Podcast
Applied Theory Series: Crafting RevOps Funnels and Building High-Performing Teams
Peter Smith
President, Ratio
On this episode of Healthcare Market Matrix’s Applied Theory Series, host Jessica Head is joined by Peter Smith, co-founder and President of Ratio, for an insightful conversation about RevOps, customer success, and how those two elements inform the ROI of a company’s marketing strategies. Peter is the master of operational and financial functions at Ratio and has worked with countless clients over the last twelve years, helping to craft KPIs and corresponding budgets to meet marketing goals. Throughout the episode, Jessica and Peter discuss building a team equipped for marketing success, recommendations for marketing executives building a 90-day plan, and Peter’s favorite tools for mapping KPIs.
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Transcript
Peter Smith on Cofounding Ratio
Jessica Head:
Okay, so we are back with an all new episode of Applied Theory series, which is a video series where Ratio team members take the hot seat to share insights and strategies for executive teams and their marketing departments. And today, we are going to be talking all about RevOps, customer success, and ultimately how those two elements and form the ROI of companies’ marketing strategies. And I’m really excited to have one of our co-founders and president of Ratio on the show with us today, Peter Smith, as he is the master of operational and financial functions at Ratio and certainly has worked with many clients over the last 12 years in helping to craft KPIs and corresponding budgets to meet those marketing goals. So thanks for being here, Peter.
Peter Smith:
Yeah, excited to be here. Excited to talk about marketing, KPIs, RevOps. This is a conversation that always comes up with prospects and clients, so it’s a fun one to talk through.
Jessica Head:
Yeah, for sure. So before we dive in, I’d love for you to share with our listeners a little bit about your personal journey into launching Ratio and working with enterprise SaaS companies. As a finance guy, what inspired you to want to be with a bunch of creative people?
Peter Smith:
Yes, great question. Well, I would say a combination of ignorance and excitement around it. So we started this organization somewhere around 12 years ago. At the time, I was in undergrad. I was getting a business degree with a focus in entrepreneurship. And from a personal standpoint, I’ve always had interest in finance numbers, really enjoyed my finance classes, accounting classes. So whenever the three of us got together and started talking about starting this organization, I was really the business generalist doing a little bit of everything, so account management, project management, all the financial management. And fortunately over the years, got to gravitate a little more towards my more natural skills.
But what it’s really afforded me the opportunity, wearing so many different roles, is really getting to understand the seat of our clients, in that ultimately these are healthcare technology companies that are … from very different types of companies, so whether from a product offering, to how they’re formed. Some of these companies are self-funded, been in business 15 years, and are at some inflection point where the traditional sales model just isn’t working anymore and they’re needing to turn up sales or marketing. Whereas others, they’re heavily funded in a series D, and it’s really about scaling the department and gaining additional market traction.
So it’s been fun for me starting out as a business generalist, today, working with our team. I assist in the sales process, talking to these prospects, understanding … And as an organization, from 2011 to now, 2011, we really started as a creative agency, and now we really are a strategic growth marketing agency that has a lot of data-driven KPIs. Honestly, over the years, we’ve gravitated a little bit more towards what I understand, which has been nice. I think early on [inaudible 00:04:37]-
Jessica Head:
You finally feel understood.
Peter Smith:
Yes, a little bit more. Early on as a creative agency, I frankly had less to contribute in that realm. But when we’re talking about ROI and leads and conversion funnels, that’s a lot more math. And what I like is the convergence of the art and science of it. Why did I do this? Well, part of it is I like being around creatives and I like being around data people, and I seeing them interact and come together to have a shared goal and function.
Peter on the Struggle of Properly Appreciating Marketing Efforts
Jessica Head:
Yeah. Yeah, absolutely. It is been a fun evolution to watch from afar and now be a part of as well. So this is an exciting chapter, for sure. And on that note, I do want to talk about customer success and how marketing funnel fuels RevOps. So you’ve spent a lot of time, as you just mentioned, scoping marketing budgets for the clients that we serve, helping teams allocate funds to support teams’ KPIs. And I think this probably goes without saying, but most especially in the B2B world, and I know we see this too, marketing is often an under-appreciated function. And I think there are a variety of reasons we see this happen with companies at different growth stages. But why do companies seem to under-invest, sometimes even underpay for talent, and ultimately under appreciate the time and results generated by those functions? What are your hypotheses around that?
Peter Smith:
Yes, I have a lot of thoughts about this one. So I’ll first say I’m optimistic that equation’s changing a bit. I think a lot of companies are shifting and putting a little more focus towards marketing, but I think if we’re looking at origin why … And I do still think it’s a trend. I think if we look at healthcare in particular, while it’s huge and it touches all of us in some way, it is very much a tight-knit community. And a lot of these people have been … Once you start working in healthcare, you tend to continue working in healthcare. And with that, whether it’s in your same organization or moving to another’s, there’s just a lot of community that happens.
So I think traditionally, it’s been a lot of direct sales. It’s been a lot of networking. It’s been a lot of talking to people. It’s been a lot of like, “Oh, well, I know this person. Let me reach out to them, let me talk to them.” And it is effective. That’s a very important part of sales and of healthcare. But I think as the market has grown and gotten more complicated and noisier, that’s become more and more difficult to strictly lean on sales and let that be the primary driver of revenue; or let’s even assume absolute success, at some point you’re going to tap out those relationships. There’s only so many of those or so much networking you can do; or it becomes a bottleneck to the organization. Sometimes you can’t scale the people on the sales function fast enough to where there’s one person, they’re the primary person, they need to touch every deal that’s coming in. And that’s a bottleneck to sales. It’s kind of a ceiling on it.
So I think some of the historical it’s worked has played some part of this, but I do think that’s changed a lot. Another contributing factor is its attribution. Sometimes pure sales is a little bit easier. It’s like, “Hey, I met this person at HIMSS. We started a conversation. And six months later, they inked the deal. It was a long process, but sales did it.” Marketing doesn’t always have the luxury of doing that, but it’s very important. So in marketing, there’s a lot of different touchpoints. Brand awareness is a really big one. Brand awareness is really important, people hearing about you, knowing about you.
