Jon Miller | Cofounder Marketo, Engagio | The Gumball Machine is Broken - Rethinking B2B Marketing

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0:54I'm Mike Linton, the former Chief Marketing Officer at Best Buy, eBay, Farmers Insurance, and Ancestry.com. I'm here today with my guest, John Miller. Today's topic, the gumball machine is broken, rethinking B2B marketing. Now, John is the co-founder and former CMO of Marketo, founder and former CEO of Engagio, former CMO of Demandbase, and a board member of several startups. Notice there's a lot of things he did there that end in O. I don't know what that has to do with the show, but it just occurs. He is currently working at a new venture, which is in stealth mode, and he is also a fearless prognosticator, publishing a yearly list of B2B predictions, which we will talk about during the show.

1:43Welcome, John. Awesome. Great to talk to you today. All right, John, let's start with this concept of the gumball machine for B2B. Tell our listeners, what is the gumball machine and why is it broken? Yeah, I mean, I think it's a metaphor for what I just call the playbook, the marketing playbook we've been following for years. And I am somewhat responsible for helping to promote that old playbook. At Marketo, we went around and said, this is how you do marketing. You use content to generate leads. You capture them and then you nurture them with emails. You score them and you pass them to an SDR at the right time.

2:23And, you know, you have other SDRs that are doing outbounding, you know, to reach out. And SDR, we don't have a half-part show with B2B, the other half is not B2B. SDR is sales development rep, right? Yeah. You know, kind of a junior salesperson that's going to, you know, try to bring the human part to the whole system. And everything about this playbook was meant to be highly measurable, highly quantitative. you know I would even go to people and say the way you should set your marketing budget is you should calculate that well I need this much pipeline which means I need this many opportunities which means I gonna need this many leads which means I need to run this many marketing programs and like like literally kind of do that back backwards math and and and that's the origin of where the whole thing starts to fall apart because oh go ahead you know it starts to make you think of marketing being like a gumball machine where I can just put my quarter in and get my gumball out.

3:23I can run my campaign and I can get a buyer. And that's not how it works. Right. But this basically also assumed that it's marketing qualified leads, MQLs, right, that came out of this thing for B2B marketers. And the concept here is I put this marketing campaign out for X money and MQLs, which are essentially the gumballs, come out. Is that right? Am I describing it right? And that those gumballs that come out are going to become customers. Right. And marketing is a much more complex machine that, I mean, there's hundreds of examples that you can point to for this, right? Where like, yeah, that person comes to a website and fills out a form because they want to get a demo request.

4:10And it turns out it's because they talked to somebody that you marketed to 18 months ago. Right. And so it's a nonlinear system that can't be tuned and optimized the way you would tune and optimize a repeatable machine. When you came out with Marketo and everything, though, that was at the beginning of all this where actually the gumball machine worked because no one had actually used it before. Right. Is that kind of why this thing took off? and you can standardize it across all the B2B businesses. And as it becomes more normalized, the concept breaks down because you still have to fill the gumball machine up with new gumballs.

4:50Is that a fair way to look at it? I think that's a great point. You know, that like, yeah, when it was new and innovative, it worked better. But buyers have gotten pretty savvy and annoyed by all those traditional tactics. You know, they've learned that if they go to your website and fill out a form, you're going to start emailing them and calling them with stuff that they don't want. So, yeah, they're opting out and tuning out. They're trying, they're doing more stuff anonymously. And that just is all the more reason why this gumball machine mentality just is not working. It hasn't worked for the last couple of years.

5:22And when I think about it, though, and we've done a bunch of shows on why B2B marketing is no good and what to do about it. This is another look at it, which is people are still using that gumball machine and pounding on their CMOs to get more leads. But you're saying they're not going to happen because the leads are a lot more savvy now. The marketplace is a lot more mature. And you also say you think AI is going to accelerate the decline of B2B as well. Yeah. Well, I mean, think about it. A lot of people already have Google promotions tabs in their inbox. That's a version of AI deciding which emails go in your primary inbox and which ones go to promotions.

6:15But I also have Gemini now in my Google inbox. Gemini can read my emails. It can summarize them. It can synthesize them. We're not so far away from me just getting a digest that says, here are the emails you got today. Here are the, you know, you can ignore these 17. These five you need to pay attention to. And I've already drafted your reply. Right. That's like what we're also seeing on websites today with zero click search. Yeah. People do a Google search. They don't have to come to my website anymore to get their answers. So AI is disintermediating your search. It's disintermediating your email.

