It's Time To Pivot Your Revenue Model, With Nelson Gilliat

The CRO Spotlight Podcast, powered by the Sales IQ Network. Hi and welcome to the CRO Spotlight Podcast. I'm Warren Zenna from the CRO Collective and I'm here with my co host, Lupe Feld. Hey, Lupe.

Hey, Warren. This is Lupe Feld and I'm glad to be here with you.

So this podcast is really for aspiring CROs and CEOs and current CROs whom are interested in learning from not only us, but the great guests that we're going to have.

We're here to tell you that there is other areas of the business that can drive revenue, and we're going to look and inspect and come up with some great ideas for us to bring in as much revenue as we can and drive some meaningful change for the business.

So tune in, we have some exciting opportunities coming up for really amazing conversations and any B2B leaders. I think you're really going to enjoy it. So thanks for tuning in and we look forward to seeing you. Okay, and welcome to this episode of the CRO Spotlight Podcast. I'm operating a little alone today. Lupe is out, but I had an opportunity to have a conversation with our guest today and I had to because this gentleman and I have been following each other on LinkedIn and his perspective is so in line with mine. I couldn't wait to have this conversation. So, Nelson Gilead, it's really nice to have you here and I'm going to introduce you formally and then we can start chatting, if you don't mind. So Nelson is the author of Deaf of the SDR and the Birth of the Buyer Centric Revenue, which is so in line with what I'm thinking right now. I can't wait to have this conversation. He's also the founder of the buyer centric revenue community. He's been an sdr, An SDR plus an ae, a sales enablement marketer. He saw the problems in the beginning of his career at a big company and then worked at startups where he was able to avoid most of the problems associated with those bigger companies. He worked at Western Union Business Solutions and at a startup called Usergems. And the book model was originally a playbook he created for Usergems. Anyway, Nelson, welcome and thank you for talking to me today.

Yeah, excited to be here. Thanks for having me.

Totally. So here's where we align and why I wanted to talk to you. As you probably have saw, the CRO Collective mission and goal is to really rethink the way revenue operations are being structured today because they're broken and people are on autopilot. CROs are being caught in the middle because they're being hired essentially to run sales as opposed to actually run like actual revenue operations. And we're trying to fix that. But one of the more important parts of it is that because most CROs come from sales, there seems to be this addiction to utilizing these tactics, particularly in the areas of hiring SDR organizations to help build out these organizations. And I think that. My opinion, I think you share it is while it worked. And I credit its success and what it's done, but I think it's cannibalized itself and there's a lot of problems with it. I'd love to hear more about your perspective on this, why you wrote your book, what your point of view is on what you're trying to accomplish, and a little bit more about what got you here.

Yeah, sure. And I think that CROs are rightly concerned because they're at the helm and they're on the hook for the current popular B2B growth playbook. And I think as you've seen, their tenure is really low and has been decreasing year over year. And from what I've seen starting since the 2011, every year, you know, CRO and in fact. And also chief marketing officer, tenure has been going down and now and it's, you know, it's something like 17, 18.

Yeah, I think it's. Now it's lower, I think so 17.

Months in a normal sized company in like 11 months, according to Actor at a Startup for a VP of Sales at least. And so that's. That's really concerning. And so I think we need to understand why that that is the case and what's what we can do about it. And that's sort of the question I've been chewing on for the past couple years or so, since I got my start in B2B maybe six, seven years ago. First in sales development, then in sales and then in marketing. And fundamentally what I saw is that the current playbook that most B2B companies are running on is outdated and harmful. And that playbook is the predictable revenue model, which is based on aspects of what Salesforce did in the early 2000s and were part of their broader marketing and sales effort. So the predictable revenue model essentially consists of sales development to do prospecting full time as opposed to sales doing it part time. And so that's the marketing portion of it. You know, sales development is a way to generate and qualify leads for sales. Used to be done by sales part time. And then you know, predict revenue comes along and says, nope, sales development will do it full time. And then the second element of the predictive revenue model is the sales assembly line, which is the account executive and the customer success manager split. So you have one seller that handles the initial sale and then you have one seller that handles expansion and retention and oversees things like implementation and adoption. And so, and in practice there are further subdivisions, as you may know, the sales engineer that actually has product knowledge and does the demo, and maybe you have an account manager that just handles renewal in addition to the customer success manager. So that by and large is the predictable revenue model. And again, that's based on something that Salesforce did 20 years ago aspect of their broader marketing sales efforts. And it hasn't really changed in the past 20 or so years, you know, despite changes in buyer preferences and in modern, the modern Internet and modern technology and modern marketing and sales. And because of that misalignment, we can kind of get into what that looks like, you know, that, that, that playbook, I think, or those aspects of marketing sales do more harm than good. And the better elements of marketing and sales, aside from predictive revenue, are the ones that are actually generating the growth and the profit and the efficiency and the effectiveness. And so I think that both markers and sellers are very much harmed by the predictive revenue model. They're in this straight jacket that prevents, I would also say, leaving aside the business stuff, it prevents people from having more fulfilling careers. I think there's a lot of frustration among both marketers and sellers because of this. And I think that's one of the reasons why we see across the board in both marketing and selling sales, high turnover, low tenure, low performance or low goal and low job satisfaction. We can talk more about that.

