The Non-scalable Reality of Inbound Marketing

Interesting guest post by Connor Keppel Chief Marketer @thephorestword. This post was originally published on NothingVentured.rocks

Sometimes ‘Needs Must’ in the World of B2B Lead Generation

It is silly that penning this post almost feels taboo. But that is probably because I’ve consumed the kool-aid of inbound marketing evangelists now for many years. Inbound works for sure, and has been the staple lead generation tactic here in Phorest Salon Software from about $2m ARR (annualised revenue) to $10m ARR.

In my mid-twenties naivety, I thought it was the answer, not another solution to a problem. A few years later I haven’t lost ‘the faith’, but honestly I think it should be used alongside other really powerful methodologies. It’s an ‘and’ not an ‘or’ for high-growth SaaS companies, and an over-reliance on inbound brings many problems with it.

What is inbound marketing?

The premise is simple.

You cast a net by creating amazing content around key search terms your prospects regularly use or hooks on platforms like social; make sure you work hard on your search engine optimisation and rank high when they search; offer a non-salesy call-to-action that draws them into a webinar, ebook download or similar problem-solving piece of content; and then over time introduce your product as the solution to whatever problem they may have through lead nurturing before passing them to sales.

Makes. TOTAL. Sense. And it has many pros:

• Leads tend to be very qualified as they have an understanding not just of what you do, but the philosophy behind why and how you do it
• It gives the perception that you understand whatever industry you operate in or whoever you are targeting by providing them with great content (thought leadership)
• It is great for positioning you in a competitive market?—?often at trade shows for example, we hear “Ah you are the marketing software guys for salons” as opposed to just salon management software
• Conversion rates to demo, trial or purchase are usually higher as you have developed trust by giving something to them and helping them before you even start talking about your product

BUT … Marketers rarely talk about the cons of inbound vs. a more old school ‘sales marketing’ approach… and they are significant!

1. It takes a long time to build a scalable inbound engine if you have limited skills, resources and chops like most start-ups and SMEs do (it’s much more technical than traditional marketing or outbound lead gen/sales approach)
2. It requires A LOT of effort and you must have consistency: time spent writing blog posts, hosting podcasts, shooting videos, creating webinars, writing ebooks, creating and A/B testing landing pages?—?that is salaried time you could spend on sales prospecting and other departments to reach out and just chase accounts directly
3. It lacks predictability. It can be seasonal. And it can have a maximum bandwidth within a certain timeframe (there are only so many relevant search terms a salon owner or whoever searches for every year)
4. In the long run, it is reactive?—?you are capitalising upon demand that already exists for ‘X’ and attracting them to enter into your marketing funnel. This means that there is probably THOUSANDS of businesses in your territories that are not searching for or even talking about the problems you solve. In other words, inbound is a great way to capitalise on existing demand but a slow way to generate it from standstill.
5. It creates a term that Jason Lemkin from SaaStr calls ‘Inbound Dependency’ where by sales and growth are reliant on inbound meaning prospecting and growth outside of lead generation to get new accounts doesn’t happen. Inbound dependency also means growth becomes unpredictable because as mentioned above, inbound flow is unpredictable by nature.

At $2m ARR the cracks can begin to appear as Inbound ramps, particularly if you serve one vertical:

Marketing for many SaaS companies, particularly ones that are not VC-backed, is often non-existent from $1–2m ARR. Sales hires in day one should come before marketing. Why? Firstly, if leads come in through word-of-mouth, who is going to close them? Secondly, sales generates the revenue within weeks of starting unless you are a pure-play and thirdly, they find out things like product-market fit, how customers are using your product and create an informal feedback loop about suggested improvements from customers.

Once the marketing hires kick in though, here is a (terrible hand-drawn) chart showing what many SaaS companies experience lead generation-wise during growth over the first number of years.

CAPTION ‘Hand Drawn Diagram’: As this crappy diagram suggests inbound growth creates a lack predictability even if overall growth is on target

The Marketing Cycles of Many SaaS Companies

The ‘cold approach’ of reaching out through your sales team, through research, asking for a referral etc. isn’t terribly scaleable or highly converting but it is cheap and you are not pushing out content hoping for some leads?—?it is predictable and being scaleable isn’t what really matters in the super early days.

Then you hit $2m-$10m ARR and provided you have worked hard on it, your inbound engine begins to hum. Lots of hot inbound leads come that close well. You are in the perfect equilibrium of positioning yourself through content, growing your brand AND your on-boarding more customers year-on-year with a pipeline for sales.

But then, you hit something that I wouldn’t define as a ‘wall’, but more like a roller-coaster: you know it will succeed in doing what it is supposed to (in this case generate enough leads for growth) but you are limited in scope to say when and how and it is unpredictable. This then creates lots of possible problems:

• Lead numbers are good, but heavily skewed by territory meaning reps one month have lots of leads and little the next even if overall sales are great
• You are getting the more tech saavy, or more progressive low-hanging fruit from inbound. But that might only be 10% of your TAM (total addressable market). If you are a ‘grudge buy’ in a market that isn’t traditionally SaaS or technology driven, this is particularly true
• Operations that onboard clients, trainers that show you how to use it and support technicians that are there to hold your hand have to be rostered, budgeted for and hired in line with growth. When you are yo-yoing month-on-month and by territory this cause operational issues and unpredictable workflow to budgeting

So don’t do Inbound?

No of course not. In fact focus much (if not most)of your marketing firepower and budget on it. Unless maybe you are super-niche enterprise.

But when you get to a certain point and you have a CEO, board and other leaders that expect 50%, 60% or triple digit percentage growth in a company doing $10m+ ARR, unpredictable streams are too risky to depend on in isolation. Inbound, frequently, is one of these.

My next posts will focus on how the most successful SaaS companies like Salesforce have built lead development units and something called PCR, pipeline creation rate. A much more sophisticated, non cold-calling version of outbound that creates predictable revenue. Stay tuned!

Connor Keppel is Head of Marketing at Phorest Salon Software

Rethinking Marketplaces and Why ‘The Uber of’ in Hair and Beauty is a Fallacy, by Conor Keppel

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