The MQL > SQL Framework is Dead!

How we should be thinking about it instead

When I started in SaaS there was a pretty easy to understand go-to-market motion that basically involved: driving people to your site; getting them to take a free trial; and converting them to paid.

As we (our company) started selling to Enterprise that shifted to: driving people to the site and getting them to somehow identify themselves as an MQL; handing them over to Sales as an SQL; and converting them to paid.

And it worked. In a world where SaaS was on a rapid upward trajectory and opportunities to create a new SaaS business were everywhere, it felt like everything we did turned to gold. People at scale behave predictably and so all you had to do was double-down on whatever seemed to be working.

The trouble is, sales cycles have increased, quotas are harder to achieve and everything is becoming, well… just more tricky. When you think about it, the concept of the marketing team generating leads, scoring those leads based on some arbitrary set of measurements (2 for opening an email, 5 for attending a webinar) and then presenting them to Sales for them to select which ones they like the look of, is pretty inefficient. Lobbing a load of people into the top of the funnel and waiting for them to filter their way through with a bit of a nudge here and there runs the risk of losing out on potential customers (just because they don’t click on a white-paper or whatever) as well as wasting effort on those that aren’t a great fit.

On top of that, it focuses people on the wrong things and it provides zero visibility on what is really happening. Or at least a very limited perspective.

What if we were less ‘us and them’?

What if, marketing, sales and product weren’t their own fiefdoms? What if they didn’t have their own targets? What if, instead, everyone had the same target based on revenue? (What if Marketing and Product earned a commission based on revenues in the same way that Sales teams do?)

What if basically the whole company was a revenue-machine, just with its own areas of focus? If, as a marketer, you weren’t measured on how many MQLs you could create, but instead only on the new revenue the business created, would things change?

I think we could approach our whole go to market from a different perspective. One based on having a much better idea of who our Ideal Customer Profile (ICP) is and, most importantly, where they were along the journey to becoming a customer.

About four years ago I attempted to do something like this but my thinking hadn’t been fully formulated and inevitably when it came to our SLT meetings we reverted to the tired MQL > SQL formulas to track progress. My ‘radical’ idea was that I created a ‘Growth Squad’ with representatives from product, marketing and sales. The notion was that we would meet weekly and combine our areas of focus specifically to move people through the funnel. What we were looking at doing was increasing the conversion rates between funnel stages, rather than figure out ways to simply increase leads. It was hard to get people outside of our squad excited about what we were doing. I don’t think it was seen as anything other than an experiment, but looking back, I was so close to being on the mark, IMHO!

ICP Funnel Marketing

This is inspired by something I read by a guy called Kyle Poyar from Growth Unhinged. Let’s go back to basics and assume our starting point is our Total Addressable Market (TAM), or more specifically our Serviceable Addressable Market) SAM. SAM is the portion of the Addressable Market that you can genuinely serve based on either your business model and/or other factors such as geography. As an example, if you serve US law firms there are about 500,000 law firms in the USA, but you are an enterprise play so ideally you are looking at law firms with over 50 Attorneys, which is about 1% of the total, or 5,000.

Note the word ‘ideally’ here. What often happens is that we employ a ‘spray and pray’ approach where we’re just driving leads to the top of the funnel. Ideally they are in the top 1% of all law firms, but we’ll take people in the top 20% because you never know, right? They might still be a customer so it all counts. Forget about the fact that we’ve wasted time and money on non-ICP leads because we were only ever interested in the number of new MQLs.

Back to the SAM. You have 5k companies that fit your ICP. Let’s start by looking at them and what relationship they have with your business. And let’s do that through the lens of your funnel.

Your ICP funnel might look like this:

Unaware

Companies in your SAM that you have identified as being in your ICP, where you have their details and are able to market to them, but they haven’t interacted with you yet. In effect they don’t know you exist, or at least you have no evidence yet they know you exist.

Aware

Prospects know who you are as evidenced by the fact that they have visited your website, opened an email, clicked on an ad.

