Knowing Your Numbers, With Ray Rike

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 our next episode of the CRO Spotlight Podcast. Hi, Lupe. How you doing?

Great. Great to see you, Warren.

You too. You too. You know, I was just out in Utah, not too far from from you, and I was thinking, like, God, how lucky you are to be living in a place that's so beautiful, because New York is weighing on me now.

It is beautiful, but it's been as humid as New York lately, so we've had a lot of monsoons. Although this week is dry and hot.

Yeah, you know, I want to just reference something before we get kicked off here, and that is that the conversations that I've been having recently with my clients have been really focused around revenue maturity. And we're seeing so many of these companies at these early stages between, like, the, you know, 10 and 30 million in revenues, starting to figure out how to make a lot of very difficult decisions to mature their revenue operations. And, you know, I think our guest today will be helpful in figuring that. But I just want to mention that it's amazing how a lot of these companies at this stage are very reluctant to take on outside support. They all seem to kind of want to figure it out on themselves. They want to make the same mistakes and test and learn, and it takes up so much time, and a lot of them end up hiring sometimes a CRO incorrectly, and they end up spending a lot of money. And I think I'm seeing a shift. I'm seeing a lot more people more receptive to the idea of saying, you know what? This is not working. We Got to try and do things differently and maybe borrow some existing systems that make sense. I don't know if you're seeing the same thing, but I'm just seeing so much of that now.

Well, I think it's really important. We've had a lot of guests and everybody has kind of their own wheelhouse of expertise. And the CRO position is such a broad responsibility that unless you have a really experienced team underneath you, it's going to be challenging to get it all done without that structure. So I think you're right and I think a lot of smart CEOs are looking to it for ways to support their CROs and, you know, processes before.

They bring them on.

Exactly.

Totally. Well, that's good segue here. I want to talk to our guests. So I'm really excited today to have Ray Reich as our guest. And Ray and I have worked together on a couple of projects and he's helping up on some of the course material we're doing for the CRO Collective. Ray, welcome and thank you sir, much for being here.

Hey Warren, thank you for having me, Lupe, so nice to meet you too.

Likewise. Yes.

Ray is the founder of RevOps Squared, which is based upon a culmination of his experience in senior leadership positions across companies like Fortune 500, Hypergrowth, VC backed early stage software companies. Ray has incredible depth of experience in developing benchmarking frameworks for measurement and metrics. All CROs need to know what to measure and what not to measure and Ray's expertise in this area is unparalleled. So I'm really interested in talking about this because it's something that we don't really get into a lot here is what do you measure and how do you measure it? What's the right way to look at your business and at what stages do you look at those measurements? So given that. Ray, welcome. We'd love to hear a bit more about your position, your business, your background and how you got started doing this.

Great. Well, I think, Warren, thank you for asking that, because my background is exactly why I founded RevOps Squared. So by way of background, I've been in the subscription software business for almost 30 years and it started at a division of GE where we were the world's largest provider of multi tenant hosted applications on mainframes. We called it TimeSharing, it was Gen 1 or V1 of SaaS. And I ran about a $500 million P&L there at the end. And then I went out to Silicon Valley where I started at Netscape, and I led the E Commerce group. And then I've had a series of six different software subscription businesses, five exits and one burn down. But ever since 1996, I ran at least sales and marketing or sales services, success and marketing. So I have the scars, and I mean a lot of scars and mistakes that I made because I did grow. I'm an engineer by schooling. I then went into sales because I heard salespeople made a lot of money. But I also realized very quickly that your positioning, your value proposition and messaging was as critical as selling was. So marketing was kind of like something I really embraced. So by running sales, marketing and services for 25 years, I realized there was a lack of integration. So RevOps Squared, I actually founded it first in 2009 was I wanted to use operations as a way to integrate marketing, sales and success across the customer life cycle. That's acquisition, retention, and expansion. Well, let's just say in 2009, when I was talking about software to integrate those three operational organizations, no one was ready for that. They're like, well, we have sales ops. We just formed this new thing called marketing ops to take care of our marketing automation and the data and customer success ops. We're just trying to figure out what in the hell a customer success manager is.

In 2000, it was like account management, basically.

