Table of Contents
- 1 Is your marketing and sales alignment tuned to drive lead conversions?
- 2 How Can I Quickly Assess How Much This Issue Is Costing My Company?
- 3 What Are Some Specific Reasons That Cause Inefficiency?
- 4 What Are the Costs Drivers That Influence Inefficiency?
- 5 What Drives This Marketing and Sales Cost?
- 6 How Can I Examine the Effectiveness of Your Current Sales and Marketing investments?
- 7 Why Have My Past Investments in Sales Productivity Failed to Produce the results I Expected?
- 8 What Does Sales Effectiveness Look Like?
- 9 Who Should Be Responsible for Addressing This Issue?
- 10 Wrap up on marketing and sales alignment
Is your marketing and sales alignment tuned to drive lead conversions?
Marketing and sales alignment can help boost sales and reduce costs. Learn how to eliminate the sales and marketing silos and boost your team’s performance for technology companies
You’ve heard this before, the “he said, she said” debate between sales and marketing. CEOs feel like they are a counselor or referee. Ask each member of the team and you might get a different answer to why the functional sales and marketing teams are not aligned Just look at the photo above, what do you see?
Marketing and sales alignment are critical for any business’s success. According to a survey from Demand Metric, 66% of organizations reporting complete alignment achieved their revenue goals, compared to 41% who reported no alignment.
And, 80% of respondents said their sales and marketing processes are integrated achieved their revenue goals, while only 36% of those who report no integration made theirs.
If you were to ask other CEOs how they are dealing with the situation, the most common responses you will get are:
While these are all common reactions to the problem, many CEOs also believe this issue will correct itself once the market rebounds and organizations begin spending money on technology again.
Given this perspective, and the pressures facing most executives today (sales are hard to come by, accounting scrutiny, executive compensation pressures, etc.). CEOs are just not investing time to examine the sales and marketing alignment problem.
However, this is a big issue, one that will not be cured once the economy rebounds. The organization’s revenue engine may be broken due to mistaken assumptions that drive your sales and marketing decision-making. So how do we create marketing and sales alignment?
This is the first article of a two-part series that is targeted at helping you better understand the depth and damage of your sales and marketing disconnect.
It will provide you with some insight into the causes of this inefficiency and present a view of what your revenue engine could look like. The second piece will drill into practical and specific prescriptive tactics you can execute to increase your performance.
Your marketing and sales alignment is important to design a process, monitor it, and improve it over time.
How Can I Quickly Assess How Much This Issue Is Costing My Company?
As a results-based executive, you want to invest your resources into fixing problems that will have the biggest impact on your bottom line. Your first step is to get a benchmark that will help you tell the size of the problem. Then decide how much energy you want to devote to fixing it.
Sales and marketing expenses are investments your company makes to drive profitable revenue. These expenditures are consolidated as a single expense category on your income statement.
For technology companies, sales and marketing investments are the largest expense category. Therefore, the biggest impact you can have on your operating margin is to increase the return on those expenditures.
For a simple analysis of how efficiently you are utilizing your revenue generation resources, start by determining your sales and marketing return on investment (SMROI).
This is calculated by taking your total revenues for a given period (annual or quarterly), subtracting from that your total sales and marketing expense, and dividing the remaining amount by your total sales and marketing expense.
SMROI as a percentage = (Total Revenue – Total sales and marketing expense) / (Total sales and marketing expense) (100)
This information is meaningless without a benchmark. During 2014, the average SMROI of enterprise software companies was 152%. You can visit our resource library and download it there.
So, what does this tell us about AppLexus?
Think about it. What is the impact of adding $4 million dollars to the operating margin on a $24.7 million dollar company?
If you’ve done the calculation and your SMROI is under the industry average; you are probably asking the following questions.
- What are the root problems we need to address to improve our marketing and sales alignment and effectiveness?
- What are some specific reasons that cause inefficiency?
- What are the cost drivers that influence inefficiency?
- How can I examine the effectiveness of my current sales and marketing investments?
- Why have my past investments in sales productivity failed to produce the results I expected?
- What does sales effectiveness look like?
- Who should be responsible for addressing this issue?
Simply put, the way we are trying to sell to technology buyers is out of alignment with their objectives. In the early days of the technology industry, having a technical conversation was extremely critical as engineers and developers dominated buying decisions.