Interested

They’ve done something proactive: such as replying to an email; signing up for a free trial; attended a webinar, filled out a survey etc.

Considering

They’ve spoken to a sales person, asked for a demo, asked for a proposal.

Selecting

They are actively working towards becoming a customer: they have their legal team going through your MSA, they are negotiating costs and scope etc.

Customer

They have become a customer.

Closed lost

For whatever reason they have actively decided, for the time being at least, not to be a customer, (ie it’s not that we’ve messaged them and they’ve ignored us, we’ve actually had a conversation and they’ve said no to us).

So, what would it look like if we took your SAM based on your ICP and quantified who was at each stage of your funnel? It might look like this:

As you can see, around 50% of companies in the ICP know that we exist. And of those, some are a bit further along the funnel.

Our job is to show progress at each stage. So comparing it to the chart above, we would hope that at the end of the following quarter, the makeup might have evolved to something like this:

As you can see, the unaware boxes are fewer and there has been some improvement on the amount of interested companies and customers (as well as closed lost). Obviously this is a very broad view of your SAM.

But the purpose of this illustration is to show that there is a finite universe and our job as product, marketing and sales people, is to turn as many of them as we can into customers. The way we do that is to move them through the funnel. As a result, the way we measure our progress is to track our ability to convert people at each stage. This is way more powerful than simply coming up with MQL and SQL targets based on historical conversion rates. It also acknowledges that there isn’t a tap that can be opened at the top of the funnel that will deliver an infinite number of leads. We have to care about who exactly those leads are and what we need to do to them to convert them to paid customers.

Cohort Analysis

In order to properly track this, you would need to run a Cohort Analysis on each stage of the funnel to see what changes have happened. If you were to just look at absolute numbers as per the illustrations above, you should see an increase in Aware and Customer over time, but the stages in the middle probably wouldn’t change that much since people move through these stages (or at least should). In fact, if you did see these stages starting to swell, it would signal a problem that people are getting stuck in the funnel.

What we really need to know is ‘of the people that were in funnel stage X at the beginning of a period, how many of them a) are still there, b) have moved along to a lower stage of the funnel, or c) have been closed lost?

So we might be looking at something like this if we are looking at the ‘Aware’ funnel stage:

Of the 1,500 people who were in the Aware stage on Day 1, what happened to them over the next six months? Here we can see that we moved 10% of them out of this stage, a third of which we qualified out, but the remaining ~100 were at different stages, with 12 becoming customers.

There may be some other things to consider, such as do people lapse from being Aware to Unaware after a certain period of, for example, not opening any of our emails? The key thing is to be really ‘on’ the state of your SAM and how they are engaging with you.

KPIs

To my mind, the KPIs would really be about how effective the team is at moving people through the funnel. If, for example, we saw that the Considering phase was getting bloated with everyone getting stuck there you could conclude that Awareness and Interest were functioning well, but once they got to the point of considering the product they ran into problems. From here you could conclude that maybe the sales team aren’t communicating the value well enough. Or maybe the product isn’t living up to the promise.

If however, we were unable to shift the proportion of people out of the Awareness stage, we might conclude that we maybe have a positioning or even a pricing issue.

Whatever the conclusion, you have something concrete to explore. Before you might have just said, conversions from MQLs to SQLs are X%. All that tells us is how many additional MQLs we need to hit our targets.

Attribution

The better we understand this, the better we can get at attribution. Right now we might be arguing over who or what was responsible for a particular MQL. What about if we could look at what things were most responsible for moving someone to the next funnel stage? How much more visibility would that give us of how we’re best spending our sales and marketing dollars? How much more efficient could that make us?

To conclude

I’m going to think about this more and find more real life examples. But I think we’re going to see a shift where teams need to work together and be a lot more deliberate about the people they are marketing to.

Ultimately this will lead to much more capital efficient go-to-market activity, making every dollar count. And I haven’t even started with AI and how it can make sense of all of this more nuanced data.

What do you think? Does this resonate with anything you’re seeing? I’d love to hear your thoughts.

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