Transcript:

[00:00:00] Intro: One, two, three, four, five.

[00:00:15] Dave Gerhardt: Okay, this is long awaited. I got an intro to you from my friend Tom Wentworth, who, I guess you're an advisor in a company of his, the company did well, or something like that. He said he should go on your podcast. So I am glad you're here. I posted about this. I'm going to give you the microphone in a minute because I want you to introduce yourself and give your background.

[00:00:33] But I just want to, I posted about you coming on this podcast in the exit five community recently. And the reaction was somebody wrote, Oh my God, for real. Another person wrote best blog ever. I read it all the time. So another said, Oh shit, you're talking to the goat. Another person said, huge fan of Dave Kellogg.

[00:00:50] Another one said, great guests. And everyone said pumped. So we haven't even done the interview yet. And I know this is going to be one of the most popular episodes. of all time. So Dave Kellogg, thank you for taking the time out to come on the exit five [00:01:00] podcast. I've been a secret admirer. Your blog has saved me in advance of many board meetings and marketing leadership meetings over the year.

[00:01:08] And I know I'm not alone in that. So I'm glad to have you on. 

[00:01:11] Dave Kellogg: Well, it's awesome. Thanks for having me here. And, uh, Now, I hate playing into high expectations, right? It's a good marketer. I like to keep expectations low, but it seems like we can't do that in this case. 

[00:01:21] Dave Gerhardt: All right. So for people who aren't super familiar with you and your story, give me the condensed overview of who you are and, and what your career path has been.

[00:01:31] You've been CEO, you've been CMO, you have a unique perspective on things, but how do you tell us? And just with the caveat that majority of this audience is going to be in your wheelhouse, B2B SaaS marketers and execs. 

[00:01:42] Dave Kellogg: Okay, so I'll do the quick chronological telling because I think it gives you the context.

[00:01:48] So self taught programmer, math and geophysics major at Berkeley, wandered into the software business because I knew how to program, started in technical support at a database company, so telling people how to write SQL queries, watched that company get thumped by Oracle and everyone said we were losing because of sales and marketing.

[00:02:06] So like, well, what sales marketing? So, so I got interested in sales marketing, moved over to competitive analysis, then product marketing, got an MBA on nights and weekends, ran marketing at one startup, ran marketing and business objects on kind of an Epic run from 30 million in revenue to a billion in revenue, wanted to try my hand at CEO, so I ran a Sequoia back company called Mark logic, uh, for six years from zero to 80 million in revenue.

[00:02:30] And then did a year at Salesforce as GM of service cloud. And then. Was CEO of Host Analytics, a financial planning company, took that from 8 million to 50 million ARR and sold it. Along the way, I've been writing the blog for nearly 20 years at this point, and I've sat on about 10 different boards of directors.

[00:02:47] So I like to position myself as having three views. Kind of 10 years in the CMO seat, 10 years in the CEO seat, and 10 years in the combined years in the director seat. 

[00:02:57] Dave Gerhardt: Awesome. Important tangent, just for me, out of curiosity, before we get into the good stuff. Tell me about your, the origin of your blog.

[00:03:04] You got into the blog 20 years ago before all this stuff happened. Like what, what got you into blogging? 

[00:03:09] Dave Kellogg: Yeah. So at the time I was CEO of, uh, MarkLogic and we sold an XML database system to two communities. I say spies and publishers. Uh, we'll talk about the spies, but the publishers used us for content repurposing and they were under threat by the internet, by the web.

[00:03:26] And by the new coming generation of publishing blogging was part of that. So I actually started the blog as an effort to kind of walk in my customers footsteps so I could kind of comment intelligently on new media that was threatening old media. So that's how it started. I was originally called the Mark logic CEO blog.

[00:03:44] And then one day I was wondering. Uh, the halls at Sequoia and Mike Moritz looked up to me and said, ah, the Kelblog. And I went, oh, that's a good name. And, uh, since my wife is French and I've lived in France, I'm a Francophone. Kelblog is actually a homophone for what a blog in French. So it's kind of funny, but in any case, that's the story.

[00:04:04] I love it. 

[00:04:05] Dave Gerhardt: Do you think you'll, uh, continue to blog or is one, can we just create like, um, Dave Kellogg chat GPT program and someone can just write this on your behalf and you can go retire somewhere. 

[00:04:16] Dave Kellogg: So I played around with that and I didn't do very well because I'm not very good at prompting, but I had a friend who's using chat GPT for.

[00:04:23] And, uh, he put some more time into it and it still don't feel like I'm out of business, but, but I, I had this crazy question, which is what if Dave Kellogg talked to Kurt Vonnegut, what would they talk about? I just wanted to see what it would do. And, uh, my friend actually prompted it enough. So it was a pretty interesting conversation.

[00:04:41] It's up there as a blog comment on a blog post, but, uh, I think I'm safe for now. I don't know for how many years more, but, but for now we're okay. 

[00:04:48] Dave Gerhardt: I love that. All right. So you have, you have these three, you've had a amazing career, impressive run across CEO, CMO, started off as a programmer. Today, we're going to talk mostly to CMOs.

[00:05:00] And so a lot of people listen to this podcast want to be either they are CMOs now and they're listening because it's just part of their routine and staying sharp, or they want to become a CMO today. And I'm curious to hear your perspective about what makes a great CMO. CMO. And I know that is a, that's a vague question, but I, I'm trying not to lead the witness here, just as somebody who comes at it from this angle and cares about revenue and thinks about things from the CEO level, tell me about what is a world class CMO look like to you?

[00:05:29] Dave Kellogg: Yeah, that's a great question. So. I want to give you a four part answer. I think one is I write about a lot. It's a great partner to sales. So I would say, you know, it was literally like 1987. I was at a marketing all hands meeting and our CMO said, marketing's job is to make sales easier. And I like reductionist, little pithy maxims.