A fun story on our side; we actually recently got a lead through our website. So if you just have strict attribution models, that’s going to be a web lead. Well, when we got on the call and started talking to them, it was a combination of we had a small booth set up at HIMSS several years ago. The individual saw that and has since become a CEO at another organization and is now the right fit, the right time, and asked their marketing person to reach out to us and talk about it. Well, that’s a really, really difficult lead to attribute without just from pure marketing data. So some of it is it can just be hard to track, but a lot of that’s changing, and I think people are seeing that. We’re having a lot more starting conversations where people are starting with buy-in in marketing, rather than needing to come around to that. So I’m pretty bullish on the change and that people really are seeing the value of both.
Jessica Head:
Yeah, yeah. Well, and I mean, you mentioned HIMSS. And I attended Vibe this spring, this past spring, and many of our advisory board members and team will be attending Health in October, experiencing similar live conference, these types of ecosystems. And exhibitor booths are really impressive and they’re super cool, but ultimately it isn’t necessarily a function of marketing at its finest. It’s primarily in the sales sector. And so I think we’d certainly see that in the hiring structure of executive teams, and we also see how teams are tracking RevOps in their CRMs. Talk to us about how should you be thinking about that from a CRM perspective? And talk about some of maybe of the KPIs and understand the ROI of marketing strategies that can ensure that longevity and customer success, but also attribute it properly. Is there a way to maybe explore some of that?
Peter Smith:
Yeah, yeah, we can talk about that. So our team’s very goal-oriented. So the starting point is always kind of, what is your goal? And from what we see, it is typically one of three. It’s typically either general brand awareness, which in that case what they’re often saying is, “We’re having tons of conversations already.” This is a great problem to have, but it’s where they’re having so many conversations already, where they’re really wanting the brand awareness, to where when the prospects they have, when they’re coming to them, talking to them, they already have a more deep understanding of the organization, their offerings, what they’re doing, to where when they get there, it’s truly a sales conversation because there’s been a lot of education along the way.
Another one that we’re seeing a lot is recruitment. A lot of companies, they’re saying the issue is not bringing in new customers, it’s staffing shortages. So especially on the provider side of things, clinicians, nurses, doctors, there’s a lot of shortages there, as everyone is well aware. So sometimes that’s the primary goal. We’ve had clients where recruiting is the key. And the last one, which is easily most common, is we want more leads. MQLs, SQLs are always some of the key conversion points there. But I think in building out the KPIs, so it starts with, what are you trying to do? So know which of those three, and it may be a little bit of all of them. And that’s okay, but it’s really taking those and saying, “Okay, if MQL is the key conversion point, what do you need to do? Where are those people traditionally coming from?”
I think looking at your current funnel is a great place to start. Looking back’s not always the best indicator of the future, but really understanding, where have your people come from so far? If you’re creating content, is that content converting? Is that content leading to people engaging with you? Is it relevant to the topics that they’re looking at? A lot of that can help, and there’s a lot of metrics to time on page, or how many pages did they visit throughout your site? There’s a lot of metrics that can help you understand some of these tactics, but it really is kind of like, what are you doing? Is it working? Is it not working? And then you can start to theorize why and build different KPIs around it.
Building a Team Equipped for Marketing Success
Jessica Head:
Yeah, yeah. I’d like to dive a bit deeper into building a team equipped for marketing success. So you’re alluding to some of the KPIs that teams could be tracking. For many enterprise teams, building a RevOps team for scale is key. So how would you, I guess, consult or share with a team that’s looking to scale their RevOps team, how much should you be allocating to sales versus marketing? What do those budgets look like?
Peter Smith:
Yeah, great question.
Jessica Head:
You have truly seen … just for our audience, I think Peter has the most visibility on the variety that we’ve been exposed to at Ratio.
Peter Smith:
Yeah, it is a little bit of everything. And I will say I haven’t seen a clear pattern to it. Unfortunately, I’m not going to be able to give the like, “Oh, well, 40% should go towards this, 60% should go towards” … It really is dependent-
Jessica Head:
It varies.
Peter Smith:
Yeah. Yeah, it varies depending on the organization. I think from a starting point, sales and marketing have to be friends. It cannot be an adversarial relationship, it cannot be something … And where we’ve seen companies fail is when it feels very adversarial. And that is not what this is. And I think as leaders, I think aligning compensation structure to align to make it really be a group effort is really important, because I think if you’re overly … Compensation is a thing. So if you’re tying people’s compensation in an overly siloed way where the initial attribution is exclusively contributing to theirs, that’s going to put these teams at odds and you’re going to be starting from a really poor standpoint.
I think some of it is when you have a founding team or an initial leadership team that you intend to stick around, be honest about what they’re good at and what they’re not good at, and lean into those skills. So if you do have a strong sales team, when you say that, really dig into, what are they good at? Are they good at generating leads, or are they good at closing leads, or some combination of both? And then build around what they’re naturally good at, not the thing that’s really demotivating for them that they’re doing because they know they have to, but what are the strengths? And then build from there.
I think on the RevOps side, you need a CRM and you need to be managing it well. I think I’d say where some of the greatest tension in the marketing and sales, those cross-departments, comes from, I would say, is the lack of definition or the varying definitions between what a marketing qualified lead and what a sales qualified lead is. And that’s really the wrong focus. It’s sales saying, “Oh, well, they’re not getting us enough leads,” and marketing saying, “Oh, we calculated it, you need 100 leads in order to lead to this number of sales,” and sales saying, “Well, this isn’t good enough.” Then it’s like you really need to work together to say, “Okay, well, what is good enough, in your mind?”
And you can Google definition of SQL, definition of MQL. Ultimately, you need to define a definition within your organization and then be really consistent, because what you’re doing is, in your CRM, you’re going to have leads. There’s going to be an origin date. You’re going to at some point convert them into a deal. And then you’re going to go through the funnel and see at what rate did they convert and over what period of time. And it kind of doesn’t matter what those stages are, as long as you’re really consistent and everyone on the team understands them, because all you’re really trying to do is you’re trying to make the revenue as predictable as possible. So the pattern between the teams of knowing an MQL, knowing an SQL, and just working together with what they are is a really important piece to that.
