Who’s in Charge?
Who is in charge of revenue at your company? In most B2B companies, the Sales Department owns the revenue pipeline. Sales and revenue just seem to go together, so much that some people use the words as synonyms (e.g. “last quarter’s sales grew 10%”). Marketing may play a supporting role by supplying leads (that probably get ignored), but in these companies, Sales controls the revenue process and is accountable for top-line growth.
In contrast, the marketing department too often gets left out of the revenue process. There are companies where sales holds weekly revenue calls, and nobody from marketing is part of the conversation. The executive leaders of these companies think of marketing as a cost center, not a strategic asset that drives growth. As one marketer recently lamented, “My group is perceived by upper management as the people who do color brochures.”
An Anachronistic Model of Sales and Marketing
This model of the roles of Sales and Marketing is becoming increasingly anachronistic in the age of the internet and social media. In the past, access to information about new products and solutions was limited to a few sources, and the only way a buyer could learn more was a meeting with a sales representative from the company. That’s why buyers were willing to engage with sales so early in the buying cycle.
Today, there is open access to information and customers are much better at seeking out information themselves. As a result, buyers want to educate themselves before they speak with anyone from sales, over 93% of prospects start their research online, and 80% of decision makers who made a recent purchase believe that they found the vendor â as opposed to the vendor targeting them.
This means that companies are meeting prospective customers earlier than ever in the buying cycle. At the same time, these customers want to engage with sales ever later. The old model where marketing generates a lead and sends it over to telesales or direct sales doesn’t work anymore.
An Integrated Revenue Pipeline
CEOs and other executives that care about revenue generation must let go of the outdated notion that only sales drives revenue. They must find a way to connect sales and marketing into an integrated revenue pipeline that begins when a prospect first hears about the company, nurtures that relationship over time, understands the prospect’s interests and intent, and at the right time seamlessly hands the prospect to sales to close the business. An integrated revenue funnel provides sales and marketing with a common language and metrics, and ensures that goals, initiatives, and promotions are aligned across the departments. Companies that succeed at implementing an integrated revenue pipeline enjoy better sales-marketing alignment, greater sales productivity, and an improved ability to meet or exceed growth targets.
It makes sense that marketing should be as responsible for revenue as sales. Marketing drives the first impression, which creates a disproportionate impact on the prospect’s view of the business. Marketing talks to many more prospects than sales ever will. And marketing creates the tools that educate the prospect and influence the buying criteria.
However, before companies can put the single integrated revenue pipeline in place, marketers need to shape up and take more responsibility for revenue â in other words, they must earn their seat at the revenue table.
Earn a Seat at the Revenue Table
What can marketers do in order to be seen as part of a machine that drives revenue and profits, not just the people who throw parties and buy swag? The key is to act more like Sales by taking these six key actions:
- Speak the financial “language of busiess”
- Forecast results, not just costs
- Make hard business cases for spending
- Align incentives
- Use standardized best-practice methodologies
- Do “more with less” using automation technology
1. Speak the Financial “Language of Business”
Soft metrics â such as brand awareness, impressions, organic search rankings, satisfaction, and quality â are all important, but only to the extent that they eventually connect in a quantifiable way to hard metrics such as pipeline, revenue, and profit. Look at how every other influential executive in the organization talks: they use terms like ROI, margin, and stockholder equity. If these are not the terms that marketers use, marketing becomes disconnected from the power center.
The marketing dashboard must continue to measure the impact of all marketing activities, but keep all except the most critical metrics internal to marketing. When talking with other executives, make every effort to demonstrate how changes in soft upstream metrics impact the hard downstream ones that matter to the entire organization. By speaking the same financial language as the CEO, CFO, and VP Sales, marketers will better communicate marketing’s value and impact.
2. Forecast Results, Not Just Costs
Most marketers know how much they will spend next month and next quarter, and many can forecast their cost per lead with great accuracy. However, by framing the discussion of marketing forecasts in terms of costs, they only perpetuate the perception that marketing is a cost center. Left unchanged, this attitude makes it almost impossible for a marketing to earn a seat at the revenue table.
In contrast, the VP of Sales manages a detailed forecast of how sales activities will impact revenue. By framing their activities in terms of hard metrics like revenue and growth, sales maintains their reputation as a revenue center.
Marketers must do the same, forecasting and predicting leads, pipeline, and revenue with confidence. Sales and marketing must sit together at the revenue table to contribute to next quarter’s and next year’s forecast. Marketing’s role is to predict how many new qualified leads will enter the marketing funnel, how those leads will move through the funnel, and how many of them will become “sales-ready” in any given quarter. Only by demonstrating how their efforts directly influence revenue can marketers position themselves not as a cost center but an asset that drives revenue.
3. Sell the Marketing Budget to your CFO
Marketing also must make a hard business case for the resources they need to deliver on those forecasts. In most organizations, any significant investment needs a bottoms-up business case that demonstrates it will deliver a minimum rate of return (called a hurdle rate). If the business case is made, the CFO generally approves it. Marketing spend should not be any different.
This requires knowing what it takes â in money, time, and effort â to acquire qualified leads and nurture those leads until they are ready to talk with sales. This means thinking about and justifying the marketing budget as an investment that incurs costs today but delivers benefits for many years.
