The Challenges Faced by Private Equity-Placed Fractional CMOs & CROs in Tech
8 Areas That Need to Be Addressed
The roles of Chief Revenue Officers (CROs) and Chief Marketing Officers (CMOs) are crucial for driving growth, scaling operations, and navigating market complexities.
A Growing Trend
Private equity (PE) firms often place Chief Revenue Officers (CROs) and Chief Marketing Officers (CMOs) in tech companies they invest in to drive growth and maximize returns on their investments. Tech companies, particularly those in the growth or scaling phases, require strong leadership in revenue generation and market positioning to meet aggressive financial targets set by PE firms.
By placing CROs, PE firms ensure there is a dedicated focus on optimizing revenue streams, identifying new market opportunities, and enhancing sales strategies. Similarly, CMOs are critical in refining the company’s brand, boosting customer acquisition, and ensuring that marketing efforts are aligned with revenue goals. Both roles help accelerate the company’s growth trajectory, making it more valuable at the time of exit, whether through a sale or an IPO.
Pro’s and Con’s
However, this approach has its pros and cons. On the positive side, having seasoned CROs and CMOs, often with experience in similar situations, can significantly enhance a tech company’s strategic execution. They bring expertise in scaling businesses, driving revenue, and improving market positioning, which are crucial for achieving the high growth expectations set by PE investors. These executives also introduce best practices and a results-driven culture, which can lead to more efficient operations and better financial performance.
On the downside, the introduction of external executives by PE firms can lead to cultural clashes and disruption within the company. Existing management teams may feel undermined or displaced, leading to potential friction and reduced morale. Additionally, the aggressive growth targets imposed by PE firms, and executed through the CRO and CMO, can sometimes lead to short-term decision-making that sacrifices long-term sustainability. This can result in issues like customer churn, brand dilution, or employee burnout, which may harm the company’s long-term prospects even if short-term financial targets are met.
The Challenges
However, when private equity firms place fractional CROs and CMOs in these companies, they encounter unique challenges.
These professionals, often brought in to turn around or scale a company quickly, face a myriad of issues that can hinder their effectiveness.
This article explores some of these challenges, providing insights into the difficulties fractional CROs and CMOs encounter and how they can navigate these obstacles effectively.
1. Relying on Old Techniques from Previous Companies
One of the most significant challenges fractional CROs and CMOs face is the tendency to rely on strategies that were successful in their previous roles. While these professionals often bring a wealth of experience, the tactics that worked in a different company or market may not translate well to a new environment. The technology landscape, especially in SaaS, evolves rapidly, and customer behaviors, competitive dynamics, and technological ecosystems can differ vastly from one company to another.
Example: A CRO who previously worked in a hardware-focused tech company may have successfully implemented a direct sales strategy. However, when transitioning to a SaaS environment where customers expect a seamless, self-service buying process, the same approach might fail, leading to slow growth or even customer churn.
2. Keeping Up with an Evolving Market
The pace of change in the tech and SaaS markets is relentless. New competitors, shifting customer expectations, and evolving technologies mean that fractional CROs and CMOs must continuously update their knowledge and strategies. Staying ahead requires not just awareness but a deep understanding of trends like AI-driven marketing, data privacy regulations, and the shift to subscription-based models.
Example: The rise of privacy-first digital advertising, driven by regulations like GDPR and CCPA, has dramatically altered how tech companies can track and engage with potential customers. A CMO who isn’t up-to-date on these changes risks implementing outdated marketing strategies that could lead to legal complications or ineffective campaigns.
3. Making Sense of the B2B Buyer
The B2B buyer’s journey has become increasingly complex, particularly in the SaaS sector. Buyers are more informed, conducting extensive research before engaging with sales representatives. They expect personalized, value-driven content that speaks directly to their pain points. For fractional CROs and CMOs, understanding these sophisticated buyers and tailoring strategies to meet their expectations is crucial.
