By Jon Miller, Marketo
Four Ways to Turn B2B Marketing into a Revenue Driver
It’s no secret that CEOs and boards don’t care about the open rate on your last email campaign or how many views your last press release had. CEOs and boards care about revenue — how much revenue was made last quarter, how much this quarter, and how much next quarter. Re-igniting growth is the business and economic imperative of today: how to generate more revenue, more profitably, more predictably.
Unfortunately, the marketing department is typically left out of the revenue discussion. They get pigeonholed as the “arts and crafts” team and are viewed as a cost center to be cut rather than a revenue driver that should get investment. Today, however, marketing has the opportunity to reinvent itself as a core part of a company’s revenue engine. The ways that prospects research and buy solutions has been forever transformed by the abundance of information made available on websites and social networks, and this is turn is driving a transformation in the ways that marketing and sales teams work – and work together – to drive revenue.
For example, when buyers have ready access to information, they resist engaging with sales until much later in their buying process, giving sales less visibility into future revenue. This is the opportunity for marketing: as the function that “owns” the relationship with early-stage prospects, marketing is often in the best position to talk about future revenue trends.
Action Plan for Revenue Transformation
Given this opportunity, what actions can marketing executives take to position their departments – and themselves – as part of the revenue performance solution for their companies? In my experience working with corporations ranging from global multinationals to tech start-ups, I have seen four best practices emerge time and again:
- Define your revenue cycle methodology
- Optimize lead flow and generate high quality sales pipeline
- Measure the impact of every marketing activity on revenue
- Forecast marketing’s impact on future revenue
Together, these actions are all part of a broader Revenue Performance Management (RPM) strategy that enables companies to break down the silos in their companies and improve marketing and sales efficiency and effectiveness across their revenue cycle.
Define Your Revenue Cycle Methodology
Traditional sales methodologies such as SPIN Selling and Miller-Heiman provide standard benchmarks and best practices for the sales function; no modern sales executive would attempt to build a high-performance sales team without a well documented methodology in place.
However, marketing executives have not traditionally applied the same level of rigor to their portion of the revenue cycle. This is unfortunate since without it they do not have the common language and metrics they need to improve their marketing operations or measure marketing’s impact on revenue.
That’s why codifying your company’s revenue cycle methodology – one that begins with how customers first become aware of your company and enter your funnel all the way to closed customer and beyond – is the first endeavor any revenue-focused marketing executive should take.
Documenting your revenue cycle provides three key benefits:
- Common language across the company. Too many companies today have loose definitions of terms such as prospect and lead, definitions that often mean different things to the sales team than to marketing. However, by collaboratively defining the business rules for how potential customers move from stage to stage, you will establish a common language for consistent communication inside and outside the department.
- Foundation for coordinated action. Your revenue cycle methodology provides a common understanding of the actions required from each department at each stage. You can even define service level agreements for how long a lead can stay in certain stages and automatically reassign untouched leads before they go stale.
- Foundation for measurement and forecasting. A consistent definition for each stage is critical to ensure reliable reports and forecasts, and for accurate comparisons between time periods. (If the definition of a “lead” is not stable, how can you show a report that measures lead performance over time?)
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 towards changing that perception.
Optimize Lead Flow and Generate High Quality Sales Pipeline
Once you have defined your revenue cycle methodology, no action will do more to establish marketing as a revenue driver than driving more high quality sales pipeline. Of course, this is easier said than done, but there are a few key processes you’ll want to focus on.
Content Marketing. In today’s online and social media driven world, companies need a strategy for building awareness and generating leads through content. Content is important since it provides the offers you need to generate new leads and nurture existing ones, the link-bait to improve your search engine rankings, and the basis for building your brand as a thought leader. Don’t have a lot of content? Pick last year’s lowest ROI program and use that budget to hire writers this year. For more on content marketing, see the Content Marketing Resource Center at http://www.marketo.com/b2b-marketing-resources/category/best-practices/content-marketing.
Lead Nurturing. Lead nurturing is the process of “staying in touch” with qualified potential customers regardless of their timing to buy, with the goal of earning the right to compete for their business when they are ready to engage with sales. It means sending them information on a periodic basis that is interesting and relevant to who they are and where they are in the buying cycle – if it’s not, they’ll unsubscribe or more likely emotionally unsubscribe and you’ll lose the ability to communicate with them further. Done right, lead nurturing can generate up to 50% more high quality sales leads from the same lead generation budget. For more on this topic, see Marketo’s 40+ page eBook, The Definitive Guide to Lead Nurturing at www.marketo.com/dg2ln.