So without taking up too much time, because I want to make this an interactive dialogue, I said, what's the anchor? What's going to get organizations and CEOs to say we might want to integrate and align these three functions? And I said, it's metrics. If a head of marketing and a head of sales and head of customer success share those key performance indicators and the form of metrics such as what is our total ARR growth between new and existing? What is our customer acquisition efficiency? Because that's marketing investment and that's sales investment. Right? Or what is our gross or net dollar retention rate? Well, you got to get the right prospects in the pipeline. Marketing, right. That fits your ICP and your buyer Persona. Sales needs to close the right customers, not just anybody who's interested in saying, I'll buy. And then customer success needs to do a great job of nurturing, caring, and making sure that their satisfaction and value they receive is so high that there'll be expansion opportunities there. So that's why I started a firm that is benchmarking all the performance metrics that a CRO needs to understand across the entire customer life cycle, from acquisition efficacy to retention efficacy to expansion efficacy.

That is so important so often Every, even under a CRO, every organization runs their own metrics. And it's almost like, you know, three parallel highways that don't ever merge. And that is, you know, really a challenge because everybody can be doing a great job, but together they're not going after the same metric. That's awesome. I love it.

Let me give you an example of that. And Warren, please weigh in on this. But think about a sales leader, a VP of sales, not a CRO. They have a win rate goal. Right. So win rate is one of the key metrics. Of course they look at sales cycle length, they may look at opportunity, final drop off rates, etc. But it's win rate. But now if I could turn around to my marketing colleague and say, okay, let's look at the source of every one of these leads that becomes a qualified opportunity. What's the win win rate for someone who comes in from a webinar versus a LinkedIn paid ad or a organic search on Google because they're in an active buying process? You can then that's one very simple example of where two different departmental metrics should come together to see what the holistic value is and then take it one step further. Oh, so the person who found us on Google search marketing that was sold by our sales organization sells and retained at a higher rate because they were in that core icp customer success. That customer lifetime value is much higher. Right. And your customer acquisition cost is lower. So that's just one example of how three departmental metrics should be combined into one to have more alignment and more integration across the customer life cycle.

That's great. I love it. So I'm curious to know in your, your experience, because what you're saying, I don't think there's anybody that listens to what you're saying right now and thinks it's crazy. I mean, everyone's nodding their heads and it's logical. Right. So if that's the case, if something is so acceptably logical, why is it that companies stress and don't do it? What, what do you think is in the way of companies just naturally building out these sort of integrations?

TR history, tradition, experience and bias. Let me tell you what I mean by that. Who becomes a CRO? Well, in our latest research, right, about 80% of the time it's a former VP of Sales.

Yep.

So, and she's probably only done sales leadership work. Then the next level research we did was what functions do you have responsibility for as a CRO? Do you know that only 24% of the time CROs have sales and marketing. Only 18% of the time do they have sales and customer success. But 50, I think it's 54, maybe 58% of the time they have cells or sales and partner channels. Right. It's like, well, inherently we're setting them up to fail because we'll give them a CRO title, but we're asking them to do sales job. So they're using sales metrics, close weight, acv, et cetera. So I think it starts with how we bring people into the CRO role and what functional responsibility we give them. That's number one. Number two, the CEOs and the CFO is not doing a very good job of when they bring a CRO in and they do allow them to have marketing and sales or sales, marketing, customer success, sitting down and saying, these are the performance metrics we're going to be presenting to the board that you have responsibility for. And it's not win rate or lead conversion rate, it's how efficiently do we bring a dollar of ARR in? So your customer acquisition cost ratio, where it's how efficiently do we retain and grow the ARR you do bring in? So that's gross dollar retention and net dollar retention. So CEOs and CFOs aren't telling their CROs. Here's how we're being measured as a company. Here's what's driving enterprise value. That's your stock value. So these are the company level metrics we want you to start with. So I think it starts with poor CEO.

It's so true. You're like preaching to the choir here. So here's the question I'd ask you then, right from your experience observing companies, what's the issue? Like, you're right. Everything you said is correct. So what is it? If you were speaking, let's say, to a CEO who's now in the process of considering hiring a Chief Revenue officer, what would your guidance be as they approach that role? Whether it be promoting somebody internally or looking out into the marketplace to bring someone and maybe even address that issue. Is that the right, what's the better option? You know what, what would a CEO walk away with from this next question that might have that person maybe take a different perspect on the way that they're already thinking about it.