Today, it is important that your customer buying journey is mapped to the marketing and sales alignment process within your organization.
During the late 1990s, business executives became increasingly involved in buying decisions because they realized technology could help them reduce costs by automating processes or increase sales by communicating more directly with customers.
During this time, old-school CIOs promoted through the ranks of data processing were replaced in droves as they lacked the ability to translate technical jargon into meaningful terms business executives could understand.
Even though most technology executives now hail from a business background, aligning technology to the business objectives of the firm remains a critical issue keeping CIOs up at night.
Sound odd, you got it … this is legacy sales methodology and is very hard for any rep to meeting their quota targets today. Modern sales rep get it. They are taking the initiative to learn about inbound marketing and social selling. And it’s working, they are finding the active vs. passive buyers.
While all of this change is taking place within Global 2000 organizations, technology vendors still rely on a feature-oriented, product-centric approach to demonstrating their capabilities–forcing buyers to figure out how the technology being offered can be translated into tangible business outcomes.
Coupled with the growing content chasm, technology vendors are also applying marketing models better suited for other industries than the technology market.
When the economy was growing, branding and exposure were the two biggest topics discussed. Companies often relied heavily on creating awareness and engagement with PR firms to help them.
During this period, marketing was something that every company had to excel in, and no real thought was given to the role marketing was to play. CEOs hired the best marketers they knew–people from consumer-oriented companies like Pepsi and P&G–to help build brands.
However, we quickly learned that with a highly sophisticated product, salespeople become the providers of a brand and that selling approach is a lot different than selling software.
The salespeople even today are using a legacy selling model. They have yet to learn and engage in a modern business approach using social selling and become more advisors all centered around their ideal customer profile.
Now that most CEOs have been burned by bad experiences with marketing, the pendulum is swinging to the other end of the spectrum where companies are now at risk of under-investing in the discipline.
What Are Some Specific Reasons That Cause Inefficiency?
First, most vendor organizations do not understand the steps their customers must go through to make a buying decision. The buyer journey is still not well recognized by many companies.
You must get this right before you can get your marketing and sales alignment right.
Selling B2B solutions requires involvement from many different stakeholders, a clearly defined problem the client is trying to address, a well understood and agreed upon approach to addressing that problem, and economic justification, and the ability for the client to understand how to start the project.
Often, IT buyers struggle to learn the best approach to tackle the problem, and this information is rarely provided by vendors because they look past the fact that each of their clients will be solving the issue for the first time.
A customer’s informational requirements change from stage to stage. Salespeople try to assist their prospects, but typically spend a lot of their time collecting this information, as the content provided by marketing is either too generic or unfocused to be useful with a client. Why do you think up to 90% of the collateral produced by marketing departments is never used by sales?
The second key driver of inefficiency is the conceptual misalignment between marketing and sales. Marketing is typically focused on macro-level issues such as competitive and market positioning, whereas sales are more focused on individual account level issues (how to get a meeting with the CIO, understanding their challenges and goals, and identifying sources of the budget, etc.).
These differences result in the now-common debate in which marketing accuses sales of not knowing what the company sells, and salespeople protest that marketing is irrelevant. Lead generation is a useful category to examine this problem.
Marketing will launch a campaign and claim hundreds of “qualified” leads. When a salesperson receives a lead they either have no idea how to engage the prospect in a dialog, or the contact is likely to be a tire kicker interested in learning about technology at your expense. These are a few reasons why up to 80% of the leads generated by marketing are never followed up by sales.
The third key driver, to hyper-growth, is defining your niche. If you feel like you are swimming upstream every day to generate leads or to sign new customers from the ones you do get, you typically have a bigger problem. All the time and money invested in generating new leads and closing sales can be poured into a black hole—if you haven’t defined your niche.
You can be a Fortune 500 company or have the greatest SaaS software for managing inventory. But, if you can’t predictability go out and generate leads, nurture opportunities and win them while doing this profitability, you’re going to struggle.
What Are the Costs Drivers That Influence Inefficiency?
Aberdeen Group reported, effectively aligned sales and marketing organizations achieved an average of 32% year-over-year growth in contrast to their less aligned competitors which reported a 7% decline in revenue growth. These are significant figures if you want to grow.
