Is ABM a panacea or too hard? Know thy demand gen ROI! – Blog 2 of 2
In part 1 of this blog we talked about the need for marketing to justify the detailed ROI and spend efficiency and effectiveness of its activities, and the lengthy investments required to stand up an ABM-based demand generation engine. In this part 2 of the blog, we’ll add the one competing alternative that ABM should be compared and contrasted to quantitatively.
Compare and contrast: “Predictable Revenue” vs. ‘’Account Based Marketing”
It’s useful to begin with framing the alternatives and explain the forces that led to the development of the two principal approaches we’re discussing here: Predictable Revenue (i.e. mostly outbound prospecting and the associated marketing campaigns) vs. ABM (i.e. mostly inbound, online lead nurturing and account-focused selling). Both are industry-accepted terms which we explain below.
Predictable Revenue is a formulaic process to create consistent, year-over-year growth to be able to predict how much revenue a business is consistently generating. Typically, it involves calling into a highly defined database of prospects that are well segmented to match the target criteria of prospects that are likely to become buyers. There are multiple parts of predictable revenue generation: inbound (web), marketing campaigns (webinars, events, etc.), channel partners, and finally outbound SDRs.
The folks doing the calling are “Sales Development Reps” (SDRs) who don’t close deals, but instead pass on “qualified leads” to sales reps who will close them. By making this a repeatable process it can be improved and optimized, and the actual sales reps can focus on what they do best, closing deals (vs. having to prospect for them). So, sales productivity goes up all around.
Account Based Marketing, on the other hand, is a strategy to create sustainable growth within the most important accounts. It is intended to be a collaborative approach between sales, marketing, and customer success. Another aspect is the targeting of specific accounts and decision-maker groups within those accounts, not just by sales but also by marketing.
ABM gives marketers the ability to build scalable, personalized campaigns, measure their results against a set of KPIs, and prove revenue contribution. Instead of creating thousands of low-quality leads, ABM is about identifying the best opportunities up front and dedicating resources to those accounts. That up-front identification of targets is done online, and therefore ABM is fast becoming the marketing approach of choice for cloud software companies. Cloud software is researched, tried out, bought, and consumed all online. Why not market to potential buyers where they’re looking at you?
What do Predictable Revenue vs. Account Based Marketing have in common?
There is a common core that led to the development of both methodologies: Predictable Revenue and ABM are successive attempts at creating more cost-efficient and effective demand generation approaches that are profitable given plummeting software prices. Gone are the days of million Dollar ASPs (Average Selling Prices) from the on-premise enterprise software days; as software prices fell to the hundreds of thousands, and lately to the tens of thousands of Dollars, lower cost and higher productivity ways to sell, but still at a profit, had to be developed.
Predictable Revenue does that by optimizing productivity of the sales process, but ABM takes it a step further by largely automating the initial interaction with prospects when they’re online. Here is a table that highlights some key aspects and compares the two approaches:
|Predictable Revenue||Account Based Marketing|
|Some nicknames||“Sales 1.0”, “Cold-calling”, “Outbound”||“Marketing 2.0”, “Online Marketing”, “Inbound”|
|Principal lead flows||Outbound, prospecting live targets||Inbound, nurturing online leads|
|Metaphoric descriptions||“Go after prospects with a fly swatter”||“Attract prospects by putting out honey”|
|Known influencers, bloggers||Aaron Ross, Marylou Tyler||Matt Heinz, Scott Brinker, TOPO|
|Sample MarTech software||Pipedrive, Salesloft, Outreach||Engagio, LI Sales Navigator, Demandbase|
|Making it work:|
|Dependencies||– Need target personas to sell to & segmented, enriched db
– Need email and phone scripts
– Hire and train SDRs to follow a highly structured process
– Supporting mktg campaigns
|– Understand online customer journey
– Need compelling content
– Build ABM tech stack
– Analytical lead flow models
– Good CRM data
|Difficulties||– Easy to medium difficulty
– Avoid spammer label and getting bad brand
– SDRs want to move to sales
|– Hard to do, train, understand
– Finding analytical marketers
– Cultural resistance in sales and / or finance
|Pitfalls||– Sales and SDR lead handoffs
– SDR comp depends on reps accepting leads -> Friction
|Too complicated for old timers; can create political resistance|
|Time to revenue||Fast (1 or 2 months)||Slow (>= 6 months)|
|“Pipeline Yield” * (pipeline $’s per $1 spent building pipeline)||$7 pipe / $1 spent||Qtr 1: $3 pipe / $1 spent
Qtr 5: $10 – $13 pipe / $1 spent
|Brand impact||Mostly negative brand impact:
– Emails and calls annoy people
– Irrelevant people know you
– Manipulate them, push sale
|Usually positive brand impact:
– Like you, if they like content
– They control when to talk
– Inform them, help decide
* Please note, the pipeline yield estimates are from our own experience; as mentioned at the beginning, there is little in way of hard data out there that compares the spend efficiency of both approaches.
So, which approach(es) do I go with?
In our experience it all depends. It’s a bit like in politics, the ultimate implementation works most efficiently if there is a constructive, dynamic balance between the two approaches. They both have their strengths and weakness. Key to success is knowing how to optimize spend, i.e. how to balance investments both near-term and over the long haul between the two approaches.
Spoiler alert: In our experience, you have to start with Predictable Revenue-type prospecting because you need to create pipeline quickly to keep the investors and CFO happy. However, you also implement a heavy dose of analytics to know where you’re wasting money and where not. That then tells you where you can take costs out of the current efforts (e.g. an easy one is automating the SDR workflow so they can spend more time on the phones, or cutting non-productive events or reducing spending, say, on PR or branding that doesn’t have direct lead generation potential) so you can then re-invest that money in transitioning to / complementing the outbound process with ABM over time. All within your existing, overall marketing spend budget (that saves the CEO the budget-request pilgrimage to the investors after they hired you; CEOs tend to hate doing that 😊).
Also, because of its rapid time to spool up, Predictable Revenue is better at opening new markets since all you need is a good database, a bunch of SDRs, and telephone lines. But over time ABM helps a) make the demand generation more efficient, and b) it intercepts potential buyers online and establishes a brand relationship with them there. Which is where most customer journeys start these days.
So, putting all your demand generation eggs into SDRs and outbound prospecting initially should get revenues flowing quickly. But it’s inefficient over the long haul and will cause missing the demand generation spend benchmarks that investors might be judging your startup with. Please note that those benchmarks are likely to implicitly incorporate the savings inherent in the more cost-efficient ABM approaches since they’ll look at marketing and sales spend rates (typically as percent of revenue) of best-in-class companies in your software cohort. Those leaders often are already using ABM.
On the flipside, putting it all in ABM approaches will cause near-term spend go up (e.g. subscription fees for software to build out the MarTech stack, online advertising, syndication, etc.). Yet the pipeline growth is sluggish since it depends on nurturing online browsing and shopping behavior over time until enough lead score is accumulated for a target prospect to become qualified enough to be passed to the SDR team.
So, it’s not either / or, it’s both. Disagree with our theses? Please send us your comments.
For anyone interested in further reading about Account Based Marketing, here are additional links: