Practical Advice in Marketing to Enterprise Companies with VMWare CMO Carol Carpenter

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Thank you.

Welcome to our next session, Where the Rubber Meets the Sky: Practical Advice and Marketing to Enterprise Companies, with Carol Carpenter, CMO of VMware. Carol, thanks so much for joining us. Take it away.

Good afternoon, good morning, good evening, wherever you are. Thank you so much for having me. I am so excited to be here, um, and I hope everyone who's joining is safe and healthy. This is, um, a pretty nutty time, so thank you for taking time out of your day to join me to talk about marketing to enterprise companies with a mixture of SaaS and non-SaaS products. Um, some back— quick background on me. I have been in technology marketing for many years, about 25 years, and I've had the honor of working for several different types of companies, starting with Apple very early in my career, which was— I wouldn't even call it a licensed company. You know, we sold hardware and software in those days. It was pretty straightforward. I've also worked for companies like Trend Micro, a security endpoint company, where we actually did transition from some license to subscription. And then, pure SaaS digital natives like companies like ClearSlide and most recently Google Cloud, where we definitely were running a specific SaaS business with specific SaaS metrics— say that fast— specific SaaS metrics. And, I've learned a lot. And, at the end of the day, great marketing is great marketing. But there are some differences, and so I wanted to take a little time and share with you what I've learned about marketing to enterprise companies, particularly SaaS solutions. Here at VMware, I'm super excited about where we are as a company. We are in transition. If you follow us, you know, it's a company that's built on tremendous innovation starting with virtualization over 22 years— about 22 years ago. And to where we are today, which is we have an extensive portfolio that's both broad and deep, covering any application on any cloud, um, anywhere on any device. And that gives our customers tremendous choice. And as a result of our portfolio growing, obviously the way we go to market, the products and solutions that we sell has also evolved. We have a combination of licensed products, as you can imagine, which is the more traditional You pay once, it's a license, you have renewals that include maintenance and support fees. We also have products that are pure SaaS products, and we have subscription products. So, it's pretty interesting, and we have a lot of challenges as a team because when you have such a varied portfolio, really trying to drive the acquisition, the nurture, and the renewal We just have varied motions. So, with all that said, you know, you're here because you know SaaS is important. You know that lots of companies are buying SaaS, and many companies have shifted. Over 75% of software companies have moved to the SaaS model, software as a service or subscription as a service. And those who aren't are falling behind. And why is that? Because customers want choices. Customers want the flexibility. They want to be able to try before they buy. The ability to only pay for what they use. And 38% of companies now say they're fully running on SaaS, and that is expected to rise to 73% over— by the end of this year. So no question, this is super important for all of us. It's something I'm keenly focused on, and, um, let's get into it. And that's why I call this, you know, where the rubber meets the sky. How can we as marketers help our businesses advance and actually do a better job advancing the business. So, okay. So, as I mentioned, you know, 73% of the businesses are shifting to SaaS by the end of this year, and you know, it's always a combination of technology, people, and processes to help pivot. And we need to be leaders in this, and I fully believe what I love about SaaS is that marketing plays an even more critical role. We're strategic partners anyway, but in this kind of environment where data is critical and we need to help bring the art and the science together to actually drive the customer experiences, because customer experiences are ever demanding and changing. And you can see here that— I think we missed a slide, I'm really sorry about that. Did we miss a slide? No, sorry. That as you can see here that the world has changed, right? Our customers are ever more connected, more influenced. And I'm going to talk a little bit more about what this means for us. So we have a greater responsibility, and I believe that marketing can be that strategic partner. And hopefully a lot of you already are that strategic partner. And if you are, I'd love to hear from you and hear what your best practices are. So in the 25 years I've been doing marketing, and particularly let's talk about enterprise marketing, there have been tremendous changes. And, you know, obviously the environment has changed, the technologies have changed. Apologies. I have a dog barking behind me. This is what work from home does to all of us. Um, I'd like you to look down this list. What I've seen and what I hear customers talking about is all of these different areas. And so when you think about your business and what your expectations and how you surpass those expectations, where do you focus your time and what changes are you experiencing and where are you seeing gaps in the way you go to market and the way you play your role? So I'll just pause and you can think about it for a moment. Well, you know, this, this is a trick question because I think, as most of you know, it really is a lot of the above. And as I've talked to companies and I've talked to many of our customers We're all being faced with this: overwhelming amounts of data, increased customer engagement across many channels, many channels we can influence, and some that are a little bit harder to do so. This data enables