That’s a deep, profound cultural shift that benefits from starting with alignment around the question of “what are we solving for?”. This third blog addresses that issue and more.

3) Agree on common measurements and analytics:

• • Exec staff, sales and marketing all need to agree on a common pipeline definition: What are the pipeline stages everyone agrees to use from raw lead to close and post-sale?
    • A typical lead and sales pipeline might look like this:
      1. Raw lead (i.e. a name or an IP address if it’s an online lead)
      2. Lead (complete information, they have been identified)
      3. Marketing Qualified Lead (“MQL”; the lead has a minimum score)
      4. Sales Qualified Lead (“SQL”; a lead that is deemed ready for sales)
      5. Sales Accepted Lead (“SAL”; a lead that a rep has accepted and has converted to an opportunity within the CRM system)
      6. Developing (sales has contacted opportunity, established need)
      7. Proposing (sales is formulating a proposal for the opportunity)
      8. Negotiating (sales is in contract negotiations with the prospect)
      9. Closed Won (the deal was won)
      10. Closed Lost (the deal was lost)
    • Measurements then are what percentage of leads progresses from one stage to the next in the pipeline, what percentage gets returned to nurturing or to a prior stage, and how fast are the conversions happening. For example, how quickly is a typical lead moving from one stage to the next. The complexity then starts when these statistics need to be generated for all marketing campaigns, lead sources, sales reps, territories, segments, and so on, to ensure sources of slowdown or friction are constantly eliminated, and patterns of rapid potential growth are identified.
  • Throughout these pipeline stages, different organizations touch leads. The handoffs between these organizations need to be precisely defined in terms of desired quantities and lead quality.
    • Getting these handoff criteria right is crucially important if the ABM system is to function smoothly. To illustrate how complex things can get, these organizations could typically be involved in owning / managing the above 10 stages:
      1. Marketing Operations – Raw lead
      2. Marketing – Lead, MQL, SQL
      3. Sales – SAL
      4. Sales, SEs – Developing, Proposing, Negotiating, Closed Won
      5. Customer Success – Closed Won, Closed Lost
    • A crucially important handoff is from marketing to sales. This often becomes an emotional issue because sales reps bet their livelihood on the leads that marketing generates for them, and in turn marketing / sales development gets paid by the number of leads that sales accepts. We have always made it a practice to put a heavy emphasis on marketing producing the SALs, i.e. leads that sales is willing to accept. This breeds a lead quality consciousness that if marketing were to get paid on SQLs (i.e. the leads they submit to sales, be they accepted or not) would not be there. We always train our demand generation teams that supply sales with lead flow to ensure they understand that we reward success (i.e. SALs) and not just effort (i.e. SQLs).

4) Jointly work thought leadership and compelling, differentiated content and sales narratives:

• • Technology startups are founded to disrupt existing sectors. More and more this has become the Silicon Valley’s raison d’être, which for B2B startups means that they must compellingly explain why they do what they do better than anyone else in concise, easy to understand language. Getting their messaging right is non-trivial and requires a lot of understanding of the marketplace, the competition, and a good sense for what not only is logically defensible but also emotionally compelling. We have found it useful when all parties involved in external communications collaborate on how best to craft the associated narratives.
  • The sales team typically has a keen understanding of what sells today, what customers are looking for, and often have become masters at knowing how to sell “what’s on the truck” now (i.e. the available offerings). Marketing, on the other hand, often views the market more strategically, looking at competitive differentiation, what the analysts say, and so forth, and thus often has more of a sense of “the larger story”. The overall messaging benefits when both, sales and marketing collaborate constructively on the formulation of a compelling “why us” story.

5) Agree and execute on a joint events strategy:

• • Finally, marketing and sales collaborate on a joint approach to maximizing the lead generation potential of events like tradeshows, public speaking events, and conferences where the startup can interact with buyers and influencers. Attending events, especially if there is a booth to be set up and manned, is an expensive proposition and thus maximizing the leads developed from events is key to getting a good ROI out of the events.
  • However, this requires the marketing team to closely work with sales who usually staffs the booth, and who meets with prospects. So, both organizations need to cooperate on which events the company should attend at what funding level, who goes where, which event formats work best, and who staffs the booth.