6:52You know, that those old tactics that we were doing before, you know, aren't going to work in the age of AI. We need a new playbook. Yeah. And we'll talk about the playbook in a minute. I want to kind of tie this up a little bit on why the gumball machine is broken. We also did a show called Your Next Best Customer May Be an AI Bot, in which case we talked about customers aren't going to come to your website. You've got to be out there to be found and you have to be doing good. But you're saying a lot of B2B is still stuck in the old way of doing things. and AI is going to even make that harder on marketers now?

7:35Yeah. You know, I mean, any B2B CMO listening on this call, I would be willing to bet, has had a tough few years, right? Unless they're some outlier company, right, where they are probably not making the pipeline goals. I can almost guarantee you they had some meeting where the CFO came to them and they said, all right, well, we need to grow 25 % next year, but the win rates are down, so you got to generate 35 % more pipeline. Oh, but your budget's going to be flat. And the CMO is probably looking at that and saying, I didn't even make my pipeline goals this year. Yeah. Right? And somehow you think it's going to be different next year because I'm going to, what, work just a little harder?

8:22No, it doesn't work that way. We need a fundamental rethink about how are we trying to generate our pipeline and our revenue, which is going to start from a recognition of some of these things we talked about. Marketing is a complex machine. It is not a linear machine that can just be gumball in leads out, right? Which we'll get into. That means thinking about longer term investments like brand. AI is going to disintermediate our traditional tactics, which means we need to start thinking about things that AI can't disintermediate, like relationships and experiences. Right? Like, we've got to evolve how we're thinking about this, because what's undeniable is it's not working.

9:06I like that. I think that's a good pivot to the next question, which is, you know, when I look through your predictions and read some of your stuff, one of the things you said is the future is going to go to those who do right by the customer. Tell us what you mean by that in B2B. Yeah. You know, that where that came from was, you know, I've been talking to marketers for 18 months now about this old playbook isn't working. Yeah. I see people like, okay, I believe you what should i do differently and i i i had all these lists of things that they should do differently like don't gate your content right that's good for the buyer like um publish your pricing because people you know want to know that without having to kind of you know go go go talk to a salesperson make it easy to learn and experience about your product these are all things you know they're right by the customer don't bombard them with sdr calls just because they filled out a form right and there were all these things that i could say this is what you should do better in the new playbook and i realized what they all had in common was that you know it's about treating the buyer's relationship to be built and not a lead to be captured and you know the more and it's funny because the route is this when old with old is new again right i'm basically saying understand the customer build a brand you know that that's going to be emotionally engaging with them um yeah we can go on like like invest in the insights so that you know how they think create communities where they can learn from each other and have content that's so valuable they pay for it but give it away for free right what if you do all this right what should happen is you're building that mental availability and that awareness so that way when they do become think about having a problem right you're going to actually be on that short list which which if you're not on the short list by the time they start a cycle you're dead it's not going to happen so i started a png and i'm a fundamental believer in the brands and the customer experience and all that.

11:30So this is, it's music to my ears. And, and if you look back, you know, this customer approach has been around a long time since, you know, Procter and brand management and Deming, the Deming studies, but many companies, especially in B2B, I guess I'll go out on a limb and say, they're like that CFO that just came in and said, do a lot more doing the same thing with less money. We got to make this quarter or we're going to get pounded by our investors. What's going to make it different this time? And is B2B really ready for this kind of change in a large way? You know, I think we've just got to start by, you know, this whole idea of the gumball machine came out of this concept of revenue marketing.

12:23Right. Where, you know, B2B marketers had this bad rep 20 years ago of just, you're the people who throw parties and make color brochures. Right. And sales got all the glory because they drove revenue. And marketers like, no, no, no, we drive revenue too. And look at the MQLs we create and all that kind of stuff. And that revenue mindset was the right thing, but it led to that kind of short-term gumball machine thinking. What needs to happen is we need to kind of redefine what does driving revenue mean? Being a revenue marketer isn't just I generate MQLs. Being a revenue marketer needs to become you put in place the conditions that will ultimately drive long-term revenue.

13:10Hey, John, let me jump in and make sure I'm hearing this right. the the gumball machine really works as long as there's an unlimited supply of gumballs um what you're saying if i'm hearing you right is there's not so many gumballs and those gumballs are now moving a lot more independently in fact they don't even show up in the machine they are out there in the wild and you have to go find them is that is it and and what used to be the marketers just pulled them out of the machine and gave them the sales force. Now the gumballs are everywhere. Is that fair? All right. Yeah. I see, you know, you're pulling the analogy.