Okay, great. That's a really good kind of opener. And what I'm going to do is present a couple of sort of, let's say, devil's advocate points that you could respond to. Despite the fact that I'm going to also make a declaration that I'm in agreement with you, but just for the sake of the conversation, other people listening to this, I'm sure there's a whole cottage industry right now dedicated to supporting and growing SDR organizations. It's become a pretty multimillion dollar business because these SDR organizations require training and technologies, et cetera. You see a lot of content on LinkedIn every day about SDRs and how to be good at SDR and what the transition to SDR is, how to train them. I'm just seeing More and more doubling down on this model. How do you respond to a business owner or a CRO who has fully embraced the SDR model and has made it clear that he's seen the or she's seen the evidence that this is an efficient way to go? It puts people in very specific roles, it builds efficiencies in allowing higher level sales leaders to close deals that are highly qualified. And it provides a better way to weed out people whom companies shouldn't be speaking to because they're not qualified and gets a lot of that upfront work done by that front team layer and allows that to happen at scale and that those efficiencies outweigh the costs that you just laid out. It's almost similar to like, if I throw enough soldiers at this problem, I know a lot of them will be killed, but we'll still win the war sort of thing. How do you kind of object or respond to this company, who's fictional company we're talking about has invested heavily in this model and they're really confident that this is the right way for them to go?

Yeah, sure. Maybe to borrow your analogy for a bit, which I like, you can think of sales development as cannon fodder, throwing troops blindly in the dark uphill into the enemy machine gun versus modern marketing, which you can think of as like modern military air force tanks and laser guided missiles and all that. And so just to kind of unpack that, I think for a lot of people, they haven't really realized what sales development or prospecting is as compared to marketing. And so they don't compare marketing development side by side. And they don't realize all the harm that sales development is doing. And they don't really get what modern marketing is and all the things that it can do and how that's changed over time. They don't get the history of prospecting and marketing. And so they're kind of just rolling with this outdated practice of prospecting, which I explain is the function of sales development. And basically I, you know, define it as, I basically view it as spam. So what prospecting is, it's a marketing strategy to generate and qualify leads for sales primarily through telemarketing, email spam, LinkedIn, spam and physical mail spam either to a person's work address or their home address. And spam is basically unconsented marketing solicitation to a buyer's private inbox. And you know, I think when you kind of put it into those plain terms, it's sort of like, ah, well, if you, if that is the case where actually what prospecting and sales development is, is spamming people, which I, you know, if you look at how buyers feel on the receiving end of it and how the people in sales development feel about what they're doing, then it becomes quite understandable. And I'll talk in a minute about what marketing is and the difference. There's. But another thing I'll mention is there's a lot of talk about sort of personalization as if personalization is the holy grail for sales development and what really that is. It's just a euphemism of making your spam personal to the recipient so they are less likely to ignore it and to reject it and it reduces some of the unpleasantness and annoyance associated with bam.

The analogy I use for that is you take the bitter medicine and you cover it in a sweet pill so it makes it easier for it to go down.

