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This week on How To Win: Mark Kosoglow, B2B SaaS thought leader and CRO of the customer success platform Catalyst Software. Founded in 2017, Catalyst's founders saw a need to create a tool that integrated customer success tools into a platform that was easy to learn and implement. To date, Catalyst has raised over $45M in funding and employs more than 100 people. Before Catalyst, Mark spent 8 years at the sales execution platform Outreach where he led their sales team as VP and later Senior VP of sales.
In this episode, Mark breaks down his five-step growth process. We discuss pipeline generation, engineering company processes, and creating moments of impact for your customers. I weigh in on the importance of understanding your ICP, why you should always be striving to learn new things, and the retention economy.
Hear how successful B2B SaaS companies and agencies compete - and win - in highly saturated categories. No fluff. No filler. Just strategies and tactics from founders, executives, and marketers. Learn about building moats, growing audiences, scaling businesses, and differentiating from the competition. New guests every week. Hosted by Peep Laja, founder at Wynter, Speero, CXL.
Five steps to grow your business with Catalyst Software's Mark Kosoglow
Mark Kosoglow:
I don't think it's rocket science. I think it's just, what are the different functions and parts of the go-to-market model? You have to generate pipeline. You have to convert the pipeline. You have to keep the customers that you convert. And then if you're smart, you'll take the learnings from those customers and pull it backwards, all the way back up through the funnel to inform how to do the top of the funnel better.
Peep Laja:
I'm Peep Laja. I don't do fluff. I don't do filler. I don't do emojis. What I do is study winners in B2B SaaS because I want to know, how much is strategy, how much is luck, and how do they win?
This week, Mark Kosoglow, a true B2B sales leader. He's currently Chief Revenue Officer at Catalyst Software, a customer success platform. Before Catalyst, he was employee number one at Outreach and led their sales from zero to $200 million in ARR as Senior VP of sales.
In this episode, Mark breaks down his five-step growth process. We discuss pipeline generation, creating company processes, creating moments of impact for your customers. Let's get into it.
You said when you look back at your lessons learned, you've learned that growth is like a five-step process: ICP selection, pipeline production, conversion of the pipeline, orchestrating retention, and optimizing from there. Let's start with point number one, choosing your ICP. What's the right way to do it?
Mark Kosoglow:
Yeah. I think if you're going to start with generating pipeline, the most important thing, especially if you're a young company, is your ICP, that's Ideal Customer Profile. Those are the firmographic and technographic characteristics that exist that would cause you to assume that that account could be a good customer.
For us at Catalyst, they have to use Salesforce, they need to have a data warehouse, they need to understand that they have access to resources to be able to get data from that data warehouse in a way that our platform can provide. They need to have a management structure. We don't work really well if all they have is a bunch of CSMs and they're super young. We start to go look at what data sources can give us that information. We run filters across all those.
And then to me, in the beginning, you're hoping to get 2000 to 3000 accounts, hopefully 3000, that meet those as stringent as you can get and result in 3000 companies' criteria, and then you know that most data sources are only 60% or 70% accurate, so that's going to result in about 2000 accounts. Those 2000 accounts should be able to get you to $10 to $20 million, depending on your deal size and your ability to convert and stuff like that. That's why the ICP is so important.
Now, you don't not sell to accounts not in your ICP. You just don't target them with expensive outbound prospecting resources.
Peep Laja:
Where do you see companies going wrong here?
Mark Kosoglow:
Not enough parameters, too many accounts, and probably the biggest one is those 2000 accounts are special. Those are accounts that, if you work them correctly and you actually have product-market fit and a couple other things, they can get you out of the gravitational pull of the Earth. You can start to head towards the moon and outer space if you use those accounts correctly. I think people just don't pick them accurately. They aren't thoughtful enough. Now, don't overthink it.