13:49Yeah. The, the, these gumballs are not just sitting around the machine waiting to come out, right? They're on their own, having their own autonomous journeys, doing comp, you know, complex things on their own right. And again, I think the research says, you know, that they will, you know, they, You can't do things that will make them enter a buying cycle. They will enter the buying cycle at the time that's right for them. But if you're not on the short list, 80 % of the time, they've already picked the winner by the time they've done that. So you've got to think about your marketing not as being demand creation or demand generation.

14:28Because you can't really generate demand. But, you know, you have to be, you know, build that awareness and then be, you know, be ready to be mentally available when they're there. Right. Which, again, you know this from P &G. These are this is not rocket science. This is a big deal, though, because you have to build a relationship with all these gumballs out there in space. When you started your companies, there was only one way to do the work. you know people were just getting into the internet just figuring it out and now there's a million ways to connect with them and you're saying the gumballs are now independent the rise of of the gumballs um but i want to go back to what you said a second ago i think that this change is inevitable because what we're doing isn't working but that doesn't mean that it's going to be easier happen overnight you know i i think that you know the problem that cmos get into is they still have a cfo or a board that demands quarterly results and they have private equity investors that are basically saying you need to report to me monthly how many mql gumballs you created you know and and and so as leaders we need to be part of changing the conversation um you know and and i think it's got to start with the some of the things we've talked about like a recognition that what we've been doing doesn't work that the way people buy has changed you know and that therefore we need a different set of tactics and different set of metrics for marketing you know that that's that is it's funny you know that's about marketing the marketing uh also about that everybody in the b2b space saying the whole marketplace is different it's not just that the marketing is broken yeah we know not every cmo will have that credibility right and not every cfo will ever it will think about it so who's doing it well right now if i look at this and i think who are there any companies or industries you would say are on the forefront of of this new way of doing it where you're actually marketing you know relationships versus the gumball the mqls yeah well i mean assume you're asking about b2b companies specifically because a lot of b2cs i think do do this pretty well i think that's sort of the point i think b2b needs to learn a lot from b2c and how they've done branding and and built you know kind of that mental availability kind of over time um you know but i think you know for example two companies that i've been impressed with what they're doing specifically on the content side of things are gong and carta gong makes call recording software they would say it's bigger than that sales enablement but but but ultimately they record sales calls and then they can analyze those and you use it for training and coaching and and other use cases for gong um but one of the things that they do is they now have you know literally millions of calls recorded and an understanding of how those calls led to outcomes like deals.

18:01And then they create these reports by analyzing that proprietary data. The one they're most famous for is research that says when and how should you swear on a sales call? God damn it, tell me about that, John. They've got their data. And again, what apparently they found is if you swear first, that's not good. if you swear after the buyer has sworn you actually have the best chance of winning the deal right like basically matching your buyers uh swearing there um but the point is that's cool data and that there's and sales people want to know the answers to the questions that they're researching and as a result most you talk to most sales leaders at least in technology companies They know who Gong is, right?

18:54And they've done it by using their own proprietary data to create insights, which is not asking ChatGPT to write a blog post. This is actually publishing something kind of unique and valuable. Carta does something similar. Carta is a cap table management system. So thousands of startups share data about their investors and their employees' ownership and their founders' owners with Carta. And then they produce amazing stats that to me as a founder tells me exactly how I should think about my next fundraising round and how much equity I should give to my employees versus my investors. And because they have all this data that they can publish.

19:29Give me an example of what Carter might tell you. And I know Carter, but not this way. What would they tell you like on your cap table as a founder that you should? So they would say like the median series A is at a pre-money valuation of$48 million and is raising$12 million and has an employee option pool of 14%. And that's the median. Here's the 25th percentile and here's the 75th percentile. But again, they have the data to make these kind of things. But the point is less Gong does this for salespeople or Carter does this for entrepreneurs. It's more what data do you have? that allows you to produce some proprietary insights that your buyers are going to resonate with, you know, that only you can produce.

20:18That, I think, is a fabulous way to be building brand awareness and B2B these days. And then, you know, the other one is just people talking about who are building great experiences, great communities. and you know i was talking to there are lots of companies who do this well especially for their top customers but i was talking to the woman who runs this function for salesforce yeah right their executive engagement you know committee and i mean they've got a big budget to spend but yeah they're taking people to f1 event um and and and other things like that but it's again when you can create an experience and connections, AI is never going to take that away.

