The first step in revenue generation–meeting prospective customers at the start of their buying process–is a numbers game for most companies. Marketing must generate the highest possible number of potential leads. In a world where the buyer is in control, marketing’s primary goal is to be found by prospective customers who are out looking. This is essentially the reverse of the traditional and much less efficient model in which marketing and sales people play some sort of blind man’s bluff trying to find prospects. When marketing people think about how to be found, they typically use key metrics like the number of new, unique names collected per month or per quarter, and the cost per new name. And the more names they get, the better their chances of winning the game. We will ultimately see as we tune our high-performance machine how math and statistics can be used to project future revenue on the basis of these metrics.
The game changes once a prospect becomes known to the vendor. Now, marketing’s mission is to nurture every new buyer relationship, build brand recognition and affinity, support each buyer’s individual research needs, and continuously keep track of everyone so that no one gets accidentally lost or forgotten. This is where the idea of inventory comes into play–that is, the inventory of prospective buyers working their way through their own individual buying processes.
These are the middle steps of the buying process, where the key metrics resemble those used in managing a company’s work-in-process (WIP) inventory in a manufacturing supply chain. They include things like average age of prospect relationship, or conversion rate to sales opportunity. But unlike manufacturing processes, where having too much WIP can be bad, the goal of RPM is to increase the inventory of prospective buyers while ensuring that the inventory of buyers stays fresh and keeps moving at an appropriate pace.
If you cut to the chase, the next step in the revenue process is to separate the “lookie loos” from the real buyers. You have hit pay dirt if you can accurately predict which prospective buyers are most likely to actually make a purchase in the near future.
If you successfully navigate this hurdle, you’ll reach the final step in the revenue process: closing business and putting revenue on the board. The objective here is to focus your expensive sales team’s time and attention on the most likely buyers. If sales professionals can shift even a small percentage of their time away from cold calling, prospecting, or talking to unlikely buyers and instead spend that time working with motivated buyers, you’ll dramatically increase efficiency and revenue achievement.
Each of the steps outlined here is a repeatable, measurable activity, one that can be designed, monitored, measured, and tuned through an ongoing process of continuous improvement. These steps are the cogs and wheels of your high-performance revenue machine.
The mechanistic view that I articulate here can be disturbing for executives, managers, and professional practitioners who are accustomed to thinking about marketing and sales as “arts” involving great design, compelling messages, creative offers, clever sales plays, and heroic negotiations. I understand that. But it’s essential to understand and embrace these admittedly cold, scientific, and highly structured ideas about the revenue process in order to realize the benefits of Revenue Performance Management. That’s because for businesses of any reasonable scale and complexity, the revenue process can be organized in a structured and repeatable way, and its performance can be measured and tuned using analytics and statistics.
That said, there’s a reason why manufacturing and quality and supply chain and financial operations were transformed decades ago by these kinds of process-centric approaches, while marketing and sales operations were largely left untouched. Simply put, it’s because there is a very real art to marketing, and there is a very real art to sales. Buyers are people, and people have preferences, quirks, emotions, and unpredictable behaviors. Marketing professionals are people, too, with creative inspiration and strategic vision. And sales professionals are also people, with a highly evolved ability to read other people and find ways of getting deals done.
So while RPM involves the need to adopt structured business processes, formal metrics, and scientific thinking, it must never fail to acknowledge the deep humanity involved as well. RPM may require revenue professionals to learn new skills and adapt to new kinds of formalized methods. But it is not about replacing or devaluing people in the revenue process. To the contrary, it is about laying a rock-solid foundation that channels the creative energies of marketing professionals toward finding and nourishing more prospects. And that, in turn, frees sales professionals to spend more of their time doing what they do best: “getting to yes” with more real buyers.
Marketing And Sales Alignment
In a world where the buyer is in control, and where the adoption of Revenue Performance Management strategies has begun to result in seamless processes that flow back and forth between marketing and sales, the two organizations need to be more than just close partners. Ultimately, they need to come together into one integral revenue machine.
Make no mistake. I am not suggesting that salespeople should become marketers, or vice versa. There are many different jobs and roles that need to be performed across the revenue cycle. Different revenue jobs attract different personality types. Lots of departments in modern corporations have people performing very different jobs such as accounts payable clerks, revenue analysts, IT specialists, and HR professionals, all of whom often coexist quite successfully within one G&A organization led by the CFO. But it often makes sense to put all of these functions together under one leader, because they all share a joint mission of supporting the company’s people and business operations.
But today’s marketing and sales professionals really are part of the same team that shares a single mission: To enhance revenue, profit, and growth. They are integral participants in one unified business process called Revenue Performance Management. So when you think about it that way, it makes neither strategic nor operational sense to have separate executives managing sales and marketing. It’s time we got on with reinventing the corporate organization chart, and we can start by erasing the artificial line between marketing and sales.
The CRO must assume a long-term, integrated perspective, rather than the short-term horizon that sales departments usually embrace. At the same time, the CRO must have a passion for driving deals and quarterly revenue results in balance with the marketing team’s longer-term programs and more meticulously planned work styles. The best CROs understand and embrace the differences between marketing and sales, while at the same time establishing processes to ensure their coordination across the full revenue cycle.
If structured properly and outfitted with the right talent and objectives, the CRO can play a pivotal role in driving revenue growth. That individual becomes both the catalyst for the corporation’s Revenue Performance Management initiative and the steward of its success.
Adapted with permission of the publisher, John Wiley & Sons, Inc., from Revenue Disruption: Game-Changing Sales and Marketing Strategies to Accelerate Growth by Phil Fernandez. Copyright (c) 2012 by Marketo, Inc. All rights reserved.
[Image: Flickr user Jeff Drongowski]