So it takes a bold, confident CEO who's going to smooth the way for a CRO to have cross functional responsibility. So what I would do if I was, and when I talk to CEOs and say, you Gotta believe in your soul that there is benefit to integrating sales, marketing and customer success. So first of all, are you willing to, even if you stay with three different leaders, are you willing to have each one of them co own the same company metrics? Are you willing to say we're going to measure you on car growth, contracted annual recurring revenue growth, maybe CAC payback period, gross and net dollar retention? Are you going to make sure that's the way they're measured? Okay, so if you're willing to do that now, why wouldn't you have one person who could manage that across the organizations instead of you having to do it and align departmental metrics that have high correlation to those company level metrics I just talked about that a CRO owns. But if you don't have a CEO and CFO who's willing to say we're going to force our executive leadership team to share these enterprise value creating metrics, how in the hell are you ever going to force an organization structure that allows you to focus on those company level metrics? Did I answer your question? Okay, Warren?

Yeah, very much so.

But it takes, I was talking to Howard Brown, the CEO of Revenue IO, formerly Ring DNA, talking to Nick Mehta, the CEO of Gainsight and they're like, it takes a lot of intestinal fortitude and true fundamental belief that an integrated go to market team is going to improve our performance, our efficiency and our effectiveness. And if you don't believe it yourself, how in the heck are you going to organizationally support it?

Yeah, you know, I think I've seen CROs get added to organizations as kind of the multiplier effect, you know, like the magic wand that's going to be waved over kind of revenue to make it grow. And everything still remains siloed, everybody's still kind of running their own thing and it's very difficult to be successful unless you have built that infrastructure, that communication and that like mindness. So I completely see why the CRO position has, you know, such a short life cycle. And you know, CEOs tend to hire, put some faith with some, you know, short term expectations, but really not investing in the growth of the organization going forward, fully investing Lupe, I would say also.

So for the people out there listening who are either aspiring CROs or maybe you're in your first CRO job, there's two or three, I guess, recommendations I would give you because we all have bias from our experience, if we grew up in the sales world, we see everything through that opportunity funnel lens, right? And we always had problems with, well, the leads didn't convert very high, right? Or customer success wasn't able to onboard and implement and ensure success. So first of all, be a student of the other functions. If you're a CRO who came from the sales world, get to know everything about your marketing team. What are their objectives, how are they being measured, how are they being rewarded? Right? Because a lot of bonus programs are based upon vanity metrics. Well, you got to generate a thousand leads or your MQL to SQL conversion rate, right? No. So not only once you learn about how marketing is currently motivated, incentive and compensated. I asked two simple questions. How does that measurement result in higher ARR growth? Do you know the linkage from a white paper download to ARR growth? Well, the answer is hell no. Because they know a white paper download to possibly a lead, maybe a marketing qualified or sales qualified lead. But if I ask how many of your white paper downloaded resulted in a qualified opportunity that went to stage, closed and was retained two years later, the marketer would look at me and say that's not my job. But it is your job. Because at the end of the day, if your stock is being valued on how much you're growing, how much you're retaining and your enterprise value, it is your job. Same thing I would say to somebody from marketing who goes to the CRO role from marketing, understand the sales compensation, how they're incented, how they're measured, how in the hell they keep their jobs. Right? Because then you're going to change your orientation to say, how do I ensure that sales has the ability to close the most business and that customer success has the most probability of upselling, cross selling and retaining. So that's one thing I would tell a CRO. Don't be biased by what you've done. Be interested in what you haven't done. Number two, go out of your way to make sure that the metrics and measurements that you put in front of your head of marketing, your head of sales and your head of customer success are directly correlated to the metrics that you're presenting to the board of directors and investors. And say, okay, I'm presenting CAC payback period. Here's what KBAC payback period is. Here's why it's important to our investors. Here's how your marketing metric, maybe it's conversion rate to closed one, how that impacts our CAC payback period or how efficient for every dollar of marketing investment made, how many dollars of ARR does that generate that affects CAC payback period? Right. So show them that string or pull that string from marketing activity to marketing measurements to company measurements. But Warren and Luba. Lupe, I'm Sorry, how many CEOs take the time to inform their head of marketing, head of sales, and head of customer success about that correlation and integration? They don't. That's why we don't have alignment. That's why we have friction. That's why we have dysfunction. So the CRO should try to create that common understanding and common vision of what we're trying to accomplish.

Yeah, that's a great point. And you know, I, I grew up in sales and, you know, like you, you migrated to sales from engineering because that's where the money was. And throughout my career, I kind of progressed to the highest level that I could in sales and then really wanted more. I wanted more of that kind of the C level opportunity. And I kept having conversations that really highlighted some of the things that I didn't know. And so very purposefully and mindfully, I moved into different areas of the business that quite frankly paid less. So I earned less because I didn't have that bonus component. But the result, the end result was phenomenally because I learned so much through some of the operational journeys that I took, some of the marketing things that I've done. And I encourage, like you just said, I encourage sales leaders, since it's the Highest percentage of CROs to really invest in learning that side of the business. Because it drives everything that a sales leader needs. Absolutely.