Jessica Head:
Yeah. I also love that you touched briefly on the compensation side, because I think a lot of it is like, okay, we get it. Compensation is very different for sales teams than marketing teams, but also customer success. So customer success is just this often very overlooked genre of community. They’re the ones that are retaining these clients year after year after year, and yet they’re not necessarily … while sales gets to maybe go on a big hefty vacation, “Congratulations, you made this many sales this year,” and then the customer success person is just like, “Okay, I got like a day off.” I don’t know. The structure is very different. So I don’t know if you have any other further thoughts on that or maybe how teams can structure that in a way that is rewarding for the holistic team and also understanding how marketing is kind of like that through line to helping to ensure that structured and consistent communication is happening at every stage of the customer experience. But any other thoughts on that that you want to add?
Peter Smith:
Yeah, it comes down to aligning incentives. Everything I’ve read about compensation is that ultimately money is a de-motivator, not a motivator. There’s a floor to where that changes; below a certain point it will, but then in general, money is typically viewed as a de-motivator. So in that, you want to make sure that the compensation structure is built to where people generally can control what they’re doing, or I like to think about what could go wrong. So I’d say as a leader, you want a group culture. You want a culture that’s working together, working collaboratively, so I think aligning that incentive.
So something that might not be as effective in a cross-team function is where it’s strictly like, “This is your lead or this is marketing’s lead.” That’s not going to be as effective as saying, “Hey, we need X number of dollars in net new revenue.” So there’s a tiered bonus structure where if net new revenue, if it’s Y dollars, then you’re going to see a Z percent bonus based upon that. That’s one way to do it. I think it’s the same with customer success. And different types of roles might have different structure. I think you’re right. I think someone in marketing or someone in customer success is likely to have a higher base where incentive pay is a little more incentive bonus, whereas sales might be more likely to have a lower base with a higher upside. And I don’t necessarily think that’s a bad thing. I think you just need to make sure that the metrics that’s driving that is collaborative and not isolated by default.
Peter’s Recommendations for a Marketing Executive’s 90-Day Plan
Jessica Head:
Well said. Yeah, well said. What else do we need to talk about? We could be here for a while, I just now noticed.
Peter Smith:
There’s so much.
Jessica Head:
We could be talking about this stuff for a while. I would say, questions on 90-day plan for a marketing executive, so first 90 days, what are your recommendations, steps one, two, and three, for a marketing executive?
Peter Smith:
Yeah, so I’m going to ping pong between marketing executive personas. So I’d say the first thing I would do is, I mean, come in and just audit the landscape, and that’s a big audit. So I would say, what is the website? What is the messaging platform? What are the core offerings? So I would start the first thing, “Okay, what are our core offerings? What can people buy from us and what does it cost?” I’d just go that granular: what are the add-ons?
From there, I would personally go through the onboarding journey, or start from demo, try to go through the sales process as far as I can, because a marketing executive coming in, you have objectivity. You’re going to lose that. And it’s something really valuable that you have that other people in your org no longer have. So I would take advantage of that. So understand the products, understand how it’s being articulated. And in an ideal world, it’s articulated pretty well and you don’t need to make major changes, but you need to know the message.
On the other side, on the RevOps side, is I would similarly do an internal deep dive of the funnel, specifically the CRM. So what CRM are we using? What happens? How do contacts make their way in the CRM? So generally speaking, you’re going to have contacts, you’re going to have companies and you’re going to have deals. And it’s understanding, how are those people getting here? Is it through web forms? Is it manual entry? And what are we doing? Are we marking things as a lead? Are we marketing them as an MQL? When does it become a deal? Is that system consistent. And I would say, if it’s not consistent, which I will say I’m making this number up, but 80% of the time it sounds like it is not … I had a meeting yesterday with two marketing leaders within a health system, and pretty quickly they started nodding their head, like, “Yeah, our CRM could use some work.”
And that’s incredibly common, and these teams are growing, these teams are evolving. But as much as you can, I’d say audit that CRM, see what’s working, because otherwise what’s likely happening is … You need to understand where you’re not being successful. Are you not generating enough leads, or are the leads not quality, or are you bad at closing? Is closing the problem, where you’re getting enough leads, but that piece is just not happening? You really want to isolate the funnel to understand where are you doing a great job and where are you not doing as well?
Jessica Head:
And also just chatting with customers about their entire experience. I feel like this is something that’s so overlooked that we see a lot of, companies just not having a clear view of their client experience. And you can only do that if you’re actually interfacing with that human.
Peter Smith:
It’s pretty important.
Jessica Head:
So that’s important too. Yeah, for sure.
Peter Smith:
Customers are going to give you a really clear sense of what they value. If the org’s comfortable with it, I mean, just calling some of these customers and just saying, “What attracted to us initially? What problem were you seeking to solve?” Maybe be cautious on this one, but, “How well are we solving that?” Just asking some questions that can be really helpful is kind of … trying to get to a success story and then also a non-successful conversation. So maybe some win-loss analysis, because what ends up happening is if you won the business and ask them why, that’s going to prioritize what they value. If you didn’t get the business and ask them why, that’s also going to show you what they actually valued when they were trying to solve their problem.
So it can be frustrating, because if you don’t get a deal and you go talk to them and they tell you the reason why, a lot of the time you’re going to say, “Well, shoot, we have that feature, or we do that. You just didn’t see it.” I’m a big believer that if someone doesn’t buy something from us, it was our fault, kind of regardless. So if that’s the case, then it’s just like, “Well, we didn’t do a good enough job articulating that we offer that feature, and now I know.” And you don’t want to get too caught up in recency bias talking to one prospect and then going and changing your whole messaging platform.
Jessica Head:
No doubt.
Peter Smith:
But talk to some of these people and look for patterns.
Jessica Head:
Yeah, yeah. Share a time when you’ve heard a client wanting to implement an MQL KPI for the wrong reasons. We’ve sort of touched on this already, but if there’s anything that comes to mind.
Peter Smith:
Sure. Yeah, I’d say it’s twofold, and this happens a lot. It’s almost always an incorrect definition of what MQL is, or the other would be I’ve seen a lot where people are expecting too much of an MQL. So broadly speaking, an MQL is a marketing qualified lead. It is somebody that has shown some type of interest in your product, so that could be they signed up for your newsletter, that could be that they saw you published a white paper and they downloaded that white paper, so you got their information and they became an MQL. And that’s great.