Salesforce, Marketo, and HubSpot are in the business of marketing and sales management software. And they believe in what they are selling. Just take a look at their numbers.
Salesforce invests 53% of its revenue into sales and marketing! That’s right 53%. That’s just over half of the $4.1 billion in revenue generated in 2014. What do they get in return for such a hefty investment? They get growth!
The companies still have one thing in common. The majority of their operating expenditure consists of research and development (or R&D) costs and marketing spending.
With the emergence and adoption of cloud computing and open-source software, companies are finding it very difficult to maintain high margins, which were once associated with the industry. Software and technology companies revise their R&D spending budget to keep up with the competition and innovate new products and technologies.
What Drives This Marketing and Sales Cost?
Most organizations do not relate variable sales expenses to the sales process and are therefore unaware of the daily activities that drive costs. A few examples of activities that are rarely monitored and drive internal costs include a salesperson visiting a client location five times when only two visits are necessary.
Investing too much time pursuing low probability accounts, building custom demos as the key sales mechanism, inadequate and ineffective training programs, and lost sales time due to poor internal processes.
From a marketing perspective, the costs are more obvious. When you look at various marketing categories three stand out: Lead generating investments (direct marketing, advertising, trade shows, etc.); sales support (collateral, printing, and creative); and marketing technology.
If you factor in that 71% of the leads generated and 90% of collateral produced are never utilized by sales, you can easily see the opportunity for productivity gains.
But you still need relevant content and channels to distribute it. Your customers are tuning out traditional marketing methods while consuming information and making buying decisions on mobile phones, tablets, computers, smart televisions, and wearable devices.
In fact, 57% of a typical purchase decision is made before a customer even talks to a supplier, according to a CEB study of more than 1,400 B2B customers across industries.
Finally, because most of the decisions require internal buy-in, how is your solution being sold internally within an account when your salespeople have left? Up to 80% of the sales process happens behind closed doors, yet vendors are relying on internal sponsors (typically a lower level technical person) to sell their solutions on their behalf.
Even if your champion is excited about your offering, how well are they going to be able to articulate the various business reasons for selecting you throughout their organization?
How Can I Examine the Effectiveness of Your Current Sales and Marketing investments?
To get your marketing and sales alignment right you have to know where you are. Right?
As a software firm with a direct sales organization, all of your sales and marketing activities should be focused on moving opportunities through the buying process.
Therefore, you should develop internal reporting processes that track opportunities throughout various stages–from accounts whom you’ve never had contact with to the final close.
This will achieve two things. First, it will help make marketing more visibly accountable. Second, it will provide a practical, clearly understood basis for the executive team to discuss potential investments and their impact on revenue generation.
To help track this activity, you should monitor three key metrics: close rate, sales cycle time, and average revenue per transaction. Close rate and sales cycle time should be monitored at an aggregate level (from first contact to close) and tracked from stage to stage.
This will help your sales and marketing organization focus its activities on achieving success in a specific buying cycle stage, rather than continuing to have unfocused circular conversations about what needs to be produced.
Why Have My Past Investments in Sales Productivity Failed to Produce the results I Expected?
Investments in sales force automation, lead generation programs or sales training methodologies are all wise decisions. However, they often fail to deliver the results promised by the vendor or to meet your expectations.
Sales productivity investments are all part of a larger ecosystem and are interrelated. For example, if you’ve recently had your car tuned, but your battery dies, your car will not start.
Or if buying a Ferrari and low octane gas in it, you will soon lose power. It’s the same for marketing activities. Technology, it’s an enabler.
The same concept applies here: a sales force automation system without a sales process to automate is not very valuable. Sales process training without content specific to your company will only realize marginal gains.
There are five major disciplines that comprise the sales effectiveness ecosystem, and all must be mastered for success: sales skills, market dynamics, intimate customer knowledge, business driver knowledge, and financial justification knowledge.
Your sales infrastructure (sales force automation system, organizational structure, etc.) should help distribute and encourage best practices for each of the disciplines.
To achieve sales effectiveness excellence, you must develop a way to seamlessly integrate and streamline your various investments in each of these domains, and develop a repeatable framework to create and deliver content to the sales organization.