Then secondly, is they don't have a strong strategy about how to consistently put effort against that constrained amount of accounts and contacts through multiple channels, because doing that over time results in pipeline. So people just give up too fast, "Well, yeah, this is an account on my list, but there's only one person that works there that looks interesting, and I emailed them twice and they didn't get back to me, so I'm moving on." That's egregious. That's sinful in my eyes.
Peep Laja:
To win, you need to be objectively better and clearly different. You can't be better at everything, so you've got to carefully choose your customers. What kind of customer is high-profit, long-retention, and gets the most value out of you, which results in high word-of-mouth?
You need to get two things right; you have to target the defensible market segment, and you have to create a business model that enables you to win against competitors who are going after your target segment.
In developing a high-profit business model to engage your target customers, you have two basic choices; one, increase your customer value, or two, lower cost to serve, or do both. It all starts with going after the right customer.
And how does the ACV play here? Is it that you always want to have around 2000 to 3000 accounts? Or if my deal size is, I don't know, $4K a year, how do things change?
Mark Kosoglow:
If your deal's $4K a year, then you can't have an outbound strategy. You have to figure out how to scale it with marketing. If you have a larger deal size, call it north of $10K, then you can actually sustain, economically, an outbound strategy with people that are doing it, and what that does is it accelerates the right fit customers that you can get, which should accelerate your growth.
This is the analogy I always use is outbound versus inbound is like this; inbound is you're driving along the highway, Peep, and you see a billboard for a gas station. If you don't need gas, do you stop?
Peep Laja:
No.
Mark Kosoglow:
No, you keep driving. If you're not hungry and don't want to snack, do you stop? No, you keep driving. But if I put the gas station in the middle of the road and you're driving through and you have to stop, it's much more likely that you'll just fill up real quickly and grab a thing.
Outbound is putting the gas station in the middle of the highway. Inbound is the billboard. I prefer to control my destiny, and so I think outbound offers you a lot more control.
A low-ACV business is not for me. I don't understand the marketing and the demand-gen side enough, and those things have to be super tuned on low-ACV business.
Peep Laja:
What do you say to the argument that outbound doesn't work as well as it did 10 years ago when Predictable Revenue and all those books came out, and things have changed? What do you say to that?
Mark Kosoglow:
I'd say those are the same people that a year ago said it didn't work, and the same people that two years ago said it didn't work, and the same people that said five years ago didn't work. It works. I know tons of people that are doing it well. The reason it doesn't work is because you suck at it, and you should probably figure out a different thing to go do, or start to do the stuff that everybody's telling you to do that you don't think work because it's not your personal preference.
Peep Laja:
Once we have our ICP selection done, we have our 2000 target accounts, we need to generate pipeline production. How should we go about it? What have you learned?
Mark Kosoglow:
There's two ways to generate pipeline once you have your ICP; one is marketing, and again, I'm not an expert in that area, so I rely on the experts I work with. I'm working with a person right now that's awesome at it, and I've worked with all-stars in the past too. Demand-gen is a black science. You got to find somebody that knows how to do that stuff.
Peep Laja:
Understanding what you're not an expert in, is so important. For me, the more stuff I know, the more I know that I don't know stuff. So every single week, I seek out people who've been there and done that, so I can learn from them. I get on calls with other founders, VPs and people with experience. Don't be afraid to be a student.
Here's Tom Vanderbilt, author of Beginners, on why adults often don't go out of their way to learn new things.
Tom Vanderbilt:
As adults, we're trying to present this veneer, this image of competence in our jobs. If you look at people's social media profiles ranging from LinkedIn to Instagram, I mean, it's all about perfection, generally. You don't want to go on LinkedIn and say, "Well, I'm an okay writer or something."
We're adults. We're expected to be fully functioning, competent people. Then when you have a child, you're expected to be fully functioning, competent person in front of that child who is trying to learn a lot of things. You're always trying to be the teacher, but of course, just the process of being a parent turns you into a learner as well as a teacher. It's a very confusing time. I think that if I hadn't had a child, I might not have gone down this road because that had reopened this whole world of learning.