And for the people who are currently a director of sales or VP of sales, take your head of marketing out for lunch, for dinner, ask them about their challenges, how are they measured, how do they get promoted? Do the same for the head of customer success, because even if you learn about how they're motivated and how they're measured, and then maybe you can go to the next level of. Well, how do you do that? Just by learning? Not only will you build better relationships with your colleagues and peers across functions, you're educating yourself to be the CRO of the future. And the other team, I would say, learn about what they really do is the operations team. If you're a CRO of the future, you better have some process and operational orientation. So find out what. If you have a rev ops team, great. Find out what they do, what their objectives are. If you have sales ops, marketing ops, and CSOPs, find out what they do. And by curiosity, you'll be amazed at how much better of a CRO you'll be in two, three, five years. Yeah.

That's an interesting point you bring up. And there's so much to unpack from this part of the dialogue here. Mainly one of the things I think is you point to something that we talk about a lot here and that is mindset. Right. Because all this stuff we're talking about is measurement. Things which are all obvious, they make sense and you know, tying together what the board wants and all those things are logical. But the barrier we're all recognizing here is people and the way people think and you know, their biases and their competencies and their strengths. Right. And I don't want to get psychological, but a lot of this is predicated on people's, you know, operational survival. Right. Someone gets put in a job and in the instance that you mentioned. Right. They're promoted to becoming a CRO and they're from sales. They're naturally going to lean on the things that they're comfortable doing and that they know. Right. Because that's the stuff that it survived on for the last 20 years of their career. Naturally, they're going to go and run the sales organization because they know they can win that way. So it's not as much. It's also about competencies. It's also about just having people all collectively understand that they have to all learn new things together. And to your point, as a CEO of a company, I could understand why a CEO wouldn't want to have an experiment with all these people trying to figure out new things while I'm trying to grow my revenue next quarter. I mean, I don't want to interrupt that short term. So what do you do? How do you develop an organization that manages these sort of mindset, growth opportunity, I mean, requirements at the same time fulfilling on the same board's demands for short term results that they were promised this quarter or next quarter. That's a tough balance. And what's the way that a CRO would manage both of those at the same time so that they maintain, I don't want to say making everybody happy, but doing it in a way that takes advantage of all the business requirements, not just the long term ones.

Well, I don't have that magic wand to say if you do this, it'll happen.

Sure.

But here's a couple.

Well, maybe. Exactly. Maybe a couple of things you can think about.

So if you're a VP of sales and your goal is to be a CRO.

Yep.

Make sure you have a couple of your directors who can step into your role, who can be great VPs of sales and she can actually Measure all the day to day operational aspect of leading sales. So you don't need to just be super salesman. Cause so many people got to being a director of VP of Sales by being the best salesperson on their team. But they don't make sure that there's people underneath them that could do what they do. So that's number one. Same with the Chief Marketing Officer, right? If you're the VP of Marketing, you want to be a Croat, make sure you have someone, whether it's your head of product marketing or demand gen who can step into your role and you don't have to manage that function like you are still the head of marketing. So that's number one. So number two, if I'm the CEO, right? And I think if we don't set the expectations of the organization of I'm promoting Ray to be this CRO, he doesn't have as much marketing and customer success experience. So we're going to make sure that the VP of marketing and VP of Customer success are fully on board with supporting them. And it's through common metrics. Okay, Ms. VP of marketing, you're going to be responsible for contracted ARR growth. Also Ray's success is going to be your success. So you got to, I think somehow it's not easy get the CEO to build that shared vision that together we succeed or fail. And if we see a CRO not being supported by the other functions or the CRO not supporting the other functions and understanding them, we got to have a difficult discussion early and often and make some tough decisions. Because if you've got the head of marketing fighting the Croat or the head of sales finding the CRO who grew for marketing, you're going to have silent embargoes. That is they're not going to do that. They're going to shake their head and say yes or they're going to create friction and landmines for that new CRO. And the CEOs got to clear those landmines, man.