I think what I have seen is I’ve seen sales teams say, “Well, I called them and they’re not ready to buy, so that wasn’t a good lead.” It’s like that’s not a fair expectation of the MQL. This person came, and they were likely at the awareness phase of their problem. Look at the lead source. Where did they come from? How did they make it into your CRM? But we have seen a lot where … And it’s very understandable, especially when sales are slow. It’s when business is slow and sales teams are under a lot of pressure to close deals and they only have so much to work with, then they’re doing what I would do, which is to go into our CRM and look at what is there and try to make the most of it.
But you need to know that when you’re at that point, if you’re going to someone that two days ago downloaded a white paper for the first time, and you see that traditionally your sales cycle is four months long or it takes two months to go from an MQL to an SQL, you’re rushing the process. Outside of getting lucky, your expectation is unrealistic. And it can have the opposite effect of coming on too strong. It could be someone that’s really not ready to have a conversation, still hasn’t fully understood their own problem. They’re really in the early stages of education. And calling them or trying to schedule a demo sometimes can just be really early. And just to be clear, I don’t think there’s anything wrong with that. I think if you need to reach out, but it’s kind a soft, like, “Hey, I saw you downloaded this. If you’re interested in a demo, we’d love to have a conversation.” And if they don’t respond, back off. Let them stay in your funnel and continue to let the nurturing process happen over time.
Favorite Tools for Mapping KPIs
Jessica Head:
Yeah. Okay, so going to resources, tell us your favorite tools for mapping KPIs. I think we might have one.
Peter Smith:
Oh, for mapping KPIs. How would I know? So there’s a couple. I will say something that we use with clients that’s very helpful, so this is like when you’re running a marketing program, is we use Google Looker Studio for a lot of our analytics. And we’ve built a lot of custom dashboards, but part of why we do that is because it can very easily and automatically connect into a lot of the marketing channels that we’re already using. So it can plug into GA4, Google Analytics. And it can almost always plug into your CRM where you can tie it to number of new contacts, number of MQLs, number of contacts marked as an SQL. And in some cases, you can actually pull in the visuals of the LinkedIn ads. So it ends up being a really powerful tool that can be really, really automated.
If you are wanting tools to help you understand what you could spend in marketing and still see the ROI, we’re going to do a shameless plug and point to our website. So we recently launched what we call our marketing spend ROI calculator. It’s at goratio.com/roi-calculator. And really, the intent of it was … So it happened very organically. We were working with a prospect that was well-funded and was very, very reasonably coming and saying, “Okay, we’re trying to define our marketing budget. This is new for us.” So they were a series B company, but had never really chased after marketing, and now have enough customers and significant funding to really do it right for the first time. So they didn’t have a great framework of like, “Well, what’s reasonable?” So we kind of backed into that. We helped them back into it and said, “Okay, well, let’s talk about it a little bit.”
So I think the best way to do it is really to isolate and say, “What can I spend to land one client and still meet my target ROI?” So we built a calculator that does just that, and it’s really looking at … And I’m not going to recite the whole calculator, but it’s saying, “What is your average customer in a year? What amount of revenue does it represent in a year?” Then a big question that people don’t often consider from a marketing standpoint is, how many years is that customer going to be with you? So if it’s 200,000 a year, they’re going to be with you for three years, well, your lifetime value is $600,000. So if marketing has the potential to generate that, that can help you better understand what you can spend.
I think the key question in that is knowing what ROI you need in order to do this. And I’m not going to give a whole lot of percentages, but with that, if your marketing spend is 10% of your overall budget, and if marketing is expected to bring in all of the revenue, well, right there, to break even, you’re going to need a 10X return. So some of this is where you can work with your CFO to really understand … And just I think the whole goal in this is trying to … Marketing metrics are about simplifying the numbers so you can start to understand it.
So that’s really what the calculator’s meant to do, is, what can I spend in marketing? Well, what ROI do you need? What’s your customer worth? You can spend X amount in order to generate one customer. Then you can look at, okay, well, we close one in four deals, so we need four deals. And then we close one in four MQLs to SQLs, so we need 16 SQLs to land one customer. Now you’re having really tangible conversations like, “Okay, will our marketing program support … will it lead to 16 MQLs?” And that’s a much easier conversation than just saying, “How much money can we spend in marketing?” That’s just a really [inaudible 00:31:02]-
Resources for Those Evaluating RevOps and Closing Thoughts
Jessica Head:
Yeah, a very overwhelming question, if not broken down that way. So yeah, no, super great resource. Definitely our listeners should +check it out. And I guess to follow up, any podcasts, books, resources that you would recommend for people as they’re evaluating just RevOps in general, marketing strategy, marketing ROI?
Peter Smith:
That’s a good question. I’m a big spreadsheet person, so I think … I don’t know, this is a really bad answer, but I think just lean on some basic math when you’re doing some of these things. And spreadsheets can be really helpful. ChatGPT is a nice plug. I’m still using it as a brainstorming tool, but I think as a marketer, as you’re asking yourself some of these questions, it can be really helpful to be like … And you’re not going to get some of the answers you want, like, how much can I spend in marketing, or what percent of revenue do companies usually spend? You’re not going to get really accurate answers there, but you could plug in some of your own situation, like, “I am a company that has this much in revenue. This much is coming from existing sales. We need an extra 1 million from sales and 500,000 from marketing.” I don’t know exactly where I’m going with that, but you can-
Jessica Head:
Yeah, theoreticals, right, like [inaudible 00:32:22]-
Peter Smith:
You can text them in and just see where it goes. But yeah, I don’t have … a lot of the content I consume tend to be a little more on the finance, economic side of things, but-
Jessica Head:
Which is why you’re on our team. We’re a very well-balanced team in that regard, so that’s awesome. Well, thank you so much, Peter, for joining us on the show. It’s been a pleasure. And I know this is a wealth of information for people as they’re strategizing some of their RevOps plans. We’ll definitely have to have you back on the show to talk more in-depth on a couple of topics that we hit. So until next time, we’ll see you guys at goratio.com.
