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October 11, 2017
By Derek Handova
In the rush to go to market, startups often have to choose between having a CRO (chief revenue officer), to drive profitability and then scale for sustainable business, or a CMO (chief marketing officer), to gain awareness to broaden the base of available customers. This battle of CRO vs. CMO can determine a cloud startup’s destiny from the get-go.
In the current environment, many B2B cloud startups need to show growth to investors immediately, in the opinions of some marketing experts. They think that the best marketing campaign can be a publicly available list of current users.
“The first hire should be a CRO because it’s critical for startups to get some early sales wins on the board,” says Scott Baradell, president and CEO, Idea Grove, an outsourced marketing agency for startups. “Most CMOs will tell you that the best possible marketing ammo for a startup is referenceable customers to use as the foundation of marketing campaigns and materials. A CRO’s first job would be to deliver those.”
However, if a cloud startup has strategic venture capitalists backing it who can afford both these C-level titles, the CRO vs. CMO debate could be moot, according to Baradell. Then the classic awareness and share of mind model could be pursued instead of rushing to grow the top line, but he thinks this unlikely.
“If a startup has deep pockets and patient investors, it can focus on marketing first and worry about sales later,” Baradell says. “But that’s not the case for most cloud startups in the current environment.”
CRO vs. CMO: Street Smarts or Book Smarts?
In the world of cloud startups, the question of the CRO vs. CMO can be looked at through different lenses. Some consider the purview of the CRO to be figuring out how to hack growth while assigning the CMO to the marketing tasks for brand building, sometimes now called the customer experience. It can come down to what’s been learned in the trenches or taught in the classroom.
“The difference between a CRO vs. CMO is like looking at people who are either street smart or book smart,” says Max Soni, CEO of Zooomr, a new startup digitizing the car buying process, currently in closed beta. “I recently faced this question when hiring employees. The CRO is street smart whereas the CMO is book smart. Most of the time, the CRO will focus on growth hacking and making money, whereas a CMO will focus on brand building.”
In a new startup of this sort, many hats have to be worn by different team members, even though each person has a specific specialization according to Soni. For example, all his staff has some basic-to-advanced knowledge of marketing principles, so what’s really necessary is a central overseer to make sure all marketing action items are coordinated and timed appropriately.
“If your startup founders have no marketing experience at all, then a traditional CMO is mandatory,” Soni says. “But, if your founders can self execute all the marketing tactics, then a CRO is definitely what you need.”
No Marketing Expertise? CMO, Product/Market Fit Come First
A critical point in the CRO vs. CMO discussion that can sometimes be overlooked centers on the product that the cloud startup is bringing to market.
In the old days of the engineering-driven tech company, R&D would pump out something its EEs had dreamed up. Then it was the responsibility of the sales department, which would now fall under a CRO, to find customers for it. The art of the sale seemed to be more important than mass media marketing.
However, in today’s modern economy, the buyer journey needs to be defined and the solution tailored just so. That’s why some cloud company executives feel that a CMO must be hired before a CRO: to help define the solution to meet customer expectations.
“At the early stages of launching a company, many startup execs rush to show their new product and expect immediate gratification,” says David Greene, CEO, ZeroStack, provider of a “self-driving” private cloud platform. “That never happens. Salespeople get the blame, and no CRO, no matter how awesome, can sell until the product/market fit has been established. That’s why the first hire should be a CMO, who by design does not sell before she tries to connect the product story to the customer journey and pain.”
Of course, no CMO can do it all alone. CMOs should have a small inside team to take meetings, listen to customer pain, shape explanation of the product to map to that pain, and influence the founders and engineering team to reshape the product to match the customer journey, according to Greene.
Others feel that product/market fit can be established by the technical specialists who architected the solution without the CMO. That would mean that they would be hired first before anyone else on the C-level customer-facing team, superseding any CRO vs. CMO consideration.
“Product and product/market fit are essential whether you choose to go the CRO or CMO route,” says Julie Lyle, CRO, DemandJump, an AI-based marketing platform. “Neither will matter if you don’t have a solid product/market fit. For this reason, hiring someone with experience in the industry that you are targeting is more important than any role-specific knowledge that a CRO vs. CMO would bring. Lack of product/market fit will prevent either role—and the business at large—from being successful.”
Finding a CRO and CMO in the Same Person
Although the CRO role is a newer specialization than the CMO role, hiring experts are finding more candidates who can take on both responsibilities. And in the B2B cloud startup space, there are even more candidates than in general. However, the cloud startup should be prepared to open a large ownership stake for this person or have deep enough pockets to compensate for this elevated level of experience.