Correct. And so historically prospecting was something that was done in the pre Internet era where marketing lacked the ability to properly woo buyers and connect them with sales. And so what happened is sales would go out there and basically try to sell to people who didn't request their help. They would go and spam people door knocking outside sales, telemarketing inside sales. And then when the late 90s kind of came about early 2000s, it was very obvious that that was really inefficient and ineffective. And why would you want your sellers doing this prospecting Mark? You know, part time, you know, they were sellers were unable and unwilling to do it. It had to be done constantly in large quantities and pretty to amount to any leads whatsoever, even if the lead quality was far inferior to, you know, marketing generated leads, you know, people coming to sales when they're ready and they decided to specialize that into, into sales development to have a role dedicated full time into prospecting. And that was in the late 90s, early 2000s, why Salesforce did and other companies did it. But what also happened during that time was the advent of the Internet, maturity of the Internet and social media and modern marketing. And so if you look at what modern marketing is capable of doing with content and social media and events and partnerships and referral marketing and giving the website and giving users all the or buyers all the information in proper marketing non spam methods or even giving buyers a taste of your product and solution through a free trial premium to beta access, there's a million and one marketing techniques and modern marketing tactics that I break down in the book which are far superior to Spamming people. And so in both companies though, you have both elements of both spamming and marketing. You have both sales development and marketing. So oftentimes people do not separate or compare the two to see which side of the bread is buttered on and properly analyze sales development to understand actually it's doing, it's unnecessary and it does more harm than good. So you do not need sales development to generate and qualify leads. And that's something that marketing is doing now with like they're attracting people through all these proper methods, bringing people to the website automatically qualifying buyers with a few questions on the demo request form, and then, you know, connecting qualified buyers to a seller's calendar and voila. And so that is, that is primarily why sales development remains. And obviously the predictable revenue model preserves it and fuels it and gives it a semblance of respectability, necessity. And you know, I think the illusion that just because sales development can generate lead and revenue does not mean that that is worth it. In other words, that it does more harm than good that the roi, they're relative to other marketing possibilities. And if we look, it's, I think it's very telling that marketers or marketing do not advocate for prospecting. Even though prospecting is a marketing activity. You do not see marketers beating the drum for telemarketing and LinkedIn DMs or, you know, email spamming people or talking about personalization. You know, if marketing or marketers have to do prospecting instead of sales development, the game would have been over long ago. The reason, I think another key reason I break down. There's seven or let me just say this. The advocates of prospecting are primarily sales. And it's sales that beats the prospecting drum. It's, you know, Aaron Ross, who wrote the predictable revenue model, you know, he was a sales leader at Salesforce. He was, you know, yeah, he was, he was in sales. Most advocates of prospecting come from sales. Sales from a background. They pedal prospecting to sales and not marketing. And I think one of, and my book, I identify seven reasons why I have found sales leaders be pro prospecting. But I think the chief one is the intellectual influence of the advocates of prospecting who come from sales and sales development backgrounds back in the day, who, you know, who, who advocate for this stuff. And I think sales leaders are not marketing leaders. They are typically, you know, not, you know, they're not, they're, they're unsuspecting about marketing. They don't, they often don't care as much about how marketing is done or how marketing generates leads, which I think is a grave error because I think fundamentally the shift that has happened in B2B is that. Or one thing that I think that the predictive revenue model did right is, identifies the shift is that the key to sales and success, the key to a company's growth and profitability is a predictable and repeatable source of pipeline of a sufficient quality of lead to sales. In other words, marketing pipeline. But it gets marketing wrong with prospecting. It doubles down on prospecting instead of embracing modern marketing and minimizing or eliminating prospecting and sales development entirely. And so the fundamental shift in B2B is that companies are really marketing led, not sales led. It used to be that sales had all the information that buyers needed in order for a buyer to purchase a product or service, they had to speak to sales. Marketing really couldn't get that information to buyers. They couldn't really educate them, make them well informed and easily connect them with sales. So that has changed. And right now marketing is really in the driver's seat, kind of responsible for most of the buyer's journey. You know, I think according to Gartner, you see that like basically marketing is responsible for 80% plus of the buyer's journey and then sales like you know, less than 15% or something like that. But yeah, it's marketing that's making these buyers well informed and in buy mode, which is great news for sales because sales gets these layups and they, and they get to sell to people who want their help. And then sales gets to focus on help on facilitating a purchase and then making these people successful and growing the relationship. And expansion and retention, which is in the business model of B2B is largely subscription based. So the selling never stops with a customer. Most of the revenue and profit for customers comes not from the initial sale, but from expansion, retention. So you might have heard the saying land and expand. Most companies have a land and expand motion. They get a customer with a small sale and then they nurture that relationship over time through sales and as well as marketing to produce a long term relationship and increase purchases and advocacy on behalf of the customer and referrals from the customer. But really I think that shift hasn't fully because the predictable revenue model has blocked companies from fully adopting or adapting to that shift. And so companies are still stuck behind.

I hear this whole thing and everything you're saying is, makes a lot of sense. I think that. Let's unpack it a bit because a lot you said there, it sounds like what you're Saying, in a way, is certainly this model was created at a company that was at a time where none of the stuff that we have available to us today was available. So it was a unique time in the evolution of selling and marketing. And again, I give a lot of credit to Aaron Ross for what he did. I think it is actually really impressive that, you know, he kind of created an entire new paradigm and it worked. But I would also venture to say, too, to your point, that it was done at a time when it could work.

Right?

It can't work anymore. Right? There's too many automation tools and there's too much white noise. And the other thing too is if everybody adopts that same strategy, then customers are going to be cannibalized by all these different services and it's going to become a big, if I pardon the term, shit show, because now they're getting spammed by everybody, right? If everyone adopts that same thing, it's not just one army coming at them, it's hundreds and hundreds of armies coming at them, selling them. You know, because you and I are both profiled for many, many, many different types of purchases, not just one. So if every company, not every company, but if the majority of companies adopt the same strategy, that means that's going to be more and more and more SDRs reaching out to me in various ways and my inbox is going to be overloaded and it's going to create such white noise, which is what's happened, that people just tune out sales in general, that's one thing. But. But I want to back up a bit and ask you about this because I'm in agreement, right, that if marketing, and I don't want to knock marketers, I think it has less to do with marketers themselves, has to do with organizations and how they dep. When marketing is done properly, it should do the right job of qualifying people in the same way that these SDRs are doing it right now. It should be a marketing function, not a sales function. So in your view, was it because marketing wasn't working that this was decided? In other words, why wasn't, let's say, for example, marketing just improved or increased in its scope? Is it because sales organizations took over and they felt they wanted more real estate inside of the attribution chain and they wanted to own more of this? Or is it because. Because marketing was failing to do its job? Like what. What started this initial idea when, in fact, you and I could probably agree that when marketing is done properly, a qualified lead should land on the desk of a salesperson more consistently.

Yeah. So, you know, I think fundamentally, if you observe what's going on in marketing today, marketing is trying to liberate itself from sales development because marketing is handcuffed to sales development. They're preempted by sales development, they're crowded out by sales development and counteracted by sales development. And if you look historically, you know, once sales development was created, basically marketing, you know, was torn between, okay, your job is to do some proper non spam marketing and attract, you know, buyers to request speak to sales and you have to support sales development. And so what that looked like was you have to create gated content in order to capture buyer contact information so that you can give that to sales development so they can go out and spam people. And so marketing, it's got gated content, it's got what's known as mql, which is a acronym for marketing qualified lead, which is a euphemism for the contact information of an uninterested. And so marketing is forced to constantly generate.