[00:05:49] So I was like, Ooh, that's good. I like that. I want, I want to stick with that big sales, easier thing. And I basically rode that maxim to CMO ness and a successful career as a CMO. So I always [00:06:00] said, the other way to look at it is I worked at a really small startup once and the VP of sales made a t shirt that said code seller, get out of the way, which kind of frames the mission of marketing, right?

[00:06:11] I love it. It's like, I've worked at small startups. So if you have 10 percent start. You're not going to have any marketing, right? You're going to people building the product and people selling the product. So if you kind of derive marketing from first principles, it says we got to make this stuff easier to sell.

[00:06:25] And there's a whole host of ways of doing that. Some of which are super strategic, like inputting on product strategy or ideal customer profile or distribution strategy. Some of which are super tactical, like executing a trade show really well and finding the right leads. Right. So, but, but you can derive it all from making sales easier.

[00:06:42] So the, so the first to me. Because we've got to partner with sales. The second, actually I'm going to reduce the answer to three things. To be a dispassionate analyst. I don't know how to say it, but just to show up with the data and say our stage 2 close rate is 5%. I can tell you industry benchmarks they run more 15 to 20.

[00:06:59] For this [00:07:00] company, in this space, at this time, with these opportunities, I don't know if 5 is bad or good. Doesn't strike me as particularly good, frankly, but I do know what it does to my marketing funnel, which is if you're only going to close 5 percent of these, I need to generate a huge number of them and it's going to cost us a lot of money.

[00:07:17] So, cause I'm trying to put a very difficult issue on the table, right? Cause the wrong way in that example to say, well, sales can't sell anything, right? Sales can't close. I'm not the problem. I hit my sal goal and sales can't sell. And that doesn't help anybody. Right? So I think the art of the dispassionate.

[00:07:35] Observer or the anchorman, the dispassionate analyst, really not observer, or what you might call the anchorman or the anchor person on TV. Hey, I don't make the news. I just tell you about it. Right? Like we've got a 5 percent stage two to close, right? Maybe by the way, sales ops could do that for me, but, but we need to talk about it dispassionately and kind of remove the emotion and say, How do we want to do better?

[00:07:56] Do we think five is good enough? Benchmarks would suggest it's not. [00:08:00] If you think it is, great. But otherwise, how do we do better? And leading those conversations is super important. I'm giving you a simple example, but it could be marketing channel analysis. It could be sales pipeline sourcing analysis.

[00:08:11] These issues get hot fast. So, First thing is partner with sales. Second kind of dispassionate analyst. And the third is a partner to the CEO, which actually might be redundant to the second, but I have to assume in this day and age, the CEO comes from a product background, so they understand neither sales nor marketing.

[00:08:29] Really? And I need to explain it to them and I need to lead them to understand what it is we do in marketing and how we work with sales. 

[00:08:36] Dave Gerhardt: All right, this is great. I take a lot of notes during these and I come back to different things. There's, there's lots of things that I, I want to come back to already.

[00:08:43] I also love that you gave us the rule of threes on the fly. We have a great memorable list. What makes a great CMO? We have great partners, sales, dispassionate analysts, and a partner to the CEO. I want to talk about each one of these for a second. So on being a great partner to sales, First of all, I love that you said this line in [00:09:00] 1987, marketing's job is to make sales easier because we now live in an era where somebody like me, I was born in 1987, I can now, I get to go to LinkedIn now and I get to write that pithy line.

[00:09:10] Marketing's job is to make sales easier and everyone comments like, oh my God, this is amazing. But Dave Kellogg is there in 1987 taking this from a different CEO at the time. So it's just another example of how. Everything that's new is old that it always comes back to the first principle of marketing's job is to make sales easier on this concept of being a great partner to sales when you say it like that.

[00:09:33] I'm like, it sounds obvious, but so many of the comments that I see in the exit five community or even in my career various. I was a CMO twice and had different levels of relationships with the sales partners. Why do you think there is such a disconnect between It's not as easy as this. And it's oftentimes like the sales leader is not ready to be like, yes, Dave Kellogg's here as CMO.

[00:09:55] I can't wait to partner with him. There often is a disconnect. And my perspective is it's often comes down to misaligned metrics and incentives, but why is it harder to be a great partner to sales? Then, you know, we can say it quickly in a pithy way on this podcast, but when you get inside of a company, it doesn't always work that way.

[00:10:12] Dave Kellogg: So look, it's a great point, and a not terribly well known thing is in 2020, I actually did a nine month, almost 11 month, nine or 10 month interim CMO gig. So after, the last time I was a CMO was 2004, right? So you might think, oh, Dazel dated on this stuff. He's been a CEO and board member since. But I actually sat in a chair for almost a year in 2020, and the first thing I did was bomb the sales.

[00:10:37] Right. And at some point the CEO was yelling at me, like, why are you and Tim so aligned on everything? And it's like, have you ever read my blog? Like I'm doing exactly what I said I would do. Right. Which is to interlock with sales. And we kind of speak with one voice. So, but to answer your question, I think there's a couple of reasons why it's hard.

[00:10:55] One is just an experience, not a lot of sales and marketing people kind [00:11:00] of bond themselves together and approach the CEO as a, we're one person, another old movie reference, but, uh, All the president's men, Woodward and Bernstein, their editor started calling them Woodstein, right? They were one conceptual person.

[00:11:14] That's what I want the VP of sales, the VP of marketing to be, right? Woodstein. So it's hard to do, but a lot of people have an experience with it. So what does it just say? People haven't experienced it very much. It takes two to tango. They don't necessarily know how to dance, right? That's one. The next reason is trust.

[00:11:29] I mean, a lot of marketing people know to say the right thing, but they don't actually do it, right? And salespeople are like super high EQ. So if you're kind of bluffing them or BSing them or kind of pretending or kind of bowing to the, Oh yeah, we want to help sales flag, but off running big branding campaigns or doing stuff that marketing likes to do, as opposed to what sales has asked for.