Can you think of a way to baby step the transition on Join Metrics and you know, to kind of to Warren's question, you know, you've already gone out to the board and you've presented what your quarter's results are going to be or projections are going to be and then now you have a new CRO in place and now you adopt maybe, you know, you listen to the podcast and you go, wow, light bulb went off. I should do this. How do you kind of baby step that transition so that it's not overnight that you rip off the band aid of the old metrics to the new metrics and how do you convert that in a reasonable way?

So most companies when they go into the annual planning process, they have two or three primary goals. Right. It's growing car maybe 40% or increasing our customer retention by 3% more. Right. So only have those two or three goals. Number one then bringing the head of the departments in the impact those goals. Let's say it's net dollar retention. Let's just say it's net dollar retention. We know that if we get to 100%, our enterprise value to revenue multiples are forex higher. Okay, Ms. Head of Sales, what do you think the top two or three things you can do and the metrics that are leading indicators that's going to drive increase net dollar retention and have that discussion? Oh, well, I think it's going to be if I have a higher close rate, how does a higher close rate impact net dollar retention growth? Right. And kind of walk them through that and then ask the head of customer success to do the same thing. What are the top two or three measurements, outcome measurements that you can be responsible for that's going to impact net dollar retention? Well, retention. Logo retention. Yeah, logo retention is good, but how does that impact dollar retention? Well, maybe if we make sure we focus and retain our largest customers, that inherently is going to give us a higher gross dollar retention. So we're starting from a higher foundation of existing ARR. So it's going to make our expansion make the net dollar retention look even bigger. So I really think it's as simple as focus on two or three and collaborate and brainstorm with the department heads of what's the two or three metrics that are directly correlated to those company metrics and very quickly out of market is going to say, well, if I generate more leads, I'm not sure how that's going to really drive higher net dollar retention. Maybe if they convert higher right. And they are retained better, maybe that's the way I can understand it can impact ndr. But that's just pulling the thread all the way across. Does that resonate with you, Lupe?

Yeah, no, it does resonate and I think it actually shines a really bright light on something you said earlier. That the way that these different organizations are compensated or rewarded or measured is going to be, you know, really important because if you see the right path, but the wrong path gets you a bigger bonus, you're going to choose the wrong path every time.

I'll give You a simple example. Once in the last 25 years I took a role that didn't include marketing, sales and customer success. I took a SVP of sales job because I thought it was a hot company. And they wooed me and I'm like, okay, so one of the first challenges I faced was our head of customer success also had professional services. And she was like, I'm going to drive the hell out of professional services revenue. But that came at the expense of ARR. Because if a company has a $200,000 budget, you can get 180 for ARR or 20 for services. But if her whole team is focused on getting more services, we often went on that 200k. We did a 60, 40 split. 120 ARR and 80 services. And her services revenue and her services margin look great.

Yay.

But if you look back on that two years later, it's like, well, why is our Carr growth not at the level it needs to be? Because we sacrificed the long term cash generation end of a SaaS company for short term services metrics. But you got to kind of identify and think about that up front.

Yeah, you need someone who has sort of a good financial projection mindset to be able to look forward into the future and see the implications of that sort of thing. And we speak to the CROs, we mentioned how important it is that they have these sort of computational mathematical forecasting skills or have somebody on their team that has those skills. Right. I mean, I had a job like this and I'll be up front. I mean, that's not a strong skill set of mine. I don't look at numbers or a spreadsheet and be able to look at it and become some. I see people look at that stuff. They can look at a spreadsheet. They go, oh yeah, I see a Trend Here in 20 years, like, what the hell are you talking about? I see a bunch of numbers. Right. But there are some people that naturally think that way. So either you're that way or you have someone who thinks that way whom you can say, would you take a look at this and tell me what I'm missing here? So I think to your point, it's like Aron needs to sort of understand their strengths and their competencies and how to build a team that reflects how to bring forth what's best for them and the people that can do exactly what you just described. Because without that, it goes back to what we talked about before. You lean on the things you're strongest on, but you have a blind spot where the business gets suffers because you're not having it paid attention to. You know, I had a client two years ago who said something to me which, you know, I knew it, but the way he said it was great. He said, you know, a good CRO brings in a rainmaker. He isn't a rainmaker. You need someone who is kind of like comes along with you that can handle the competency of running a sales organization underneath you. And a CRO who comes from sales sort of has to let go of the reins a bit and hand it over to somebody else so they can focus on the bigger picture. Which means that person needs to be excited about the possibility of expanding the scope of their role and not feeling like they're being somehow marginalized by not doing the thing they're great at. That's a big interview question that I think you have to ask. Find out what this person really want to do. What are they really excited about? Because if they're excited about running a sales organization, they're going to have blind spots in the areas they need to be strong on, like you just mentioned.