Well, some would argue that that's not the case, that someone would say that an MQL is defined by the organization in the way that they deem appropriate. It could be some MQLs are better than others. And I have a lot of conversations with my clients about how they build out their MQL metrics and what qualifies as a marketing qualified lead. So in some cases they do a better job. I've seen some companies do a really good job of a marketing qualified lead is somebody who has to be 25 to 30% deep into the pipeline or funnel before they even have a conversation. Whereas as you know, other ones are just nothing more than fill out a white paper or download a white paper. And I think that's part of the problem is that it's a very ambiguous and somewhat arbitrary term. Anyone can define it any way they want. And so I say that mainly because I agree with you that that's the way it's turned out. I think that still people can assign value to the MQL in any way they choose. It just needs to be assigned better. I think there just needs to be more of a strenuous way in which an MQL is determined.

And how I've helped people clarify this is the way that I define a lead, which I think is an appropriate definition of a lead is a qualified buyer that requests speak to sale. You know, so this is a website demo request, for example. So marketing has done, you know, proper Non stem marketing, this person comes website requests the demo, marketing qualifies them and connects to the sales hand rate, you know, and, and that's the point, I think, at which marketing's job is kind of done and sales takes over. And so, but what, what happened with SDRs and what happened sort of in, you know, beforehand with prospecting is, is that marketing was sort of the handmaiden to sales development or was sort of subservient to facilitating prospecting. And so you have, yeah, trying to, trying to capture people's contact information or purchasing it through lists, trade shows, business cards, whatever. And then you try to, what lead scoring is, is basically trying to prioritize which of the contact information of uninterested buyers you're going to spam. And so you do that based on the likelihood that they may request to speak to sales in the future. So that is based on a bunch of things like they downloaded the white paper, they visited the website, they attended events, but that's all like assuming that they actually want to speak to sales. And what you're trying to do is you're trying to push buyers prematurely into sales with prospecting, with sales development. And so, and so again companies have a mixture of both. The marketing will do all this stuff to kind of woo buyers and then before buyers are properly ready to beat to sales, sales development will come in and push them prematurely to sales. And so what happens with that is buyers will be turned off by that. So maybe you attended a company's event or something like that and then as soon as the event finishes, you get banned by an SDR or something like that. And then some subset of buyers will be pushed prematurely to sales, which harms sales enormously because they get low quality, non sales ready lead people who are just browsing, kicking the tongue and should, you know, should just get that information from marketing from the website and not waste sales and time. And so the result that you get is a lot of sales and efficiency higher, sorry, longer sales cycles, lower win rate, higher cost per acquisition. You know, most sellers miss their revenue quota most of the time and you basically have a large, you know, again, because sales is getting a lower quality, sorry, lower quantity of quality leads, but a higher quantity of lower quality leads. You know, you basically have a lot of sales, a lot of sellers wasting their time triaging these bad leads. And so that it's just, it's garbage in, garbage out to borrow the, you know, computer engineering term. And so long story short is that marketing has been handcuffed and there's A movement now within marketing, led primarily by folks like Chris Walker from Refine Lab to help liberate marketing. But the reason that they struggle is that they are fighting against the effects of sales development from gated content, from mql, from lead scoring, from lead intent data, from pushing premature leads and sales from the reputation damage that comes from spamming buyers and the reduction in your total addressable market because of that, as well as manual demo requests and qualification scheduling when buyers are coming to the website trying to speak to sales and they have to go through a whole song and dance with an sdr. So the solution is actually to realize that no, the problem is really sales development and sales development is suffering today. And so I break this down in the book and I go through, you know, because prospecting is unnecessary and does more harm than good, sales development is basically failing and miserable and suffering. And that's why a lot of people are questioning it and trying to think about how it can evolve. And I'm saying the best thing that you can do is to help SDR transition to marketing, sales or operation, which they're anyways trying to do as soon as possible. And I present to people an experiment in the book where they can take a compare test and experiment or sorry, prove approach. So it's a, an experiment and a gradual transition where they can prove the superiority of trying to reinvest resources from sales development into marketing, which I include some examples of companies that have done that in the book and basically gradually reduce their sales anomaly, reduce their prospecting as they increase their proper marketing until eventually either sunsetting sales development completely or making it a very minimal part of their marketing mix.