improved segmentation, and ultimately, marketing can have such a much stronger impact on the business because we actually are part of the entire customer lifecycle. In a SaaS business. So let's talk about these different areas and what are some of the best practices, and I want to just share some of the stories and things I've learned along the way in terms of being able to help companies kind of advance through this journey. So there's a Gallup study that actually shows that marketers who use data in their marketing, they outperform their other competitors by 85%, their peer group by 85%, and more than 25% in gross margin. So 85% in sales and 25% in gross margin. And I'm sure you're thinking, well, of course, data makes the world go round. And at the same time, it's super complicated. I have never been in any organization, including, you know, some of the ones who you might think are really strong at data, I haven't been in any org where the data is easy to access, easy to interpret, and easy to distribute. And those are all three big challenges that I faced, and I suspect you have too. Data is stored in many places. There are political issues around who has access to what. And then if you're lucky enough to have access to all of it, how do you actually put it to work? And all this data, what are we trying to do? We're trying to acquire, retain, and monetize our customers' effectively. And the great thing about SaaS is you get lots of data: usage, on acquisition, what have they surfed, what have they tried, what have they not tried. And you get a lot of the behavior— behavioral data. And the question and the value is how do you tie the behavioral to the intent? Because that's where expectations fall down. When I'm intending to log on to this webinar and it doesn't work, You may only see that I left, but you don't know why I left, as an example. So I think, you know, we are in this era of big data. When I started out 25 years ago, we didn't have as much data, or you had to do surveys, which we still do today, but it was a very blunt instrument for understanding both behavior and intent. So we have a lot of it. I'll tell you that the biggest challenge I've seen is, frankly, we are chasing every single data point and every metric. So, the question I ask my team is, how do you turn the data into profit? What data really is going to make a difference? And so, in SaaS, I think there are several pieces of data that you've got to be sure to have, and hopefully, for those of you who have been doing it, you already know this, but I'm just going to quickly talk about them. 5 big pieces of data, 5 metrics every marketer who works in the SaaS industry needs to know. One, your top of funnel. Not just number of visitors, but your unique visitors, which also leads to your leads. And, you know, when you go through your funnel, your MQLs, your SQLs, and your SALs— truly important. Like, you've got to be measuring that, and I'm sure most of you are. Great tools out there to do that. Two, customer churn. The average churn is 6.12%. What does that mean? Who really cares? It really depends on your business, and it depends upon your own unit economics. So That's the other thing I would just caveat. All of these data, and when you hear benchmarks, how many times have you been asked, oh, that, that's great. That's our churn rate. How does that compare to our competitors? It's a good question, but it doesn't always lead you in the right direction. As I talk to my team, sometimes, so what? What if you're 10 points off of that? What do you really need to do? You need to think about how do we directionally improve. And so measuring in a longitudinal way is super critical there. Number 3, revenue churn, which is tied to your churn, but understanding revenue churn because that helps you with your unit economics. Number 4, customer lifecycle value— customer lifetime value. You know, how much money are you making from a single customer over the course of your relationship with them? And customer lifetime value, it's your single average sale times your transaction average times your retention. And fifth, and most important, because I actually think a lot of us track this as well, is your customer acquisition cost, your CAC. Making sure that you are spending ahead, but not too much ahead, right? So some examples really quickly. You know, we have a product called Cloud Health. It's a management platform that helps manage about $12 billion in cloud spend. We have over 10,000 customers today, and it provides visibility into cloud costs. So it's a SaaS product, right? And it has that beautiful network effect that we bring in data and we can actually aggregate and look at trends, et cetera. So there's a lot of value there because by looking looking at those trends, we can provide better advice. Right? So that's really important data. There was a question about how are we going to segment the market. So when you start, you're going after low-hanging fruit typically, and you're kind of like, well, who's coming? But over time, as your business matures, you want to start to segment the market. And so we looked at it, and we wanted to look at usage, feature usage, and feature feedback. And so we analyzed all the feature usage from mid-market and enterprise customers. And what we discovered is that in fact the commercial and the mid-market actually needed some very different features from what our enterprise customers needed, and we were actually missing many. So that data helped us actually pave a path on the roadmap. We influenced the roadmap as well as new pricing, new packaging, and then obviously the offers on the site so that there was easy, clear— an easy, clear journey for those commercial and mid-market customers. And actually, as a result, we've seen based upon the latest results and explosion in customers. We also been looking— COVID started in March, and like many businesses, we started to see changes in behavior. We saw