Adults tend to take on things with very strong goals, I think, "I'm going to crush this thing in a year," or, "I'm going to turn this side hustle into a job," things that can get in the way of, or make the learning process less pleasant, I think.
Mark Kosoglow:
So that's the first thing, is you make sure that your ICP is adequately receiving air cover from marketing so that your ground troops, your SDRs and AEs, have the support that they need to do some of the real damage and take the land, take the territory.
I believe in a strong SDR-based methodology, but with a conditional way that AEs participate in that. And so that's what I believe, is you hire SDRs, you use data to figure out what's working, and then you create daily expectations around activity because there's two types of meetings that are set; one is serendipitous. I happen to call Peep, he happened to pick up, he happened to be in a good mood. I happen to be on my game. He happens to like my pitch. He happens to have a problem that does that. I happen to have my calendar ready. We happen to have a common time available, and you happen to book and then you happen to show up.
That's too much happenstance to build a business on. You need those, and those meetings happen, but what's better is what I call critical mass meetings. Those, when you put, like I said earlier, a concerted multi-channel effort, and it's consistent, against a focus group of account and contacts, you build pipeline. That group of accounts and contacts, if you just stay on them, will eventually start spinning off meetings. That's how I build an outbound strategy, is around that philosophy with an SDR heavy approach, and then conditional AE participation.
Peep Laja:
And let's talk about conversion of the pipeline. So SDR is booking meetings, we got AEs doing demos. How are we going to see it through the finish line?
Mark Kosoglow:
Broad strokes, there's two things that matter to conversion; One is a staged-based sales process that helps the seller understand how to guide the buyer to a confident decision. And notice I didn't say, "To a win." I don't care if people buy from me. What I care about is, in the end, they made a decision that they're confident helps their business the most.
If I do that and that's my energy, then those people, if it doesn't work, will come back to me. I think people also feel that energy and are more likely to buy from you. The first is that stage-based sales process. You have to have the stages that you want, and then you have to have exit criteria that creates the ability to have common vernacular, so you can talk about why are they in stage one versus stage two, and then it creates a framework for coaching.
"Have you done this to move them to stage two?" "No." "Have you tried to do it?" "No."" Well, we got to try to do it because that's how we move them to stage two," and, "Oh, I've tried it, but I can't do it." "Well, let me coach you how to do it better and more effectively."
And then once you have that in place, you can do the second part, which is a very strong deal review process, which is a weekly process based around the stage-based sales approach, that allows you to dig into the deals, and every week, cover every deal and make sure that reps are moving the deal forward through the sales process.
And so those are the two ways that I know to affect conversion. There's some nuance inside those because you'll figure out like, "Oh, this exit criteria, like quantifying business initiatives, we aren't doing well, so we need to go work on that specific skill in our sales team and that will help overall conversion," but that's a nuance of laying down the stage-based sales process and then the rigorous deal review process.
Peep Laja:
This seems pretty straightforward. In your opinion, are most companies figuring this phase out? Or where are they going wrong?
Mark Kosoglow:
No, I would say one in 100 companies that I've ever met with actually has reps that manage to stages. Reps typically are doing what they think they need to do next based on similar sales cycles and outcomes that they've had in the past, which isn't bad and should inform your stage-based process, but when you have 20 to 200 reps all acting in a way that is based on their experience, what you end up with is two, 20 or 200 different ways of doing things.
Guess what that does, Peep? It means that your data is inconsistent, which means that you cannot draw insights on it, versus if I have every rep working the same way in a stage-based process, then I know that when my stage one to stage two conversion is bad, I can look at my two exit criteria and probably nail that those are two reasons or two things that we can do to improve conversion from stage one to stage two, versus if I have 20 different ideas of when you can move from stage one to stage two, and everybody's doing their own thing and half the reps, it goes from stage one to close one. Then you're never going to have consistent data that's going to allow you to improve your process.