Got it. So this is great. I like the fact that not only are you identifying the problem, but you're obviously you're offering some solutions. It sounds to me what needs to happen here. Sales needs to decrease the size of its footprint in the revenue operation and marketing needs to increase its footprint inside the operation such that marketing can be more effective. I think if I were to maybe lead the witness a bit, looking at this, we're talking understandably and effectively from a symptomatic perspective. We're looking at what's wrong. The knee is in pain, the back hurts, the blood pressure's high, that sort of thing. But the bigger picture here is, I believe what's really going on and the reason why these things are happening is there's a lot of money flowing into B2B businesses, right? I mean, the biggest news you see on LinkedIn right now about a company is when they get a funding round. I'm starting to talk about this a lot more now. You'll see I a company's website recently and on their homepage, the first thing on the top of their homepage above the fold is we just got a seed round, $160 million seed round, right? Congratulations. This is something that they felt was worth putting on their front page of their website and even maybe executives put on their LinkedIn posts. And I was thinking about the fact that getting a funding round or a seed round or an investment round has become something that a company touts as evidence of success. And I was thinking about, I think someone else said this. I'm not going to say it was my own idea, but it was a brilliant point, was if I got a mortgage, I wouldn't announce that on LinkedIn. It's a financing event, right? I mean, what they got, I understand they're giving an infusion of capital, which means they had to convince people that they were worth that capital. But essentially they got a financing deal, which means it's good news, bad news for them because now they're on the hook for that money. And all the stuff that comes with that investment round, all the expectations and demands are going to drive types of tag tactics that you're talking about, right? Because now I need to fill that pipeline, because the measurements that I'm going to use to prove to that investment organization that I'm successful are not necessarily going to be sales and profitability or even customer retention or renewals. It's going to be, look how many people I have in the pipeline. Look how much interested buyers there are. Look how many people are clicking on my website. Look how many people are doing these vanity metrics that indicate somehow to show that there's traction in the marketplace. And I think that what's happening is we're sending people into the market with marching orders that they're responding to. I mean, they're doing their jobs, they're getting clicks, they're getting website visits, but they're not meaningful for the business. But that's what they're being measured to do because of the demand. On showing evidence that the business is growing and expanding. I do think that there's a connection between. I'm trying to draw a bigger connection between the reasoning behind a lot of these things. It's being driven by a lot of profitability and pipeline growth just for the sake of scale, as opposed to thinking more about customer outcomes and customer retention. You said in the beginning, which I agree with, is that customers are where you're going to get most of your business from renewals. So it seemed to me logically then I would want to get as many people into the customer category as possible because good customers, happy customers are where most of my revenue is going to come from. But an inordinate amount of resources are being spent against people in the pipeline part of the sector. And I think I'd like to hear your thoughts on like what needs to be done to shift this thinking. How do you stave against the fact if I have a CEO of a company and again, I want to speak to it for the purposes of our, of our conversation here, if I'm a chief revenue officer and my marching orders are to respond to the fact that we just got a funding round and now I have to set up the organization to make sure they respond to that properly, I'm probably going to employ a lot of the tactics that you're talking about because that's what's going to keep me employed and it's going to keep me going in my job as opposed to keeping customers happy. So what are your thoughts on how a CRO would manage those dynamics when they're in that role?

Yeah, so I think any marketing or sales leader needs to recognize that they are not the owners of the company and that owners that take of the company take financing. They themselves not the only owners. There's the venture capitalists or the PE firms that own some extent of the company or if you take loans from a bank or something like that, then it's not, you know, so there's, as you're right, as you say, taking money is a mixed bag. It allows you to grow a company, but it also comes with some strings attached. And it depends on how the owners of the company, whether you know, the founders and the CEO or the private equity and investment capitalist, it's how they want to run a company. Do they want to run a company that the good, long term, profitable, sustainable company that cares about profit and that cares about growth, that cares about efficiency, that cares about trying to grow a company in the best way possible. So you know, it's the fastest growth, it's the least costly growth. And you know, do they, do they care about the happiness of their customers and retention and customer success sort of metric, you know, or are they trying to just, you know, pump up, as you say, vanity metric and be a fly by nighter and artificially pump up valuation to then sell or an artificially inflated company either to the public market or in a private transaction. And so yeah, there are some issues that are going on similar to private investing where you see that the value of an underlying asset does not reflect its price. And there's a whole bunch of bad malinvestment that goes on and distortion in the market. Now leaving that aside, fundamentally most owners and most investment capitalists, whether they're VC firms or PE firms, want to use the best growth playbook to grow a company and make the most, the most maximum profit in the most optimal way. And so that's the whole purpose of a model, is to offer the most efficient and the most effective way of doing it. And the predictive revenue model is not that. And I believe that the proposed alternative that I offer because as you say, it's not just identifying a problem, it's proposing a solution and examples of how it's worked in a way for people to adopt it. I propose the buyer centric revenue model, which is marketing, not sales development and full sales cycle sales, not the sales assembly line. What I mean by full sales cycle sales is the AE or the account executive and the CSM or the customer success manager combined. No handoff and no prospecting. You know, a seller, if they want, can generate leads through proper marketing, non spam marketing, but it's icing on the cake to what marketing is doing. And then in addition to that, I've identified two other secondary problems that I think fuel and like exacerbate the predicted revenue model and which I think is the primary problem with the B2B and that is quota and commission. And I propose instead of quota to have proper goals and metrics and instead of commission to have full ote salary plus bonus. And I share examples of companies that have done that successfully and why that's superior. And so I think when you talked about or you raised the, you know, the issue of vanity metric, you know, goal, I think whoever said it was like what gets measured gets managed. Yeah, that's true, you know, so I think the, the goals that the owners and the venture capitalists pose for the company as a whole and then the goals and metrics. So the goals and metrics that they pose and then also the goals and metrics and then trickle down to marketing sales, you know, direct things. And so I think the predictable revenue model is one of the key sources of misalignment between marketing and sales. Or it's because if you notice they are not aligned to proper and holistic goals and metrics. Marketing sales have different goals and I think an impartial metric. And so marketing sales aren't accountable together for profit, for revenue, for customer acquisition cost, for customer acquisition cost payback period or customer lifetime value or customer feedback and happiness and churn and you know, win rates and sales cycles and average contract value. Basically marketing's job is to generate MQ sales development's job is to push those buyers prematurely to sales or to generate meetings booked and sales job is just to. It's just revenue on the initial sale and really nothing else. At least the account executive then the CSM has to worry about everything else like customer success which creates a. Which I think creates natural friction and misalignment within the sales org that one seller is accountable to the promises of another seller. And I think buyers feel that.