Example: In the past, a straightforward product demo might have been enough to convince a buyer. Today, however, B2B buyers often require in-depth case studies, ROI calculators, and a clear understanding of how the product will integrate with their existing tech stack. CROs and CMOs who fail to address these needs may struggle to convert leads into customers.
4. Understanding Modern Go-To-Market (GTM) Strategies
The GTM strategies that work today are vastly different from those of even a few years ago. With the rise of account-based marketing (ABM), product-led growth (PLG), and other modern approaches, fractional leaders must be adept at deploying the right strategy for their specific market and product.
Example: A CMO from a traditional B2B company might not be familiar with product-led growth, where the product itself is the main driver of customer acquisition, expansion, and retention. Without a deep understanding of PLG, a CMO might miss opportunities to leverage the product as a tool for growth, thereby failing to capitalize on one of the most effective strategies in modern SaaS marketing.
5. Shaping Offers for the Marketplace
Creating compelling offers that resonate with the target audience is another area where fractional CROs and CMOs often face challenges. This requires a deep understanding of the market, customer needs, and competitive dynamics. However, without adequate time to immerse themselves in the new company’s market, these leaders may struggle to craft offers that drive conversions.
Example: A CRO accustomed to high-value, long-term contracts may not effectively develop offers that appeal to the current trend of flexible, subscription-based models that are popular in the SaaS space. This misalignment can lead to poor product-market fit and sluggish revenue growth.
6. Over-Reliance on Naive and Inexperienced Digital Marketing Agencies
Private equity-backed companies often rely on digital marketing agencies to accelerate growth. However, an over-reliance on agencies – especially those that are inexperienced or naive about the specific needs of tech and SaaS companies – can be detrimental. Fractional CROs and CMOs may find themselves cleaning up after failed campaigns or misguided strategies, wasting precious time and resources.
Example: An inexperienced agency might focus heavily on short-term lead generation tactics, such as pay-per-click (PPC) advertising, without considering the longer-term need for brand building and nurturing leads through the sales funnel. This approach can result in a high volume of low-quality leads and a poor return on investment (ROI).
7. Navigating Organizational Culture and Alignment
Fractional leaders are often parachuted into companies with established cultures and existing teams. Aligning these teams with new strategies and approaches can be difficult, particularly if there is resistance to change or if the company’s culture is not conducive to the fast-paced, iterative processes often required in tech and SaaS.
Example: A CMO who tries to implement a data-driven, rapid experimentation approach in a company with a risk-averse culture may face pushback from teams that are uncomfortable with the pace or uncertainty of such methods. This cultural misalignment can lead to friction and slow down the implementation of critical initiatives.
8. Balancing Short-Term Wins with Long-Term Growth
Private equity firms often prioritize quick wins to maximize their return on investment. Fractional CROs and CMOs, therefore, face the pressure to deliver rapid results. However, focusing too much on short-term gains can compromise long-term growth, particularly in the SaaS industry, where customer
Example: A fractional CMO may be pressured to deliver a significant uptick in MQLs (Marketing Qualified Leads) in the first quarter. While they might achieve this by running aggressive promotions, this approach could harm the brand’s reputation or lead to a lower customer lifetime value in the long run.
Fixing the Challenges
The challenges faced by private equity-placed fractional CROs and CMOs in tech and SaaS companies are multifaceted and complex. These executives must not only adapt their previous experiences to a new, fast-paced environment but also stay ahead of evolving market trends, understand the modern B2B buyer, and craft effective go-to-market strategies. Additionally, they must navigate internal resistance and avoid over-reliance on inexperienced digital marketing agencies.
To overcome these challenges, partnering with a seasoned marketing management consultancy like Digital Clarity can provide invaluable support.
With deep expertise in the tech and SaaS sectors, Digital Clarity can help fractional executives align their strategies with the unique demands of these industries, ensuring that their efforts lead to sustainable growth and success.
Whether it’s crafting data-driven marketing strategies, optimizing digital campaigns, or providing insights into the latest industry trends, Digital Clarity offers the guidance and expertise needed to navigate the complexities of today’s tech landscape.
This article was written by Reggie James and published in LinkedIn.
