Five Rules of Revenue Marketing

Five Rules of Revenue Driven Marketing In many companies I have been in, the most solid relationships I have had have often been with Finance folks. So, doing this with a CFO (Chuck Boynton) was awesome. We did this just before Covid.

Transcript

Hi, my name is Rahul Sashtep. I’m the CEO and co-founder of Fortella, a revenue-driven marketing company. I’ve been in the B2B marketing space for over 20 years, both as a B2B CMO, as well as working or running marketing technology companies. The pressures on the CMOs have really increased over the last 20 years. CMOs need to be not just master tacticians of campaigns, but strategic drivers of revenue growth. Those CMOs that can make that shift will continue to thrive. And those that can’t will move on. So for today’s conversation, I’m joined by two respected colleagues. Why don’t I ask you guys to introduce yourselves to our audience?

Great. Thank you, Rahul. Chuck Boynton. I’m the CFO of Poly. It’s a public company, the merger of Plantronics and Polycom. I’ve been there for a little less than a year. Before that, I was the CFO at SunPower, a large public solar company. And then before that was the CFO of several other public companies. Including IntelliD and Rahul, where we worked together about 15 years ago.

And I’m Venkat Nagaswamy. I run marketing at 8x8. We are a cloud provider for business communications. I came to this company as a result of my company, Mariana IQ, being acquired by 8x8. Mariana IQ is a deep learning for marketing platform. And I started that as a result of some insight that I got when I ran enterprise marketing at Juniper Networks. This topic is very close to my heart. I’m really, really glad to be here.

So today for the audience, what we want to talk about are what we call the five rules of revenue-driven marketing. I’m going to go through each one of those guys and would love to hear and ask you some questions. And get your thoughts on each one of those points.

Sounds great.

Awesome.

Okay. So the rule number one of revenue-driven marketing is to align marketing to revenue. I strongly believe that marketing strategy should align with your corporate goals, especially revenue goals. I recently read a study by the firm Batch. Spencer Stewart. That said the median tenure of CMOs declined from 34 months to 28 months in the last five years. So that’s astonishing to me given that a CMO has just over two years to craft and execute their marketing strategy and show impact. Now, I don’t think CMOs have suddenly become less effective over the last five years. I think this is really more about change of expectations. So, let’s talk about the CFOs and the board level. What do CEOs, CFOs and the board expect from the modern CMO?

Clearly, every business is designed or their mission is to make money and grow revenue. I mean that is the core tenant of every business. And the CMO plays an integral role in helping that company grow revenue and grow profitability. And so their goal would be things like driving lead generation, awareness of the product so that customers can buy into it. Right. Right. Right. Right. And they play a really critical role in managing and creating that funnel so sales can go execute and close transactions. What’s happened over the past ten years or so is rise of digital, rise of SaaS, both of which contribute towards increasing role for CMOs and marketing within B2B organizations. Specifically, with Salesforce and being able to measure the activities and so on, that kind of visibility that we’ve been getting we haven’t had in the past. past and once people started getting that visibility and once the importance of marketing to a SaaS company started going up that put CMOs and marketing in the prime position of having to deliver to the board and to to the CEOs and CFOs so every day I get asked this question around hey what’s your pipeline what’s your pipeline and that expectation of the fact that marketing needs to deliver pipeline that then converts has gone up significantly over the past five ten years far more than what it used to be let’s say 15 20 years ago

so when you think about when you create your corporate plan how do you determine marketing’s expected impact on that corporate plan?

well I think you first of all you’d start with what is the business model of the company in other words you know what’s the revenue plan by geography or product what are the growth expectations and then the the traditional model be what percentage of sales or revenue should marketing be and that’s really an expectation of revenue growth if you’re not growing revenue why would you spend a lot of money on marketing if you’re gonna grow revenue you need to invest in marketing to build awareness lead gen and all those great activities that support the ability to grow top line that’s Chuck was saying

