The revenue opportunities PE investors identify during the due diligence process usually form a big part of the investment thesis and are pinpointed as core growth levers. After the acquisition, starting to build out the strategy for these leavers and put them into practice is a top priority. Seventy-two percent of investors are looking to validate their investment thesis in the first 100 days. You’ve paid a high price to acquire the company, so it makes sense to validate the core growth levers early to make sure you’ve made the right move.
To make this likely (or even possible), everyone needs to be clear early on what is expected from them. Marketing leaders need to be fully aware of how each of the strategic levers in the investment thesis connects to their function and responsibilities, so they can help make sure the company meets those projections.
There are seven core strategic growth levers often included in investment theses:
Let’s look at the kind of responsibilities Marketing should shouldering to support each growth lever. Only once everyone understands the role Marketing plays in these levers will you be able to start prioritizing the right Marketing activities to make them a success
Demand generation is central to Marketing’s role in a PE environment. This is also the easiest lever for Marketing to understand because most Marketing departments are already driving this to some extent.
But most businesses aren’t maxed out on the pace their demand gen could grow. Marketers often get caught in thinking there is a ceiling on how much room there is to grow here because they assume there’s a ceiling on how much budget is available. In reality, there isn’t a budget ceiling—there’s only a performance ceiling. It makes sense to fund Marketing as well as it can perform. If it delivers aggressive growth, it’s a no-brainer to invest more.
By increasing demand gen, Marketing can truly step into its role as a rainmaker and direct revenue to the business. But to enable that, Marketing needs a plan for how they can be an accelerant on the growth journey. Where should they make big bets? And in what order?
Regardless of your company size, vertical, pricing, or product, you should be scaling the best marketing channels and campaigns first and working your way down to the ones that are less effective. To identify what that means for your business, Marketing needs to build a demand generation framework:
This framework maps out the campaigns you need to meet people where they are on their buyer journey and fill each stage of the journey with experiences. Leads who are just moving into the Awareness stage of the funnel will have different needs to leads who are in the Consideration stage, so the Marketing campaigns they interact with need to be different too.
For the channels Marketing is already invested in, you need data analysis to get insight into which efforts are successfully moving people through this journey at an efficient Customer Acquisition Cost—and which aren’t. Armed with this data, Marketing can map out the gaps in the customer journey where content is absent or below grade. They need to scale demand generation activities that are working efficiently, reallocate budget from channels that aren’t delivering, and experiment with new demand generation campaigns that will fulfill the gaps in the customer journey.
To increase the impact of Sales, you’ll need to increase the efficiency of your sales pipeline. To do this, you’ll need to leverage Marketing.
After the acquisition, one (or more) of these three changes to the sales team usually happens:
Regardless of the change, the sales organization will need training as it’s being ramped up. New reps will be hired, often without much market or industry expertise. If there’s an emphasis on M&A and more companies are added, the same sales reps are now selling several products they don’t have previous experience with to markets they don’t understand nearly as well. If you acquire another company in the same space but selling to different segments of the market, reps will need to know how to sell the new product to their customers and vice versa.
Marketing needs to step in here to support the new Sales team in keeping customers moving through the funnel.
It’s Marketing’s job to ensure the sales team has the right content to succeed. Sales needs enablement resources and tools to ensure reps have the right training to have conversations with prospects.
Marketing’s role here is to build a better Sales playbook. They need to create sales enablement assets like personas, positioning documents, case studies, battle cards, one-pagers, sales decks, and more. In particular, the Content team has a huge role to play in these efforts because they’ll be the ones producing many of the assets Sales need.
In many cases, companies have never increased their prices. Founder-led businesses are often resistant to increasing prices due to concerns they’ll upset the loyal customer bases that have helped them build the business. This results in companies priced significantly lower than the rest of the market, despite having a better end product.
During due diligence, market mapping exercises often reveal the potential here. Increasing prices can unlock 10-20% increases in EBITDA without any cost at all, particularly in businesses where the products are mission-critical and the churn rates are low. Having regular pricing increases can drive expansion revenue and increase the dollar value of new customers as the average deal size increases.
However, pricing increases do need careful handling to prevent conversion rates at key points in the funnel from dropping. Effective Marketing is an essential part of any pricing increase to communicate the value and minimize resistance from existing and new customers.
Marketing has information about the customer’s willingness to pay for the value they’re receiving, so Marketing needs to be a key member of any internal Pricing Committee that explores how the new prices need to be structured.
To launch the new pricing, Marketing needs to be heavily involved in communicating with both existing customers and new customers entering the pipeline. They need to develop a full plan to communicate timelines and exact increases to existing customers. In many cases, these customers need to be given the option to be grandfathered in. Marketing will also need to update all marketing and sales materials for new customers, including the website, sales enablement assets, emails, and webinars.
A poor pricing launch can cause a spike in attrition that wipes away some of the expected gains. To avoid this, many companies give additional value in the product to go along with the pricing increase. Marketing needs to communicate all the benefits and prepare the organization to overcome customer complaints with the right messaging and value to ensure the expansion revenue is captured.
Particularly in software and technology markets, capturing untapped market share from the Total Addressable Market is less about stealing your competitor’s customers and more about getting customers to switch from analog solutions like using spreadsheets to solve their problems. Greenfield opportunities can come in the form of new markets, new geographies, new customer segments, new languages, and more.
Speed is key here. There is a market of good fit customers that hasn’t chosen a solution yet, but you need to scale quickly because the unaddressed portion will not remain unaddressed forever. It is a lot more difficult to get a customer to leave a competitor, move all their data, and switch to your solution than it is to find someone who doesn’t have a solution in place already.