an explosion of usage for cloud health, cloud usage in gaming, and that was followed by healthcare, retail, telecom. I mean, not surprising, these are industries that have been hugely impacted by COVID, but this enabled us to quickly pivot to create more geographic-based, verticalized enablement to help our sales team. So that's just an example as well of how you take some of the data that's both, you know, that specific, those metrics, as well as some more behavioral data to drive and influence what's happening in the company. Well, as we all know, it's not a one-size-fits-all model anymore, which has made our jobs even more complicated and why I think marketing is one of the more complex functions to actually lead and participate in. And we're not wasting as much time on A/B testing. There are so many other ways, because agility is the imperative, and the demand process is shifting. And so one thing I've seen, I'm sure you've seen, is that this is what we would do 5 years ago. Here's our segmentation. Remember, you'd make cutout posters of each of your personas and put them up around the office and make sure everybody understood. Here are our key personas. Still important to do, but the reality is that the majority of B2B buying decisions are not made by any individuals, and we know this. I mean, in SaaS and even beyond SaaS, just in enterprise more generally, decisions are made by buying groups. And that buying group is critical because these buying groups are typically trying to solve a problem together, and everyone has a voice. From the practitioner to the C-level. At Google Cloud, we found that we needed about 40 touches to move leads through a funnel effectively. 40 different contacts were needed. That's just an example. Another example, if you are selling an HR SaaS tool, that you need actually HR, tech, and operations to be involved as your buying group, as your demand unit. And so you can have multiples of these taking place. And so when you think about when people say, "Oh, we've got to really work on the buyer's journey," it's really buyer's journey. Again, more complexity, but it gives us that opportunity to look at who are the influencers from the top and the bottom. And when you look at the product-led growth companies, you look at Zoom, Salesforce, I would even argue many of the areas of our portfolio, that as marketers, we're looking at how do you create the usage and the marketing experience that are so integrated and influence it as for acquiring, converting, and retaining. And the companies who do this well, I think we all know them, and we've also seen that the product and the experience are one and the same. And this is what I think gives us such a tremendous opportunity to improve the full lifecycle. So, you know, another example I'd like to share with you is that There was a Google example in research, and this is more of a consumer example, but I think it still applies, that they looked at data for car buyers. And what they found is that it takes 900 touches before deciding what to purchase. 900 touches, both online and offline. 71% of that was mobile. Pretty tremendous. So you have to ask yourself, what are the critical touches that lead to a final transaction, and even then our jobs are not done. So that buying unit in enterprise, super critical to understand what is that buying journey. Apologies, here is a slide about the buying unit and props to Serious Decisions, who I do think is really great for B2B marketing for data and best practices. So, um, I really highly recommend them. So, how do we fuel value at scale? And that's what SaaS is all about, right? How do you get to scale? How do you make your unit economics work? And if you can't get there, those are, you know, 101 here in California is littered with those who can't get it to scale. It goes without saying that the customer is critical. We talked about the data from the customer behavior. This is everlasting, and this hopefully will be the case going forward for a long time, that Without customers, we're nowhere, and beyond selling, we have to learn from them. And we have to look at that product data, as I said, and figure out, like, what do they need, what do they take, what does it take to continue their usage, not just land, but how do we expand over time? I talked a little bit about cloud health. I'll use another example from VMware. So VeloCloud, um, in response to COVID and the immediate need for all of us to suddenly work from home, Our VMware SD-WAN team, they were really hyper-focused on how do we increase the performance for this whole new office experience. Suddenly, we went from— I'll give you the VMware example. You know, we have many offices around the world. We went from a set of many tens of offices to suddenly we have about 32,000 employees, 32,000 offices. Imagine that. And we're just one example. I'm sure you can look at other companies. So, with VeloCloud, the team— delivered at the end of the day a 97% improvement in business impact. And it all came from the insight that customer employees were experiencing this decline in internet performance because of the sudden work from home. I don't know about you all, but I have two children. They are adult children, but they have pretty high bandwidth needs, everything from gaming to their own Zooms and their own conversations. And so what they found is that by seeing this increased a decrease in traffic, that there was an opportunity in 2 weeks to actually deliver campaigns that actually spoke to this need around performance, and they actually saw a quick impact on business. The best part of all of this is it wasn't just that we used the customer voice. Every customer who had a positive experience— and I'm sure you've all heard this, but we actually saw it— they tell on average another 5 people. Okay? Now, we all know what happens with bad news. It travels and it's amplified even more, right, than that.

And Carol, we're right at 10 to go.