[00:11:49] They're going to look at you and go big hat, no cattle, right? I mean, you talk a good game, but when you place your chips on the table, when you spend marketing money, when you hire people, I don't see it. I don't see the alignment that you're talking about. And the last would be, it is often the CEO's fault.

[00:12:04] I mean, I have worked with companies. You know, just to pick a very old, old example that's shockingly still happens today, but the CMO is going, I got all the sequels or sales, whatever you want to count, go marketing, we're awesome, and sales hates them, thinks they're not the right leads, not closing them, right?

[00:12:22] That still happens. I was talking to a company. And I literally looked at the CEO I had all three of them in the room. And I look at it and go, yeah, grab a mirror, pal. It's your fault because you're telling the marketing person that you want them to be aligned with sales, but you're not measuring them on opportunities or revenue, right?

[00:12:42] You're measuring them on sales or sequels. Shame on you. Right. So definitely part of it. The CMO has a boss. 

[00:12:49] Dave Gerhardt: And if the boss is a CEO, just like any other part of the org, that the boss has goals and benchmarks and comp based on those things. And so if my comp plan is based on the [00:13:00] me generating a bunch of SQLs, like then my boss, the CEO is going to think I'm doing a good job.

[00:13:05] I was going to follow up this question with like, seems to come back to metrics, right? Which is like, do we have a shared view of like, Company goal, what is sales own? What is marketing own? I think it's hard and part of the disconnect in B2B SaaS is there's a blurry line between like what sales is responsible for and what marketing is responsible for.

[00:13:24] And so the metrics kind of make it a bit messy. What have you found to be the best, simplest, like unifying metric? Is it marketing owns opportunities? 

[00:13:36] Dave Kellogg: So two things. One, on the prior point, I'm going to give some risky advice, which sometimes works. I'm not going to claim this always works because sometimes it's a no win situation.

[00:13:46] If you're a CMO and the CEO says to go right and the CRO says to go left, what do you do? And the answer to me is go left. And it may sound crazy, but, but I've seen enough CMOs [00:14:00] die on the other Hill, because the instinct is to go, right? Hey, the CEO told me to go, right. I'm going, right. The CEO will have my back sales will be unhappy, but the CEO will take care of me.

[00:14:10] And that doesn't work because what happens is if the CEO is not aligned with sales and you do what the CEO wants, it'll work for a while. You'll be their favorite employee for a few months, but sales will be increasingly complaining about what you're doing to the point where. Sales is coming for your head to the CEO and the CEO go, okay, sorry, we'll get rid of them.

[00:14:30] So I know it doesn't work. I mean, look, there are exceptions to this, but in general, I say, go left. Here's the counter derivation. If you go left and work with sales and actually help the company hit the number first, there's no problem because we're hitting our number because we're working together. And second sales will have my back.

[00:14:45] If the CEO goes, I can't stand the CMO and never does what I want. You go sales would be like, Whoa, Whoa, Whoa. No, they're doing exactly what I want. So I think it's a really hard situation for a CMO, but I think you need to understand if you're in a subtle [00:15:00] misalignment, cause these things aren't as simple as left and right, right?

[00:15:02] They tend to be subtle, but if you're in one step one, get the three of them together and say, I feel. Misaligned. In fact, I once had a direct report. Tell me, he goes, do you know why the asteroid belt exists? And I go, I don't know why he goes, there used to be a planet in between Jupiter and Mars, but it got torn apart by gravity.

[00:15:19] I don't know if that's true because that's what I feel like right now of an asteroid belt. You guys are tearing me to bits. I 

[00:15:25] Dave Gerhardt: love this advice. I love, love, love this advice because it is not traditional, but it's like, I just love, I love simple, very clear advice. Like, it's like when you go to the doctor, I don't like when your doctor's like, well, you could do this and you could do that and you could take that.

[00:15:39] No, no, tell me what to do. And I think what you just gave people is a actual recipe of something to do, which is if you zoom all the way out, If you hit the revenue number, almost everything is going to be fine. 

[00:15:50] Dave Kellogg: Revenue cures all known ailments, as they say. Um, so totally it's counterintuitive, which is why I belabor it now to answer your question about [00:16:00] metrics.

[00:16:00] I personally think the right way to measure marketing and enterprise B2B SaaS when it comes to the demand generation part of marketing is stage two opportunity count, believe it or not, not pipeline dollars, um, not stage one opportunities, but what I call stage two opportunities actually looked at by an AE and accepted.

[00:16:23] Um, because at some point sales needs to be accountable, right? Sales doesn't get to play the game of they were low quality. Which is their low quality, why'd you accept it? Right? So, so to me, you get what I call the marketing is the stage two manufacturing facility and sales is the stage two closing facility, and if sales has accepted an opportunity, they need to be willing to be held accountable for a close rate of somewhere between in my opinion, 15 and 25 percent of those opportunities.

[00:16:54] But I'm what I'm trying to do is get rid of the finger pointing, and the most obvious finger pointing place is, Oh, they hit their number but they were low quality. And we solve that through the acceptance process. If it's low quality, reject it. And if you're rejecting a lot, we're going to challenge you on that.

[00:17:10] So stage and the other, just to be quick, I don't like pipeline dollars because it's too skewable. One would either encourage using placeholder values early in the sales cycle, or, you know, marketing can actually miss their goals significantly, but 1 million Opti can offset that. So I actually prefer count.

[00:17:26] Yep. 

[00:17:26] Dave Gerhardt: And this seems like something that can't just be done in a spreadsheet or in a salesforce dashboard. It seems to be that to have this, you need to be sales leadership and marketing leadership need to be like actively working on this together on a week by week basis and talking about these things.