Marketers that use this type of rigorous methodology to determine marketing spending are also able to justify and defend their budgets. If the chief executive officer wants to cut marketing spending by 10 percent, the chief marketing officer can specify exactly what impact that will have on next quarter’s revenue.
4. Align Incentives
One challenge presented by the integrated revenue pipeline is that marketing’s incentives tend to be very different from those of sales. Marketing is a very measurable process, but the results are head to measure; it’s easy to measure Sales outcomes but Sales activity is hard to measure. As a result, compensation and rewards tend to be very different, hurting marketing’s ability to sit at the revenue table.
It all comes down to incentives. If marketing is measured by cost per lead and/or lead volume, marketing will generate lots of cheap, low quality leads. (What’s the cheapest source of low-quality leads? The phone book â just start dialing.) Instead, measure marketing’s impact on revenue, and hold marketing accountable for revenue. Take a cue from the sales playbook and give marketing a quota. Of course, everyone knows that sales people have higher on-target earnings than marketers, so as marketers take on more incentive compensation, they should expect to earn more as well.
5. Use Standardized Best-Practice Methodologies
Next, marketers need to develop repeatable and systematic processes. One reason that sales is effective in the organization is that they can follow agreed upon best practice methodologies. Similarly, finance is effective since they can follow generally accepted accounting principles that everyone understands and agrees about. In fact, all functions in the enterprise need repeatable and systematic processes in order to be seen as professional disciplines. Marketing is no different: what’s needed is a rigorous, quantifiable, and universally understood methodology for creating interest and turning that interest into revenue and cash flow. Only with this in place will marketing be seen as a professional discipline, not a second-class department that lacks rigor and precision.
There are additional benefits to using a documented, best-practice methodology. First, it provides a common language for consistent communication inside and outside the department. Consistency is critical to ensure reliable roll-ups and forecasts, and for accurate comparisons of value between different leads and opportunities. Second, a best-practice methodology improves performance by helping every marketer perform more like the top performers in the field â regardless of each one’s experience with any given tactic or channel. For too long, marketing has been seen as an art and not a science. Implementing a consistent best-practice marketing methodology will go a long way toward changing that perception.
6. Do “More with Less” Using Automation Technology
There is no doubt that marketers need better forecasting, accountability, and methodologies. However, accountability is a double-edged sword that shines a bright light on poor performance as well as good performance. This means that predictability and accountability are necessary but not sufficient conditions for CMOs to earn their seat at the revenue table. Without better performance, better accountability will actually hurt marketing’s role in the organization. That’s where automation technology can help.
On the sales side, Sales Force Automation (SFA) technology has become a no-brainer for most companies. The SFA solution is a key enabler of the activities that tie sales to revenue; without SFA, sales executives would find it much harder to roll up forecasts and implement best-practice methodologies. Unfortunately, most marketers have found it impossible to implement marketing automation technology to support their activities and funnel. The problem is that traditional marketing solutions are expensive, require up-front capital investment, and need lots of technology resources to implement and maintain. Fortunately, with the rise of on-demand software like Marketo, there are now fast and easy solutions that work within the framework of today’s marketing budgets and technology support. These solutions provide the automation and support that the marketing department needs in order to drive revenue, predict results, plan spending, measure impact, and improve performance.
Characteristics of marketers who have earned a seat at the revenue table
|Marketers Who Have a Seat at the Revenue Table||Marketers Without a Seat at the Revenue Table|
|Strategic mindset that adds value to the C-suite||Executes tactical marketing programs|
|Key skills: Financial acumen, strong business intellect, measurement and ROI||Key skills: Marketing experience, branding, awareness|
|Measurable results, hard metrics like revenue||Soft metrics and measurements|
|Seen as a source of revenue||Seen as a cost center|
|Partner to sales (single revenue pipeline)||Subservient to sales|
|Contributes to product direction and strategy||Given final product and told to figure out how to market it|
|Board-level interactions||Little to no board-level interaction|
|Business leader||Departmental leader|
Modern B2B Marketing
Marketing can and must earn a seat at the revenue table. Earning a seat requires acting like the departments that are already at the table. It requires making forecasts, planning spending, and measuring results using hard business metrics such as pipeline, revenue, and cash flow. It requires implementing a best-practice methodology â supported by marketing automation software â that delivers consistent communication and improves performance. And, since better accountability necessitates better performance, it requires that the marketing department make good on its promises by delivering more and better leads to sales. Only then will marketing be seen as an equal partner with sales in the effort to deliver revenue for the organization.
Marketo provides sophisticated yet easy on-demand marketing software that helps mid-market and enterprise B2B marketing professionals drive revenue and improve marketing accountability. Our demand generation solutions automate lead generation campaigns and lead management activities â including email marketing, lead nurturing, lead scoring, and landing page optimization â to help marketers generate and qualify sales leads, shorten sales cycles, and improve conversion rates. At the same time, our marketing analytics give marketers the tools they need to measure results and demonstrate marketing accountability, helping turn marketing from a cost center into a revenue-generating part of the company.
Marketo’s on-demand marketing products are easy to buy because they don’t require complex implementation or upfront fees, easy to own because they don’t require IT support, and easy to use without specialized technical skills or significant training. Pricing starts as low as $1,500 a month, and qualified customers who commit to running a production campaign can get started with a free trial that includes set-up, training, and integration.