it starts over the revenue plan finance has gives us targets based on regions and and segments we sell to three segments small medium and large and we sell in about 20 geographies so based on the revenue plan finance gives us a bookings target and once we get the bookings target we convert that into a pipeline target that we have for ourselves and in going from booking targets to pipeline targets we look at the dynamics of each of the regions and dynamics of the segments what are the timeline does does it take from conversion from pipeline to final bookings conversion how big are the deal sizes what’s the conversion rate so we take all of these things and the time they’re in the pipeline we look at the numbers of the regions and what’s the conversion rate we’re looking at the number of the regions that are in the pipeline and we can then figure out what the pipeline that we need to generate in each quarter by segment by region

so that clearly defines a connection between the overall revenue goals that the company has to the marketing the contribution that marketing makes that actually dovetails into our rule number two which is measure marketing’s contribution to revenue so one of the recommendations that we make to CMOs is to specifically measure what how they can contribute to revenue.

to the company’s revenue plan. And a mistake that I’ve seen CMOs make over the number of years is really to start with their tactical metrics, like event registrations or website visitors or social media followers. Those are great, but start with your strategic KPIs and determine how you’re going to impact the company’s revenue. So, Chuck, which KPIs as a CFO do you like to see from marketing?

Well, I think, I mean, so as a finance guy, the most sort of critical would be things like return on investment. So clearly when you do a budgeting process, whether it’s your AOP, your annual operating plan, or your quarterly updates, you’re going to go through a bunch of detailed metrics that could be customer acquisition cost or cost per lead or cost per click or at the detail level. But at the Uber level for a CFO, it’s really what’s the return on the investment? If I’m putting money into a program, I want to measure what’s the return I’m getting. And in marketing, many times people say, I can’t do it, it’s too hard. And I would say, no, you have to create a model that is, this is what I expect to happen, and then be able to measure that this is what actually happened. And you learn a lot in that variation. And I think part of a great marketing person is the ability to understand the financial connection between what am I spending and what is the return on that spend? And if you can’t measure it, then I’d question, why are you spending that money? So how do you determine what exactly you’re going to measure? And what’s hard about it?

There are certain things in marketing that you can readily measure, certain things that you cannot, right? So for instance, a lot of our spending goes into direct response. And direct response marketing, given the lack of relatively few touches that we have, we can measure directly. On the other hand, awareness metrics are harder to measure. So nevertheless, what we do is we start off with pipeline and then we break it down, the pipeline targets, and then we break it down by channel, from which lead source or campaign, expected to get what kind of pipeline. And then there are submetrics within that is what I measure, right? So for instance, Google AdWords is an important metric for us, or important source for us. For that, we look at the cost per click, we look at conversion rates, we look at all the other intermediate metrics for that. But all of these things filter into the pipeline. Pipeline is the main goal that we look at. Even in awareness, we are getting better. One other thing that I want to point out is radio ads is an interesting area. Back in the day, again, you used to do before and after, you used to do awareness metrics. But one of the things that we can do today because of big data and data collection is you know the instant when the ad was aired in a specific geography, and based on instrumentation of the website, you can look at the traffic that came before and after.

As a CMO, one thing I never understood was the dark art of how budgets get assigned. So maybe you could share that insight with our audience. How do you determine how much money, how much budget to assign to marketing?

Yeah. Companies do budgeting and forecasting. But I would say it typically starts with the annual operating plan. Many companies call AOP or the op plan. And that really is we start with what does the industry growth rates look like? You’ll look at it by product, by geography, by product segment. And you’ll say this product in this segment, according to industry research, is growing at 8% or 15% or whatever the number is. We then say, should we be growing faster or slower than the market? Based on our product portfolio and our attributes. We then align on, OK, we’re going to grow at 9%. We then build the model to say, revenue for that product is growing at 9%. Therefore, what are the sales metrics that you need? Sales coverage to close that amount of business. And then you’d say, what is the other things like in marketing? What kind of marketing spend should you get to build pipeline to support that growth rate? The marketing piece is really the key, because that’s the tip of the spear. If you don’t have the lead job, you’re not going to be able to do that. And the awareness and the campaigns to go generate those opportunities, sales can’t really sell or the channel can’t really sell. You start with that rule, that economic model. What’s the profitability I’m looking at with the given growth rate? And it’s sort of a timeless model that I’d say most companies follow that sort of general formula for budgeting and forecasting.