[00:17:42] And so it's not just like I'm looking at some report of what was accepted or not. We're going to have a conversation about this criteria because things will ebb and flow. Sometimes marketing will be doing a great job and sometimes they will not. And sometimes sales will be doing a great job. And so you have to have that kind of weekly rhythm.

[00:17:56] them of like, if you're reviewing stage two opportunities, is it [00:18:00] a sales issue? Is it a marketing issue? It has to be this, it has to be kind of this shared relationship. Do you have a rough way of how you like to actually make this real? Like, how do you enforce this? How do you build alignment? Do you meet on it weekly?

[00:18:11] What's the process? 

[00:18:12] Dave Kellogg: So I think the right answer is to have sales and marketing leadership meet weekly to discuss handoffs. Because that handoff point is critical, right? Like once it's a stage two and sales has accepted it, they're pretty much accountable for closing it. So the marketing conversation is how can I help?

[00:18:30] Right. Hey, I've noticed after the demo, the conversion rate is low. Do you want a new demo? Right. Do you do, or I noticed we get stuck on financial viability. So he wants to build an ROI model, right? I can help you all the way to the closed deal and thereafter, but it's, there's a difference between I'm your helper.

[00:18:47] Kind of riding shotgun and I'm driving, which is in the high funnel, the tofu, right? I'm driving. So to me, the handoff point is important because I switch roles. So I thought I don't have any roll down funnel. It says I switched the shotgun [00:19:00] and up funnel. I think the answer is, The handoff point matters enormously because it's just so hard.

[00:19:07] I don't know how to say it. What can go wrong at the handoff point? Hey, we can get inundated, right? Where, where we just, we go to a big trade show and have a ton of leads and we get behind right now. We're not calling people back and we need help. What else can happen is what I call a floating bar, which is starving reps tend to accept low quality opportunities and reps who already have 15, 17, 20 opportunities tend to reject good ones.

[00:19:30] So we need to be watching, right? Because, you know, God didn't declare that we were going to generate Opti's and the exact distribution needed by sales, let alone the right number. But basically what I'm coming down to is distribution, right? Because after we run all the marketing and after we hit our Opti per quarter goal.

[00:19:48] Who knows if the Chicago sales rep has enough opportunities or the New York one is carrying 34 and can't possibly call them all back. And the Chicago rep has seven and is working on two total non starters because it's better to work on something than work on nothing, right? And that's why it has to be so close.

[00:20:05] And we need, obviously we watch that rejection rate. Because you get a lot of information on that, but you also listen to Gong Calls, Chorus, Jiminy, whatever your tool is, just go listen. So, to me, it's like a weekly meeting where we just sit down and talk about the handoffs. It's the same thing I do with partners, where we have a weekly meeting to say, okay, or services, sorry, services and partners, but where we say, this opportunity needs some services.

[00:20:26] Do we want our team to do it or our partner's team to do it? And opportunity by opportunity can just go through the pipeline in some sense you do the same thing at the handoff point, because I agree with you, the answer is not in the spreadsheet here the answer is on the ground, and it's, it's not in the averages really on the spreadsheets tend to present the averages, 

[00:20:43] Dave Gerhardt: and then you can, that's a great framework to then go and present a united front to the rest of the team.

[00:20:47] The team and Hey, here's what we're doing. This is the revenue team. Okay. Number two on your list of what makes a great CMO is the art of being a dispassionate analyst. And I love this and go back to the example that you talked about [00:21:00] and having a 5 percent close rate. I do think it is. I've made this mistake.

[00:21:04] Many people that I talked to. We instantly go into defensive mode where I'm going to, I'm going to present to the leadership team about why we're behind on this number and here's all the excuses and reasons. But what you said, when you positioned this way, being the dispassionate analyst, you made me think of this, which is an important lesson that I've had to remind myself of.

[00:21:23] You as the CMO, you often have to cook the dish. You have to make this amazing meal, but you don't own all the ingredients. You know, you don't control sales. You don't control product. You don't control the market or the roadmap or this partner or that partner. And so I think when you can take the lens of being a dispassionate analyst, you're then presenting more as the, Hey, this is, uh, I'm the manager of this portfolio.

[00:21:43] And I, I want to rally the company and I want to get your help. It's like when you go in there with on the defensive of like, here's why we're at this number. And here's, here's all these 15 excuses. I just would love to hear you talk about that perspective. 

[00:21:54] Dave Kellogg: Yeah, super. Look, I think I developed this perspective because I'll tell you why I developed it.

[00:22:00] It's an interesting story. Um, there's a long time ago. I was a business objects. We ran the company on geographic P and L's and we'd have this problem where the French were pretty unaggressive. So they, they plan to grow at 30 percent and grow at 32. And the Italians were really aggressive. They planned to grow at 70 percent and grow at 65.

[00:22:19] And every meeting, the French were heroes and the Italians were zeros, right? Cause the French were making plan and the Italians are missing plan. Despite the fact the Italian absolute growth rate is twice that of the French. And these are not the actual numbers, but highlighted to dramatize the idea. And I went, this is messed up.

[00:22:36] I mean, I understand that making plans is important, but the Italians are growing twice as fast as the French, and we're kind of giving medals to the French and kind of, you know, dissing the Italians. What are we going to do about this? So I created a local market share chart. At the time, you could actually just kind of map.

[00:22:52] Basically, I mapped our growth to our competitors growth in each of those countries. And basically, you take your, your revenue and divide by, divide everyone's revenue [00:23:00] by your revenue. So your line is always flat. And then anybody who's coming up is gaining relative share. Anyone who's coming down is losing relative share.

[00:23:07] So I call it the relative market share chart. I would just be the dispassionate observer. I didn't have to give a speech about gaming plan performance or plan negotiation or all this junk. Stuff that I actually thought was happening that like, wow, the French are better negotiators because the negotiator really low plan and our, you know, our well intentioned Italians are terrible negotiators.