If these five conditions are fulfilled and everyone works together, then ABM can be a work of art. The upsides are a large volume of high-quality leads and lower cost pipeline, and after the initial investments the ROI is compelling. We have seen the “marketing yield” (i.e. $ pipeline generated per $ of non-personnel marketing spend) go from 3X to 11X and higher once ABM was implemented.

However, there also are potential downsides that need to be managed: An ABM system is more complex and takes time to ramp up. Targetable segments need to be precisely identified, and targeted with content and contacts they find compelling, then those prospects need to be nurtured with content. Systems need to be implemented, new content and artifacts created, and so on.

So, compared to, say, a tele-sales cold calling operation, an ABM system will not produce leads as quickly. But, within 6 to 9 months, depending on the size of the operation, it will outperform those more traditional go-to-market approaches, and will do so more cost-effectively. At one security company, we saw costs per qualified lead and per deal decline by 36% and 67% respectively over the first twelve months of the program, while increasing quarterly output of new business deals by 40%.

For anyone interested in further reading about Account Based Marketing, here are some additional links:

• https://en.wikipedia.org/wiki/Account-based_marketing
• http://www.heinzmarketing.com/2016/07/lead-based-marketing-vs-account-based-marketing-heinz-marketing
• http://www.heinzmarketing.com/2016/05/is-abm-right-for-your-business
• http://www.huffingtonpost.com/vala-afshar/accountbased-marketing-ma_b_10004668.html
• https://business.linkedin.com/marketing-solutions/blog/linkedin-b2b-marketing/2016/what-is-account-based-marketing–10-definitions-from-the-experts

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Which brings us to the next key to success, namely the cultural changes needing to go along with implementing an ABM system:

2. ABM drives cultural changes throughout the organization:

One of the aspects of implementing new processes is navigating the transition to becoming data driven. There are two challenges here. One is obvious, while the second is subtle:

• The more obvious challenge pertains to the mechanics oflearning the pipeline models the organization uses; understand and knowing how to interpret the various metrics used at each pipeline / sales stage; as well as knowing how to use the available software tools to obtain and interpret the data.
• The subtle challenge is the fact that the use of these systems implies a profound cultural shift away from political or emotion-driven decision making to data-driven decision making. Which in turn drives the need for the management team as well as sales and marketing to be analytically trained to utilize these systems and base their actions and decisions on the data underlying their pipeline.

The ability to navigate this transition to becoming data driven is most important among the executive staff. If the CEO and her / his team base their decision on fair and rational assessment of the underlying facts and act on the data, understand analytics and reward honest reporting, and have a clear grasp of the needed budgets to navigate this transition, then the impact ABM and the underlying systems can have on organizations is profound.

Implementing ABM in the sales organization means three things:

• Sales reps need to get into the habit of inputting accurate information and data into the sales and marketing automation systems. This data includes pricing, likely close dates, probability of moving to the next sales stage or to closure, lead sources, and contact information. If the entered data is inaccurate, the whole effort will be for naught.
• Related to the above issue, is a shift in thinking. All too often sales reps are uncomfortable at having their performance measured accurately. If sales management makes it clear that transparency is being valued and if someone’s pipeline is soft, they can expect help and coaching instead of a verbal lashing, then reps will use the ABM systems more willingly.
• Third, sales reps need to accept SLAs (i.e. Service Level Agreements) or a minimum time within which they need to respond to and dispose of an incoming opportunity from the demand generation team. This way they are the lucky recipient of a rapid and growing opportunity pipeline. Once they get into the habit of responding quickly, their commission checks at the end of the quarter will benefit just by the sheer law of numbers (we’re assuming processes to assure lead quality are in place and demand generation teams are training in them).