Lead Scoring. Lead scoring is a shared sales and marketing methodology for ranking leads in order to determine their sales-readiness. The best lead scoring systems use demographic and firmographic attributes such as company size, industry, and job title to indicate how interesting the prospect is to your company, as well as behavioral scoring such as clicks, keywords, and web visits to indicate how interested the prospect is in you. Lead scoring helps sales prioritize their time on the hottest leads and opportunities so they spend their time selling and not qualifying and educating early bad leads. Done well, lead scoring can help improve sales effectiveness (and revenue) by 20% or more. For more, see Marketo’s 50+ page eBook, The Definitive Guide to Lead Scoring at www.marketo.com/dg2ls.
Lead Follow-Up and Service Level Agreements. Once you’ve determined that a potential lead is “sales ready”, how do you follow-up? One best practice is to have a junior sales development function (i.e., inside sales or lead qualification team) whose job is to further qualify marketing leads via telephone. This can help ensure that only truly qualified, sales-ready leads make it to the higher-paid account executives. Regardless of whether this function reports to Marketing or to Sales, be sure to put in place rigorous service level agreements (SLAs) for how they follow-up on new leads (e.g. time to first touch, number of total touches, total processing time before final disposition, etc.) and then track compliance against these SLAs.
Measure the Impact of Every Marketing Activity on Revenue
Marketers know that measuring the impact they have on revenue is an essential part of transforming marketing from a cost center into a revenue generator, and yet most companies say they lack the tools and processes to measure ROI.
Why is there such a discrepancy between the percentage of marketers that want to measure their impact on revenue and the number that actually achieve it? One reason is that today’s marketing investments may not have a payoff for a long time, and past marketing investments affect current period results. Approaches to measuring marketing ROI that do not properly take this into account can lead to decisions that bias towards short-term gains versus building true long-term value.
That is why defining your revenue cycle methodology is the first step to a solution. By formally defining each stage, as well as the business rules that determine when a prospect moves from one stage to the next, marketing executives can begin to understand the dynamics of how prospects flow through the pipeline over time. This allows them to answer the key questions on the mind of every marketing executive, such as:
- Measure: How do leads move through the revenue cycle to become customers? What is the cost per lead per stage?
- Justify: How did marketing influence the opportunities we are closing?
- Understand: What is the conversion rate and velocity at each stage of the revenue cycle?
- Plan: How many leads and opportunities do I need to reach sales goals?
- Optimize: What mix of programs will generate the most high-quality sales pipeline?
By talking about marketing in terms of outputs (revenue) and not inputs (e.g. budget and programs), these kind of marketing analytics position marketing as a revenue center that deserves investment to improve profits, not a cost center to be cut.
Forecast Marketing’s Impact on Future Revenue
Revenue forecasts are traditionally the domain of Sales. In fact, it is this ability to make revenue forecasts – and to be held accountable for delivering against them – that is the single biggest factor that gives the sales function credibility and power at most companies.
That’s why it is so powerful for marketing executives to make forecasts as well. By using analytical rigor and a deep understanding of how prospects move through the revenue cycle, marketing forecasts allow the marketing to answer questions such as:
- How many additional people and deals do we expect will enter each revenue stage during future periods?
- How many incremental qualified leads will we create next month? How many opportunities and how much marketing-driven revenue will we create next quarter?
- How does that compare to the plan?
As an example of a typical marketing forecast, the marketing executive might say, “Next quarter, marketing will generate an incremental 900 new deals worth $40 million of bookings that are not currently in the sales forecast. This is 40 deals and $3,500,000 higher than our Commit plan.”
Marketers that can make forecasts like these are in a great position to improve their organization’s revenue performance, justify and protect their marketing budgets, and increase their personal power and credibility in the organization.
Get Started – Define Your Revenue Cycle
Marketers are under as much pressure as ever to deliver more results with less money and fewer resources, but today’s changing economy also creates the opportunity for marketing executives to lead the revenue transformation at their organizations – and to transform marketing from the “arts and crafts” department into a fundamental part of the revenue engine.
This journey begins with defining and documenting your revenue cycle methodology. Using marketing automation with measurement and forecasting will generate insights that enable you to “seize the day” and make marketing at your corporate the revenue driver that it deserves to be.
Jon Miller is VP of Marketing and co-founder of Marketo, the leading revenue performance management and marketing automation vendor. He is a co-author of the popular blog, Modern B2B Marketing, and was named a Top 10 CMO for companies under $250 million revenue by The CMO Institute. Jon graduated Magna Cum Laude in Physics from Harvard College and has an MBA from the Stanford Graduate School of Business. Jon can be reached on Twitter using @jonmiller2.