It's interesting, Warren, I. You know, using sports analogies can be dangerous. Right. Because not everyone is passionate about sports as you are. But. But I'm going to use one anyhow.

Yep.

And it's a very simple one. And in football, you have kind of their sales and marketing. There is. You have the offensive coordinator and you have the defensive coordinator. And great teams have a good offensive defensive coordinator. The biggest mistake that someone who gets promoted from offensive defensive coordinator to a head coach makes is they want to keep running the offense or call the plays because they know they're good at that. Right. And what happens is they have a great offense, they're scored a lot of points. The problem is the other team scores one more point because his defense sucks. Right. So it's the same thing. You want to make sure that you don't just play to your strengths. You hire someone who can take that role over and you understand that you're the orchestrator, you're the coordinator of the offense and the defense. Sales and marketing.

Yep. You know, we had this conversation with another guest recently. We're talking about like the difference between like a relationship based person and a science based person and how they look at the world differently. Right. You know, great salespeople. And like myself, I'm much more of a relationship based person. You know, I can build bonds with people and build trust and create persuasion and get confidence and all that stuff. And it's Great skill, you need it. But if you want to do what you're talking about, you need someone who looks at things more scientifically, looks at the bigger picture, understands how systems work together and how they operate together. And you're sort of not getting yourself caught in the weeds of being caught in relationships more just how do things work? What's the impact this is having on things? I think that that's an important distinction to make in the way you look at this role, that this is a weird kind of amalgamation of skill sets that the unicorn person out there probably exist, but you need to know where you sit inside those competencies to know how to manage yourself appropriately when you have to get the job done.

It's interesting you say that because the other thing. So I'm, as you can see, analytical more in the science of sales, right?

Yep, yep.

The relationship management's not my core strength, but let's. A lot of people like you, Warren, are really good at the relationships, et cetera. So I think one of the biggest, most important hires you can make is a revenue operations, almost your chief staff. And what he or she's really good at is not only operationalizing all the measurements, metrics, processes, et cetera, but challenge her and say, I don't want you just to operationalize all the data into measurements. I want you to provide insights. What are you seeing? What is all this data that you're generating in these dashboards? What do we need to do? I want you to be a canary in the coal mine. Tell me before we're dead that we're dying. And that might be your pipeline philosophy that's so great.

The canary in the coal mine. It's such a great, perfect context for the rev ops role. It's a person that walks over to you and taps you on the shoulder and goes, I see a train wreck coming down the road here in about two weeks and here's where it is. And okay, thank you for being my eyes and ears on this sort of thing. So I can manage that appropriately. That's such a great and astute way of looking at it, because that is exactly what it is. It's someone who sort of mitigates risk for you by being able to show how the system is going to crash or go off a cliff if we keep going this direction.

One other question that I have for you, Ray, is as you work with different CEOs, do you see any kind of a trend that when they hire a CRO, are they hiring a little bit of themselves or are they purposely looking at the makeup of their team and balancing that out, because I kind of see in the marketplace a lot of lookalike, you know, sea levels. And I think that is maybe a gap. I'm just wondering if you're seeing that as well.

Well, I think that's human bias, right? The whole diversity trend is because we tend to hire and like to hang out with people like us, right? But I think this is at another. Another level. And that is it's a 2080 rule. I think 20% of people of CEOs are brought up in a traditional siloed departmental world. So I think when they say we have a revenue problem or we need somebody to help take us to the next level of revenue growth, they quickly go to, I need new customers, I need a head of sales, right. Or I need new pipeline. So I think about the head of marketing. So I don't think it's the fixed mindset versus the growth mindset. And Warren, you talked a little bit about mindset. I think far too many CEOs have a fixed mindset of what they've seen work in the past and not where we need to go tomorrow. So I think it's a mindset issue and it's a bias.

