Marketers Need a Seat At the Revenue Table by Chris Trayhorn, Publisher of mThink Blue Book, April 6, 2009 Who’s in charge of revenue at your company? In most B-to-B companies, the sales department is the primary and exclusive owner of the revenue pipeline. Sales and revenue just seem to go together, so much that some people use the words synonymously – for example, “Last quarter’s sales grew 10 percent.” Marketing may play a supporting role by supplying leads (which all too often get dropped or ignored), but in these B-to-B companies, it is the sales department that controls the revenue process and is accountable for top-line growth. The marketing department, in contrast, too often gets left out of the revenue process. There are companies, in fact, where the sales department holds weekly revenue calls, yet nobody from marketing is included. The executive leaders of these companies think of marketing only 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 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 by 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, in contrast, there’s 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: more than 93 percent of prospects start their research online, and 80 percent of decision makers who made recent purchases believe they found the vendor (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 later. The old model in which marketing generates a lead and sends it over to tele-sales or direct sales simply doesn’t work anymore. AN INTEGRATED REVENUE PIPELINE CEOs and other executives who care about revenue generation must let go of the outdated notion that only sales drives revenue.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 and 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. After all, marketing drives the first impression, which creates a disproportionate impact on the prospect’s view of the business. In addition, marketing talks to many more prospects than sales ever will. And marketing creates the tools that educate prospects and influence buying criteria. However, before companies can put the single integrated revenue pipeline in place, marketers needs to take more responsibility for revenue. In other words, they must earn their seat at the revenue table. BECOMING PART OF THE REVENUE MACHINE What can marketers do to make themselves seen as part of a machine that drives revenue and profits rather than just the people who throw parties and buy swag? The key is to act more like sales – and to do that, they must: Speak the financial “language of business”; Forecast results, not just costs; Make hard business cases for spending; Align incentives; Use standardized best practice methodologies; and Do “more with less” using automation technology. 1. Speak the Financial “Language of Business” Soft metrics – such as brand awareness, impressions, organic search rankings, satisfaction and quality – 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 return on investment (ROI), margin and stockholder equity. If these are not the terms marketers use, marketing becomes disconnected from the power center. The marketing dashboard must continue to measure the impact of all marketing activities; however, it should keep all but the most critical metrics internal to marketing. By speaking the same financial language as the CEO, CFO and VP of 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. In contrast, the VP of sales manages a detailed forecast of how sales activities will impact revenue. By framing its activities in terms of hard metrics, sales maintains its reputation as a revenue center. Marketers must do the same, forecasting leads and revenue with confidence. Sales and marketing must sit together at the revenue table to contribute to next quarter’s and next year’s forecasts. Marketing’s role is to predict how many new qualified prospects will enter the funnel, how those leads will develop 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 rather as an asset that drives revenue. 3. Sell the Marketing Budget to Your CFO Marketing also must make a hard business case for the resources it needs to deliver on those forecasts. In most organizations, any significant investment needs a bottoms-up business case demonstrating that it will deliver a minimum rate of return. If the business case is made, the CFO generally approves the investment. Marketing spending should not be any different. Building this kind of business case requires knowing what it takes – in money, time and effort – to acquire qualified leads and nurture those leads until they’re 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 who use this type of rigorous methodology to determine marketing spending are also able to justify and defend their budgets. If the CEO 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; however, the results are hard to measure. And while it’s easy to measure sales outcomes, it’s difficult to measure sales activity. As a result, compensation and rewards tend to be very different, hindering 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. 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. Everyone knows that salespeople have higher on-target earnings than marketers. Thus, as marketers take on more incentive compensation, they should expect to earn more as well. 5. Use Standardized Best Practice Methodologies Marketers need to develop repeatable and systematic processes. One reason that the sales department is effective is that it can follow agreed-upon best practice methodologies. Similarly, finance is effective because it can follow generally accepted accounting principles that everyone understands and agrees about. In fact, all functions in the enterprise need repeatable and systematic processes if they’re 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 lacking 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, as well as for accurate comparisons of value among different leads and opportunities. Second, a best practice methodology improves performance by helping every marketer perform more like the top performers in the field – 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 Technology There’s 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. In the absence of 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. The SFA solution is a key enabler of the activities that tie sales to revenue; without SFA, sales executives could not 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, 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 to drive revenue, predict results, plan spending, measure impact and improve performance. MODERN B-TO-B MARKETING Marketing can and must earn a seat at the revenue table. But earning that seat requires acting like the departments 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 also requires implementing a best practice methodology – supported by marketing automation software – 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. Filed under: White Papers Tagged under: Jon Miller, Perform, White Papers About the Author Chris Trayhorn, Publisher of mThink Blue Book Chris Trayhorn is the Chairman of the Performance Marketing Industry Blue Ribbon Panel and the CEO of mThink.com, a leading online and content marketing agency. He has founded four successful marketing companies in London and San Francisco in the last 15 years, and is currently the founder and publisher of Revenue+Performance magazine, the magazine of the performance marketing industry since 2002.