Peep Laja:
Well, how are you getting data on why people are dropping out between stages?
Mark Kosoglow:
Every week, I have the deal review process. We tell the rep for each deal what they're communicating with the data. So we have an amount, close date, stage, forecast category, and then we have risk assessment field. And so every week, I'll be like, "Okay Peep, here's your deal at ABC Corporation. Let me tell you what you're telling me right now on Salesforce. There's a $20,000 deal that's closing at the end of this month, that's in stage three, which means that you're getting an approval on a mutual action plan from somebody that can make a decision. It's in best case, which means that you have a deal and there's a timeline, but it's in yellow risk, which means that we think the deal's going to push because there's so much risk here that we won't be able to resolve it by the end of the month. Is that right?"
And they say, "No," or, "Yes." If they say, "Yes," then we move on to what they need to do. If they say, "No," I say, What do we need to correct?" "Oh well, actually, I got the map approved last week." "All right, well, let's update the stage right now to stage four."
We do that with every deal, every single week. And so all you have to do is look at your stage-based conversion funnel and it tells you where you have conversion rates that are below where they want to be, and then you can optimize because what you do in that stage is very explicit and consistent. Improving those behaviors and skills will improve conversion.
Peep Laja:
If you can't describe what you're doing as a process, you don't know what you're doing. This is still as true as ever. If you want to scale it, teach it, repeat it elsewhere, it's got to be made into a process.
Pay attention to the process somebody used to get a result, not the result in itself. One can only admire a result, but you can learn to use a process. Setting up strong processes leads to consistency, but you have to do it one step at a time.
Here's Databox's Peter Caputa, explaining how he figured out his repeatable processes on a previous episode of How to Win.
Peter Caputa:
But the way I look at it is because we're bootstrapping, I couldn't go and just hire a VP of Sales, VP of Services, VP of Marketing or two VPs of Marketing. I couldn't go out and make those expenses on day one. So instead, we had to think about, "How do we take someone, maybe that's never even sold SaaS or even sold before, and get them to the point where they can contribute in a specific role?"
We have a handful of senior people in the team with different experiences that are relevant in building this business, and generally, their job is to hire and train. We've done kind of one department at a time, for lack of a better way of dividing it up. So take marketing, for example; our first approach is just get traffic, get our domain authority out, get content out there, build links, etcetera, and then we'll worry about conversion.
Once we did that, it's like, "All right, now let's figure out how we're going to get people to convert on the site," and we figured out a really clever way to get people to convert that connects our content marketing strategy to our product.
And then on the sales side, we started with one salesperson, go and figure out some kind of repeatable process. We trained support people, because we already had a support team, to take phone calls, learn how to set an agenda, ask questions, qualify need, demonstrate the product, etcetera. It's really about building one piece of the business at a time.
Peep Laja:
Once we close these deals, we need to turn our customers into advocates, we need to retain them, we need to expand accounts. How do we do that?
Mark Kosoglow:
Listen, I'm not definitely not as an expert on the customer success time. I'm learning a lot there and talking to dozens and dozens of people to catch up. I have some opinions, but I think that the best way to make sure that you retain and expand customers is to help them have this thing that I call a moment of impact. That's an event where the customer receives measurable and appreciated value that they directly attribute to your company.
A good example is Spotify; every time I go search for a new playlist around a certain vibe of music I want to hit, and when I get that playlist and it has half the songs or songs I've never heard, but I'm totally vibing with, that's a moment of impact where I'm like, "Damn, I'm glad I'm paying $15 bucks a month for Spotify for my family," you know what I mean? It cements me as a customer, and when somebody's like, "Yo, what are you listening to right now," I send them a Spotify link and now I'm advocating for Spotify, right?
But that moment of impact, you should have multiple ones that are architected to be achieved in 30 to 45 days if you're selling complex B2B software, sooner if you're not, you should always be trying to maximize that. And then what you want to do is you want to make sure that those moments of impact align to the business initiatives that matter to the customer, and that your product can drive value in.
