milestone in early 2011

o Employees grew from 40 to 160 in 2010 with plans to near 300 in 2011

o Marketo spends $0.90 for every $1 in sales

o 80% of revenue is sourced by Marketing

o Average cost-per-customer is $5,800


Useful links related to this article

CREATIVE SAMPLES

1. Revenue cycle
2. Revenue cycle metrics
3. Form accuracy chart
4. Sales development representatives
5. Metrics chart
6. Forecast chart

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