21:07Got it. If I'm a B2B agency out here in the world now, or I'm a CMO sitting here looking at my agencies and my MarTech stack, what should I be thinking about in addition to the concept of I got to build relationships, the brand manners how should i be thinking about all the relationships i have with everyone invested in that stack and in my current set of creative now you know i mean we can take that question a lot of different answers um i'll say if you're a cmo one thing that i'm seeing some cmos do is redefine the cmo title you might have heard somebody else on the podcast talk about this but there are people calling themselves chief market officers that have chief marketing officers.

21:59And the reason why is because marketing is otherwise the only CXO function named after the act of doing the job and not the outcome. It's not a chief selling officer or chief financing officer. So I get that. I don't, at the end of the day, I don't give one you-know-what about whether you - Don't swear until I swear first, John. A chief market officer or a chief marketing officer, I don't care about that. But what I care about is, can you have that conversation about the changing role of marketing? And that is about understanding the market and being strategic rather than tactical and having long-term value creation over short-term metrics.

22:39And if having a conversation about re-changing your title can prompt that conversation, I think that's potentially important. Go ahead. You also asked about MarTech stacks, and that's obviously near and dear to my world. Yeah. Um, you know, we started Marketo the same month my son was born. He's a freshman at college now. So literally this month is the 19th birthday. Um, these old tech legacy tech stacks are not going to take us into the next AI enabled generation. Um, I think what we want, you know, is, is the irony of marketing automation is that it didn't actually automate anything. And then we had to hire people to run the marketing automation.

23:25but what if we actually had a platform that could truly automate the marketing? I think if we could do that, we could have technology to focus on the ING of marketing. So as humans, we could actually focus on the market. And I think that's exciting. I like the market thing. And we had, it was Kate Bolas. She's well known for preaching this. Yep. Yeah. And does a lot of B2B CMO searches. who is very passionate about what you just said, which is your job is to understand and manage the market. It's not just to do the marketing. So I think that's a really good call out. So if I'm sitting here in this space as a marketer, I'm looking at 2025, what should I be targeting to do in the remainder of 2025 that keeps me on the front end of where the new machine is going.

24:28So, I think a big part of what we talked about is, how can you start thinking about adjusting your mindset to be a little bit more demand-focused versus, or brand-focused versus demand-focused? LinkedIn did a study a while back with Binet and Field where they updated the classic recommendations for Dave Dilden. They ended up saying that recommending 56 % demand, 46 % brand, which is, I think, a higher investment in brand than most B2B companies are doing. That causes stress and agita for a lot of people I talk to, right? Because like, well, how do I make that measurable and, you know, all that kind of thing?

25:09I had a conversation with the CMO of Bram early that I thought was insightful on this topic. you know at the end of the day the brand isn't about your color or your logo you know the brand should be what is that set of feelings that you want your target buyers to feel about you yeah um and ideally is one or two words it's something very simple that you just kind of need to inject into their consciousness. For Grammarly, she's very clear on what that is because most people think of Grammarly, at least I did, as the tool that their kids use to check their school papers. But what they want to be is they want to be an enterprise AI content solution.

26:07um and so she knows what her job is right is how do i get more of the people i care about to think of grammarly the way i want them to think about grammarly yeah so she then said i'm going to spend one less trade show than i would have otherwise done this year i'm going to take the money that i would spend on that trade show and use it to do a more traditional brand tracking study, right? How much my audience thinks about me the right way. And then she can track that over time. And she can say at the end of the year, how did we move the needle on this number one thing that we all said is the number one thing that matters?

26:50So it does mean spending less on some of these gumball tactics that may not work anymore and having the courage to say, I'm going to put it more into these things like proprietary content programs and experiences, but I'm going to track it by really moving the needle on, on knowing what I'm, you know, what I want people to think and feel about me. So she probably worked with her CFO to say, I'm going to lose this many MQLs out of this trade show, but this will be worth it. And she's bringing the company along tastefully without having a massive fight of saying, I'm going to cut our trade shows in half or something.

27:29You got them to MQLs was a vanity metric that didn't actually measure value. Yeah. And what mattered is these other metrics around, you know, who are the accounts that we care about? What do they think of us? Are they engaging with us? You know, and, and when you can, you know, she was able to move the conversation forward in that way. That's, that's, I think what we really need to be focusing on. I like the vanity metric thing because I think actually a bunch of brands do this where they or a bunch of companies do this where they care more about traffic or they care more about likes than they actually.