Life within marketing will change dramatically in an ABM world as well:

• Gone are the days of marketing being immune from measurable accountability, and or the days when if PR, events or branding initiatives were collectively deemed successful, then marketing was considered as having done a good job. The shift now, however, is away from such earlier focus to measurable results, preferably with pipeline impact. For example, how many social media likes or even leads were generated by a contributed article, or what was the revenue contribution of a series of speaking events, and so on.
• Marketing professionals must become increasingly analytical. They need to understand the new lead flows and the associated systems used to measure progression through the various lead stages and identify observable behaviors of emerging leads. When we work with marketing teams new to ABM, we often ask them to take Excel classes, for example, and we expose them to basic analytical techniques and terms such as “MECE” or regression analysis to understand the pipeline contribution of various artifacts, and cohort analyses to model lead flows and needed budgets over time.
• These analytical techniques are needed to assess whether new campaigns, pieces of content, or initiatives are working in terms of awareness building or lead generation potential. This also implies the need for experimentation and agile, “fail fast” approaches where new ideas get tested and, if needed, get modified or even aborted to give some other initiative a chance. Often marketing organizations are not used to the rapid pace of change that’s needed to optimize marketing-generated pipeline funnels.

All involved organizations (i.e. executive staff, sales, marketing, operations) need to meet for weekly analytics meetings to understand and interpret the previous week’s and month’s data to interpret what worked, what didn’t, and what should be planned for going forward. If needed, updates to the cohort model and the resulting marketing budget should also be initiated at these regular gatherings. As part of these series of regular meetings, sales and marketing need to agree on common definitions for what constitutes qualified leads and lead criteria. For example, when can a lead be considered qualified and sales ready?

Don’t turn that dial, we’ll be back with more …

The post Aligning Sales and Marketing (blog 2 of 3) – Key to Successful ABM appeared first on Premonio.

• Plummeting software prices: Cloud solutions are being sold at lower prices than ever before, motivating the need to replace more expensive techniques like enterprise selling or cold-calling with cost-reduced sales and marketing processes.
• Customer journeys are changing: It is a rare customer that has not done online research about the product they’re about to purchase. A recent article in McKinsey & Company’s “Marketing & Sales Insights” series provides compelling data on how even for large, key accounts the digital buying journey has changed the way they purchase, making old school selling insufficient.
• The sophistication of marketing automation software: Innovation started with the likes of Hubspot and Marketo and has now evolved to include many other tools. As have the myriad of vendors that support ABM through a wealth of online behavioral data that tracks – and intercepts – eventual prospects’ digital journeys.
• Cost-optimized demand generation processes: The above trends drive the need for deeper behavioral analytics as well as much more cost-optimized demand generation. Which in turn necessitate closer cooperation between sales and marketing. This sales-marketing alignment will help focus precisely defined customer segments, even down to a prospect in a market of 1.

Successful implementation of such high volume, high quality, and low-cost processes is doomed if sales and marketing cannot figure out how to work together. This blog is based on our experience with five concrete approaches that we employed to align marketing and sales. The results were impressive in that our teams were able to produce 75% of accepted sales opportunities within 9 to 18 months, all the while supporting business growth.

What were those keys to success?

1) Executive staff and sales and marketing teams need to be familiar with the basics of ABM:

• It all starts with setting realistic expectations with the board and executives. While modern demand generation approaches are more cost-efficient and result in high-quality leads, the process and infrastructure requirements are complex. Therefore, it’s important to set realistic expectations for how quickly results can be generated; what is involved in setting up these systems; and, more importantly, how much will need to be invested for how long before management and the investors see upticks in growth.
• Second, sales and marketing teams need to meet frequently to understand the system to be built and learn each other’s languages. This ranges from how the two teams perceive market realities (for example, sales reps will see the political landscape of a prospect, while the marketing folks will home in on the prospect’s standing in their respective market place), on to communication and interpersonal differences (for example, salespeople tend to be more extroverted, while marketers quite often are more introverted; sales reps usually place a higher value on incentive compensation, while marketing folks derive motivation also from intrinsic rewards; etc.). Bridging these perceptions and communication differences requires patience and self-awareness.
• Last but certainly not least, the CEO and the board need to embrace analytics, and promote a data-driven and transparent approach to managing the opportunity pipeline. This implies learning how to use and analyze the data that the new systems provide. Since many executives have cut their teeth in the enterprise selling days of software sales in the 1990s or earlier, when selling was art more than science, some find the wealth of data in modern systems overwhelming to use and difficult to understand.

