Death of the Salesman? Marketo Is Automating Sales Relationships-And Growing Like Crazy

11/8/11Follow @wroush

From Phil Fernandez’s point of view, there’s a precise moment in the sales process when a potential buyer is ready to be contacted by a seller. Reach out too soon, and they’ll be annoyed or spooked. Contact them too late, and they may have moved on to another vendor.

In the old days, human salespeople chose that magic moment—picture the car salesman standing in his office at the dealership, watching out the window as consumers wander the lot and calculating which ones are ready to buy and which ones are just tire kickers. Today, though, companies should “let the buyer control the dialog,” Fernandez argues. What’s more, he says they should let software pick the moment of outreach.

That’s basically what technology from Marketo, the San Mateo, CA, startup where Fernandez is co-founder and CEO, is designed to do. The cloud-based system monitors and scores a prospective customer’s every interaction with a company, down to the Web pages they visit and the e-mails they open. When its mathematical models say the prospect is ripest, the system prompts human salespeople to follow up with a phone call or meeting.

There’s no more role today for the hard-driving, Glengarry Glen Ross-style salesperson who goes on instinct alone, Fernandez says. In fact, he says, that kind of hucksterism could only persist as long as there was no data to show how dysfunctional it was. “The notion of a salesperson as a lone wolf is totally dead and obsolete,” he says. If companies retired their old-school salesmen and broadly adopted technologies like Marketo’s, he argues, it could add $2.5 trillion to the world economy every year.

Marketo CEO Phil Fernandez

That’s an extreme claim—but then again, companies convinced by Fernandez’s message are adopting Marketo’s technology at an extreme rate. The startup’s revenues grew by 1,486 percent between 2007 and 2010, making it the fastest-growing private company in Silicon Valley, according to a list published last month by the Silicon Valley Business Journal. More than half of the 220-employee startup’s $57 million in venture funding is still sitting in the bank, Fernandez says. The company has been able to fund most of its growth from its revenue, which will be between $30 million and $40 million this year.

Marketo’s technology is totally separate from salesforce automation or customer relationship management software like Salesforce.com or SugarCRM, although it communicates with those systems. This is about marketing automation: tracking every interaction between a company and a potential customer, and figuring out how to increase the chances that a prospect who enters one end of the marketing funnel comes out the other end as a buyer.

Marketing technology may not be as sexy as mobile app development or as socially enlightened as e-waste recycling or crowdfunding—but it’s an area that has attracted some serious investment over the last few years. Google Ventures and Sequioa Capital, for example, recently put $32 million into Hubspot, which Fernandez calls Marketo’s “East Coast doppelganger” (though it mostly serves smaller companies). And there are some serious brainiacs involved too—Marketo’s chief scientist Yan Zou is a Stanford statistics and machine-learning PhD who used to build financial models for the hedge fund industry.

Marketing automation has been both enabled by and necessitated by the rise of the Web and social media, in Fernandez’s view. “Prior to the mid-2000s, the seller had some degree of power, which was that they controlled information,” he says. “As a result the ability of the seller to control the dialog was very strong. The explosive shift to the Web and now social media has … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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