28:03And whether those translate into sales or anything, they can get lost in the vanity metric, particularly if they're doing compensation wrong and paying for the vanity metric. Oh, yeah. So I think that's good. Let's talk about your predictions because every year you make a bunch of predictions. And we haven't touched on your predictions for 2025, or maybe we have in some of this discussion. What predictions do you want to put out there for our listeners? Yeah, well, good is we've hit a bunch of the big ideas, right? You know, we've talked about breaking free from the gumball machine, reframing marketing's role in revenue, balancing the budget towards brand, as well as how AI is going to change buying by disintermediating our marketing and therefore need to focus on things like experiences and relationships.

28:56The one other set of things that we didn't really talk as much about, I think, is AI agents. and you know I think it's tough for us humans to really understand all the changes that are going to be coming here but for example I think marketing operations is a function that exists in most B2B companies and I love marketing operations people but the reality is they're often a bottleneck on what we want to do. Like, oh, I want to do more. Oh, but we only have so much capacity. Right. Right. There will be marketing operations agents that, you know, literally you can be in a sauna and create a task and assign the task to the agent and the agent will go build the campaign for you, you know, and build your landing page for you or whatever the things are, or, you know, clean this list of data.

29:59You know, of data, you know, that's going to be pretty profound, right? As we start seeing these agents take on tasks and I think free us from the bottlenecks so that we can do more things. We're already seeing agents on the sales side. I frankly think most of them aren't very good, but there's this big rise of AISDRs. where I think a lot of companies are using these AISDRs today for outbound prospecting, which I think unfortunately ends up just being more spam. But I think there are interesting use cases for these sales agents, especially on the inbound side. So if you want to see a demo, should you really have to fill out a form, wait for an SDR to call you, schedule a meeting, do a discovery call, and then finally you can get a demo, right?

30:55Three weeks later, somebody's going to come along with an AI agent that can just give you your personalized demo right then and right there. And if you can do that, your competitors of three weeks later, who do you think is going to win? Right. Well, so you're saying the agentic AI will just compress the entire timeline for someone that really wants to look at a demo or something, right? I think when, you know, when somebody's ready to raise their hand in the buying cycle, they don't want to like, ready, you know? So anyway, you already, I think, talked a little bit earlier in the earlier episodes around agents.

31:33So like, we're going to have to start marketing to agents. We're going to start talking about, you know, agent qualified leads or whatever the name is going to be. It also potentially will change pricing, right? If you're a SaaS vendor that sells by seat, there might be fewer seats to sell if agents are doing more of the work. So there's just some pretty profound things that are coming. And I'm not going to get all those right. Could you imagine if you would be able to predict Uber in 1999? You'd be really rich. But the reality is, we didn't even conceive that such a thing might be possible. Even when it started, no one believed it was going to work.

32:18So any other predictions you want to share with our listeners for the year?

32:27I guess the last one is, you know, I really do think, and this is a prediction I'm working to try to make happen, that we're going to see a new era of marketing platforms built for the age of AI. And personally, I'm pretty excited for that. excellent we'll bring you back on the show when that shows up this brings us to our traditional last question john it's a two-parter practical advice for our listeners we haven't talked about yet and or the funniest story you can tell on the air you can pick one or both but you have to pick at least one all right well first i will just bring in you know because we're talking about it in the pre-show um you know so yeah my first company was called marketo you know uh my second company was called engageo and you were cmo of a lot of these two companies um you know the best thing i ever heard about engageo was that it's a harry potter spell for marketers when i was trying to find a new name for this new company that i'm doing the name i originally came up with was going to be Conducto.

33:36Because it's kind of like an orchestra conductor orchestrating all the interactions. Right? And then I'd have Marketo engage you in Conducto. But my wife convinced me that Conducta sounded better than Conducto. All right. I bought the URL Conducta.com. But there's a company that I've been friendly with. I've known their CEO for a long time. A company in the SEO space called Conductor. And out of a courtesy, I decided to call the CEO and just say, hey, you know, I'm starting a new company called, you know, and I just want to give you a heads up. And he's like, oh, no problem. Let's talk. Hey, I'm getting in the elevator.

34:20So talk to me while I'm going. And right as he's getting in the elevator, you know, I say, yeah, so the company's going to be called Conductor. But what I didn't think about the fact is that this guy is from New York. and how does the new yorker the head of conductor call what does he call his company right like conductor like like like like no no you're conductor i'm conductor uh anyway he didn't like that so needless to say conductor is not the name of my new company um and the new company i'm not going to reveal the name of yet but it is not a three-syllable word ending in a vowel okay very Very good.