Peter Smith:
Thank you.
Transcript (custom)
Peter Smith on Cofounding Ratio
Jessica Head:
Okay, so we are back with an all new episode of Applied Theory series, which is a video series where Ratio team members take the hot seat to share insights and strategies for executive teams and their marketing departments. And today, we are going to be talking all about RevOps, customer success, and ultimately how those two elements and form the ROI of companies’ marketing strategies. And I’m really excited to have one of our co-founders and president of Ratio on the show with us today, Peter Smith, as he is the master of operational and financial functions at Ratio and certainly has worked with many clients over the last 12 years in helping to craft KPIs and corresponding budgets to meet those marketing goals. So thanks for being here, Peter.
Peter Smith:
Yeah, excited to be here. Excited to talk about marketing, KPIs, RevOps. This is a conversation that always comes up with prospects and clients, so it’s a fun one to talk through.
Jessica Head:
Yeah, for sure. So before we dive in, I’d love for you to share with our listeners a little bit about your personal journey into launching Ratio and working with enterprise SaaS companies. As a finance guy, what inspired you to want to be with a bunch of creative people?
Peter Smith:
Yes, great question. Well, I would say a combination of ignorance and excitement around it. So we started this organization somewhere around 12 years ago. At the time, I was in undergrad. I was getting a business degree with a focus in entrepreneurship. And from a personal standpoint, I’ve always had interest in finance numbers, really enjoyed my finance classes, accounting classes. So whenever the three of us got together and started talking about starting this organization, I was really the business generalist doing a little bit of everything, so account management, project management, all the financial management. And fortunately over the years, got to gravitate a little more towards my more natural skills.
But what it’s really afforded me the opportunity, wearing so many different roles, is really getting to understand the seat of our clients, in that ultimately these are healthcare technology companies that are … from very different types of companies, so whether from a product offering, to how they’re formed. Some of these companies are self-funded, been in business 15 years, and are at some inflection point where the traditional sales model just isn’t working anymore and they’re needing to turn up sales or marketing. Whereas others, they’re heavily funded in a series D, and it’s really about scaling the department and gaining additional market traction.
So it’s been fun for me starting out as a business generalist, today, working with our team. I assist in the sales process, talking to these prospects, understanding … And as an organization, from 2011 to now, 2011, we really started as a creative agency, and now we really are a strategic growth marketing agency that has a lot of data-driven KPIs. Honestly, over the years, we’ve gravitated a little bit more towards what I understand, which has been nice. I think early on [inaudible 00:04:37]-
Jessica Head:
You finally feel understood.
Peter Smith:
Yes, a little bit more. Early on as a creative agency, I frankly had less to contribute in that realm. But when we’re talking about ROI and leads and conversion funnels, that’s a lot more math. And what I like is the convergence of the art and science of it. Why did I do this? Well, part of it is I like being around creatives and I like being around data people, and I seeing them interact and come together to have a shared goal and function.
Peter on the Struggle of Properly Appreciating Marketing Efforts
Jessica Head:
Yeah. Yeah, absolutely. It is been a fun evolution to watch from afar and now be a part of as well. So this is an exciting chapter, for sure. And on that note, I do want to talk about customer success and how marketing funnel fuels RevOps. So you’ve spent a lot of time, as you just mentioned, scoping marketing budgets for the clients that we serve, helping teams allocate funds to support teams’ KPIs. And I think this probably goes without saying, but most especially in the B2B world, and I know we see this too, marketing is often an under-appreciated function. And I think there are a variety of reasons we see this happen with companies at different growth stages. But why do companies seem to under-invest, sometimes even underpay for talent, and ultimately under appreciate the time and results generated by those functions? What are your hypotheses around that?
Peter Smith:
Yes, I have a lot of thoughts about this one. So I’ll first say I’m optimistic that equation’s changing a bit. I think a lot of companies are shifting and putting a little more focus towards marketing, but I think if we’re looking at origin why … And I do still think it’s a trend. I think if we look at healthcare in particular, while it’s huge and it touches all of us in some way, it is very much a tight-knit community. And a lot of these people have been … Once you start working in healthcare, you tend to continue working in healthcare. And with that, whether it’s in your same organization or moving to another’s, there’s just a lot of community that happens.
So I think traditionally, it’s been a lot of direct sales. It’s been a lot of networking. It’s been a lot of talking to people. It’s been a lot of like, “Oh, well, I know this person. Let me reach out to them, let me talk to them.” And it is effective. That’s a very important part of sales and of healthcare. But I think as the market has grown and gotten more complicated and noisier, that’s become more and more difficult to strictly lean on sales and let that be the primary driver of revenue; or let’s even assume absolute success, at some point you’re going to tap out those relationships. There’s only so many of those or so much networking you can do; or it becomes a bottleneck to the organization. Sometimes you can’t scale the people on the sales function fast enough to where there’s one person, they’re the primary person, they need to touch every deal that’s coming in. And that’s a bottleneck to sales. It’s kind of a ceiling on it.
So I think some of the historical it’s worked has played some part of this, but I do think that’s changed a lot. Another contributing factor is its attribution. Sometimes pure sales is a little bit easier. It’s like, “Hey, I met this person at HIMSS. We started a conversation. And six months later, they inked the deal. It was a long process, but sales did it.” Marketing doesn’t always have the luxury of doing that, but it’s very important. So in marketing, there’s a lot of different touchpoints. Brand awareness is a really big one. Brand awareness is really important, people hearing about you, knowing about you.
A fun story on our side; we actually recently got a lead through our website. So if you just have strict attribution models, that’s going to be a web lead. Well, when we got on the call and started talking to them, it was a combination of we had a small booth set up at HIMSS several years ago. The individual saw that and has since become a CEO at another organization and is now the right fit, the right time, and asked their marketing person to reach out to us and talk about it. Well, that’s a really, really difficult lead to attribute without just from pure marketing data. So some of it is it can just be hard to track, but a lot of that’s changing, and I think people are seeing that. We’re having a lot more starting conversations where people are starting with buy-in in marketing, rather than needing to come around to that. So I’m pretty bullish on the change and that people really are seeing the value of both.