I agree with all this. I'm curious to know. Sorry to interrupt you. I just want to hit this squarely on the nose where we're focused here on someone's listening to this podcast right now. They're a chief revenue officer and they work for companies who is on that, let's call it that assembly line treadmill where they just got a big infusion of cash and they're looking to increase another round or they want to get acquired or whatever other objectives they have that have nothing to do with customer outcomes. They're very much driven by the market and that CRO's marching orders are to put together a strategy that does all the things that would be required to do that. Get the right metrics, create the right front facing, how do you say, perception to the board that that's happening. Right. We need to show evidence that we're moving in that direction. Get me leads, get me clicks, get me interested buyers, make sure that we're driving as much as we can towards putting people into a pipeline that we can grow. And all those indicators are going to help us continue to beef up our valuation and create the perceptions necessary for the market to respond in a way that we want to. And I need you to do that for me. And the CRO is in a conundrum because the Croatia has been, I don't know, let's say for the sake of even being really magnanimous here, was trained by the CRO collective and knows that Custer really the drivers of businesses and that ultimately if he wants to keep his people happy and keep them engaged and aligned in an organization that works, that they all need to be on the same page and fighting for some larger goal which is mostly customer retention and customer satisfaction. But those things aren't achievable because they're counter to the Marching orders that I just got. What does the chief revenue officer in that situation do to recalibrate and not end up being one of those 11 or 17 month CROs?

Yeah, so great question. So the same thing that I recommend that people do on the marketing front, which is analyze sales development and marketing. And I propose this test prove and gradual transition approach where you propose business case for experiments and then you prove and then you gradually transition reinvest resources. You do that similarly with sales and with the sales of soundbyline as opposed to full sales cycle sales and also with quota and commission. And so I present to people a way for them to do that. So if you're a CRO, what you should do is you start by obtaining a historical baseline where you analyze the health of your sales organization, your sales assembly line, using real business metrics that the CEO and the board actually cares about. So you're looking at profit, revenue, the number of customers, number of opportunities, growth rates in everything and win rates and sales cycle in your average contract value and your cost per acquisition in your churn rate and your expansion reoccurring revenue and all those customer success metrics, right? Customer health score, customer satisfaction score. You're trying to get a full picture of how happy customers are with you and how your sales org is doing. And then you know, obviously you calculate the cost of your sales org, the hard cost, salary, benefits, everything like that. Try to get a sense of how your sales team is doing from a performance perspective. Like you know, what you know, based on the goals and metrics you've outlined for them. How's their attainment doing, what's their turnover like, what's their tenure like? So how long are they actually staying in the role? Are they turning over every six months? You know, and so you kind of need to get that picture first. You know, the doctor does get the full health of the patient. And then you know what I would also do? You know, I would, you know, once you kind of gather that, I propose that you basically present a business case to the leadership, to ownership for an experiment in which you basically designate a portion of your sellers, become full sales cycle sellers, as I call them, you Let a few AES keep their customers and, or you give a few customer success managers some potential buyers.

You'd have to also ramp up some other part of marketing to compensate for that as well so that you can kind of replace those SDR efforts in that group with some other type of prospecting source, I assume, correct?

Yes. And that relates to the other experiment on the Marketing side front. So I'm leaving aside for right now sales development and lead generation. And I'm just talking about the structure of the sales or the AE CSM combined. No handoffs, no prospecting as under the full sales cycle model I propose for sales. But to prove that and to like give that a shot, you do it in an experiment way where, you know, some subset of your existing sellers transition to that, you can ask for volunteers and you know, you set out, you give them the proper goals, metrics and compensation that I recommend. And you know, you run that experiment the duration of a few sales cycles. So you can basically track your sales metrics all the way to the end and ensure repeatable success. And then if it doesn't work, you know, basically then those AES customers can be handed off to CSMs as they were before and the AES can return to what they were doing before and just handling the initial sale. That's essentially the experiment to prove it. And some companies are doing that, and I outlined a few of those in the book. And companies to some extent have combined that sales role, the AE and the CSM role, or they haven't specialized it or kind of divvied it up into so many subdivisions. So companies kind of do that to different extent. But that's what I would say. You need to, you need to have a gather data and then do an experiment and then with proof, then be able to gradually transition things. And so that's the best way to go about it.

And then as you say, essentially as it sounds like what you're saying is, in short, you need to gain permission to experiment. And in order to experiment and make your case, you probably have to collect some really compelling data to show that there's a problem that the CEO may not be aware of and that that data needs to tell a story that has the CEO persuaded enough to say, okay, I'm willing to have you carve out a section of your organization to try something different. And if you can prove to me that you've alleviated those, those issues that I'm seeing that, and you can do it at scale, that I'm willing to consider it. But you sort of have to have that experimental space to play in first to be able to do it so that you can prove out that a different model works.