Don’t turn that dial, we’ll be back with 2 more blogs on aligning sales and marketing …

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Some of our marketing folks opened by lamenting how sales people don’t understand analytics, don’t input data accurately into the CRM systems they built for them, and that the old excuse that the leads are bad is an ever-present political nuisance. Could our esteemed sales colleagues please help by explaining how sales people think and translate their behavior for marketing?

That was when the following conversation ensued:

• Sales person (S): “Do you have credit card debt?”
• Marketing person (M): “No, my only debt is my mortgage.”
• S: “Do you pay off your debts regularly?”
• M: “Always.”
• S: “Do you party a lot?”
• M: “Rarely.”
• S: “Are you analytical?”
• M: “I dream in Excel.”
• S: “Then you’ll never understand sales people. They typically live in the moment. They’re not analytical and they’re relationship people. They don’t care too much about how accurate the data is in the CRM system. But they know how to work a relationship until they walk away with the business. It looks easy but it’s really hard to do.”

We were laughing, of course, while having this somewhat tongue-in-cheek debate. But then things got more serious. Marketing wanted to know whether the newly emerging demand generation approaches, sometimes called  “Marketing 2.0” or “Account Based Marketing” and the associated technologies like Salesforce or Marketo aren’t also changing the sales world.

The response was yes, but that the average sales organization was probably less ready to implement deep analytics and the associated transparency and accountability than their marketing colleagues, who are further along the adoption curve of these modern technologies. Partly because these transitions are not just about implementing new systems but also about making deep cultural and process changes.

However, as of late, sales organizations are increasingly taking a more analytical approach to managing their pipelines, and are implementing new sales management tools, as well.

For example, “Sales 2.0” executives are increasingly passing MQLs or SQLs to their most effective sales teams, be they internal (enterprise, SMB, tele sales, channel) or external (partners, channel) teams, based on who’s more likely to close those leads. This new approach contrasts with common ways of passing the best leads to members of their respective sales cohort, no matter what the impact on conversion and closure rates.

Or sales leaders are increasingly relying on analytical pipeline management and visualization tools such as InsightSquared or Tableau that make the pipeline progression graphically visible and provide the analytics to diagnose what’s working or not.

At this point we might pause to explain our light-hearted choice for this blog’s title, in case you were wondering about our choices of galactic origins for sales and marketing. First, we were compelled because not even the experts could agree if sales and marketing are from Mars or Venus, respectively, or vice versa:

• Marketo has asserted that sales is from Mars and marketing from Venus
• While SalesRamp determined that the opposite is true.

Second, we believe that given the distance that all too often exists between sales and marketing, they could not possibly originate from the same planetary system. So, we decreed that sales is not from Mars or Venus, but instead hails from Alpha Centauri, a fantastic galaxy far, far, far away. While marketing, in contrast, must clearly be from Gliese 581, a planetary cluster presumed to be inhabitable, but sadly in an unreachable galaxy.

With that bit of humor out of the way, after all our Fourth holiday banter we made the more serious decision to expand on some of our other, recent blogs about how to get sales and marketing to work together with practical, proven tips about how to bring the two halves of the demand generation function to cooperate more effectively. And to also dive more extensively into the role of analytics in re-inventing the way technology businesses market and sell their wares–subjects we also recently blogged about.

For now, here are some interesting links also worth sharing on the subject:

McKinsey & Company Reports

A just released article from McKinsey & Company on the benefits of making sales and marketing pipeline management more analytical, focused on four key areas (i.e. lead generation, sales resource allocation and management, customer lifetime value, and pricing optimization), complete with a nicely thought out, five-phase implementation process.