Jessica Head:
Yeah, yeah. Well, and I mean, you mentioned HIMSS. And I attended Vibe this spring, this past spring, and many of our advisory board members and team will be attending Health in October, experiencing similar live conference, these types of ecosystems. And exhibitor booths are really impressive and they’re super cool, but ultimately it isn’t necessarily a function of marketing at its finest. It’s primarily in the sales sector. And so I think we’d certainly see that in the hiring structure of executive teams, and we also see how teams are tracking RevOps in their CRMs. Talk to us about how should you be thinking about that from a CRM perspective? And talk about some of maybe of the KPIs and understand the ROI of marketing strategies that can ensure that longevity and customer success, but also attribute it properly. Is there a way to maybe explore some of that?
Peter Smith:
Yeah, yeah, we can talk about that. So our team’s very goal-oriented. So the starting point is always kind of, what is your goal? And from what we see, it is typically one of three. It’s typically either general brand awareness, which in that case what they’re often saying is, “We’re having tons of conversations already.” This is a great problem to have, but it’s where they’re having so many conversations already, where they’re really wanting the brand awareness, to where when the prospects they have, when they’re coming to them, talking to them, they already have a more deep understanding of the organization, their offerings, what they’re doing, to where when they get there, it’s truly a sales conversation because there’s been a lot of education along the way.
Another one that we’re seeing a lot is recruitment. A lot of companies, they’re saying the issue is not bringing in new customers, it’s staffing shortages. So especially on the provider side of things, clinicians, nurses, doctors, there’s a lot of shortages there, as everyone is well aware. So sometimes that’s the primary goal. We’ve had clients where recruiting is the key. And the last one, which is easily most common, is we want more leads. MQLs, SQLs are always some of the key conversion points there. But I think in building out the KPIs, so it starts with, what are you trying to do? So know which of those three, and it may be a little bit of all of them. And that’s okay, but it’s really taking those and saying, “Okay, if MQL is the key conversion point, what do you need to do? Where are those people traditionally coming from?”
I think looking at your current funnel is a great place to start. Looking back’s not always the best indicator of the future, but really understanding, where have your people come from so far? If you’re creating content, is that content converting? Is that content leading to people engaging with you? Is it relevant to the topics that they’re looking at? A lot of that can help, and there’s a lot of metrics to time on page, or how many pages did they visit throughout your site? There’s a lot of metrics that can help you understand some of these tactics, but it really is kind of like, what are you doing? Is it working? Is it not working? And then you can start to theorize why and build different KPIs around it.
Building a Team Equipped for Marketing Success
Jessica Head:
Yeah, yeah. I’d like to dive a bit deeper into building a team equipped for marketing success. So you’re alluding to some of the KPIs that teams could be tracking. For many enterprise teams, building a RevOps team for scale is key. So how would you, I guess, consult or share with a team that’s looking to scale their RevOps team, how much should you be allocating to sales versus marketing? What do those budgets look like?
Peter Smith:
Yeah, great question.
Jessica Head:
You have truly seen … just for our audience, I think Peter has the most visibility on the variety that we’ve been exposed to at Ratio.
Peter Smith:
Yeah, it is a little bit of everything. And I will say I haven’t seen a clear pattern to it. Unfortunately, I’m not going to be able to give the like, “Oh, well, 40% should go towards this, 60% should go towards” … It really is dependent-
Jessica Head:
It varies.
Peter Smith:
Yeah. Yeah, it varies depending on the organization. I think from a starting point, sales and marketing have to be friends. It cannot be an adversarial relationship, it cannot be something … And where we’ve seen companies fail is when it feels very adversarial. And that is not what this is. And I think as leaders, I think aligning compensation structure to align to make it really be a group effort is really important, because I think if you’re overly … Compensation is a thing. So if you’re tying people’s compensation in an overly siloed way where the initial attribution is exclusively contributing to theirs, that’s going to put these teams at odds and you’re going to be starting from a really poor standpoint.
I think some of it is when you have a founding team or an initial leadership team that you intend to stick around, be honest about what they’re good at and what they’re not good at, and lean into those skills. So if you do have a strong sales team, when you say that, really dig into, what are they good at? Are they good at generating leads, or are they good at closing leads, or some combination of both? And then build around what they’re naturally good at, not the thing that’s really demotivating for them that they’re doing because they know they have to, but what are the strengths? And then build from there.
I think on the RevOps side, you need a CRM and you need to be managing it well. I think I’d say where some of the greatest tension in the marketing and sales, those cross-departments, comes from, I would say, is the lack of definition or the varying definitions between what a marketing qualified lead and what a sales qualified lead is. And that’s really the wrong focus. It’s sales saying, “Oh, well, they’re not getting us enough leads,” and marketing saying, “Oh, we calculated it, you need 100 leads in order to lead to this number of sales,” and sales saying, “Well, this isn’t good enough.” Then it’s like you really need to work together to say, “Okay, well, what is good enough, in your mind?”
And you can Google definition of SQL, definition of MQL. Ultimately, you need to define a definition within your organization and then be really consistent, because what you’re doing is, in your CRM, you’re going to have leads. There’s going to be an origin date. You’re going to at some point convert them into a deal. And then you’re going to go through the funnel and see at what rate did they convert and over what period of time. And it kind of doesn’t matter what those stages are, as long as you’re really consistent and everyone on the team understands them, because all you’re really trying to do is you’re trying to make the revenue as predictable as possible. So the pattern between the teams of knowing an MQL, knowing an SQL, and just working together with what they are is a really important piece to that.
Jessica Head:
Yeah. I also love that you touched briefly on the compensation side, because I think a lot of it is like, okay, we get it. Compensation is very different for sales teams than marketing teams, but also customer success. So customer success is just this often very overlooked genre of community. They’re the ones that are retaining these clients year after year after year, and yet they’re not necessarily … while sales gets to maybe go on a big hefty vacation, “Congratulations, you made this many sales this year,” and then the customer success person is just like, “Okay, I got like a day off.” I don’t know. The structure is very different. So I don’t know if you have any other further thoughts on that or maybe how teams can structure that in a way that is rewarding for the holistic team and also understanding how marketing is kind of like that through line to helping to ensure that structured and consistent communication is happening at every stage of the customer experience. But any other thoughts on that that you want to add?