So much of this is about that. So much of this is about that. You know, I want to kind of explain a little thing that I came up with, which I'd like your opinion on. So for someone like myself, whom is less systemically oriented and is more relationship oriented, sort of the thing that we don't talk about enough in these types of conversations is the importance of the customer success role has emerged over the last 10 years or so in terms of running a business. And I think that's because we always focus so much on sales and marketing as this engine that runs, right? So for me, what I sort of came to the conclusion of a while ago was, okay, what's the most important thing in a business, Right? Whose perspective is the one that matters most? It's the customer's perspective matters the most because ultimately that's going to inform how we do things. Things satisfied customers, satisfied experiences, retention, growth, et cetera, et cetera, et cetera. So I look at the customer success organization as sort of the sort of relationship tether to the bigger picture around the organization, where if I have a customer success organization and I put the customer's outcomes or the customer's needs or the customer's experience at the center of the context, all of these other organizations have a much simpler way to understand the relationship they have to the outcome. Because it's all about customer outcomes, right? How do we speak to a customer? What's the first time we touch a customer? When we bring a customer on, how do we like, move them from sales into the delivery funnel? How do we keep them happy? How do we derive the insights that we get from the way that they're using our products to help make product better? How do we help them retain what they want? I don't think that this is done enough in my opinion. I don't think customers are as important in the context of things as they should be. Matter of fact, I think the way that we go to market these days, it actually makes customers feel angry and pissed off with all the emails and crap they get. That seems so much more directed by the company's growth goals as opposed to customer outcome goals. I'd like to know what your perspective is on that particular part of this revenue.

It's funny, we did some research recently with Gainsight McMahon over at Gainsight, kind of one of the leaders in customer success platform, but also the profession and the function as a whole. And what we found was the companies that invested in the top 25 percentile in CS as a percentage of revenue had the highest net dollar retention.

Makes sense, right?

So he's like, okay, so we invest 10%, industry average is 6%, but our net retention is 8% higher. A lot of numbers there. So number one, I think customer success is critical, but it's how do you measure them? You can't measure them on, okay, they delivered a QBR to 80% of their customers. It's, did you have successful onboarding? That is, did everyone actually start using the product? Are they engaging with the product? Right. Are they happy? But most importantly, are they receiving the business value, the outcomes that they expected? So customer success needs to become almost a financial analyst in and of it herself to say, oh, you bought our product to compress your sales cycle time and grow revenue by 10% faster. Are you doing that? And so many customer success organizations are focused on the tactical stuff, but not the business outcome stuff. And that's a big miss. And the best CS organizations that are driving the highest net dollar retention are focused on the outcomes as much as they are on the product engagement input. Yep.

So, so great.

The second thing, and this is the first CRO, if your CS organization is doing QBRs and you're invited to the QBRs, get into the QBRs. What are we doing? So many QBRs being delivered by CS are, well, here's Your product usage. Here's some of the stats, right? But they don't include the executive sponsor who buys a product and what she's being majored on. Maybe if it's a marketing automation system, it's did they generate higher qualified leads and pipeline that converted at a higher rate. You as a CSO organization need to be responsible for making sure that your customer knows that your product is driving the business results that the CFO and CEO are going to use to decide to renew. Because in today's cautious capital, headwinds, more oriented world, you got to make sure you're aligned to business value as much as you are the product satisfaction. Did that answer your question? A little bit about the CS organization. And once again that means their goals needs to be more about net dollar retention, net promoter score. Right. And maybe some level of product engagement, but not a bond. Did you deliver QBRs all your accounts?

Yep, 100% it did. It's a very, very good, astute thing. So thank you.

Yeah, no, I often have seen customer success like really angst about a QBR and wanting to get through it as opposed to getting really into it and uncovering, you know, is there a gap? What do we need to do? What are we doing great? What do we need to improve and really leveraging that face to face time or that, you know, meeting to build trust and responsibility.

It's interesting that you say that Lupe, because I remember I joined a company about five years ago and I said okay, I want to go to 10 QBRS because I really need to understand what the customer satisfaction is, why they bought the product, how are they measuring, you know, the value they're receiving. And we had these 30 to 40 page decks and 80% were reports. They were reports and dashboards that was in the product. So I'm like, well why don't we actually maybe share that part of the QBR a week in advance, see if they have any questions about any of the usage trends. Right. Et cetera and focus the QBR that hour to hour and a half you have with the client around business oriented things. So I noticed like my company that I was an analyst, where I wasn't a founder, was with retailers. So I was like, what's your same store sales growth look like this quarter? What are your goals for next quarter and how can we help impact it through our digital marketing platform that we had? Right. That was an entirely different discussion that the manager of digital marketing didn't really care about. But you know who did? The chief marketing officer. And we were able to get her to come because we were talking about those outcome metrics that she's being held to and she was like, well, I didn't know you could do that. I didn't know you could actually look at translating foot traffic into my store into same store sales comps. She's like, why didn't I know this? It's because the tactical QBRs and your manager of digital marketing, he was just worried about how many people were actually engaging with your Instagram post. Who cared, right?

