Spotlight on Inbound Marketing, with Lola.com CEO Mike Volpe
First published March 5, 2019
The market for Small and Medium-sized Business (SMB) software is very large and still underserved. There are millions of SMBs in the US and Europe, but unfortunately these businesses have been difficult to reach. As many SMBs are becoming more enthusiastic buyers of technology, a new breed of SMB-focused software vendor is now able to engage with these customers, using online marketing methodologies such as inbound marketing.
In our most recent Accel Breakfast Series, we were fortunate to hear insights from a global expert in “SMB go-to-market,” Mike Volpe. Mike is CEO of Lola.com, the SMB travel management business and an Accel portfolio company. He was formerly CMO of HubSpot, one of the companies credited with pioneering the concept of inbound marketing. He spoke to us about how to attract customers, make content work for your business, and build a global marketing function that can reach an SMB audience.
You were one of the pioneers in inbound marketing. How do you make customers come to you?
Mike: You need to focus on creating content that can attract an audience and generate sales leads. It depends on your market, but for a lot of companies that will mean a blog offering insight and commentary relevant to the customers you are targeting. A good company blog with strong content can attract millions of unique users a month, and as a result inbound marketing can generate as much as 85% of all sales leads.
This approach has two advantages. The first is that it’s cost-effective. Having regularly compared the cost of hiring a blogger to what that same money would achieve invested in SEO and paid search, I’ve generally found the blogger delivers better value. Secondly, inbound leads have a better conversion rate than those you pay for – as much as 5x higher in my experience.
Taking a content-led approach requires investment in people. You may have to spend more of your marketing budget than your CFO expects on headcount (at HubSpot we had a 120-strong marketing team, 25% of whom were content creators), but it’s justified if you can measure the impact being made by every extra blog writer.
In this saturated market, is content still king?
Mike: It is true that the content landscape has changed significantly in recent years, and the market has become saturated in some places, but the principle behind using strong content as a basis for inbound marketing remains the same. There are also some industries where there is still a void of useful content, which is the opportunity we have at Lola.com in SMB travel management.
To make it work you need to tailor the content you create to the audience you are serving. When I was CMO at Cybereason, I found that vanilla blogging and podcasts failed to gain traction with a security audience, and the way to engage them was with in-depth, data-driven content around key industry issues. For example, we created a documentary featuring senior executives from the US Department of Defense and New York Times. In a technical industry, higher quality and lower volume was the right approach.
Content can still work for your company, but only if it is carefully matched to the needs, interests and expectations of your customers, and written in a way that feels authentic. Think carefully about who should produce your content. Some companies instinctively want to hire journalists for this job, but for many industries you need a sector expert to speak the right language and carry credibility with a technical peer group. It’s worth the time it takes to find someone who is both deeply informed about the subject, and who can write and speak well on their topic. Sometimes these people will be on your team already, but need convincing that their ideas are interesting, and content creation is worth their time. Make the effort, because they are the thought leaders who will really earn respect and gain traction.
You also need to look at different kinds of content that can attract customers to your brand. At HubSpot, we offered free tools that gave a flavour of the product, published a successful book on inbound marketing authored by our founders, and grew our customer conference from a 250-person event to one that attracted 25,000 people. Inbound marketing can take many forms, and you need to be creative to keep reaching new audiences.
You often talk about prioritising revenue retention over logo churn – what do you mean by that?
Mike: Beyond lead generation and sales, retention is one of the most important functions of any marketing department. But you have to be smart about it, otherwise it can mean a lot of wasted effort chasing after customers who were never going to stay anyway.
Rather than trying to hold onto customers who want to leave, it’s often more valuable to spend time with people who love using your product, and want to do more with it. These are the customers with whom you can grow value over time and increase revenue retention (a more important metric than logo churn).
Pricing is an incredibly important piece of this picture. If you operate a simple tiered system, the risk is that a heavy user of the product will be paying the same as an occasional one. Most companies are now better at usage-based pricing, and at upselling by offering added value services that users can upgrade to. Through a flexible, usage-based and upgradable pricing structure, you can enable your best customers to do more business with you and improve revenue retention as a result. At HubSpot, we increased this from 78% to over 90% in the 18 months preceding IPO by taking this approach.
In the early days of a company it may be right to focus on logo churn, which can guide you on how to improve the product. But, as the business matures, I would advise you to invest greater time and effort in expanding the usage of your existing customers, those who are already committed to your brand and engaged with your product, instead.
Should your marketing strategy change over time?
Mike: You need to constantly evolve the way you market your product, as your understanding of how customers use it gets better. It’s important to remember that actual user behaviour can differ from the expectations of the product designers. You need to study your customers and learn from them what the actual use case is. Then you can build your marketing around that.
At HubSpot, we learned over time that long-term subscribers were those who used more than three of the apps and took advantage of the ability to integrate our platform with existing systems. Once we understood what represented a sustainable use case for the product, we could adjust the sales pitch accordingly and target the customers we knew were most likely to be long-term users, emphasising the multi-functional nature of the product.
How do you grow a marketing function to support global expansion?
Mike: You have to invest a lot of time on both recruitment and training. Everyone who is responsible for selling the product – across both sales and marketing – needs to understand it and talk about it with the same vision. Get your new hires to spend time using your product as a customer would, to better understand the people they are selling to.
As you grow internationally, transplanting the culture becomes critically important. My rule of thumb is that a new office should comprise roughly half local market hires, and half who come from the head office. You want a mix of people who understand the specific needs of the new market, and those who are embedded in the company culture. Make sure every new hire spends time at headquarters during their induction, so they understand the business and feel a part of it. And don’t expect recruitment to be a quick or easy process: you may need to make multiple trips to a new market to interview people before you find the right ones.
Whether it’s lead generation, retention or growth, a company’s marketing department is always having to find new ways to tackle the fundamental challenges of connecting a business to its customers. Mike’s advice in a sentence: Marketing is about reaching customers, so let them guide the content you create, the messages you mould and the audiences you target. Put another way, customer-centric content is king.