Ask a marketing director how much revenue marketing made last year and you will get a number. Ask the sales director and you will often get a smaller one. Ask the finance director and often he will show a complicated set of emotions depending on how the revenue and EBITDA numbers look at the time:
If they are good, he will sometimes look dazzled, like he’s seen a wonderful magic trick. If the numbers are bad, he will more often than not look frustrated, yet still just as mystified.
All three are reasonable people
looking at the same business.
Marketing-sourced revenue is the
revenue from deals where marketing made the first qualified contact, under a
definition both Sales and Marketing have agreed. Most companies cannot state
theirs. That is why three directors give three different numbers.
When I was at a telco software
company, our entire universe was about 400 big accounts. Once we landed a mega
deal. It had come in through an event, then been nurtured by us in the email
channel for nine months. Then it closed.
It turned out the salesperson
who closed it was old friends with the man who signed. The relationship went
back years, offline of course, so no way of tracking or confirming that. But
the deal went to Sales. A cynic may say that this was more the work of politics
than attribution.
This has happened many times in my career in B2B software. It happens often enough that HubSpot built a method for it: the Sales and Marketing Service Level Agreement, or SLA.
Both
teams sign one page. Marketing commits to a number of qualified leads a month,
defined in writing. Sales commits to contact each one within a set time and
work it a set number of times. Every month the two numbers are read out
together.
HubSpot’s final ingenious
addition is a Judicial review: any disputed deal goes to a C level
leader (above the political fray) who runs neither Sales nor Marketing, usually
the President, COO or CFO, who looks at the evidence and rules.
I have recommended it at several
companies since I first read about it over six years ago. It has never been
implemented, and I have never seen it run anywhere, even though it comes
closest to solving the problem.
The reason is not complicated.
An SLA makes both teams measurable by someone else, and nobody who is winning
the current argument wants a referee. It’s the Sales/Marketing equivalent of gerrymandering.
Why is the marketing revenue number usually
wrong?
Because there are two systems
and two definitions, and nobody owns the join.
Marketing lives in a marketing platform. It knows who opened an email, clicked an ad, came to a webinar. Sales lives in the CRM. It knows who was called, who got a proposal, who signed. The two systems are supposed to talk to each other.
In my experience, across a
dozen B2B companies, Sales and marketing alignment is on a spectrum; never
perfect, rarely terrible, but that continuum is flexible and rapidly changing. It needs constant
maintenance to keep it on the 'healthy' side.
The first time I saw this
properly was at a Fintech software company in 2013, where I ran marketing
automation on one system while Sales ran the pipeline on another. A customer
could be a hot lead in one and a stranger in the other.
When the systems disagree, each side counts its own way. Marketing counts everyone it touched. Sales counts everyone it closed. Both numbers are true, but neither tell the whole story.
That’s why in B2B you need constant honest communication (addressing the brutal facts in your funnel) to keep all your numbers healthy: from lead to
sale conversion rates, to cost per sale, to Return on Ad Spend, and so on.
What does the real number look like?
Different from both of the ones
you were given, and findable depending on the systems you have in place –
perhaps immediately, perhaps longer (maybe a week, say, for a poorly integrated
platform).
The method is not clever. You
take every closed deal, you look up every contact on it in the marketing
system, and you write down what marketing did to that person before the deal
was opened. Then you do the same for every open lead. It is tedious. It is also
the only way to get a number that both directors will sign.
What are three levers I can pull right now
to improve my campaign peformance?
None of them needs new budget.
Each need one decision from the top and a fortnight of someone's time.
How do you find leads lost between
marketing automation and the CRM?
Lever 1: find the customers
you have already paid for.
This is the cheapest revenue in
the building. The marketing money that produced it has already been spent.
Every company I have worked in
had leads that were generated, paid for, and then lost between two databases.
The fix is a rule, not a project: once a fortnight, every contact in the
marketing system is matched to the CRM, and anything that does not match gets a
name next to it.
If you do want the bigger fix,
it is worth it. The question to ask: when did we last check that every lead we
paid for reached a salesperson? If the answer is a date, good. If it is unclear,
or only gives you a partial picture, this is your first lever.
How do you get Sales and Marketing to agree
on lead definitions?
Lever 2: make Sales and
Marketing count the same thing.
The argument about whose lead it
was is a definition problem, not a personality problem. But it is also a big
picture systems issue. If we are not clear about definitions, then we are also
unclear about incentives, and most importantly, accountability. It has a
one-page fix, and it is the SLA from the top of this piece.
