Beyond Sales and Marketing to “The Revenue Team” — Inside Scoop with Marketo CEO Phil Fernandez

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CustomerThink Founder/CEO Bob Thompson interviews Phil Fernandez, President and CEO of Marketo, about Revenue Performance Management (RPM).

 

Interview covers the following topics:

Interview recorded May 2, 2012. Transcript edited for clarity.


Transcript

Bob Thompson:
Hello, this is Bob Thompson of CustomerThink, and welcome to another episode of Inside Scoop. Today, my guest is Phil Fernandez, CEO and Co-founder of Marketo, one of the rising stars in the marketing automation industry the past few years. Phil is a 30-year veteran of Silicon Valley, including leadership positions at Epiphany, Red Brick Systems, Metaphor Computer Systems, Masstor Systems and probably a few other firms, as well.



He’s also the author of a brand new book Revenue Disruption. We’re going to be talking today about the big topic of that book, Revenue Performance Management or RPM, for short. Phil, welcome to Inside Scoop. It’s great to catch up with you.

Phil Fernandez:
Great to be with you, Bob, thank you very much.

Bob Thompson:
All right, so today we’re going to be digging into RPM and try to understand what it really means, why business executives should pay attention to yet another buzzword, and hopefully, talk about some keys to success, as well. But first, I just wanted to congratulate you on your new book. I know how much work that is. I’m actually writing a book of my own this year, and it’s a tremendous amount of work. I’m one of your early customers; I’ve been reading it on my Kindle, and it’s really excellent. Could you share a few thoughts on why you wrote it?

Phil Fernandez:
Great, thanks, Bob. Well, it’s just been a thrill to actually have this book come together and be now published out in the marketplace. As we’ve been building Marketo, really the founding principle from when my co-founders and I started the company four or five years ago has been an abiding belief that there’s just a sea change happening in the marketplace that’s driven by web and social media and just the changes in the whole digital marketing economy. But this was a big, big idea and a big wave that was going to help us build a business, but was going to impact every business.

And so, it’s really been a set of things that we’ve been thinking about as I’ve been building this company for a number of years, and it was time to sort of bring all the ideas together and put it down in a manifesto and say, “Here’s the big picture, here’s the big ideas, this is why people need to care.” It was time to sort of get those thoughts all together in one place where business executives everywhere could have a resource to say, “What’s going on here, what do we need to do, why do we care, and how can we win by adopting these ideas?”

What is Revenue Performance Management (RPM)?

Bob Thompson:
Well, we’re going to touch on some of the things you talk about in your book. Let’s start with the very basic. Please define for me Revenue Performance Management, and if you’re pitching this, say, to a CEO, a VP of Marketing or executive in charge of sales, why should they care about it?

Phil Fernandez:
First of all, Revenue Performance Management is not a piece of software. Let me get that out on the table. Revenue Performance Management is a set of ideas about how companies can grow and accelerate revenue growth by taking advantage of these very broad changes in the way buying and selling takes place in our economy.

It was just a few years ago that all buying really started by people talking with sales reps. There just was no other way. But over the last 10 or 15 years in an accelerating fashion, buying has now shifted to the web and it’s now even more rapidly shifted to social media. What that means is that buyers, the people who are actually choosing to put their money down, are acting and relating to people who have something to sell in a very different way. And that’s either a challenge that’s a disruption to the way traditional sales and marketing teams have worked that is causing some to become less efficient and some to seize the moment in change to become more competitive and to grow faster.

RPM or Revenue Performance Management is really about how companies need to react to this massive global change in the way buying takes place, and how they can seize the opportunity of that change to grow revenue faster. So, that’s the big idea. And I think every top executive, CEO, CMO, head of sales, CFO has to wake up in the morning and think about how to achieve revenue growth. And I think this is a set of ideas that really give all of them a guidebook for how to do that.

Bob Thompson:
All right, but when you say “revenue growth,” you’re basically talking about a strategy to grow revenue in this new world of empowered buyers. I could argue that, well, why not build better products? That would grow revenue. Why not improve the sales experience. That would grow revenue. So, what I’m struggling with a little bit, Phil, is what exactly is different about Revenue Performance Management when people have been hearing about CRM and other terms for years?

For a presentation I’m doing, I came up with, I believe there’s 20 different acronyms and buzzwords, and they all claim to grow revenue, cut cost, improve the customer experience, and they’re all something that CEOs ought to pay attention to. So, what’s distinctive in your mind about RPM versus what people have been doing?