[00:23:26] So instead I just put the data, the dispassionate, that's where I got the dispassionate from, because that's a very unpleasant thing to tell a management team, everyone's celebrating. Cause most of the people made their numbers and you're like, folks, we might be making our numbers, but we're losing relative market share on three countries.

[00:23:39] And you could just see it right there. So what do we want to do about it? And I think why I say that this passionate analyst is I just present the fact. I'd never say why, and I never say what to do about it. I present the fact and say, do we think this is a problem? Yes or no. And then once you get agreement on a problem, somebody goes, what can marketing do to solve it?

[00:23:58] Let's take a different example. Now, say it's that stage two to close rate. That's too low. Do we agree that 5 percent is too low? Yes or no? Cause if we don't agree, it's a problem, no point in fixing it. And then if we agree, it's too low, the dispassionate person, well, what can marketing do to fix that? 15 things.

[00:24:15] And there is no right answer. The right answer is the one I agree to at the CRO. Period. That's the right answer. So, if you take that point of view, that says, we basically are going to be a dispassionate analyst, I'm going to present facts, we're going to agree to some things we don't want to fix and some things we do.

[00:24:31] And as a good marketing person, you've got a thousand tricks in your bag. So, there is no right answer. The right answer is the one that I agree with my CRO to go execute. And that is super powerful. And that's what keeps you alive. Cause that's who you avoid the blame game. The funny thing you said at the start is I tend to go offensive.

[00:24:48] You tend to go defensive, right? My natural tendency is like we're losing market share, uh, which makes everybody mad at me, your tendency, like many CMOs to be defensive because we get beat up so much, right. And the right answer is to be right there in the middle. 

[00:25:01] Dave Gerhardt: Well, I think what you said there is really important, which is like, you got to have the perspective of like, Hey, look, I'm the dispassionate analyst.

[00:25:06] I, I got 15 ideas of how we can go about this. And I just think a lot of people, or maybe this is just, this comes with wisdom over, over the years. But I think like, as a, for me, as like a first time marketing leader, I felt like, Oh my gosh, we're behind on this number and everyone's going to hate me for it.

[00:25:22] And I'm going to lose my job when like, When you go to that bag of tricks, like what's in that bag of tricks is actually not just marketing tactics. It's never just like, Oh, let's do a webinar or let's change the homepage. It's like, Oh, it goes deeper than that. It's like, maybe we need to change our ICP.

[00:25:38] Maybe we need to try this offer. Maybe we need to tweak this product. It's like, it's very much rarely just on you as the marketer. And this is why I'm. I was interested in talking to you today, just your, your perspective as a CEO, like you almost have to think like a CEO where, yes, your title is CMO, but you're not just looking into like, what levers does marketing have?

[00:25:56] You need to be the change agent across the company, whether that's [00:26:00] influencing sales, influencing product. And the mistake I made was always trying to like put all that pressure on myself and thinking like, yeah, maybe if we go send six more emails right now, we're going to get to our number. But really rarely that's the case when you're like trying to tackle an issue like 5 percent close rate.

[00:26:14] Dave Kellogg: Yeah, look, I mean, so yes, and to me, that's the beauty of this model is. I don't feel any pressure to go tell everyone the answer. Cause I think what you were doing as a first time CMO was there's a problem. I need to figure out the answer and I need to sell everybody on my answer. And that's a recipe to get yourself in trouble.

[00:26:34] Frankly, I just want to show up and say, can we agree there's a problem? And if you want to solve it, I have 15 ways. And by the way, the better a marketer you are, the more tools that are in your bag. I don't just have a hammer. I've got 17 different tools. All the ones you mentioned, we can change the product.

[00:26:48] We can change the ICP. We can do sales and sales tools, sales training, sales enablement, right? We can change who we're generating leads from. I can fix this 18 ways to Sunday. The right answer is let, let me and the CRO go offline to agree. I'm going to lay out all the different things I can do and what sounds good to them and me.

[00:27:04] We'll come back next week with a proposal. That's how you stay aligned to sales. It's how you take the pressure off yourself. It's how you don't get defensive. 

[00:27:11] Dave Gerhardt: Beautiful. And the last one is partner with the CEO, which I think is closely related to number one and there's a hundred other things I want to ask you.

[00:27:18] So I'm going to jump around a bit. I have some, some specific questions I got for you, but I want to ask a broad one. And this is for you specifically, one of the, so I run this community of 3, 500 marketers, they all pay to be in it. Uh, it's a professional group of B2B marketers. And between the podcast and the community, I get a lot of questions.

[00:27:39] One of the number one questions I get About marketing is benchmarks. People want benchmarks, Dave. They want to know the ratio of this to that of salespeople to marketing people of pipeline to spend, you know, of all these different things. And I was saving this to ask you because you've had a lot of perspective on this over the years on [00:28:00] on your blog.

[00:28:01] Do we need benchmarks? First of all, and why do marketers obsess over benchmarks? Then let's talk about some of the most helpful ones if you have any. 

[00:28:09] Dave Kellogg: So yes, I believe marketers need benchmarks. I believe we always need to use benchmarks. I mean, the things that go wrong with benchmarks are when you don't slice them correctly, right?

[00:28:20] So you're comparing yourself to public companies when you're not. Or a common, another one more subtle would be you're comparing yourself to different size companies. So you're a 5 million company benchmarking on the 80 million companies. Another one is different track companies. You're a 20 million low growth PE company optimizing for profitability.

[00:28:39] And an EBITDA driven exit in three to five years versus a venture backed IPO class company. And a lot of these benchmarks don't separate these. And, you know, it might even be a founder bootstrap company. If you look at some benchmarks, they're actually mixing and they rarely let you cut it this way or they'll cut by size, but literally you have to go look at the sample and go there's founder owned bootstrap companies that are 20 years old and here growing at, you know, 20 million and growing at 10%.