At Catalyst, we have 16 moments of impact, all of which can be achieved in 30 to 45 days, and then we have what you need to do to do that, what we need to do to do that, and the checklist of things that we have to get done in order to get there. Then we drive the customer to that moment of impact.
Then the minute that we get there, we celebrate it with our decision maker and our economic buyer, we report back the progress that we've made, and then we schedule a meeting and say, "Now that we have all this momentum, what is the next moment of impact? These are two or three that we're suggesting based on the initiatives that we uncovered." Then we get the next one, and now the CSM is driving that moment of impact.
When you do that over and over and over again, the customer has no reason to leave you. When you're doing a boring QBR, where the CSM pulls the data two days before it to see how it's going, and we find out it's going crappy, and so then you got to manipulate the data, then you know don't really have something that people feel is valuable, so they don't go and it doesn't help you retain the customer or anything.
And then what you do is you then take the moments of learning that are most impactful, that have the greatest bang, you figure out areas where you're missing, and then what you do is you take that thread and you pull it backwards, back to the top of the funnel.
So now we have moments of impact architected, our onboarders are creating those quickly. Our CSMs are doing more of them. I pull them back now to my AEs, and now my AEs, when they pass the onboarder, they say, "This is a business initiative and this is the moment of impact that we've agreed to that they want to receive first," and so now the onboarder knows what to do.
Then now we pull that thread back to the SDRs, and the SDRs have little videos of those moments of impact and they're like, "Would you like your people to experience this," and then we pull that back to marketing.
Now what we have is a consistent and super achievable expectation that people desire because we know the reaction of customers when they achieve that moment of impact. And to me, that is total customer-led growth, go-to-market alignment. I think that that process, there's just too few companies that are actually doing it.
Peep Laja:
We now find ourselves in a new era: the retention economy. Companies that ignore this are going out of business. Combined high tech with low retention equals death.
Chasing quick revenue over lifetime value, community and relationships with customers is not sustainable. Strong retention and customer relationships is how you win in this new world. VCs and private equity give far higher valuations to companies with stronger retention rates.
To thrive in this new reality, we need a shift in our thinking. The sole focus on conversion rates is flawed. Instead, we need to consider the full customer experience, the brand, and focus on down-funnel metrics like customer lifetime value, retention, purchasing frequency, and pipeline dollars.
It's like, do you always translate it into hard dollars, economic value?
Mark Kosoglow:
I just went to my VP of Customer Success and I'm like, "What are 16 things that we can architect in 30 days that you have seen customers really love?" I'm like, "How many can you come up with," and two or three days later, she talked to her CSMs, talked to the onboarders, and she's like, "These are 16 things that we realistically can deliver in 30 to 45 days, that we know people super appreciate." So I'm like, "All right, boom. There we go. Let's start there." That's how you start, and then we're going to add more as we go along, we'll subtract some out.
And then the way that we do the dollars is part of our sales process says, "This business initiative, the two or three business initiatives that we can help you with, are meant to achieve this much money in difference according to your plans, right," because we align to their business initiatives. "Oh, we want to increase our retention three points." "Well, on $100 million base, that's a $3 million project. Is that right?" "Yes." "All right. Well, have you also thought about those customers that would've churned, are now expanding too? So what's your typical expansion rate?" "20%." "Oh, actually, so this is actually a $3.6 million problem." "Oh yeah. Thank you for helping us understand that."
"Yes. So now, we can't solve that problem for you completely, but we believe with this, this, and this, we can take a $2.1 million chunk out of that $3.6 million problem, and oh, here's a couple other initiatives."
So that's how we quantify it, and we say, "Moments of impact are getting you closer and closer to that realization of the total impact that we could have on that problem and that business initiatives that you're working." So we don't say, "A moment of impact has a $50K value." We say, "It helps you get closer to the $2.1 million of impact that we can influence."