Phil Fernandez:
Well, I think the roots of RPM are, in my view – and while I use the term, “RPM,” I should state this is not a passion to create a buzzword. This is a set of ideas about the way buyers relate to sellers the way marketing and sales teams relate to each other and work. And the ideas are about how people and organizations and buyers and sellers work with each other. It’s not about a buzzword. And I think in many ways it’s bigger because it’s a more strategic set of ideas. As I said, it’s not about a piece of software, not about a single thing to do. I like to draw the analogy to Six Sigma. We saw in the 80’s and then more profoundly in the 90’s when somebody like Jack Welch of GE rededicated their entire company to excellence through Six Sigma. That was a journey he sent that company on to reinvent manufacturing, to reinvent quality, to fundamentally change their long-term business economics. And I think RPM and Revenue Performance Management, that’s the analogy I draw, is this is a big set of ideas that executives and business leaders need to take advantage of to generate long, long-term growth.

QlikTech Uses RPM to Accelerate Growth

Bob Thompson:
OK, fair enough. Maybe we can approach it a different way. Let’s talk about an example. Do you have one of your customers, perhaps, or a company that you know about that you feel is at least trying to approach this RPM idea in the right way? Tell us about that company.

Phil Fernandez:
Yeah, we have 2,000 of them, but I can pick one. I love to talk about QlikTech, which is a super fast growing BI, business intelligence and analytic company that’s just been growing like a weed, much faster than the older line companies like Cognos and the like. And they’ve really driven from the top of their organization, the CEO, the head of sales, head of marketing, have adopted a pervasive RPM technology. What they saw was that they wanted to sell many more deals much faster, but their sales team just couldn’t prospect and couldn’t cold call fast enough to grow the company at the rate they wanted to. And they needed to shift the center of gravity to their marketing team for finding prospective buyers.

So, really driven from the top, they adopted an RPM strategy that said that they were going to create a center of excellence for their global organization in marketing to help them master finding leads online and the web and in social media, and to teach people in Turkey and in Italy and the United States and in Sweden and Japan and all over the world how the marketing teams can use the web and use social to find more buyers.

Then they changed the relationship between buying and selling so that marketing was held accountable for delivering more warm, ready-to-buy leads to sales, and sales was held accountable to spend their time calling those warm leads, rather than doing cold calling and prospecting. And in exchange, sales took higher quotas, marketing took revenue quotas, and they’ve been able to continue to grow as one of the fastest growing analytics companies really of all time, with a wildly successful public offering last year and continued growth. So, that’s a company that basically said, “We need to fundamentally empower our marketing organization globally, we need to hold them accountable for producing many more leads than they did before. We need to hold sales accountable for taking those leads and sales accountable for taking higher quotas and driving faster growth in their company as a result. So, it’s just a classic example of how this works in a big company.

Marketing and Sales Alignment

Bob Thompson:
Great example. As I talk to other people in the industry, the subject of marketing and sales alignment comes up again and again. It’s kind of an age-old issue, especially in business to business, where marketing and sales, in some cases, are marching to different drummers, so to speak, different goals and objectives and so forth. Would you say that a core tenet of RPM is this more of a collaborative effort of marketing and sales with at least some mutual goals that they’re both marching toward?

Phil Fernandez:
Absolutely, and it’s not just business-to-business. I was in New York City a couple weeks ago, and my driver was actually, by day, an insurance salesman and was just talking to me about the sales and marketing disalignment in selling life insurance. So it’s everywhere.



But the basic idea, Bob, is that buying has changed, that the buyer makes a decision about how they’re going to interact with a possible vendor on their own terms. And so, a buyer might engage in social media and ask their friends about a possible vendor. That probably interacts with marketing. They might come to a website or click on a Google ad that interacts with marketing and say, “Pick up the phone” or “Send a text message to a salesperson,” they’re interacting with sales. So, in today’s world unlike even a few years ago, the buyer is making the decision about when and how they interact with marketing, when and how they interact with sales. And frankly, they interact with marketing a lot more frequently.

So, what that’s done is it has brought forward this ages-old issue of dysfunction between sales and marketing. Where it used to just be an irritant, now it’s actually disrupting the buying process. And so, it now says, “OK, corporate executives everywhere, it’s time to really step up and think this.”

Bob Thompson:
The issue has been festering for a long, long time, as long as I’ve been in this industry. It’s been festering, people talk about it, but they haven’t really changed. It’s like all things, all major change is driven by the market and by customers. And so finally, we’re seeing changes in how organizations behave, at least those that are progressive because if they don’t change, they can’t really be responsive to how buyers want to work.