Peter Smith:
Yeah, it comes down to aligning incentives. Everything I’ve read about compensation is that ultimately money is a de-motivator, not a motivator. There’s a floor to where that changes; below a certain point it will, but then in general, money is typically viewed as a de-motivator. So in that, you want to make sure that the compensation structure is built to where people generally can control what they’re doing, or I like to think about what could go wrong. So I’d say as a leader, you want a group culture. You want a culture that’s working together, working collaboratively, so I think aligning that incentive.
So something that might not be as effective in a cross-team function is where it’s strictly like, “This is your lead or this is marketing’s lead.” That’s not going to be as effective as saying, “Hey, we need X number of dollars in net new revenue.” So there’s a tiered bonus structure where if net new revenue, if it’s Y dollars, then you’re going to see a Z percent bonus based upon that. That’s one way to do it. I think it’s the same with customer success. And different types of roles might have different structure. I think you’re right. I think someone in marketing or someone in customer success is likely to have a higher base where incentive pay is a little more incentive bonus, whereas sales might be more likely to have a lower base with a higher upside. And I don’t necessarily think that’s a bad thing. I think you just need to make sure that the metrics that’s driving that is collaborative and not isolated by default.
Peter’s Recommendations for a Marketing Executive’s 90-Day Plan
Jessica Head:
Well said. Yeah, well said. What else do we need to talk about? We could be here for a while, I just now noticed.
Peter Smith:
There’s so much.
Jessica Head:
We could be talking about this stuff for a while. I would say, questions on 90-day plan for a marketing executive, so first 90 days, what are your recommendations, steps one, two, and three, for a marketing executive?
Peter Smith:
Yeah, so I’m going to ping pong between marketing executive personas. So I’d say the first thing I would do is, I mean, come in and just audit the landscape, and that’s a big audit. So I would say, what is the website? What is the messaging platform? What are the core offerings? So I would start the first thing, “Okay, what are our core offerings? What can people buy from us and what does it cost?” I’d just go that granular: what are the add-ons?
From there, I would personally go through the onboarding journey, or start from demo, try to go through the sales process as far as I can, because a marketing executive coming in, you have objectivity. You’re going to lose that. And it’s something really valuable that you have that other people in your org no longer have. So I would take advantage of that. So understand the products, understand how it’s being articulated. And in an ideal world, it’s articulated pretty well and you don’t need to make major changes, but you need to know the message.
On the other side, on the RevOps side, is I would similarly do an internal deep dive of the funnel, specifically the CRM. So what CRM are we using? What happens? How do contacts make their way in the CRM? So generally speaking, you’re going to have contacts, you’re going to have companies and you’re going to have deals. And it’s understanding, how are those people getting here? Is it through web forms? Is it manual entry? And what are we doing? Are we marking things as a lead? Are we marketing them as an MQL? When does it become a deal? Is that system consistent. And I would say, if it’s not consistent, which I will say I’m making this number up, but 80% of the time it sounds like it is not … I had a meeting yesterday with two marketing leaders within a health system, and pretty quickly they started nodding their head, like, “Yeah, our CRM could use some work.”
And that’s incredibly common, and these teams are growing, these teams are evolving. But as much as you can, I’d say audit that CRM, see what’s working, because otherwise what’s likely happening is … You need to understand where you’re not being successful. Are you not generating enough leads, or are the leads not quality, or are you bad at closing? Is closing the problem, where you’re getting enough leads, but that piece is just not happening? You really want to isolate the funnel to understand where are you doing a great job and where are you not doing as well?
Jessica Head:
And also just chatting with customers about their entire experience. I feel like this is something that’s so overlooked that we see a lot of, companies just not having a clear view of their client experience. And you can only do that if you’re actually interfacing with that human.
Peter Smith:
It’s pretty important.
Jessica Head:
So that’s important too. Yeah, for sure.
Peter Smith:
Customers are going to give you a really clear sense of what they value. If the org’s comfortable with it, I mean, just calling some of these customers and just saying, “What attracted to us initially? What problem were you seeking to solve?” Maybe be cautious on this one, but, “How well are we solving that?” Just asking some questions that can be really helpful is kind of … trying to get to a success story and then also a non-successful conversation. So maybe some win-loss analysis, because what ends up happening is if you won the business and ask them why, that’s going to prioritize what they value. If you didn’t get the business and ask them why, that’s also going to show you what they actually valued when they were trying to solve their problem.
So it can be frustrating, because if you don’t get a deal and you go talk to them and they tell you the reason why, a lot of the time you’re going to say, “Well, shoot, we have that feature, or we do that. You just didn’t see it.” I’m a big believer that if someone doesn’t buy something from us, it was our fault, kind of regardless. So if that’s the case, then it’s just like, “Well, we didn’t do a good enough job articulating that we offer that feature, and now I know.” And you don’t want to get too caught up in recency bias talking to one prospect and then going and changing your whole messaging platform.
Jessica Head:
No doubt.
Peter Smith:
But talk to some of these people and look for patterns.
Jessica Head:
Yeah, yeah. Share a time when you’ve heard a client wanting to implement an MQL KPI for the wrong reasons. We’ve sort of touched on this already, but if there’s anything that comes to mind.
Peter Smith:
Sure. Yeah, I’d say it’s twofold, and this happens a lot. It’s almost always an incorrect definition of what MQL is, or the other would be I’ve seen a lot where people are expecting too much of an MQL. So broadly speaking, an MQL is a marketing qualified lead. It is somebody that has shown some type of interest in your product, so that could be they signed up for your newsletter, that could be that they saw you published a white paper and they downloaded that white paper, so you got their information and they became an MQL. And that’s great.
I think what I have seen is I’ve seen sales teams say, “Well, I called them and they’re not ready to buy, so that wasn’t a good lead.” It’s like that’s not a fair expectation of the MQL. This person came, and they were likely at the awareness phase of their problem. Look at the lead source. Where did they come from? How did they make it into your CRM? But we have seen a lot where … And it’s very understandable, especially when sales are slow. It’s when business is slow and sales teams are under a lot of pressure to close deals and they only have so much to work with, then they’re doing what I would do, which is to go into our CRM and look at what is there and try to make the most of it.