Peep Laja:
So you put in place all these steps at your previous employer, Outreach?
Mark Kosoglow:
Some of them.
Peep Laja:
Any stories you can tell us of moments of learning?
Mark Kosoglow:
Yeah. So the first thing I would tell you is that the only way that you can do this is if you have one person that's responsible for the customer journey. At Catalyst, that's me. At Outreach, I didn't have that responsibility, so I wasn't able to inform the processes of post-sales or SDRs because I didn't own those organizations. That's one reason why I needed to go somewhere else.
Now, we had some awesome processes and threads that we ran through, but I probably would've done things differently if I had owned the entire customer journey. They may have made things better, they may have made things worse, but I'm betting on myself of figuring it out the right way at Catalyst.
So that's the first learning, is you can't do this unless you have a single person that owns the customer journey because you got to have that architect that figures it out.
Peep Laja:
Should that person be the Chief Revenue Officer? Or who should be the owner of that journey?
Mark Kosoglow:
Title doesn't matter. Who's the architect that is bringing together... My brother builds US embassies abroad, and he is typically the head of a project. He just finished building a $350 million US embassy in Ankara, Turkey. His job was to bring in the concrete person to this person, to that person, and to orchestrate all of those people together so that the concrete matched the plans and was of the right strength so that it could build on top of it and happened at the right time, so that the next people come in had something to build on top of, right?
And that's what the master... Somebody has to own that. And people have a say. I'm not saying that it is like a dictator, but you use the knowledge of all the people that are contributing to the process, but one person has to bring that together and make the call on how it's going to work. And so to me, whatever the title is, that's the role that someone needs to play.
I do want to let people know that our conversation today was a little more strategic. I also really like to think tactically. I would say that one of the things that I see in the companies I advise and consult, what their major problem is, their reps have an inability to discover effectively. Discovery is a skill that everyone works on, but there's a lot of very rigid frameworks that don't work in every situation.
Over the last 20 years, across coaching hundreds of reps, I've helped dozens of reps become top earners and managers at some of the baddest ass companies in the world, teaching them a very simple, flexible framework that allows you to figure out what's important to your buyer in a 30 minute meeting every single time, no matter what the conversation's about.
I've been asked, I don't know how many times, to do a course on how I do that and the coaching that I give people that work for me. I worked with my buddy Andrew Mewborn, and we've put together a course now that we're launching on December 19th. The waitlist is available at Digitalsalescollective.com. We're doing offers for people on the waitlist.
If you'd like to see the course, if you want to see how it works, it's basically a five-part framework. Each part has a little bit of a framework inside of it, but it's an easy, simple way to conduct deal-winning discovery calls that will set you apart from your competitors and other people in your company. I encourage everybody to sign up for the waitlist. We'll be giving away some free stuff for people on the waitlist, some offers and things, but that course launches on the 19th of December.
Peep Laja:
So what are Mark's three winning strategies? One, put work into figuring out your ICP.
Mark Kosoglow:
Those are accounts that can get you out of the gravitational pull of the Earth, right?
Peep Laja:
Two, align your team's work by building processes.
Mark Kosoglow:
When you have 20 to 200 reps all acting in a way that is based on their experience, what you end up with is two, 20 or 200 different ways of doing things. Guess what that does, Peep? It means that your data is inconsistent.
Peep Laja:
Three, have one person own the customer journey.
Mark Kosoglow:
You use the knowledge of all the people that are contributing to the process, but one person has to bring that together and make the call on how it's going to work.
Peep Laja:
One last thing from Mark...
Mark Kosoglow:
If you're trying to figure out how to help your customers become a growth engine for your company, check out Catalyst.io. Give me a ring. I'm happy to give you a demo, and take you through a deal-winning discovery experience.
Peep Laja:
That's how you win. I'm Peep Laja. For more tips on how to win, follow me on LinkedIn or Twitter. Thanks for listening.