What Does Sales Effectiveness Look Like?
A well-functioning sales and marketing organization will have the following characteristics:
- The linkage between marketing and sales pipelines. Your marketing and sales alignment is essential. Most organizations look at the number of leads (or top of the funnel) and the forecast (bottom of the funnel) but spend little time tracking the stages in between. Interestingly enough, this is where there are the greatest opportunities for improvement. You should create a business development pipeline that tracks the progression of key accounts throughout all stages of the sales process (from a targeted account that has not yet been contacted to a closed opportunity).
- Micro-marketing focus. By breaking out and tracking discrete conversion rates from stage to stage, you can focus on developing and measuring specific programs targeted to improve results for each phase. Due to the varying informational needs throughout each stage of the buying process, and the unique perspectives of each stakeholder that salespeople will encounter, the content required to facilitate the buying process will increase dramatically. Marketing should focus on delivering highly specialized tools that help salespeople address specific customer problems, and can be used by champions to sell internally on your behalf.
- A customer-focused framework (or buyer journey). Due to the magnitude of the content required, an organizing structure must be developed to streamline communications between customers, sales, and marketing. This framework should be based on the customer’s decision-making process and related to the business development pipeline tracking system.
- Marketing program portfolios. All marketing programs should be organized by their relationship to moving opportunities through the business development pipeline, rather than on traditional categories (advertising, trade shows, PR, analyst relations, etc.). Leading companies are mapping the buyer journey rather than trying to force-fit their internal sales cycle.
- Well-defined pipeline process. If sales pipelines are populated by “gut feel,” than the information contained will be meaningless. Strict criteria must be established for each pipeline stage, and each entry must be auditable.
- Objective and credible measurement. Relating sales and marketing investments to the financial performance of the firm is extremely important. With an effective pipeline process, marketing program portfolio, and a business development process, you can create extremely insightful measurement programs. These should be linked so they can be prepared at the territory, product, vertical market, or corporate level.
Who Should Be Responsible for Addressing This Issue?
If you believe that marketing’s responsibility is to reduce the friction in the sales process, then that organization should have ultimate responsibility for sales effectiveness programs. They do play a critical role in your marketing and sales alignment design.
Marketers given this task must:
- Establish credibility with sales. Any initiative will fail unless you have the support of salespeople in the field, not just their managers.
- Be inclusive of other groups (development, sales, professional services, etc.). This will help improve the content, but also increase internal adoption.
- Communicate openly, honestly, objectively, and frequently. Selling internally is extremely important, but you have to be transparent and factual while managing expectations.
- Create a test program and make sure it is successful. Ideas are great, but the results are even better. Select a well-targeted area to focus on, make a few salespeople extremely successful, and promote their success internally.
- Establish credibility with executive leadership. Make marketing accountable by working with the finance department on a measurement program that relates performance to sales results.
- Be 100% customer-centric. When considering a new program, determine your customer’s informational needs first and work backward from there.
- Become service-oriented. Develop a thick skin and aggressively solicit the tough criticism, prioritize that feedback, and rapidly address the problems raised.
Wrap up on marketing and sales alignment
Sales and marketing alignment is not a “touchy-feely” relationship problem, nor is it something that should be viewed as a standard result of different personality types.
It is an efficiency problem caused by software companies’ inability to provide their prospects with the right information, for the right person, in their context, at the right time.
A buyer’s journey that at its simplest level is to identify, connect, explore and advise. With this simple framework in place, marketing and sales can begin working together to prioritizing active buyers over passive buyers.
Developing the relevant content and creating a repeatable framework to organize, distribute, and measure this information is a prerequisite first step to achieving sales effectiveness excellence. Identifying the right business opportunities from the start can be the difference between your business thriving or failing.
Where do I start? How do I fix the plane while it’s flying? In the next installment, I will take a detailed look at how you begin addressing this problem and what specific tactics you can employ to begin increasing your sales and marketing efficiency.
Are you not getting the results you had hoped for with your current marketing agency? Let the experts at this digital marketing agency help you generate more web traffic, convert more leads, and close more sales. Our team knows just what it takes to build and maintain a proven marketing strategy that drives high-quality leads. For more information, check out our marketing services or contact us to schedule a free consultation to discuss your needs and our services.