Write down once what counts as a
marketing-sourced deal and what counts as marketing-influenced. Get both
directors to sign it. Then stop arguing about individual deals. Where you can,
replace the argument with a score. That is the real test of a definition. Not
whether it is fair, but whether the sales team changes its behaviour because of
it.
The revenue effect is large.
Once both teams count the same way, marketing stops generating volume (‘MQLs’
for their own sake in a performative manner) to win the argument and starts
generating leads Sales will work. At a fintech scale-up where I made this
change, the cost of a sales demo fell eightfold in a year. Same budget, same
team, different definition of a good lead.
The question to ask: do Sales
and Marketing have one written definition, signed by both, and does Sales use
it?
How should a B2B company reallocate its
marketing budget?
Lever 3: spend where the last
ten wins came from.
Most marketing budgets are set
by last year's budget. The better question is where the last ten customers
actually came from, by name, and whether the money is going there.
I would caveat that by saying –
sure, you need to look at the longer-term trends, not least because the large
data sets show statistical significance. (Bayesian statistics, though,
is the primary approach well-suited for working with small data sets – as in
your last ten deals).
The deal-by-deal check answers
this for free. What I see usually is that a handful of behaviours predicts a won deal far better than the rest: repeat
visits to the website, a recent email click, a look at the pricing page. The
campaigns that produced those behaviours were not the biggest. They were the
ones aimed at a short list of accounts rather than a long list of names.
I have seen this at every size
of company. At a telecoms billing software company, a year of work on one named
account became a five-million-pound annual contract. At a B2B software company
a decade later, moving paid media from broad targeting to a named-account list
halved the cost of a lead. At a martech scale-up, the two largest customers of
the year came from targeted outreach to a handful of global brands, not from
the campaign with the biggest budget.
The lever is to move money,
not add it. Take ten percent from the channel that produces the most leads and
put it into the channel that produced the most customers. They are rarely the
same channel.
This approach can also work on the campaign level.
The question to ask: where did
our last ten (for B2B Enterprise), or a hundred (for smaller transactional
selling) customers come from, and does the budget match that list?
Three questions to ask on Monday
You do not need to understand
the systems. You need to ask three questions and insist on a date, a name or a
number in reply.
1. When did we last check, deal by deal, that marketing's
revenue number and sales' revenue number describe the same customers?
2. Do Sales and Marketing have one written definition of a
marketing-sourced deal, signed by both, and does Sales use it to decide who to
call?
3. Where did our last ten customers come from, by channel
(and Campaign), and does the budget match that list?
4. Are you regularly disagreeing over whether a deal 'comes from' sales, or marketing?
If all four come back with a
clear answer, you have a commercial engine most companies would envy. If any
come back with a pause, you have found your lever.
And if the answer to the final question is yes, you know why.
Nobody who is winning the argument wants a referee.
That is a decision only the person above both teams (President/COO/CFO) can make - Certainly not the Head of Sales, nor the Head of Marketing.
But as I've said many times, most of these problems don't come from tech (but tech is the easiest scapegoat to blame, for sure), they come from politics, systems, and above all, Governance.
Frequently asked questions
What is marketing-sourced
revenue? Revenue from deals where marketing made the first qualified
contact, under a definition Sales and Marketing have both agreed.
Marketing-influenced revenue is wider: any deal marketing touched along the
way.
What is a Sales and Marketing
SLA? A one-page agreement. Marketing commits to a number of qualified leads
a month; Sales commits to how fast and how often each one is worked. Both
numbers are reviewed together monthly.
How do you reconcile
marketing automation with the CRM? Match every contact across the two
systems on a shared identifier, flag the ones that do not match, and give each
unmatched record an owner. Fortnightly is enough.
Why do Sales and Marketing
disagree about leads? They measure different things. Marketing counts
engagement; Sales counts readiness to buy. One scoring model, adopted by Sales
(and by ‘adopted’ I mean they need to believe in it, like a priest does in
Jesus), closes the gap.
How often do marketing
automation and the CRM disagree? More than most leaders expect. Daily, at
some companies, weekly at others, rarely just monthly, and never have I seen
them never disagree.
What is the fastest way to
increase marketing-sourced revenue? Find the leads already paid for and
lost between systems, agree one definition of a good lead, and move budget
toward the channels that produced the last ten customers.
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