Okay, great. Thank you so much. I can slow down a lot. So, we talk a lot about being customer simple but enterprise scale. And how do you do that? Well, we do that with— sorry, I'm having a— let me just— Go forward. There we go. Oops, doesn't want to stay there. Okay, we talk a lot about going from product to solutions, and why is this important? So I'll give you this example. When I got to Google Cloud, we literally have had hundreds of products. So Google Cloud includes both G Suite, which is a collaboration— set of collaboration tools to help businesses collaborate and be more productive, as well as Google Cloud Platform, which has everything from compute, network storage, to AI/ML, to many, you know, API management and more. And it was pretty clear that trying to explain to customers or prospects what we did was just taking a long time, not to mention all the deal sizes were very, very small. So, we endeavored to move to solutions, and this is something that I think a lot of companies have realized, whether you're a SaaS company or not, is that if you can't describe your customer problem in terms of their vocabulary, their use cases, and the problems they have, and elevating to what the business value, that it just takes much longer. You'll get there, but it can take much longer. And if you think about it, we're trying to create, especially with the SaaS products, the seamless online experience for acquisition, transaction, retention. How are they going to get it? Well, we know, number one, all the data shows very few people read websites. If you're like me and if you look at all the eye-tracking tests, people read the headlines and they go very fast. It's like 2, 3 seconds on a page if we're lucky. So how do you communicate what each and every one of your widgets does? It's very difficult, especially as your portfolio expands, and especially if you're trying to solve enterprise-level problems, which typically have some complexity, have a security element, have a manageability element. You need to think about how do we talk about our— the value, and this is on marketing. Engineering creates the value. Marketing, we express the value. Sales and us, we go out and extract the value, right, online and in the real world. Solutions are a shortcut. That is our way of getting to the customer, making it easier for them to buy. I heard a colleague say to me a long time ago that our job is to decrease the cost of customer thinking. Make it super simple. And you hear a lot about the KISS metrics, keep it simple, etc. I love to talk about SAVE, and I think most of us have pivoted from the 4 Ps to SAVE: Solutions, Access, Value, Education. That's the power. We're here to provide the solution, solve the customer's problem completely, give them access. So it's not about placing it in a channel, it's about giving the customer access wherever they are. Value—we just talked about that with respect to moving from products to solutions—and education. It's all about education and through the whole customer lifecycle, right? So, I mentioned we went on this journey at Google Cloud. When I started about 3.5, 4 years ago, you know, Google Cloud was on a run rate of about $1.5 billion—this is all public information—per quarter, $1.5 billion. Most recent report, they're around $2.5, maybe closer to $3 billion per quarter. That happened over the course of 4 years. About scale. And I've seen that. ClearSlide, which was a sales engagement SaaS tool, when I joined, we were doing about $10 million of ARR. Two years later, we were doing $40 million of ARR, so smaller scale, but still incredible increase over two years. And most of that is because we adopted this SAVE methodology. So I can't say enough about it. If you already are doing it, kudos to you. If you want to learn more about it, there's so much written about it. Will increase your deal size, it will increase your velocity, you will win bigger deals, and you will sell higher. Promise you. And I think you've probably seen that. Gives us again that opportunity to have a seat at the table, influence R&D, and bring that full circle 360 view back. Um, so I will also just say one thing here: selling to enterprise, you also have to think about your partners. And if I had the graphical ability, I think I would have put partners into this picture somewhere. Partners are critical when it comes to large traditional and non-traditional. They have all sorts of partners. It's not just the traditional channel that many of us know. It's also the global system integrators, your regional system integrators, your implementation partners, your VARs, a lot of influencers in the mix. Really important to have them. So when I say solution, I'm not just talking about the product, I'm talking about the full experience, which often will include partner services, will include how you bill, how you follow up. Again, all of that seamless online experience that we were talking about earlier. Okay, let me just forward. So the new marketing mix, I wish I could tell you, um, other than the fact it keeps expanding, which keeps our jobs really interesting, but it really isn't that new, right? Your customer is touched in so many ways, whether they're a consumer or an enterprise customer, by lots of incoming headlines, stories. They're influenced by more and more of their peers. Peer influence, incredible way to drive changes you want to see in a market. And the fact of the matter is, this is ongoing. Right through your whole customer lifecycle, you need to think about pre, during, post. I talked about acquisition, transaction, and retention. You're going to need to be able to master this. How do you keep them happy for years? No one is done. And so, you know, the typical funnel I think you've all seen in SaaS, the funnel is like you've got the triangle up here and the triangle down here. Others have called it, you know, the top hat of marketing, and we often forget about the triangle down here, which is about encouraging usage, education, helping customers understand what they can do. Because when you start to see usage decline, you start to see features not being used, you know you're not doing a good job. You're not educating the way you need to, and it's usually a yellow flag that shows you— at ClearSlide, we actually built models with our data science team to actually predict who was going to churn. And I'm sure a lot of you have done that. It takes a little bit of data science, and I meant to mention this earlier, if you don't have a data scientist on your marketing team, you should get one now. And I think, you know, I've seen the CMO role evolve. In the old days, it was, "Help us build a brand," right? And then it turned to, "Help us with the content marketing," and then it became, Oh, are you a growth marketer? How many of you have been asked that? And the only way to be a great growth marketer is you have to be facile with the data. So if you're not— if you don't have a data scientist, or if you're not comfortable, make sure you are. Lots of great classes out there. I do want to touch on a few things here that I think are highly leverageable, and it's search engine marketing, search engine optimization. You know, it's key for SaaS and