“I recently recruited a CRO who started out as an account manager in marketing tech then moved on to both sales and marketing leadership in later roles,” says Karrie Sullivan, CEO of Culminate Digital Consulting, which consults with small and midmarket tech and digital transformation companies on revenue generation, strategy, operations and growth. “In this case, the talent has to have enough revenue to invest sweat equity and/or the company has to be funded enough to afford experience.”
Of course, the way some see it, the CRO and CMO roles naturally go together, with the latter being a subset of the former, in their opinions. This combined CRO/CMO person will be similar to a black swan—or even a purple cow—in that they are exceedingly rare.
“The role of the CRO encompasses the responsibilities of the CMO and the head of sales; in that way it is similar to a vice president of sales and marketing,” says Louis Gudema, president, revenue + associates, which helps companies develop and implement strategic marketing and revenue programs. “CROs have become especially popular among tech companies in the past few years as a way of ensuring alignment between marketing and sales. If the company has, or can find, a person who truly has deep skills in both fields—they are very different—that is ideal as it maintains a focus on revenue, and not just narrower marketing or sales goals.”
A Fractional CRO vs. CMO? Can a Part-timer Do it All?
And while it would be great if a cloud startup had enough money to hire both roles and avoid the CRO vs. CMO debate, many just don’t have it. Another possible solution to the CRO vs. CMO debate is the idea that a cloud startup can hire a part-time CRO/CMO. This solution has worked before to deal with CFO turnover through temporary or virtual financial executives. Whereas the CFO takes care of the money already coming in, an alternative CRO/CMO would find that money in the first place.
“Many entrepreneurs lament their lack of revenue,” says Drew Stevens, CEO of Buzz Marketing Alliance, a strategic communications firm for small business and entrepreneurs. “In most cases, the lack of revenue stems from an acute focus on marketing and sales. Simply put, entrepreneurs are not familiar with the marketing experience. The best alternative is to hire a fractional chief revenue officer or chief marketing officer.”
Small cloud startups without a CRO or CMO need to keep three principles in mind, according to Stevens: sales is part of the marketing process, sales is exchange of money for value, marketing is a set of strategic and integrated marketing messages that creates visibility and community.
“This is exactly what the startup requires: visibility to allow the demographic to understand the value and a community that becomes enamored with the message to manifest the brand,” Stevens says. “Therefore, startups must hire an individual capable of creating digital and traditional messages that capture the audience’s attention.”
Must a Startup Endure the CRO vs. CMO Debate?
Some technology industry veterans question whether the focus of business needs to have a CRO vs. CMO discussion at all. With the overlap between revenue growth and going-to-market responsibilities, choosing a CRO vs. CMO can become a false choice.
“At the end of the day, it’s less about title—CRO vs. CMO—and more about achieving your revenue goals,” says Thom Gruhler, former CMO of Microsoft Windows, now CEO and founder, Fjuri, a marketing consultancy. “Is your CMO able to drive top line growth? Are they able to act as both a chief growth and marketing officer? If not, they should be. Building awareness can be achieved as a part of the broader plan focused on revenue growth.”
CRO vs. CMO Peace Equals Sales-Marketing Alignment
A larger question that can concern cloud startups beyond the CRO vs. CMO is the idea of sales-marketing alignment. With the CRO representing the sales function in some startups and the CMO obviously representing marketing, it can become a question of how do you get sales to love marketing and vice versa.
“Ensuring that sales and marketing work together is an initiative that any company looking to grow needs to oversee,” says Pablo Gargiulo, CRO, Jive Communications, a hosted VoIP startup. “And if this seems like a far-fetched goal, whether because meetings are being avoided between leaders, managers or team members—and feel more like necessary evils than productive collaboration sessions—or because goals and strategies don’t reflect improved communications, then changes need to be made.”
So you may need to rethink leadership, or you may need to begin discussions on hiring a CRO—which could mean investor talks if more funding is needed, according to Gargiulo.
“In our experience, hiring a CMO and a strong sales leader right off the bat was the right decision,” says Matt Peterson, CMO, Jive Communications. “However, with increased growth comes increased complexity, and with time—11 years—we voted to bring in a CRO. Today, we enjoy the benefits of having a capable, collaborative executive team with a CRO, CMO and a sales leader who all act as equals. In the short time since hiring a CRO, we’ve already seen a transformation in the way sales and marketing not only work, but work together.”
In the end, the benefits that a CRO brings are long term, looking at ways to generate and retain revenue across different channels, according to Peterson.
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