Two more McKinsey & Company articles on managing organizations using analytics include:

• Insightful do’s and don’ts of data analytics, and how there is much more to analytical thinking and investigation than collecting statistics
• How to derive value from analytics and use it for competitive advantage, complete with comparative statistics on where and how value is accrued

Stay tuned…

The post Forget Mars and Venus, Sales is from Alpha Centauri and Marketing from Gliese 581! appeared first on Premonio.

Over the last few years these disparate trends have been coalescing among leading companies, and are giving rise to a new role: The Chief Revenue Officer (CRO). Now even companies without a formal CRO seem to recognize the need for what we call the “CRO mindset”. The trend is especially prevalent in fast growing Silicon Valley cloud software companies.

We think the CRO mindset is here to stay and is worthy of a longer discussion.

These are the three key questions CEOs and Boards should ask themselves, especially if they didn’t achieve their desired 2019 revenue growth or 2020 is looking soft:

1. 1. Should we have a CRO?
   2. If yes, why?
   3. And if we do so, what will make that CRO successful?

Silicon Valley software companies are increasingly employing CROs

An analysis of LinkedIn data for a little over 2,000 San Francisco Bay Area sales leaders suggests about 15% of all sales leaders in January 2019 were CROs. The software sector is leading this trend with about 20% of sales and marketing organizations being led by CROs, compared to between 10% and 14% for other verticals. Or put another way, nearly three quarters of San Francisco Bay Area CROs are in software companies and the supporting marketing agencies.

Our analysis puts numbers on a trend that’s already been discussed locally and nationally for a few years now, most notably in this Venture Beat article. So, is this just another Silicon Valley trend that will come and go, or is there more to it?

Our experience and analysis suggests it’s very much the latter. Investors and CEOs alike would benefit from a structured approach to thinking through whether a CRO can be the right answer for their organization. Especially if last year was soft or growth wasn’t where it needed to be, or if this year’s renewal rates and / or sales and marketing pipelines aren’t looking too promising.

Heuristic analyses do indicate that software companies employing CROs are the who’s who of the Silicon Valley, forcing a strong hypothesis that the presence of CROs is correlated with higher growth rates. Now, that’s correlation and not causation. It could be, for example, that trendsetters grow faster and one of the trends they’re setting is a shift to CROs, whether or not that’s a causal driver of their growth.

However, when comparing CRO-staffed organizations to more traditionally run sales and marketing organizations, our research suggests that the ~300 companies with CROs in the San Francisco Bay Area are on average growing more quickly than the 85% conventionally staffed companies.

Additionally, the CROs’ greater span of control over sales, marketing, and customer success can result in greater organizational efficiencies, and we’ve 10% improvement in efficiency cited in the literature.

Why should you be switching to the CRO mindset and model?

To understand why software companies are leading the adoption of the CRO model, it’s important to understand why the market and investors are flocking to cloud-based, on demand software companies compared to legacy, on premise ones. And why at this point the growing momentum of the shift to cloud software is beyond dispute.

Some reasons are inherent to different technical architectures for cloud software, but the compelling financial reasons arise from the associated changes in software business models such as conversion rates, scalability and churn. And those are precisely the factors that are driving San Francisco Bay Area software companies to transition to the CRO role.

Very few examples of legacy, on premise software companies exist that have successfully relaunched cloud versions of their products. Those exceptions include names like Adobe, Apple, Intuit, and Oracle to some extent (if we count NetSuite), but then the list of successful transitions thins out.

Besides often being saddled with calcified organizational structures, these legacy companies compete against new entrants that are building their software on code bases that are 10 or 20 year more modern. They leverage key benefits of the SaaS model such as the comparative ease of API integrations with other cloud software products into suites of offerings. That way they can offer the clear benefit of their software being available anytime, anywhere in a simple browser, without big compatibility issues and upgrade requirements.

As compelling as these technical advantages are, cloud software’s impact on underlying business models is what makes the transition to the cloud financially more appealing. It is also driving the underlying organizational changes in software sales and marketing. Buying cloud software essentially is a lease or rental model vs. a license purchase as in the on premise model. The financial consequences are profound because software providers are launching a recurring revenue stream with each purchase vs. a one-time transfer of funds.