Yeah. That's stuff you can read. It's not meaningful stuff that you can discover. You know, going back in my career, at one time I ran the merchant business in Canada and one of the things that was really important because we were not, we were a premium brand card brand. And one of the things that was most important to talk about was the rate because that was typically what made the decision to keep the product or not and the value that we were delivering for that rate. Yet it was the elephant in the room that no customer retention person, customer success person, I don't think they were called that at that point, but discussed. And it was the demise of that account. The minute you brought that into the forefront, the minute you were able to articulate with data the value that you were delivering, it became a non issue. And now you are really partnering to growth and to different things that were meaningful. So I think that's really valuable, valuable insight.

And one of the things I would say on that is we recently did some benchmarking research on what percentage of B2B SaaS sales organizations use a value based selling methodology. I was shocked. 80% said they did well. So first of all bullshit, right? But beyond that, we asked the follow up questions. So you know, do you use some type of ROI mechanism to know the value of customers receive to justify the investment? And most of them said yes. Right? It was about 74%. And then we asked, does your customer success team know the business value outcome that you use to get them to close and do they integrate that into the qbr delivery? Like 18% said yes. So we as an organization are saying we're doing value based selling. We do some level of ROI calculation, but we're not even sharing that with customer success. Thus customer success isn't ensuring that the customer is actually getting the value that you sold them upon.

Yep, exactly. So when it comes to making that buying decision or rebuying or recontracting decision, they're missing the data that somebody else will come in with more compelling information. And maybe win the business away. So it becomes a vicious cycle.

And then the last thing. I'm sorry, can I add one more thing?

Absolutely, absolutely.

The other thing we asked is what percentage of companies are doing some level of NPS Net promoter score in like 80? No, it wasn't 80. It was like 92% of respondents said they're doing net promoter score. But then we asked, which of these three categories of people are you conducting net promoter scores on? Users, administrators, or economic buyers? Only 24% of companies do a separate NPS calculation for economic buyers. They're all doing it for users. And with all due respect, users typically aren't the people signing the check. Right. It's the economic buyers.

No, it's true. And nobody can sell your product or service better than you can. And if you're leaving it to the users to be the ultimate closers of that business, it's not going to happen. As well as if you're the one delivering those metrics and then. And have somebody disagree with them. I think I could talk to you all day, unfortunately, I think we're getting to the end of our time here. Maybe you can, you know, tell us a little bit about something that's exciting going on right now with you or perhaps, you know, let everybody know how they can get ahold of you and reach you if they're more curious.

So everyone can reach out to me. You can follow me just Ayreich on LinkedIn. I post almost every day about some type of metrics and today I talked about the top four, five SaaS metrics for a CRO. So very appropriate. Probably the most exciting thing is I'm putting on the SaaS metrics Palooza event on October 11th and 12th, and I have probably 16 of the 20 top thought leaders around SaaS metrics and benchmarks in the industry to keynote. Geoffrey Moore wrote Crossing the Chasm, also wrote Zone to Win about what metrics are appropriate in each zone of a company's evolution. Nick Mehta is going to talk about how CEOs and CFOs collaborate on metrics to make metrics informed decisions. Mary D', Onofrio, who's the partner in charge of the entire growth fund at Bessemer, over 200 SAS IPOs out of her fund and 13 other people like that. So I would say that if you're interested in metrics and learning from the best and brightest SaaS metrics Palooza is probably one of the things I'm most excited about. 10-11-12 and you can reach out to me, as I said, at Ray Reich on LinkedIn or Ray reichevopsquared.com and I'll make sure you get an invitation to the event.

That sounds exciting. Boy, a lot of great minds brought together, so definitely count me in.

Yeah. So I know you probably can't hear me as well as before, but I'm back here. So I just wanted to thank you, Ray. It was such a great conversation. I agreed, Lupe, this could have been like another hour of worth of stuff to talk to you on, so we may even have you come back. But thank you so much. And that event sounds great. I certainly think it'll be a good idea for you to promote that. I'll be happy to help you do that because it sounds like something I think people would really get a lot.

Of value out of. Great. Well, Warren, Lupe, thank you for having me on the CRO spotlight. Warren, thank you for what you're doing with the CRO Collective. I think it's a great initiative and it is such a critical role to get our industry to the next level, maturity. So thank you very much.

Thank you, Ray.