Yes, quantitative metrics as well as qualitative. And so what I would do is I would speak to your, to your buyers and I would ask them, you know, do they prefer a single seller, know, you know, a seller that is accountable to their promises and has greater efficacy and expertise? Or would they prefer, you know, these handoffs among sort of partial sellers? You know, one seller to do this, one seller to do that. And I think that's part of the story that you tell to the board, which is, hey, the quantitative metrics aren't as good as they can be, or maybe they're not looking too good. And from, from speaking to our customers, they actually prefer that our sales. Org operates differently. And then you can also speak to your sales. I think, and I argue and from my anecdotal experience and from my data research is that sellers don't want to be on the sales assembly line. They don't want to do the partial sales. They don't want to do prospecting. They want to do the actual sales job. They want to do the initial sale, expansion and retention.

I agree. It seems like SDRs are almost in a persistent pursuit of getting out of being SDRs. It's like they see it as a place they have to get through to become salespeople and they're. It's a training ground.

Well, and in fact, it's more of a burial ground because, you know, from, from Pavilion, formerly Revenue Collective, they did a big analysis and only 22% of SGRs turned AES actually performed. And the reason being is that it's not a sales thing, it's a marketing thing to do. Processing.

I agree. And I would say it probably would be looked at because by the way, it is the way people sort of like rationalize things is that, well, I'm glad we did this because we found that 22%, you know, it's like almost like it was a weeding out process as opposed to the other 78% of people or whatever it is. 80 something percent might have been amazing salespeople buried in that, but they didn't stick around long enough to be developed or found out. And so it's not like you found the diamonds in the rough. It was like those are the only ones that hung out long enough to make it work.

Yeah. Do you think attracting good talent.

No.

When you offer them a sales development role, does any parent want their child to be a sales development role? Does any sales leader, if they're being honest or sales development leader, really want their kids to go to college in four years and all that money and whatever to then end up basically spamming people and doing telemarketing, email, spam? It was a very clever trick to disguise the sales development role as a sales role. Even though it's technically marketing spam drudgery. And to make that a requirement for sales because otherwise they'd have trouble getting people into that role.

Yeah, no, I agree. Now, here's the thing I'd ask you, though, right, Because I work very closely with people whom I have a lot of respect for, a lot of respect for who train SDRs, right? They have an entire, you know, SDR training business, you know, and I understand that, right? I mean, people who go through. Because, look, I was a salesperson as a little kid. You know, when I say little kid, I mean, you know, 20 something, right? I was walking door to door, knocking on people's doors, told to screw off, get away, you know, go home, whippersnapper, you know. But, you know, I managed to get some people to buy from me. I did rather well. And I would say, you know, very compellingly and persuasively, that that was great experience for me. It taught me a lot of things. You know, it taught me how to build up some muscle and develop some scar tissue, and it taught me how to be more persuasive, and it gave me confidence and it gave me chops because I put myself through that. It's no different than in, like, any sort of, like, boot camp or something that there are obvious outcomes for. I mean, just running obstacle courses may not be something that you end up doing in life, but the fact that you did it makes you. Develops character and makes you a better person. There's a lot of people that come out of the SDR organizations having developed really good skills of speaking clearly, being more succinct, being more direct, having a lot more confidence, and those aren't bad things. So there's a lot of people that would say that this sort of frontline sort of work is a good opportunity for people to develop skills faster that they need in life, and some of them end up becoming successful at it and actually end up running them. So what's the argument to say that the SDR organization is a really good proving ground for a kid, like, particularly, like, let's say I'm a parent to your analogy, right? And I got some spoiled kid that I can't stand now. I mean, I raised this kid as best I could, but all they do is complain, throw them into that situation. They'll learn something. They'll get rejected for two years, and they'll probably develop some thick skin that I probably want them to have that I wasn't able to give them. And, you know, is that so bad? I mean, I guess Maybe they aren't really doing something that's so great for society. I understand they're spamming people, but at least they're going to have a chance to go in there and really have to understand what it's like to be in the marketplace and have those kind of experiences that'll build up some other aspects of their personality that may be beneficial. I hear a lot of this. I'm curious to know what your thoughts are on that.

Yeah, so what I would say is the best way to teach someone to shoot a basketball is not by having them kick a soccer ball in their face. And I think if you want to train entry level sellers to do sales, you train entry level sellers to do sales and you don't have them basically doing marketing spam drudgery. And we see that the effects of that in sales development, we were suffering 39% turnover, 14 month tenure, 11 month productivity and 48% goal attainment. And among the SDRs that become AES, that's even worse. It's, what is it? 22% goal attainment. So if we were to project those dismal figures in any other department, they would be untenable in product, in HR and finance and marketing, or even amongst your customers. If you projected 39% turnover amongst your customers and how expensive and time capital labor intensive sales development is and all the efforts that go into construction, constructing and maintaining that organization. Whereas if you just had a proper entry level sales role which exists, then you do that. Similarly, if you have an entry level marketing role, marketing specialist, marketing coordinators, content marketing specialist, social media specialist, marketing writer, partnership marketing manager, whatever you call them. And so that's what I would do is like if, you know, you bring a new person to the sales org, just like any other role, you teach them, you train them, they shadow people. You, you, you know, you, you learn sales on you, you learn, you know, you learn sales on.

