Aligning Your GTM w/ Frank Cespedes PhD
In this installment of The GTM Interview, I had the privilege to ask the hard questions to the legendary Frank Cespedes, Ph.D., Senior Harvard Lecturer, and bestselling author of “Aligning Sales & Strategy” and his new book, “Sales Management That Works.” He helps us get to the bottom of the changing roles of GTM in a digitally enabled landscape, how diverse GTM teams like you can align, the emerging role of RevOps, and how we can foster the next generation of GTM leaders. While we have better analysis tools than ever, we can’t lose sight of customer-facing interactions to know and deeply understand our buyers.
Where is GTM going in 2023?
The most important thing about marketing and selling is buying: who buys, why, how. That’s where Marketing adds distinctive value to a business. Customers are now online and offline at multiple times throughout their buying journeys in most markets. They get information from many sources beyond ads and sales reps. Understanding how buyers navigate those sources and when to interact with them—knowledge that good Marketing provides—is now central to effective business development.
Many managers, however, misunderstand the implications of these buying changes. It is not a digital-eats-physical world: online and offline are typically complements, not substitutes. But this change does affect key areas of an effective go-to-market initiative: hiring criteria, training emphases, pricing, and channel-management skills, among other topics discussed in a book I recently published.
Online and offline interactions have big economic implications. For instance, shoppers who pick up online orders in store spend more. About a third of clothing ordered online is returned versus 8% bought in store, and processing a return in the store is often half of what it costs when an online order is shipped back to a distribution center. This is one reason why–before the pandemic, and now again as the pandemic recedes–a trend was the addition of brick-and-mortar outlets by once pure-play ecommerce firms like Bonobos, Casper Sleep, Warby Parker, Wayfair, Amazon, and Alibaba.
Meanwhile, online marketing is now very expensive, cluttered, and high maintenance because you must keep up-to-date with changing algorithms on diverse platforms: for example, how many Marketers knew how to spell Tik Tok accurately as recently as 3-4 years ago? It’s an example of the law of diminishing returns, and growing privacy regulations make online marketing even more expensive: some firms are now paying customers to share data, driving up their CAC. Going forward, digital marketers will be under increasing pressure to demonstrate ROI.
The other key reality facing GTM in 2023 is inflation. In business, a dollar today is always worth more than a dollar tomorrow, but even more in an inflationary economy. For most firms the biggest driver of time-to-cash is the selling cycle. Accounts payable accrue during selling initiatives, and accounts receivable are largely determined by what’s sold, at what price, and how fast. Accelerating selling cycles will be a key challenge and opportunity for marketers and sales managers in 2023 and beyond.
How are Sales and Marketing aligning?
Omnichannel buying increases required interactions between Marketing and Sales, and digital tools are blurring their roles. Traditionally in most firms, Marketing was responsible for generating awareness and then a hand-off to Sales. But technology now allows Sales to do many things that were in Marketing’s domain. Think about content marketing and lead generation in subscription models. That’s now often handled by Sales groups, and you see that reflected in budgets at many firms. The issue is whether Sales knows how best to conduct those activities and the role of Marketing beyond sales support.
Similarly, more data about Sales and Marketing is now available, and data analytics groups often report to Finance, which then asks questions about those resource allocations. Marketing needs ROI answers beyond “brand awareness” metrics, and Sales need answers that go beyond top-line volume. The requirement for deeper financial literacy is increasing in these functions and affecting careers.
A key issue is pricing and, again, inflation increases the importance of alignment and effective two-way information flows between Sales and Marketing. It’s key to linking price and value, and that’s where Marketing and segmentation are vital. But a market or segment never buys anything; only customers buy. And especially in B2B firms, the sales force ultimately frames the value proposition with customers.
Moreover, as platform models disseminate more widely, value changes, identifying the relevant unit of value becomes essential, and that affects how the firm must market and to whom. For example, the length of the sales cycle often shortens as you move from an upfront-payment pricing structure to outcome-based performance. But the buyer, relevant value documentation, marketing collateral, and the sales conversation also change.
What is the role of Revenue Operations?
RevOps is the current term for groups that have long existed in many companies as a key conduit for sharing information between Marketing, Sales, and post-sale Service or “Customer Success.” The difference is that RevOps groups now have access to more data, and more timely data, than in the past.
But data is never the same thing as the answer to a management issue. CRM, for example, has been with us for decades. But most companies will tell you that their CRM systems are typically under-utilized by their sales leaders, often ignored by reps, and when reps do input data into CRM the inputs are inconsistent because different salespeople use different criteria in reporting what is or isn’t a prospect, deal, probability of closing a sale, or where a prospect is in the pipeline.
As usual in business, the key capabilities are people and management. But given good management, my experience is that RevOps often has the biggest impact in two areas:
Increasing Selling Time. Most salespeople spend the bulk of their time on non-selling activities and much less than 50% of their time interacting with customers. Most companies, therefore, have a big opportunity embedded in their sales models.
Think about the impact in a business if you can off-load other activities and increase selling time by an incremental 10-15%. In most firms, that is a very big productivity gain. Further, when you improve sales utilization, prospects that were not economically feasible to target become worth it, increasing your addressable market.
Monitoring Online/Offline Interactions. As a multi-channel go-to-market becomes the norm, Rev Ops becomes important in measuring and evaluating where, when, and how to deploy online and/or offline efforts.
For example, time-on-site and page views are often associated with positive engagement, when they may be a result of a confusing or slow-loading site. New visitor counts are often counted as growth, but much of this may simply be driven by the proliferation of new devices and disconnected from actual purchases. In many subscription sales models, a “win” is treated as synonymous with the “last click” when the reality is that the purchase was motivated by a combination of sales and marketing activities throughout the buyer journey. RevOps groups shed light on the types of onboarding that spur initial adoption, the features that retain customers, and the offers that are more and less likely to be effective.
The ultimate economic rationale for marketing investments is a “baseline-lift” valuation—i.e., a measure of the lift over baseline sales attributable to an initiative. But you will never know what that lift is (or isn’t) unless you can link the investment to the customer-conversion dynamic in your GTM model. Further, the lift from a given investment will inevitably alter. You rarely generate three times current revenues and profits by doing three times whatever got you to your current state.
How do we foster the next generation into the C-Suite?
This is a great question about an important issue. In the past 25 years, the number of reports to the CEO has, on average, doubled in Global-1000 companies. But most of this addition has been specialists (CIO, Finance, Digital, etc.), not people coming from a general management role, and more executives than ever have made it to the C-Suite without a background in Sales or Marketing. Many senior executives lack knowledge about the daily activities of their customer-facing colleagues.
That’s dangerous for two reasons. A core C-Suite responsibility is formulating and executing a market-relevant strategy. And operationally, moreover, customer-acquisition efforts affect resource allocations across the business. Most cap-ex is driven by revenue-seeking activities with customers, so the focus of Marketing initiatives often determines where a firm invests, and because a key driver of cash-out and cash-in is the selling cycle, increasing close rates and accelerating selling cycles are also strategic issues, not only sales tasks. But leaders must understand how that really works in order to make improvements.
Unlike professors, executives get paid to manage today and tomorrow, not yesterday.
I don’t have a simple answer to the issue of building the next generation of C-suite leaders. But always remember that, unlike professors, executives get paid to manage today and tomorrow, not yesterday. So career paths that increase ongoing customer contact over time and throughout changing market conditions are one place to start.