[00:29:02] There's PE companies. That are maybe focusing on EBITDA more than growth right now. And there's VC companies that are all moonshots and they're all blended together in a random waiting , right? So, so, so yes we need benchmarks, but we always need to understand what we're looking at and always kind of, uh, almost be skeptical about what we're looking at.

[00:29:23] And it's applicability to us and how we slice it. I think we like benchmarks 'cause we get asked questions by sales and finance, and I think we use them partly as a defense bank. I think partly good faith. We wanna know how we're doing. Like how do I compare to other people I used to use, I'm never going to remember their names now, but one got bought by Forrester, one bought, bought by Gartner with serious decisions.

[00:29:43] And the other one, yeah, I would use them for like, you know, what's Topo. Yeah. Thank you. Topo and serious decisions. I used to use them. A lot. There's one called OpEx Engine, which is more financial benchmarks, but some stuff, there's the Pacific Crest study, which is more company level metrics. There's RevOpSquared, which is more company level metrics.

[00:30:01] But yes, I try to use benchmarks because, A, I want to know how I'm doing. B, I'm going to get asked. Right. By finance and or by sales. So I like benchmarks personally, but I'm, I'm never kind of a slave to benchmarks. I'm never, I don't rule the benchmarks or I don't let myself get ruled by benchmarks. You know, it's like an average family is 2.

[00:30:19] 2 kids. So honey, let's go try and have 2. 2 kids. Right. Can't do it. Right. Doesn't even make sense to try and do it. So we need to be thoughtful in our approach to benchmarks, but I think they're very important. So the other thing you didn't talk about when it comes down to data is to me just market research.

[00:30:36] So I'm a big believer that people today are pretty good about using benchmarks. They're very good about using internal systems data. But we've almost forgotten about market research. And back in the day, when I was first in marketing, you didn't have a CRM system. So you couldn't actually do all this internal analysis.

[00:30:53] So you do market research to look at your funnel. And just do the, you know, Hey, have you ever heard of this company? Have you ever considered buying them? Did you ever [00:31:00] try buying them? Did you buy them? Why or why not? Right. That used to be a market research exercise, not a reporting exercise office CRM.

[00:31:06] And I still think you should do that to compliment your CRM analysis. Cause CRM remember only shows you the people you found. And what about all the people, especially if you're a startup, who never found you? What about that vast majority of people who'd never heard of you? They're completely omitted from your analysis because you're not looking at them.

[00:31:22] So that's my view. Yes on benchmarks. Yes on internal reporting. And yes, yes on market research. 

[00:31:31] Dave Gerhardt: In the market research example, are you talking about actually hiring some type of market research firm or finding a way to do it on your own? 

[00:31:37] Dave Kellogg: Yeah, proprietary studies typically cost 20 to 50k, right? But if you're of any size, that's not a huge percentage of your marketing budget.

[00:31:45] And you can, let me just tell you the kind of things I would ask in such a survey. First, I would do a quantitative part where I'm trying to look at the funnel, right? I get me and my top competitors and do awareness, interest, consideration, purchase, roughly, repurchase. 

[00:31:58] Dave Gerhardt: Oh, wait, wait, pause on that for a second.

[00:32:00] Yeah, I love that because I feel like, um, that's the perfect medicine. That's the perfect, like, way to figure out what you should go and do, right? How many times do we just go and do marketing to all stages of the funnel, but you go and do this research and you're like, well, nobody even knows you exist compared to these five competitors.

[00:32:16] And so, oh, well, that's going to tell us what our marketing should look like over the next three to six months. First, sometimes we just, there's too many things to do. We don't know what to focus on. I love that. 

[00:32:23] Dave Kellogg: Or the counter, which is the one I actually started doing this for. Nobody's ever heard of us.

[00:32:29] If I had a dollar for every time the sales leader told me that nobody's ever heard of us, right. I'd have an Island somewhere. And when you run the study, right, both sides of it, you run the, and by the way, your CRM isn't going to tell you about awareness, right? So you have to run this kind of study to say, if I listened to sales, and this is what I talk about partnering with sales.

[00:32:48] I'm not a doormat. They used to call this tough love when you had like, you know, teenagers in trouble, you'd give them tough love. That's the way I view the CRO, right? Okay. You're asking me for more awareness, but I'm going to go do some homework and come back and try and convince you it's not what you want.

[00:33:01] Cause our awareness is actually fine. What's actually hurting us is our reputation or our consideration, or we're not making the long list or whatever it is. So yes, I look at the funnel. I would look at buyer pain points. Right. One of the age old questions of marketing is what are the best pain points for us to go market around?

[00:33:17] I'd have a list of 15 pains, 10 pains that we can solve and rank order them. And then when I say, Hey, I want to run a webinar themed on my last company, I'd say, uh, mistakes in board decks, board deck preparation, sales would be like, well, I'm not so sure. I go, well, I ran some research and it says, this is it.

[00:33:34] And I might even research my customers and say, what do you use this for? Like, Hey, it's the number one use case on our customer base. And it's a super high pain point amongst prospects. Let's go market on this, right? There's a bunch of other things you can go survey, but it's that sort of stuff that you're not going to find in the internal reporting.

[00:33:49] Dave Gerhardt: Just using myself as the example in this. I think the first time marketing leader in me would be like, no way. I'm going to take 20, 50 grand and spend it on a research firm. Like we'll figure [00:34:00] that out on our own. But now as I'm hearing this back and replaying my lessons and losses over the years in my head, I'm like, well, actually, no, that would be an incredible investment because I'm basically trading you 50 grand to have like the right playbook to go and generate millions of dollars in pipeline.

[00:34:16] And I just think that that's such a better way of thinking of it versus me trying to justify, well, what's the ROI on that spend going to be? The ROI. is going to be figuring out our whole freaking revenue strategy, revenue strategy. 

