Michael Treff, CEO Code and Theory | B2B Marketing - The Year in Review & the Year Ahead

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1:37Learn more at typeface.ai slash CMO. Welcome marketers, advertisers, and those who love them to the Chief Marketing Officer Confidential. CMO Confidential is a program that takes you inside the drama, the decisions, and the politics that go with being the head of marketing at any company in what is one of the most scrutinized jobs in the executive suite. I'm Mike Linton, the former chief marketing officer of Best Buy, eBay, Farmers Insurance, and Ancestry.com. I'm here today with my guest, Michael Treff. Today's topic, B2B marketing, the year in review and the year ahead. Now, Michael is the CEO of Code and Theory, an agency that combines creatives with engineers to bring clients answers at the intersection of technology and marketing.

2:28Under his leadership, the company has grown to over 2 ,000 people. For the record, this is our 150th show since we started, and we are proud to bring back the only punk rocker we have interviewed in the history of the show, who incidentally also has our most watched episode ever. Also, Michael has also agreed to serve as our B2B correspondent, sharing periodic observations from the front lines in the coming year. Welcome back, Michael. Thank you so much, Mike. It's always a pleasure to be here. Congrats on 150, and I look forward to my press credentials for next year. There we go. All right. It's been a while since we last talked because you've done two shows with us.

3:17Let's check in on the health and financial trends just generally you see in the B2B space. Give us an overview of what's going on in the B2B world? Well, I'm so glad you brought that up. Thank you. Look, it's sort of a tale of two cities in the sense that you see so much investment and so much infrastructure going into the B2B space for a lot of reasons. There's a lot of work to be done there. The journeys are changing. The customers are changing. Their behaviors are changing. The way products are sold, services are sold, all that is changing. There's a ton of this intermediation in the relationships, unlike before.

3:55And so you see a lot of investment going into the B2B space generally for people to reinvent their infrastructure, reinvent their MarTech, reinvent their systems, reinvent their technology, because they need to. You also see a squeezing of some of the legacy platforms and legacy spending that you would have had. So like to go a little deeper on that. Let's go a little deeper and give us a couple examples so everyone can go ahead and follow along on the pressures on the business. Sure. So look, you see, it's important when we talk about B2B that we're not when I talk about it, I'm not just talking about B2B marketing per se.

4:37Exactly. Yes. All the things that sit around it. So when I look at our clients and I look across the landscape, a lot of the money is shifting away from consumer marketing or B2B marketing in the traditional sense because people are investing in their infrastructure. What do I mean by that? They're building better MarTech systems. They're implementing content supply software so that they can do better. They're trying to still figure out what they're doing with AI. And where are all those investments? And did any of them work? Did any of them not work? What can we learn from that? There's no question that there's an ROI accountability piece to it as well.

5:10so that for people to make investments, and you do see a lot of the money shifting into more capitalized budgets versus OPEX budgets, infrastructure budgets versus disposable spend budgets, you're seeing that because there is an ROI analysis layer that hasn't happened before, or at least hasn't happened to this degree. So people investing in their infrastructure, in their MarTech, in their software, in ways to reinvent themselves as a business, how they show up, how they go to market, how they manage customers, how they engage them, the platforms that they build around them, definitely happening.

5:44People just spending more money on sponsorship or traditional marketing spend or social or the other places where you would have historically seen investment even in the B2B space, not as much. And I think a lot of that comes back to the sort of change in behaviors and relationship between customers and their B2B customers as well. Tell us about that change, because what I heard you say is the industry is becoming much more disciplined on how it spends money. And it's not just about leads or anything else. It's really about return on money. Tell us what you meant by that last comment you just made.

6:26Sure. So let's talk about it in a B2B sense. You're selling expensive software. You're selling work enablement products. You're selling infrastructure to companies. You're selling insurance services, whatever it may be, to large organizations. Sure, great. You're selling technology that goes into a manufacturing cycle. Great. One of the changes and the big ones is the way people collect information and do comparison shopping. And it's not just because there's, oh, there's AI and there's agents. That's true. People can get information in a different way, but it disintermediates the relationship.

6:59So it's been about events historically. It's been about thought leadership. It's been about downloading PDFs and reading them, white papers, and establishing your credibility in a sector, especially that's true in financial services as an example. Well, today, there's such disintermediation because people are using things like Perplexity or ChatGPT or other platforms to collect the information, do the hard work, do an analysis, understand it. that like when you're finally, you know, at the end of what was a traditional cycle, it's like all that work was already done. So you need a different way to engage with that consumer.

