Marketing and Sales Alignment: Step 2 to Power Revenue Growth
Last month, guest expert Ron Friedman and I presented a webinar on the BrightTALK Sales Expert Channel, titled Assess, Align and Accelerate – 3 Steps to Power Revenue Growth. You can listen to the on-demand version here. In just 45 minutes, we covered a lot of ground regarding our experiences in helping B2B companies boost their revenue. Ron and I have worked together a couple of times previously and I have been a long-time fan of his practical and impactful approach to hitting revenue targets.
My previous article covered the assessment part of the formula. Let’s now turn our attention to marketing and sales alignment. By alignment, I mean not only between the sales and marketing organizations but also, among people, processes and technology. Here are some key areas of alignment:
Sales and marketing’s expenses as a percentage of total revenue. There is no right answer here because it depends on your market, competition and maturity as an organization. But the point is to understand where you need to be, monitor this closely and always strive to get better.
Resources to meet requirements. First, do you have the quality and quantity of resources to meet your objectives, in terms of people, budget and technology? This includes a sufficient amount of technical, management and subject matter experts to help facilitate deals. Second, are you deploying these resources to achieve maximum output?
Effective pricing. By this, I mean that pricing should align with customer expectations of ROI (as measured by their criteria) and also based on maximizing revenue vs. cost to bring in as much profitable revenue as possible. There are many effective ways to do this and you can learn more here.
Incentive compensation. We run into situations where the way the sales (and sometimes marketing) comp plan seems almost designed to NOT achieve the company’s business/revenue plan. Compensation drives behavior so make sure you write the plan so reps understand how their actions not only help the company meet its goals, but also how the plan puts more money in their pockets.
Sales processes that maximize time and territory. Not every sale is going to happen, so you need to really understand the sales cycle metrics as well as the points at which deals are being lost – and adjust accordingly.
Effective lead-to-revenue approach. Lead-to-revenue encompasses everything that happens from when a prospect becomes aware of your organization to when they sign the purchase order or pay with their credit card.
As the above graphic shows, there are two major approaches to the lead management process. In the wide-funnel methodology, you want to separate the wheat from the chaff after the opt-in. The objective is to generate a large amount of inbound inquiries, and then use a qualification procedure that passes along sales-ready leads to the sales force, while putting the non-sales-ready leads into a nurturing sequence.
In the narrow-funnel methodology, you want to separate the wheat from the chaff before the opt-in. You do this by making it clear that you want inquiries from those that are ready to engage in the sales process. For example, you can require lots of extra qualification details on your landing page. This will cut down on quantity, but, on average, bring you a much higher level of prospect.
Note that each approach requires different content, processes, offers, etc. More often than not, we encourage our clients to adopt the wide-funnel approach because it gives us a large pool of opt-in contacts to target for low-cost re-marketing campaigns. Over time, we can convert many of these contacts into customers. Note however, that you need an effective nurturing program to produce good results.
Service Level Agreement
A service level agreement (SLA) is a great way to achieve marketing and sales alignment. An SLA is a covenant between sales and marketing, that is endorsed by the CEO and executive team. SLAs usually include:
- Number of leads required.
- Definition of sales-ready lead.
- How leads are distributed and tracked.
- How marketing’s contribution is measured (closed-loop system).
- KPIs for entire lead-to-revenue system.
While there are dozens of ways to measure progress (or lack of progress), I recommend the following as a good starter set:
- Number and cost of new inquiries
- Conversion of inquiries to qualified leads
- Cost to acquire a new customer
- Cost per new dollar of revenue
- Sales and marketing cost as a % of total revenue
- Conversion of qualified leads to opportunities
- Opportunity close rate
- Pipeline coverage ratio
- Average sales cycle
- Average deal size
In a future post, I will cover the fun stuff: How to accelerate revenue once you have assessed your current state and aligned all resources for maximum efficiency. In the meantime, have a listen to our on-demand webinar: Assess, Align and Accelerate – 3 Steps to Power Revenue Growth. And of course, contact me at email@example.com if you need help in any of these areas.