Technology Framework

I’d like to talk a little bit about technology. You made it clear that you look at RPM as this set of ideas. I would say you’re really talking about a business strategy to respond to these empowered buyers with this coordination, synchronization, orchestration — pick your term — of marketing and sales.

And that would lead me to… if you want to enable this, you do need technology. I know that Marketo, just looking at your website, you position yourself on the market as a provider of technology to help enable RPM. What specifically does Marketo offer? And then we’re going to talk a little bit about what other types of things in the market should companies need to make this whole RPM idea come to life?

Phil Fernandez:
Perfect, perfect. Yeah, we do offer technology. Fundamentally, all of modern business processes rely on technology — ERP systems, CRM systems, etc., — so it should come as no surprise that this set of ideas do, as well. And because it’s really all about the shift to digital and online and social buying, obviously, that is all about computers and about technology. So, from that perspective, we offer a platform that helps people Google – leverage banner ads; leverage social media, Facebook, Twitter, etc.; leverage webinars, seminars, trade shows, online and offline direct mail to really interact with and find more buyers, to develop the buying relationship, to really help people through their self-directed research process as they go from curiosity to ready to put their money down on making a purchase, and to help salespeople spend their time more effectively talking to people who want to actually buy from them. So, we offer a platform that really spans the earliest stage of finding buyers in web and social media through the mid-stage of the buying process where companies need to interact with their researchers and future customers in a designed way.

And then, tools to help salespeople spend every minute of their time more efficiently by talking to the people who are more likely to buy from them. We do all of that and help those processes be implemented in new businesses to respond to this changing world I’ve talked about. And then we provide analytics that help managers and executives across the organization make that whole process perform better and better every day, every week, every month by really understanding where logjams are and unblocking those logjams.

Bob Thompson:
OK, so you have — I would characterize — a kind of the backbone technology to really orchestrate the entire marketing to sales process and to help executives understand what’s going on, as buyers go through their journey. But as you get especially toward the later stages of the process and you’re starting to deal with either inside sales or field sales, many of these reps have been using Salesforce.com and other sales automation systems. And there’s just a whole portfolio of things that have been sold and used by sales executives over the last few years, sales incentive management, sales enabling systems like content management systems. Is that part of an RPM sort of technology framework in your point of view?

Phil Fernandez:
It is, it is. Again, RPM is an umbrella concept for how marketing and sales need to work together to meet this new buyer. So since that includes sales, it clearly includes all of those kinds of technologies that have been sitting in front of salespeople. At Marketo, for example, of our 2000 customers, more than 90% of them also have Salesforce.com, and Marketo and Salesforce.com are integrated in the cloud in a really deep way. So, these are complimentary technologies. They work together, not separately, they don’t fight each other.

Bob Thompson:
You would say that this integration of marketing and sales technology is really a key component because you’d want to be able to not only pass leads over to sales, but also to get some information back that you can help to manage this entire process from the SFA system, correct?

Phil Fernandez:
Absolutely, so Marketo and Salesforce just hook up and exchange information continuously. And it’s not just passing information back and forth, but one of the key things that RPM calls for, for example, is for a salesperson, if they’re talking to somebody who they believe might buy in the future but isn’t ready to buy now, they need to give that lead back to marketing.

They call it lead recycling. And so, for example, one of the things we do is provide a button right on Salesforce.com where a salesperson can just say, “Hey, marketing, take this back. I trust you to take care of this lead and bring it back to me when they’re ready.” And so, it’s not just information, but true business processes that flow back and forth.

The Revenue Team

Bob Thompson:
I think it’s one of the under-explored issues, and something I’m very interested in because I’ve talked to a lot of people in B2B sales that are struggling to how to respond to this new environment. And, of course, one of the things that they appreciate is getting better quality leads for marketing.

But I think you’ve touched on an issue that over time is going to be more important, as well, which is the role of sales in marketing. So, instead of marketing doing more selling, which is kind of what we’re talking about — they’re getting involved earlier in the process with buyers, taking off some of the early work that reps might have done in the past — sales can actually add value to marketing by recycling leads, I would suggest. They have a lot of industry insight. It can help in content development and things that really add value to marketing that perhaps they’re not doing today.