The cloud model delays available revenue in the early years of a sale, which is why many CFOs initially opposed launching cloud products. But now, years into the transition into cloud, the early pioneers are reaping the benefits of recurring cashflows where the name of the game is holding on to the existing customer base to not threaten the future cashflows of the later years.

Another byproduct of renting software instead of buying it is that customers are not willing to pay as much per year as they would for a full software license. A typical heuristic is that buyers are willing to pay up to 40% of the comparable license purchase price for their year 1 rental. This creates cost pressure on cloud companies’ sales and marketing organizations as the fat enterprise software prices of old are long gone, and with them the associated lavish sales and marketing budgets.

A second major change is that by renting vs. buying software, power shifts from the software producers to the buyer because “renters” have a choice every month or every year to renew their purchase agreement or to switch to a new vendor. Which is made easier by the less onerous implementation requirements of browser-based consumption of cloud software.

On top of that, the emergence of cloud-based sales and marketing tools like Eloqua, Hubspot, Marketo and Salesforce have enabled organizations to re-invent the way they attract customers and build sales pipelines. These applications create a shift in the way software sales and marketing organizations need to be set up and managed.

What is the CRO mindset? What are CRO best practices?

We talked about how sales and marketing budgets are now tighter given the lower, initial cashflows for cloud products. And not only are gone the days of collecting the licensing fees with an automatic 20% annual maintenance contract, the buyer is now king, forcing the software vendor to re-earn their business and to manage renewal rates extremely carefully; 95+% is best practice.

Delivering and experiencing the product are now mostly done through browsers or mobile apps, creating immense possibilities for reinventing the online customer journey from initial awareness to purchase and support. Customer success roles are even more crucial to a company’s growth and indeed survival.

Legacy software companies’ organizational models of separate marketing, sales, professional services and customer support organizations have turned out to be too siloed to manage these simultaneous trends we described. Trends like greater cost pressures, new cloud technologies to create and manage pipelines, and seamlessly needing to manage the customer journey from initial contact to ongoing use.

Most importantly the financial need to hold on to customers is of paramount importance. Most cloud software sales don’t recoup the initial marketing and sales until sometime in year 2 or even 3 of the customer’s purchase. Losing those customers is costly. Conversely if a cloud company continues to delight those customers for 10+ years, the cost of acquisition will decrease.

The need to integrate marketing, sales and customer success into one, seamless customer journey is what many software companies find themselves struggling with. And with it some very fundamental cultural challenges. Addressing these needs and challenges requires a new mindset and is the organizational vacuum that a CRO steps into.

So, what makes a CRO successful? Based on my own experience having performed this role, it boils down to these common traits:

• The CRO’s span of control mimics the end-to-end customer journey, ensuring there are no organizational gaps through which the customers can fall, resulting in higher customer satisfaction scores and renewal rates.
• The CRO combines and consolidates a clear focus on sales, marketing and customer success, being the one-stop arbiter of revenue generation, be that new, upsell or renewal revenue.
• The CRO owns the revenue and growth goals, and partners with the CFO and CTO for the short, medium, and long-term financial health of the organization.
• Successful CROs are not only good at selling and marketing, they are literate in the capabilities of modern demand generation technologies that allow an unprecedented degree of transparency and accountability, and they’re usually highly analytical and operationally focused.
• In this partnership with the CFO and CTO, the CRO frees up the CEO from day-to-day operational monitoring of revenue attainment to elevate his or her focus on long term strategic goals such as funding further growth, M&A, international expansion, and managing the board and investors.

There is a growing body of material being written on the emerging role of the CRO and the need for a CRO mindset, especially for cloud software companies, and articles are proliferating by the day.

Some great articles, if you are interested in reading more, can be found here:

• The rise of CROs in the Silicon Valley
• A good post by the former CEO of Marketo
• A classic article on the key attributes of a CRO by Marketo’s former CRO

Generating revenue and profits is what private enterprise is all about, because it is evidence that customers find useful what the organization offers. It stands to reason that someone with the right mindset and skills should own that number end-to-end.

What do you think? Send us your comments.

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