July 22, 2015

The rise of the CRO

One of the biggest trends we have observed over the last two years is the amount of CRO, Chief Revenue Officer, positions that are being created by SaaS companies across Europe. In this post, we outline what types of businesses could benefit from a CRO and what they typically do all day.

What type of business needs a CRO?

If you are (or are planning to be) a fast growing B2B SaaS business who intends to raise growth equity then you will end up with a highly evolved customer acquisition and retention strategy. The business will need to deliver top decile CAC to LTV metrics and therefore the alignment of some key functions historically dominated with individual CXO’s will come under scrutiny. You will be asking simple questions with big ramifications like:

  • How do I get Sales and Marketing working together?
  • How does my Martech and Sales Optimisation stack work together?
  • What is the hand off between Sales and Marketing but also between Sales to Enablement & Customer Success and Renewals?
  • How does Sales interface into the product, the user experience and the user journey?

The first nut to crack is often your CAC efficiency – how do I drive accountability, efficiency and revenue growth with great returns on my cost of acquisition spend? To deliver CAC efficiency, SaaS companies are increasingly turning to a CRO to align their sales and marketing departments and drive better performance.

The founder of Marketo, Phil Fernandez’s 2010 blog post confirms in its earliest gestation the CRO was about unification of Sales and Marketing. The smaller the average order value, the smaller the CAC to Order ratio needs to be for success – this requires optimal efficiency across the marketing and sales funnel and a CRO who is highly analytical, hacky and willing to act like a COO in many ways. In businesses exhibiting these characteristics it becomes more important to hire a CRO than have split roles and separate lines of accountability between leaders running Sales and Marketing separately. In businesses with higher AOV and complex sales cycles where the CAC to Order ratio can be higher the CRO role is less critical or can be kicked down the road for longer.

Lets be clear two leaders running Sales and Marketing can absolutely work but they both have to be brilliant, work incredibly well together, be highly fast and effective and of course justify their cost. If they can do this then don’t waste time, equity and money.

Is it a role which combines Sales and Marketing? Definitely not…

Its funny how the uninitiated and even those with burnt or burning SaaS fingers often forget that world class SaaS companies have world class SaaS metrics. We have one of the biggest data sets of aggregated SaaS metrics to draw from. The best have great CAC, great LTV and therefore great Churn, Retention or DRR numbers.

So revenue in SaaS is not just driven by the ability to efficiently acquire customers it’s also the ability to keep them and grow the revenue per customer. Whilst many SaaS companies are wrestling with Product Market Fit and CAC the best have nailed this and moved to the second stage of high retention rates and DRR (otherwise known as positive Churn).

While some companies are hiring Customer Success Leaders into the C-Suite, others are bundling full customer lifecycle under the CRO. It’s not for us to say which is best but typically this is highly contextual and driven by the specific needs in each company.

How is the CRO role developing?

It’s clearly heading towards the COO of Sales, Marketing and Customers Success, it’s technical, it’s process re-engineering, it’s hacky, it’s highly evolved and data intense. These people are spinning up & down campaigns, channels, people, tools, applications and processes. They are materially impacting the roadmap, the customers and user journey. They drive up advocacy and viral co-efficiency and crush blockers to customer value, negative sentiment and churn risk.

If software is eating the world, and SaaS is eating software, then within 10 years highly analytical CROs may be eating Sales and Marketing Leaders.

Article produced in partnership with Michelle Williamson at Kommol.

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