7:36It used to be about relationship nurturing and stepping them into it. Right. You get an MQL and then that was really good. Exactly. We're evaluated on how many MQLs you got. We did a whole show on the gumball machines broken and MQLs are kind of a false metric. Yes, exactly. Because now it's like, if I'm a B2B seller, if I have a big B2B business, I should be asking myself, like, how can I add value now? Because just sending the information and doing the comparison and specs and all these other things, that's not necessarily the best place for value, because I can get that information elsewhere so much easier than I ever could before.

8:13And I can do the comparison. And so what does matter and what helps me with the, I'm the buyer now, what helps me prove my ROI? Well, sales enablement materials, just as an example, making the case so that me, the technology buyer at company X can go to my CEO, go to my CFO, go to my board, whatever it may be and say, look, look at this analysis we've completed. Here's where we think the ROI is. Here's why we want to buy product X over product Y. Here's the tests we've done. Here's how it integrates into our stack. And all that stuff, I don't have to do that on my own anymore. I can now flip back over to the B2B seller.

8:50I can provide platforms that can help you do that. I can help do the modeling for you. I can help do the sales materials and enablement for you. I can help do the integration planning and timeline for my technology into your company if I need to. And now more than ever. So if I'm the B2B marketer, I'm stepping back and I'm saying, huh, where can I add value in this relationship, in this chain? And if it's really not in just the materials or the establishment of my brand is credible, which I can do a million other ways, maybe it is in all the things that will help you be successful in your own organization.

9:23Let me put my effort on that. And so that's the kind of things we've been focused on. It's a massive revolution in B2B marketing where targeting and segmentation and power to the buyer, really, where it's a focus on end-to-end results, not just the front end. That's a massive shift, right? Let's take a short break from our discussion for a word from our sponsor, Typeface.

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10:47now back to our discussion with code and theory ceo michael treff exactly yeah and i would think it's you know it seems obvious like businesses are in the business of making money they're in the turn on getting an investment on their roi you know on their investment they're only getting an roi on their investment so you know being a partner that's not just a seller you know we look at the software companies i'll give an example yeah we look at the software companies And what are the software companies very, very good at, be it Adobe, be it, you know, whoever else, maybe Salesforce, you name it, doesn't matter, agnostic.

11:20They're really, really good at explaining all the products to you. These are what our products are doing for you. Buy our stack because you can then do all these following amazing things. Exactly. But then they also, and they've learned over the years that they can't just leave it. They can't just say, hey, write me the check and here's the stuff. Now go do it. So they've all built implementation arms to compete with the SIs that are out there or partner with the SIs that are out there. They understand that unless the clients can unlock the value of it after the sale, they're not going to re-up.

11:52It's pretty simple. If I didn't get the ROI, if I just spent$100 million on a MarTech or an AdTech stack and I don't get the ROI out of it, there's a problem. So the software companies have been smart in saying, well, we've got to ensure the success of our products and services. How do we do that? consultative change management, implementation services, you know, value realization work streams. And the SIs do that too. And Code in Theory does that too. I mean, we have a change management SI piece of our business called EXT, where we're partnering with these companies to do that for them. But the reason that's important is those software companies were smart and they were early and they said, this is a complicated purchase.

12:26This is a very significant technology purchase. And now we need to make sure our customers get the value out of it. And so the outcomes are getting a lot clearer. Is it easier if you're in B2B and we'll take the big guys out of it, like Salesforce and Adobe out. Is it easier for startup B2Bs to do this right than it is for legacy B2B businesses? Oh, it's such a great question. That's a hard one. That's why I'm such a good interviewer after 100 years. Your experience is just shining right now. The answer I think is yes and no. It's both. So I I think what smaller companies are able to do, two things they're able to do really well is one, really understand the problem that they're solving because they're laser focused on those problems.

13:13They're new companies. They don't have a robust product portfolio. They're focused on solving specific use cases, specific needs in the market. So everything around those use cases, like they're able to sell really well, support really well, be agile. Their customers really matter to them because they're young and they're growing and they're new and they need to establish that revenue intake, et cetera. And you sort of start to see that even in some of the acquisition market, like in the AI acquisition market, like these huge acquisitions being made left and right on sort of, I don't want to say single purpose, but like limited scope companies that do this one thing really well.

13:48So they're better at that, that's for sure, because it's more meaningful for them. What they're not better at and where some of the institutional players are really great at, it's understanding how it all works together and having a suite of how everything might work together more effectively and helping you navigate that holistic change better because it's not just one component that they're solving. It's the end-to-end system. So that's, I mean, this is great for B2B buyers. It really is. It really is. Like if I'm a B2B buyer, this is like the heyday. I can impact the products and the services more than I ever could.