But you need to know that when you’re at that point, if you’re going to someone that two days ago downloaded a white paper for the first time, and you see that traditionally your sales cycle is four months long or it takes two months to go from an MQL to an SQL, you’re rushing the process. Outside of getting lucky, your expectation is unrealistic. And it can have the opposite effect of coming on too strong. It could be someone that’s really not ready to have a conversation, still hasn’t fully understood their own problem. They’re really in the early stages of education. And calling them or trying to schedule a demo sometimes can just be really early. And just to be clear, I don’t think there’s anything wrong with that. I think if you need to reach out, but it’s kind a soft, like, “Hey, I saw you downloaded this. If you’re interested in a demo, we’d love to have a conversation.” And if they don’t respond, back off. Let them stay in your funnel and continue to let the nurturing process happen over time.
Favorite Tools for Mapping KPIs
Jessica Head:
Yeah. Okay, so going to resources, tell us your favorite tools for mapping KPIs. I think we might have one.
Peter Smith:
Oh, for mapping KPIs. How would I know? So there’s a couple. I will say something that we use with clients that’s very helpful, so this is like when you’re running a marketing program, is we use Google Looker Studio for a lot of our analytics. And we’ve built a lot of custom dashboards, but part of why we do that is because it can very easily and automatically connect into a lot of the marketing channels that we’re already using. So it can plug into GA4, Google Analytics. And it can almost always plug into your CRM where you can tie it to number of new contacts, number of MQLs, number of contacts marked as an SQL. And in some cases, you can actually pull in the visuals of the LinkedIn ads. So it ends up being a really powerful tool that can be really, really automated.
If you are wanting tools to help you understand what you could spend in marketing and still see the ROI, we’re going to do a shameless plug and point to our website. So we recently launched what we call our marketing spend ROI calculator. It’s at goratio.com/roi-calculator. And really, the intent of it was … So it happened very organically. We were working with a prospect that was well-funded and was very, very reasonably coming and saying, “Okay, we’re trying to define our marketing budget. This is new for us.” So they were a series B company, but had never really chased after marketing, and now have enough customers and significant funding to really do it right for the first time. So they didn’t have a great framework of like, “Well, what’s reasonable?” So we kind of backed into that. We helped them back into it and said, “Okay, well, let’s talk about it a little bit.”
So I think the best way to do it is really to isolate and say, “What can I spend to land one client and still meet my target ROI?” So we built a calculator that does just that, and it’s really looking at … And I’m not going to recite the whole calculator, but it’s saying, “What is your average customer in a year? What amount of revenue does it represent in a year?” Then a big question that people don’t often consider from a marketing standpoint is, how many years is that customer going to be with you? So if it’s 200,000 a year, they’re going to be with you for three years, well, your lifetime value is $600,000. So if marketing has the potential to generate that, that can help you better understand what you can spend.
I think the key question in that is knowing what ROI you need in order to do this. And I’m not going to give a whole lot of percentages, but with that, if your marketing spend is 10% of your overall budget, and if marketing is expected to bring in all of the revenue, well, right there, to break even, you’re going to need a 10X return. So some of this is where you can work with your CFO to really understand … And just I think the whole goal in this is trying to … Marketing metrics are about simplifying the numbers so you can start to understand it.
So that’s really what the calculator’s meant to do, is, what can I spend in marketing? Well, what ROI do you need? What’s your customer worth? You can spend X amount in order to generate one customer. Then you can look at, okay, well, we close one in four deals, so we need four deals. And then we close one in four MQLs to SQLs, so we need 16 SQLs to land one customer. Now you’re having really tangible conversations like, “Okay, will our marketing program support … will it lead to 16 MQLs?” And that’s a much easier conversation than just saying, “How much money can we spend in marketing?” That’s just a really [inaudible 00:31:02]-
Resources for Those Evaluating RevOps and Closing Thoughts
Jessica Head:
Yeah, a very overwhelming question, if not broken down that way. So yeah, no, super great resource. Definitely our listeners should +check it out. And I guess to follow up, any podcasts, books, resources that you would recommend for people as they’re evaluating just RevOps in general, marketing strategy, marketing ROI?
Peter Smith:
That’s a good question. I’m a big spreadsheet person, so I think … I don’t know, this is a really bad answer, but I think just lean on some basic math when you’re doing some of these things. And spreadsheets can be really helpful. ChatGPT is a nice plug. I’m still using it as a brainstorming tool, but I think as a marketer, as you’re asking yourself some of these questions, it can be really helpful to be like … And you’re not going to get some of the answers you want, like, how much can I spend in marketing, or what percent of revenue do companies usually spend? You’re not going to get really accurate answers there, but you could plug in some of your own situation, like, “I am a company that has this much in revenue. This much is coming from existing sales. We need an extra 1 million from sales and 500,000 from marketing.” I don’t know exactly where I’m going with that, but you can-
Jessica Head:
Yeah, theoreticals, right, like [inaudible 00:32:22]-
Peter Smith:
You can text them in and just see where it goes. But yeah, I don’t have … a lot of the content I consume tend to be a little more on the finance, economic side of things, but-
Jessica Head:
Which is why you’re on our team. We’re a very well-balanced team in that regard, so that’s awesome. Well, thank you so much, Peter, for joining us on the show. It’s been a pleasure. And I know this is a wealth of information for people as they’re strategizing some of their RevOps plans. We’ll definitely have to have you back on the show to talk more in-depth on a couple of topics that we hit. So until next time, we’ll see you guys at goratio.com.
Peter Smith:
Thank you.
About Peter Smith
Since 2011 Peter has served as a partner and President of Ratio. He is a strategic and results-driven leader with a passion for developing and integrating operational and financial functions in alignment with organizational mission and values. He loves the process of establishing and scaling a company culture alongside company growth. His expertise lies in planning and executing business and financial strategies to drive growth and profitability.He also serves as the Leader of Finance for OpenMined, a non-profit open-source community working to make the world more privacy-preserving by lowering the barrier-to-entry to private AI technologies. He serves on the leadership team to help with organizational strategic planning and goal setting. He also manages the organization finances including cashflow management, revenue and expense forecasting, financial analysis, payables and receivables, and budget management.