Recommendation for CEOs: MBOs that Improve Sales and Marketing Efficiency
- AUTHOR Bonnie Crater
- March 12, 2013
- No Comments
In my career, I’ve been lucky to have some really fun VP of Marketing jobs. But in those 5 stints, my personal MBOs (Management by Objectives) have had a great amount of variation. For example, sometimes I carried a revenue number (though I wasn’t responsible for the entire funnel) and sometimes I did not. The purpose of carrying the number was to get Sales and Marketing on the same page but in hindsight I don’t think it worked very well.
I can tell you one thing, Marketing should not be given the entire revenue number just like the VP of Sales! As a former VP of Marketing, I totally resented carrying the exact same revenue number as Sales. I mean geez, how was I supposed to control the outcome of whether we hit our number or not? Certainly my team was responsible for teeing up qualified leads, sourcing deals, and running programs that helped Sales engage and close opportunities. But my team was not in a position to close the deals. Also we had some other longer term initiatives that supported demand generation but weren’t directly tied to it. I think you can hear my frustration.
Today I strongly believe that Sales and Marketing heads should share complementary objectives to improve the partnership in B2B companies. The question is, what should those metrics be? And of course, now that we have Full Circle CRM and we can accurately measure marketing performance, I have a different idea than giving Marketing the revenue number.
First thing to consider is what your company goals are. Almost all companies are trying to grow revenue. The question is “how”. Are you trying to get more deals? Increase deal size? Or close deals faster? Let’s just consider these variables as this question gets very complicated very fast. And let’s assume, for example, that your sales channel is unconstrained, you are not trying to enter a new market, and your new deals vs. existing customer sales remains constant.
To entice Sales and Marketing to work together, I recommend focusing on 3 major metrics: volume, conversion rates, and velocity. A complete description of these is in one of my previous blogs about funnel metrics.
Volume can be looked at along a couple of dimensions such as number of marketing campaign responses, new leads, number of deals, and average deal size. If you know your current funnel conversion rates you a can assume that you will convert at a similar rate and with a similar average deal size. Then you can set some volume goals for marketing which includes: % of deals sourced by Marketing and number of campaign responses. The complementary MBOs for Sales would be revenue (or bookings), number of deals closed, average deal size, and percentage of new deals sourced by Sales.
Next is conversion rates between funnel stages. The overall conversion rate from response to close is most meaningful for the company but you can also measure the conversion rates for each part of the sales cycle relevant to Sales or relevant to Marketing. Marketing could be measured on conversion rates from response to marketing qualified response and Sales could be measured on sales accepted to close rate. Both could be measured on the hand-off from marketing qualified to sales accepted. A lot of times, this is where the constraint in the system is. Marketing may be teeing up leads that are not really well qualified and then Sales tends to cherry pick. And even though Marketing may be offended by this behavior, cherry picking could be the best response from Sales to drive revenue efficiently. The main thing is to be sure Marketing and Sales have an agreed upon system to optimize for maximum revenue potential.
Lastly let’s discuss velocity a bit. Improving sales velocity (e.g. shortening the sales cycle) is a terrific way to drive more revenue in a shorter time. If you have a long sales cycle of 9 months, all things equal, shaving 3 months off can improve overall revenue by 50%. Marketing can emphasize campaigns that increase velocity and Sales can identify the best selling practices to shorten sales efforts. Perhaps working with a partner shortens the sales cycle, for example. Again, the overall velocity could be a shared number but you can also measure time in stage and set MBOs for marketing stages separate from the sales stages.
I’m sure a lot of you have thought about these kinds of measurements. I’d be interested in hearing your comments, what metrics work for you, and how you are keeping sales and marketing in alignment.