14:22I can hold accountability to the ROI of my investment in you and then force you to help me unlock that value. It's more transparent because we have better data, we have better attribution, we have better modeling, we have better ROI analysis to know if it's working or not and then hold us all accountable in that. So for me, like if I'm the B2B buyer today, this is like where I've wanted to be. Yeah. So we'll talk about the marketing part of this in a little bit, but I want to dig into AI a little bit because you're just watching so much money pour into this. You see the mutual tieouts between the LLMs and the chip bankers.

14:58and you predicted in an earlier show, I think a number of months ago, that there would be pressure on ROI. Tell us what's going on in AI as seen through your lens as the B2B correspondent for CMO Confidential. Oh, my first assignment. I love this. Look, there's no question about it. I mean, we all knew it. I mean, I'm old enough to remember dot-com bubble one. Like it was about ROI at that point then. And of course, with AI, it follows a very similar trajectory. There is no question that there is more pressure on organizations to demonstrate what AI is doing for them. Now, wave one of AI was all about automation and cost savings.

15:42Can I automate these jobs? What can I do? Can I get more output with the same number of jobs? But how can I bottom line impact, but really from a cost savings or even just potentially a volume output perspective? We're definitely seeing that. Another thing we're seeing is, and this is both good and bad, probably more bad for people like me who run agencies, but you're seeing a lot of clients put pressure on the agencies to do more because they're using AI and they're using tooling and essentially at the same cost or less, they want the full value savings of that. And that's like a pressure as well.

16:12So wave one, automation, efficiency, cost savings, et cetera. Wave two and what we're seeing now, and the bridge between the two I will explain in a second, is, well, what is it doing now to grow my business? Not just save money, not just be more efficient on the bottom, but like every company needs growth. Earnings are about growth, right? They're not just about efficiency. It is a brutal growth market for a lot of industries because of inflation and there's numerous sentiments down. People are nervous. So let's talk about where you were going with that point. No, I love it. It's a great observation.

16:49The market is getting tighter and tighter and harder and harder to navigate from a growth perspective, but the street's expectations are on growth. And certainly, again, if more capital investments are happening, you ultimately need to show the ROI and the enablement on that. So the bridge is that so many people spent all this money on automation and AI, and they have been mostly unsuccessful in realizing the value. Maybe they were able to realize the value in short-term job cuts or other sorts of efficiency measures, but certainly no one has been able to point to AI and say, it's unlocked growth for me in XYZ, unless they're the AI software company, in which case they built a piece of software to do a thing.

17:26So that is the bridge. And so the next phase and where we think it's going has always been around CX. it's been about how do you and again that's a word customer experience yes customer experience thank you for defining we like to say that word is like a mirror it's like whatever you think it is that's what it is we used to say that about digital transformation like people thought if i took the money from traditional advertising and put it into digital i was digitally transforming so like cx can mean anything to us it means how are you meeting customers better where they are How are you creating better products, better services, better experiences for them using AI, both as like an experiential enabler?

18:04And I don't mean experiential marketing, but I mean in the experience or in some sort of computer personalization or ways that ultimately drive value to the experiences that a customer has with a company. Hey, so everyone, all companies say they're really into the experience, but my experience has been a lot of companies, airlines, and, you know, let's call you out. You say you're into it, but you're not really into it. Yeah. How do I know the company I am using is really into my customer experience or not? Like, what's the measures you recommend people do? So, a few things. So look, you know, code and theory, not to plug code and theory, but like we live at the intersection of creativity and technology.

18:48And so much of our business is about building products and services. So good. You got your talking points in so perfectly there. I know my PR team is going to be really happy. They are going to be really happy. The point of that is like you should be looking at customer satisfaction in the experiences, both in a qual and a quant perspective. I mean, you should be looking at ultimate business metrics of repeat revenue. If you're an e-commerce business, you know, your ARPU, if you're in a subscription business, your ARR, is it growing? Like you should be looking at the things that ultimately tie back to the transaction, the business itself, not the penetration or the marketing metrics.

19:23I'm not saying those aren't important. They are. But they're diagnostics, they're not outcomes. Exactly. So you want like real key indicators. Like you want real things that corollarily relate to the business. You don't want indicators of like efficient, creative or marketing spend. And so we push people on that. You know, we actually not to not to, you know, talk about stuff that we do, but we actually just published some research with the Wall Street Journal that was exactly about this. I will show you it's printed right here. Look, you send it. We'll post it in the comments. OK, great. Where we did a study on this.