Like I was taught, I mean, I was taught that way. I was taught, I went out on the road and I actually was running sales meetings and doing the actual work. And there's no doubt about the fact that I learned the same things that I just said to you. I was still rejected, it was still difficult, but I learned a better skill. Right, so I'm in agreement with you on this one, but I thought it was worthwhile because I hear a lot of this. Please continue.

The average cost of a fully loaded sdr, direct cost benefits, all that type of stuff is about 130,000. And the cost of turnover is one and a half to two times that. And they turn over quite high, as you know, at 39%. And so you need to. One thing that I outline in the book is how to properly analyze the cost of sales development org and then project the opportunity cost and all the talent and productivity that you can unlock if you were to repurpose that talent into sales and operations and marketing, which again they're trying to do as soon as possible. And all the profit and growth that you will get out of that. And so I outlined the way for people to gradually sunset sales development, to repurpose sales development. And I just want to touch upon that very, very briefly, which is in that experiment that I mentioned, I outlined in my book, there's two experiments. One is you automate website demo requests and qualification automatically the website. You repurpose those SDRs that were doing that, you know, in other words, inbound SDRs to helping, ideally to help out with marketing stuff like proper marketing. But you know, if not, you can just have them do prospecting. You give them quota and commission relief accordingly. And then the second experiment that I recommend is that you gradually reduce prospecting activities in their prospecting quota in 25% increments. So if you know, they, if they're prospecting quota with 10 meetings a month, then you make that into like eight, eight meetings a month. And then if they were doing 100 telemarketing calls, they're doing 75 marketing start, 75 telemarketing calls a day instead of 100 or whatever it is. And then you repurpose those SDRs to marketing, you know, content, social event, community, partnership, referral.

So you sort of reallocate their time towards other things. You get more value out of them and you utilize that resource more effectively.

And they'll be thrilled. And then you proved, and then, and then basically you monitor your metrics, you do that over a few sales cycles to again, you know, track all those metrics all the way to the end. And then, you know, and I think what you need to also do is that you need to recognize that, that marketing is kind of begging to like and it's fighting to be free of this stuff. And so you give marketing greater free reign for them to tee sales up with website demo requests with high quality leads that have higher win rates, faster sales cycles and really improve the efficiency of the sales org and makes the CRO look better. And hopefully we can reduce that low tenure amongst the arrows and the dissatisfaction among CROs to be like, you know, no matter what I do, I feel like, if I follow these best practices, I'm stuck in a rut and I'm just going to be fired or I'm going to quit in frustration.

Yeah, this is great. We're kind of heading ahead of our time here. We could probably talk for another 45 minutes or so, I'm sure. So I want to make sure that we end this on a. A conclusive note, because what you're saying is also valuable. And by the way, just so you know, I'm kind of a bit happy you're saying all this because you're basically selling my own work here. Because I assess companies in the way that you're proposing. I have an entire assessment program for exactly the same stuff. So this is one of the reasons why I wanted to talk to you. It's amazing how closely aligned we are on this, and it's great to see because you. And like you said, like Chris, there are some people in the marketplace who are really making a lot of sense. And I'm really hopeful that more people listen because I could see how the things you're talking about, we're talking about, if they were implemented, we can have a really big impact on the way companies thrive. Not only that, but also the way people within the companies thrive. Because I agree with you, it's become sort of like a graveyard for a lot of people to go into organizations with these types of objectives. So I close it out like this.

You are one of two sales leaders that maybe one of two that I'm aware that I would consider. No, one of three that I would consider modern in alignment with, with these views and are really leading the next revolution of sales and helping sales to liberate from these bad practices and become way more fulfilling and way more productive. And so I'm glad for you and your efforts and thank you for.

Look, it's a team effort, man. Together. So that's why I wanted you on here. I want to collect more people. So it's funny. I'm going to be transparent. So in order for me to set up my technology the way that I wanted to today, I had to abandon one port in my computer. And it's the one that. That charges my computer, so my battery is going to run out. But I want to thank you because literally I'm getting a red light here. This is a great conversation and there's so much here. And if you could just. What's the name of your book?

It's the Death of the SDR and the Birth of Buyer Centric Revenue. It's available on Amazon as an ebook. You don't need a Kindle for it. You can just read it on your desktop or on your mobile phone. The first version of the book was published eight months ago. And then the second update of the book, the real, I would say the real product, the main, will hopefully be pushed out in the next month or two where that will be the definitive statement of the buyer centric revenue model. And also I'm creating a community to bring a lot of people who are interested in discussing these ideas and discussing the model and testing the model, implementing the model together, marketing and sales leaders, operations folks. And that way, you know, there's resources for people, you know, to get knowledge and to get help to do this stuff. Great.

Well, look, when your book, when that second meal comes out, let's have another conversation and talk about that. But in the meantime, you know, we'll obviously include information about the book when we produce this episode. And this was a great conversation. So in support of what you're doing, what you're saying, and thanks for what you're doing and for all this great information, it was really helpful and actually very practical. So, Nelson, it was great talking with you and I know we'll be talking again.

Awesome. Thanks for having me.

Thank you.