Phil Fernandez:
Oh, you bet, and there’s just been these walls between sales and marketing that have prevented so much of that interaction. But as organizations start to really tear those walls down and see that these are all people participating in a single, unified revenue process – I mean there’s different roles at the different stages and different specialties and expertise. I don’t mean to say just all sales and marketing people are the same, but as soon as you start to turn on the walls, the ability for these two organizations to learn from each other, to think as one, to act as one just becomes unlocked. And that’s where ultimately, the power of this whole thing leads.

Bob Thompson:
I think that’s really where the magic is, really creating one team and not two groups kind of working independently. All right, we’ve got a few minutes left. I really want to talk leadership and organizational change. This is a big idea that we’re talking about here. What would you suggest is the right executive and the right approach that executive should take to really move toward this idea?

Phil Fernandez:
Well, I think in an ideal world, the adoption of RPM is literally led out of the CEO’s office in the same way that Jack Welch at GE committed the company to Six Sigma. This is why I’ve written a book to try to elevate the discussion up to that person. In terms of actually leading it, one of the things I’m a big believer in is the creation of a Chief Revenue Officer. I think companies need a single revenue architect that owns and spans marketing and selling. And not just managing them as two separate departments, but really thinks of it as being an advocate for this entire revenue funnel. And so, I think we see many of the best companies adopting RPM appointing a true Chief Revenue Officer.

Bob Thompson:
Now is this kind of a staff position where they have some power but not necessarily the marketing and sales reporting to them, or is this like a Senior VP of marketing and sales or what?

Phil Fernandez:
Well, it’s a Senior VP of marketing and sales or I think it does elevate to be an executive officer, a C-level role. And I do believe that “marketing and sales” report to the CRO. Now I actually have my book and org chart for what I think the future organization looks like, and it doesn’t look like marketing and sales reporting to a person as two separate organizations. I’ve seen that org chart for 30 years. I love those organizations. It’s about starting to understand what are the different phases along the revenue cycle, from content creation, early stage seed nurturing, inbound marketing, mid-stage marketing, selling, closing, qualification, etc. And so, I think the org chart starts to look very different where people will no longer talk about it as being marketing and sales, but they’ll talk about it as being the revenue team.

Bob Thompson:
Yeah, I might turn it around and say, being the customer-centric guy that I am, you’re really talking about organizing the company around how buyers do their thing. It’s really being buyer-centric and not taking an organization and trying to make buyers work with it.



Phil Fernandez:
Absolutely. And I often stress about whether I should be advocating a Chief Revenue Officer or a Chief Customer Officer. I think too often, Chief Customer Officer, people interpret that to mean customer service, and of course, that’s part of the whole equation, too, as a buyer’s experience. So, we’re going to continue to see these ideas evolve, and I think they’re catching fire faster than ever before.

Bob Thompson:
I don’t think they’re going to be any one answer, and I know you do talk about that in your book. Some companies are approaching the Chief Customer Officer the wrong way. It’s kind of a figurehead role and doesn’t change anything. I can certainly see in some B2B organizations where the Chief Customer Officer really had both a responsibility for revenue, as well as customer experience, customer loyalty, and was the place where all that comes together. Are we getting the right revenue production, but are we also doing the things that customers ask us to do because in the long term, that’s the only way companies are going to grow, if the customer’s likely to do it.

Phil Fernandez:
All fit together, yeah.

Bob Thompson:
All right, well let’s go ahead and wrap up. If somebody picked up your book and said, “You know, I’ve got to get behind this,” what would you recommend as the first step that an executive make?

Phil Fernandez:
I think an executive needs to say, “Hey, folks, this is a big idea and we need to get on board. I want marketing and sales to start to come back to me with a Revenue Performance Management plan.” And then to get really granular, one of the things I talk about a lot in the book is it’s a journey. This isn’t a big bang. Think big, but start small and move quickly. So, I think a very key first step is for a marketing and sales team to come together – sometimes it needs an executive to make that happen – to talk about what’s a sales-ready lead, what really measures and defines a really high quality sales lead coming from marketing into sales hands, and for each of the organizations to listen to each other in ways that have never happened before. We’ve seen when companies do that step that it really starts to break down the walls and the barriers, and then they can start to build around all of that, both back into marketing and forward into sales, the first steps of an RPM framework.

Bob Thompson:
Phil, thank you very much. I really appreciate talking with you today on Inside Scoop. And once again, congratulations on your new book and best wishes on pushing RPM out into the market.

Phil Fernandez:
Fantastic, Bob. As always, it’s great to talk to you, thank you very much.

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