What You Need to Know About Marketing in Portcos

On this episode of the Private Equity Value Creation Podcast, Shiv Narayanan interviews Cody Lee Vice President in Summit Partners Peak Performance Group.

Cody and Shiv discuss why marketing is a function no portco (and no investor) can afford to ignore, and what you need to know about portco marketing in the current environment.

Learn about a realistic approach to data-driven marketing strategy, common areas where portcos are wasting their dollars, and how to find the right person to lead a marketing function.

Marketing’s Rising Role in Portfolio Companies

In many portfolio companies, marketing is becoming an increasingly critical component of business strategy. This shift is evident in the growing focus on how resources are allocated between marketing and sales. Traditionally, sales and marketing expenses were often combined in financial statements, but companies are now paying closer attention to how these budgets are divided.

There is a noticeable trend toward a more balanced distribution of spending between sales and marketing, with a higher percentage of resources being directed toward marketing. This change is particularly significant in the B2B sector, where marketing is often seen as a powerful tool to amplify sales efforts. Some even refer to marketing as "sales at scale" because of its ability to create network effects that can make the sales process more efficient.

This balanced investment in both marketing and sales reflects a broader recognition of marketing's role in driving business growth. It also signals a positive shift for marketers, as their work is increasingly seen as essential to the success of the company.

Reducing Marketing Waste: The Power of Keyword-Level Tracking

Companies are increasingly scrutinizing their marketing spend to maximize returns, but ironically, one of the most common areas of waste remains paid search. The allure of broad, sweeping campaigns often leads to significant overspending, but a deeper dive into keyword-level tracking can reveal opportunities for substantial savings.

A majority of these companies tend to evaluate their paid search efforts at a high level, often overlooking the nuances of keyword performance. While an overall campaign might appear successful, a closer examination often uncovers that a large portion of the budget is being funneled into underperforming keywords. For instance, branded keywords frequently inflate performance metrics, masking the inefficiencies lurking beneath the surface. This can lead to a staggering 80% of the budget being wasted on keywords that contribute little to overall success.

The good news is that this issue is relatively easy to address. By identifying and segmenting spending into different tranches, companies can selectively turn off underperforming keywords to assess their impact. This approach is low-risk, as these decisions are easily reversible. If turning off certain keywords negatively affects performance, the strategy can be quickly adjusted.

Ultimately, the key to reigning in marketing waste lies in the details. Focusing on keyword-level tracking allows companies to refine their strategies, cut unnecessary costs, and improve overall efficiency. This method not only optimizes spend but also ensures that every dollar is working harder to drive meaningful results.

The Need for Deeper Analysis in Paid Media Strategies

Paid media challenges arise when companies continue to invest despite an unfavorable Lifetime Value (LTV) to Customer Acquisition Cost (CAC) ratio. Often, this is due to an overreliance on blended metrics without delving into campaign-level data to identify what's truly driving results and what isn't. This lack of granular analysis can lead to inefficiencies and missed opportunities for optimization.

To navigate this effectively, it’s essential to move beyond a surface-level understanding and perform deeper analyses of campaign performance. Evaluating paid media on a more detailed level can reveal which campaigns are contributing positively and which ones are dragging down overall performance. This next level of scrutiny is crucial, especially in a market where close rates may be deteriorating, sales cycles lengthening, or average selling prices (ASPs) decreasing. These shifts fundamentally alter the effectiveness of previous marketing strategies.

Additionally, marketing teams must stay closely connected to broader business metrics. If they operate on outdated targets that were efficient a year ago, they risk misallocating resources in a changed market environment. It’s important to recognize that what worked in the past may not work now, and targets should be adjusted accordingly to reflect current market conditions.

In some cases, market shocks can actually serve as a catalyst for positive change. They force companies to reassess their strategies from the ground up, often leading to more effective approaches. By rethinking how paid media is approached, companies can identify better ways to allocate resources and achieve a higher return on investment, even in challenging market conditions.

Navigating the Dark Funnel: Understanding Modern B2B Buyer Interactions

Unlike a decade ago, when digital marketing allowed for clear attribution from an ad impression to a sale, the current buyer's journey is much less transparent. This phenomenon, often referred to as the "dark funnel," represents the interactions and touchpoints that are difficult to track but play a crucial role in influencing purchasing decisions.

The way people engage with products and services has evolved significantly. For example, many buyers now seek recommendations in private channels like Slack groups or online communities—interactions that often go unnoticed by traditional tracking methods. These untraceable touchpoints are critical to understanding how decisions are made in the modern B2B space.

A striking example of this can be seen in the experience of a company that noticed a discrepancy between traditional attribution data and customer-reported sources. Their software’s attribution models suggested that only 5% of inbound demo requests were coming from YouTube. However, when they directly asked customers how they discovered the company, 30% mentioned YouTube as their source. This significant gap highlights the limitations of conventional attribution methods and the importance of a more nuanced approach to understanding the customer journey.

To effectively navigate the dark funnel, companies must adopt strategies that incorporate multiple points of attribution. This broader perspective not only helps illuminate hidden touchpoints but also allows for more informed decision-making in marketing strategies. In the modern B2B landscape, recognizing and adapting to these subtle influences is crucial for staying competitive and effectively reaching potential buyers.

Check out the full conversation with Cody ??

Private Equity Value Creation is a podcast about the innovative approaches leading investors, operators, advisors and bankers employ to?drive sustainable growth?and create enterprise value. Hosted by Shiv Narayanan.

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