To make sure your solution stands out in a crowded market, you need to move quickly to make this lever a priority for Marketing.
Marketing’s role in this lever is to find a way to educate, nurture, and capture the greenfield opportunity. The key is to drive demand from the greenfield while investing heavily in the brand so that prospects choose you over a competitor that has a similar feature set. Marketing needs to differentiate your companies with a distinctive narrative and positioning.
This involves a heavier investment in content, more investment in paid media (where your competitors are bidding up competitive terms), and a presence at all key industry events. The more Marketing builds the brand and invests in demand gen, the more likely the company is to win the untapped market share before someone else does.
There is huge value to capture from existing customers by cross-selling or upselling products to them. Selling one product to the customer base of another opens up new customer acquisition at zero additional cost.
This is especially valuable in platform companies with multiple product lines since these companies usually have a portfolio of products that are selling into the same markets and verticals. A platform company with three products creates six cross-selling opportunities, but a platform company with four products creates twelve. Each time a company is added, you can cross-sell that product to your current portfolio of products and vice versa.
Each of your solutions may have a large base of customers, some of which overlap with the others, but there is also likely a large group that is not using all solutions. Since you already own the customer relationship, you can market and sell your other solutions to your base. You have the inside track on these customers, and by leveraging Marketing, you can cross-sell to them for free.
Customer Marketing becomes more important than ever here: Marketing’s job is to educate existing customers on the value of having tools like the other products in your portfolio.
Marketing needs to be deeply integrated with Product teams to understand all the benefits customers can get by having both systems. Marketing also needs to pass customer feedback on to the Product teams:
In essence, Marketing should become the spokesperson for Product, Sales, and the Customer.
Your investment thesis may have identified additional products you can create internally to generate greenfield or whitespace opportunities organically instead of through acquisitions. These ideas may already exist in the roadmap as future functionality that is going to be released, or customers may have sent frequent requests for add-on products to your solution.
If your company can offer a suite of all of the solutions your target customer needs, you can capture increased customer value in the form of whitespace, or even pricing to reflect the added functionality. By creating a new part of the supply chain, you capture extra value from the new customers you’re drawing to your original product and the new customers using the add-on product. The customer also wins because they get a more vertically integrated solution.
To make sure your investment into developing the new product pays off as soon as possible, Marketing needs to be involved from an early stage to lay the groundwork for a successful launch.
With initiatives like these, new products often start out like small startups inside larger companies. They require dedicated resources to scale because there is a lot of value to capture.
In the early stages, Marketing’s role is to:
As the uptake grows and the thesis behind the product is proved out, the initiative will need additional resources to continue scaling. Marketing will need to build the demand gen, customer communications, and Sales enablement responsibilities for this product into their roadmap. As well as more budget to run campaigns, Marketing will likely need to identify where these additional responsibilities are over-stretching their team and which roles they need to fill to market this product effectively.
In many cases, buying an existing company makes a lot more sense than building the solution from the ground up. The target acquisition already has a large customer base, proven product-market fit, and a working Go-To-Market strategy, so growing by mergers and acquisitions is faster and more efficient than building in-house.
Plus, as you continue building your portfolio of products, you can share the underlying cost structure across those organizations, and as you align on sales, there is more revenue to generate via new and existing customers.
With each new company you acquire, there are new growth levers that Marketing needs to help you meet. There’s also work that needs to be done here to integrate the new product into your portfolio and leverage their existing customer base.
The action Marketing needs to take here depends on your overall strategy for the acquisition.
Are you folding one product into the other? For Marketing, the key is to align on the Go-To-Market strategy and integrate the overall marketing organization. Marketing will need to map out how this looks as part of a larger branding, positioning, and solution strategy. They’ll need to merge Go-To-Market efforts such as ad spend, content, and creative to focus on the larger brand narrative and story. Marketing also needs to leverage customer communications to make the transition smooth for existing customers and minimize attrition.
Or are you intending to keep each product with an appeal to a different segment of the market? Given the differences in the types of customers being targeted, the Go-To-Market will be left to stand alone after the acquisition. However, Marketing still needs to identify opportunities for cross-selling between the products and update your brand marketing to include the new addition.
Figuring out which variation of integration Marketing needs to adopt for each acquisition is critical because the approach Marketing takes drastically impacts its ability to deliver on the investment thesis.
Each lever has a timeline for the expected return, and these responsibilities extend beyond Marketing’s ongoing budget and forecasts. This is the additional value they have to create on top of what they already do: If they continue operating BAU, they will drastically fall short of expectations.
Marketing needs to continue delivering on their ongoing marketing initiatives and deliver on the key items on the investment thesis: This is a big realization for marketing leaders in a post-acquisition environment. The marketing plan needs to be adjusted to reflect these added responsibilities and ensure each growth lever gets the right content it needs to be a success. For example, Marketing needs to ensure their demand generation plans account for the greenfield and whitespace opportunities the investment thesis identifies.
If Marketing feels they are forced to choose between high-priority, high-ROI demand gen initiatives and providing support for the core investment thesis initiatives, they should always side with the investment thesis. After all, those initiatives are designed to increase the enterprise value of the organization.
However, if their data is in order and their department is organized, Marketing should be able to deliver on both within the expected time horizon. To do so, they may need more budget and a larger team. Once Marketing’s priorities are clear, it’s time to look at bringing in the right people, building the right teams, and assigning the right budget to accomplish every item on your list.
Get bite-sized insights on SaaS marketing, growth and strategy in your inbox a few times a week.