19:59We did a study around like AI's imminent, you know, impact on CX. And what we heard, you know, and I want to make sure I get the numbers right here was that, you know, from the survey that we did, 94 % of executives that we spoke to say that CX strategy contributes to business success. But then 93 % of those exact same people said that their digital CX needs improvement. So we're sitting there saying, huh, it's all really important to you. But none of you are happy with it. So when we talk about the next realm of AI investment, that's why we can conclude it's going to be around AI investment that drives experiences for customers and how those can relate back to the business.

20:39But beneath that is also, you have to actually, you can't just invest, you have to have use cases and think it through. You can't just throw money at this. You have to have a plan, right? Yes. It's a great point. Because, I mean, this isn't like, it's not going to take care of itself. You have to direct it, right? Exactly. So this is another place we think is a huge area for the next few years. It's like, what are we seeing in the market around AI? We're seeing one, and you made this point, incredible connectivity. AWS goes down, all of a sudden, 15 other things go down that are critically important.

21:15All the infrastructure is related to itself. And I don't mean to call it AWS, it could be anybody, it's just a recent example. It's all connected. NVIDIA is doing a chip deal with company X who's also buying from company Y, and it's all interconnected. And so the interconnectivity of the AI landscape and the technology landscape is more clear than ever. So what does that mean? It means if I'm a company and I'm investing in technology and infrastructure, I'm investing in AI, it can't just be use case by use case, tool by tool, area by area of implementation. That's important. No one's saying that's not important.

21:53but point solution tooling isn't going to get you all the way there. So you need to step back and have a roadmap and to have part of that roadmap. And I think this is the one that most companies are really struggling with. No shade, but like, what is your plan for your humans? Why don't we start with designing the company? We, how do we want our humans to be spending? Well, we did a whole show on this with the CEO of typeface about, you know, the culture is the biggest issue because people have to think bigger and it's not easy. Totally. And so that's hard. Think about that confluence of things I have to think through.

22:31I have to think through what are my customers and their behaviors and what's changing there? What is my infrastructure, my tech stack and my tooling that's going to help me get there? And then also for all the humans that are going to work at my company, what do I want them spending their time on every day. And that Venn diagram is a really hard thing. So your point of like, do we need a plan? Do we need a roadmap? Shouldn't we be focusing there? Absolutely. And that doesn't mean that you have to wait three years to do something. You shouldn't do that either. It's this weird, uncomfortable gray where you need to be thinking long-term, but also immediate use case and application and be opportunistic about that.

23:09In order to do that, to your point on culture, you have to be willing to like accept that you're going to fail. You're going to make mistakes and that's okay. Cause you'll learn from it. Well, and this, I want to go back to the ROI thing because this is where I think it might get dicey. I want to talk about valuations, but also where if you ROI, every project you'll never get going, but if you don't have some long-term ROI, you will probably go out of business. So when I look, I want to start with the big story here of all this money just, and these tie-ups between everybody, these valuations, where do you think they end up from a long-term ROI perspective?

23:49Again, can everybody, I think there's seven big players now, can they all win? Like, what's going to happen here? Look, if I knew that, I would be retired because I would just be investing on - Well, maybe you do, and it's just a matter of time. Maybe. I mean, look, we have historical analogs to learn from, right? It's not like - technological advance that we've ever seen like the machine you know the engine was a big advance the printing press was a big event it's not like publishing went out of business yeah exactly like the camera didn't put you know oil painting out of business like there's you know a million examples i look back to let's just think about the last 25 years you had basically the proliferation of the internet the mass internet in a way that the rest of the world could could use it you then had the smartphone which came in and you know the smartphone didn't kill the internet it just found a way to be complementary to it right and it built a whole new other industry of really big players and social media comes along and you know that didn't that didn't kill talking well maybe in some families it did but like you know certainly these all are symbiotic and so well now here we are we're in the world of ai it's still very early like we're in like inning you know i'll use the the Dodgers Blue Jays example, we're in inning one of 18 here from that very long world series game.

25:08You know, we are very young right now. We are very Mason. We really don't know. Like, like just think of two years, like three years ago, we were all talking about blockchains and NFTs. Now that's not important. What is it three years since chat GPT came out? Exactly. So let's let's let's so everyone's entering or about to enter the planning process for next calendar. When you look at what your companies are looking at and all the moving pieces and all the craziness, what kind of growth targets and budget allocations are they doing for next year? And then we'll write the marketers into that story.