[00:34:26] Dave Kellogg: Absolutely. And if you're really good, I mean, to me, I always said, look, I'm spending 5 percent of the budget or whatever to make sure the other 95 is spent more wisely.

[00:34:35] That's one way to look at it. Uh, the real marketing, uh, guerrilla marketer. Asked 10 questions. They can turn into white paper on the back of it. So I get an asset out of it as well. I get a bunch of questions I'm going to use for my marketing planning, but I also get, you know, state of the CFO priorities and financial planning.

[00:34:49] And based on these 10 questions, so now I've got a white paper and a webinar so I can have it all. 

[00:34:54] Dave Gerhardt: I love that 5%. To get security on the 95 percent I think that actually answers my benchmark question too, which is if I can answer this for you, it seems like if you can carve out the budget to do it and sign up for a service and I don't even know who does this today, whether it's Gartner or Forrester or serious decisions for everybody, it sounds like it's worth it to tap into one of those to get access to some of those benchmarks and guardrails, whether it's for headcount, budgeting, forecasting, different types of ratios, 

[00:35:22] Dave Kellogg: Yeah, I think so.

[00:35:23] Look, I would, I would always try and do it at, at not terribly large scale, because in the end you're spending 50k, hopefully, maybe 50 these days, especially with Gartner and Forrester owning them, but you're getting data that's hard to get somewhere else. And, you know, the alternative is, you A lot of Google searching and a lot of networking with friends where you can waste a lot of time trying to get those numbers and they'll be less credible anyway, because you're going to say, well, what's a good MQL to S1 conversion rate, and you're going to go, well, according to my five friends who I asked to 10%, and it's just, It's not as compelling.

[00:35:57] So in my mind, it's worth having the data. I always think about [00:36:00] exactly that balance. We talked about, I must be willing to spend something to make sure the other, I used to call it measurement too, because the other question is how much do you measure your program spent on that? And I'd be happy with a 10 90 ratio, frankly.

[00:36:11] So you can probably afford it earlier than you think. And it'll make your life. I was glad to watch you kind of go, Hey, wait a minute. When I was a CMO, this might've been a really good idea. And it would have been, yeah. Think of all the meetings. 

[00:36:21] Dave Gerhardt: And when you just said 10 90 on programs there, you mean like you're spending 10% On something that's good to 

[00:36:26] Dave Kellogg: guide the other 90, yeah, either the measure to benchmark to try and give you some idea because a lot of marketers are so proud.

[00:36:33] They spent 100 zero, but it's like, well, how do you know you spent 100 right? And you can say, well, I may be testing, but if you're going to be testing the wrong hypotheses, you're not going to find out if the number one buyer pain point was something completely different from what you're going to be testing.

[00:36:45] You're not going to find it. 

[00:36:47] Dave Gerhardt: Here's a listener question. This is from Tom Wentworth himself. He says, ask him how much CMOs need to know about SAS metrics versus how much of that should come from the CFO or FP& A.

[00:37:00] Dave Kellogg: Look, I'll tell you a story one time. I have a very distinctive point of view on this issue, but one time at BusinessObjects, an investor was in, And they were, everyone was sick.

[00:37:10] Nobody can make the meeting. And it was somebody who owned like a million shares of the company. And I was the only guy available and it was like fidelity or something, you know, big institutional money. And they wanted to meet and said, well, the only guy we've got available is the CMO, so you're going to meet them.

[00:37:22] Uh, and I did the meeting and the guy kept asking me all these questions. And I knew all the answers. So at some point the guy was like, are you COO or CRO or CMO? And I'm like, no, I'm CMO. And I obviously always remember that meeting. Cause he was quite surprised that I was the CMO and I knew all those numbers.

[00:37:39] I think the CMO should know a lot about SAS metrics and just, The answer is, it would be great if you could fill in for your CFO on an investor relations call, that would be the bar I'd set. Could you actually, if needed, in a pinch, fill in for the CFO on an analyst relations call or investor relations call?

[00:37:58] And it means you're going to have to be pretty fluent in the numbers of the business. And I think it's only good for this, because now you'll understand. I don't know how to describe it, but a lot of the SAS metrics, they help you like tune your car engine, right? They're not just about making investors happy and want to buy the stock.

[00:38:14] In fact, I do a blog post on this called the investor versus operator perspective on metrics. And I think you should take the operator perspective because you're an operator. It's helpful to understand the investor one, but, uh, and it will lead you to different metrics like investors, like CAC payback period.

[00:38:27] Operators to me, it's less applicable because like, well, which part of it's broken, there's three parts of it. And I don't know which one to fix. If you tell me, you tell me it's 36 months, I'm not going to buy your stock and I don't care why. Right. But if you tell me it's 36 months, my job is to fix it. I need to know, are we spending too much in sales, too much in marketing?

[00:38:43] Is the subscription gross margin too low? What's breaking the ratio. So yeah, so long story short, I think knowing those numbers are important. I'll give you one other story. So when I worked at Salesforce, I worked for a guy who worked for Benioff. And once in a while, I'd go to Benioff staff meeting, filling in for my boss.

[00:38:59] And I would spend like an [00:39:00] hour memorizing a spreadsheet of numbers. Cause I think in kind of numbers driven cultures, you need to have all this stuff in your head. If somebody asks you what's the service called pipeline in France, and you don't know the answer, I would argue that's like a career ending move at Salesforce, right?

[00:39:14] In certain other companies, like. They're not going to ask you 15 questions. You're going to get asked one out of the blue in a segue and you need to know it. And I like those cultures because it means people are on top of the numbers and they understand what's happening with their business. So I like that as kind of an ante, because if you don't know all those numbers, I don't know how you're making decisions, right?

[00:39:32] I kind of believe in guided intuition. Whereas if I steep myself in the context and I actually know what's happening and I can play 20 questions around numbers to demonstrate that to you and then say, look, my sense is we should go this way because I believe my brain is somehow kind of synthesizing all that and helping me get the right answer.

[00:39:47] Maybe in a way that's not easy for me to articulate. So that's why I like it. But yeah, I'm a big believer in running by the numbers, making your team run by the numbers. 

[00:39:57] Dave Gerhardt: I love how you got to that by having to be in that meeting and [00:40:00] learning all those things. And it's almost like a training. I don't even know if it's like a training, but if it like, if you have that as your baseline and then you can go put your CMO hat on, you're definitely going to be a better business partner.

[00:40:10] You're going to be more effective. Shoot. I'm seeing this now and running in running my own business. I look at the P and L differently than I did when I was at a company because it's my, you know, it's all coming from my credit card and my money. And I think having that understanding just forces you to do something different.

[00:40:26] So how would you go if you're listening to this and you're like, man, that's a great idea. I need to go learn more about the numbers in this business. How would you go approach that? Do you go knock on the CFO's door, send an email? How do you, how do you get in there? Yeah. 

[00:40:38] Dave Kellogg: So I think, I mean, look, there's a, I'll start with a plug.

[00:40:41] There's a number of bloggers, including myself who talk about metrics, right? There's a number of kind of personalities. I'd call them on Twitter. Only CFO is a CFO one. A guy named CJ Gustafson is one. The SaaS CFO is another. Ray Reich is another. There's kind of a little, Metrics, SAS community out there.

[00:40:59] If you follow those people and the links they point you to, that's how I'd start out the SAS CFO even offers a training class, I think, so you can go take class on SAS metrics from him. So I think I, I just want to try and get fluent in the subject matter. If I'm at a larger company, I would ask the CFO to send me financial analyst reports.

[00:41:16] So sell side analysts. Write reports up on companies. And if you compete with one of those companies, or you're going to be one of those companies one day, or you're one already, Lord knows, get those reports. They don't often mail them to CMOs and marketing people, but make friends. If it's a big company with the investor relations person or the head of finance or the CFO, because if you, the day you can read one of those and understand every word you will have graduated.

[00:41:41] Right. And lots of people can't understand every word cause they're, they're going to talk about guides and RPO and billings, and they're going to talk about all this stuff. It's going to sound pretty foreign to you, but that, that is the language that the investors are looking at. 

[00:41:55] Dave Gerhardt: This will be like a quick hit section.

[00:41:57] I'm going to try to get as much in as I can.

[00:42:00] This is from a, uh, exit five member. What's your day. Uh, he writes a lot about, uh, metrics and the explosion of Martech. What's your take on brand? 

[00:42:07] Dave Kellogg: I think short answer is brand is for later. Right. Like the best way to build a brand of the startup is go sell some software.

[00:42:14] And when we get to 50 or a hundred million dollars, call me back. And then we can talk about. I love that. I love it. 

[00:42:19] Dave Gerhardt: Okay. And their next, next question. What's your perspective on category creation? 

[00:42:24] Dave Kellogg: I think it's less important than it used to be. I think in the old days, the goal, the dream was to make a category, have Gartner print a quad and then go lead it.

[00:42:32] Now, I don't think people care as much about categories. Well, I can't even name the category for some of the more popular packages. I like. 

[00:42:39] Dave Gerhardt: What's your perspective on lead gen versus demand gen? 

[00:42:42] Dave Kellogg: I like demand gen, I'm not even sure why. I think leads are a little tainted because they're so far up funnel.

[00:42:47] You can argue demand's even higher, but I, just terminology wise, I use demand gen. Not even sure why. 

[00:42:52] Dave Gerhardt: What role do you think, uh, chat GPT and these AI tools are going to have in B2B SaaS the next five years? 

[00:42:59] Dave Kellogg: I think two roles, one content generation and two search. They're going to change search. Obviously, we'll do the second one first, but all the work we do on SEO, I'm not even sure how to do it yet.

[00:43:09] Like, I don't know how to SEO for chat GPT. Like, how do you get it? Imagine the chat GPT search engine. There must be a way, meaning like, 

[00:43:18] Dave Gerhardt: uh, how do you make sure that you show up in chat GPT search results? Yeah, 

[00:43:22] Dave Kellogg: yeah, yeah, absolutely. Right. Just like we, we, you know, somebody types in your category name today, you want to be above the fold.

[00:43:29] Like what happens when you say chat GPT, show me three financial planning and budgeting systems. It's going to name three. The question is, how did it get there and how do you get yourself on that list? So I think it's going to change the whole world of SEO on the demand gen side. The web is kind of our number one tool for generating demand.

[00:43:45] So it's a huge change on the demand gen side. And then operationally, it's obviously a great tool for generating SDR mails, generating content, etc. So I think it's going to change the content generation business, and it's going to change, really, the web demand generation business. 

[00:43:59] Dave Gerhardt: All right, [00:44:00] Dave Kellogg, I could have interviewed you for for three hours.

[00:44:02] If you listened, I took a bunch of notes. I'm going to write these up. This will be in our podcast, but this is fantastic. Go to kellblog. com, K E L L B L O G. com. You can also follow Dave on Twitter, Kellblog. And I think one of the things that you said there is great. And I'm going to try to extrapolate a lesson from that, which is about learning SAS metrics.

[00:44:22] And if you want to go deeper on that, I love the mental model of finding one or two people in the space and just Reading like don't worry about following 10 and 15 different perspectives. Find one or two people and like you've been that for me. And so I think people can continue to follow you, but I just appreciate all the knowledge that you've, that you've put out there.

[00:44:41] If you want to go more on any of these topics, go and check out Dave's stuff and make sure you tell them that you enjoyed this interview on exit five. Dave Kellogg, so much for doing this. 

[00:44:49] Dave Kellogg: Thanks for having me.