Fortel is rule number three for revenue driven marketing is to plan marketing mix around revenue. So CMOs need to determine what combination of tactics are going to best work for them. And we know in this digital first world, you have a lot of choices. You could do ads, you could do email, content syndication, search, events, social. How do you create that optimal mix of the plethora of choices in this digital first world that you have? How do you decide what to do, what not to do?

So what we do is once we get the pipeline target, we said, okay, here is the pipeline target. Here is the target. Here is the pipeline target. We have. And because we have good experience based on history in terms of lead sources, we know the conversion rates, et cetera, of each of the lead sources. We know the cost per lead of each lead sources. But the dynamics of each of these lead sources are different. Some are constrained by the market and what can be provided. And some are within our control, right? A classic example for market is Google, Google searches. The number of searches in Google is relatively flat for generic terms that people are searching for. You do, you can bid on those and there is some degree of control that you have, but the overall search itself is a given. On the other hand, when we do outbound marketing, email, phone calls, other kinds of outbound marketing, those are under our control. So what we do is to first start off with a place, the most efficient way of that we know how. And in our case, it’s lead aggregators. So we take that and we fill up the bucket as much as we can. And then we go to the next step, which is to build a network. And once we fill up the bucket, then we go over to other lead sources. And once that is done, then we then say, okay, given the gap that we have, how much more do I need to do from an outbounding perspective or from things that I directly control that could make up the pipeline? And I think many times CMOs and marketing professionals don’t really know what is the cost of that customer acquisition. And they may go throw money at a trade show that yields that’s the wrong target. And so you get a bunch of people who are like, oh, I don’t know. I don’t know. But I think CMOs are really smart. And they run a program. And they have no idea that they’re going to take the steps that are necessary to get a bunch of business cards and leads, but they’re not the right ones that convert. Or they run a program which may not deliver the intended results.

One point in my career, I was at a company and our business in Germany was suffering badly. And they came up with a plan to go sponsor a soccer team or a football team, as they may say there. And it kind of got fast-tracked through when it was a sponsorship that really didn’t have the data or ROI built in. It was like, we have to go do this because the business is suffering. It was a multi-year, millions of dollars of cash burned with very little new customer business. And there’s many examples like that that I think are painful for both CMOs and CFOs when you see that amount of money wasted that could be put towards programs that actually drive revenue and drive bottom-line results.

So for tellers, rule number four is to execute, measure, and adjust around your revenue goals. What’s hard about the B2B business is you have long sales cycles, multiple touches, and marketing’s performance today will have an impact on your revenue tomorrow, right? And that’s hard. So the visibility into your future performance is important but hard to measure. And you really need, we believe, some sort of a navigational dashboard. So you need to have a good understanding of your current performance and some leading indicators of where you will end up. So Venkat, which KPIs do you look at on a daily or a weekly basis that give you the confidence that the company and you will make your number one or two quarters from now?

The dynamics of each of our businesses in terms of segments are very different. When it comes to small business, leads that are created like today will close for the most part within three to four weeks. I mean, as in revenue in the door. Right? On the other hand, when it comes to our mid-market and enterprise, it takes much longer for that to happen. So there are two sets of metrics that I look at for both. One, I need to know whether I’m going to make my pipeline target for this quarter. That’s one that I need now. Secondly, I also need to know whether for mid-market and enterprise, whether they’ll have enough pipeline in two quarters time when things would land, whether they’ll have enough pipeline at that stage or not. We look at number of leads that come in. We look at quarter. We look at quarter to date pipeline. And then we compare that with what did we do last quarter. And then we look at what did we do relative to the targets a year ago this quarter. So that gives us the seasonality within the quarter. And we also look at the pacing within the quarter. What did I do last week relative to 90 days, the past 90 days. That gives me the trend that we’re going. So those metrics give me a sense of whether I’m going to make the pipeline numbers this quarter. And whether it’s going to tell me whether the company is going to make the number in future quarters or not for that we look at conversion. We also look at in terms of whether we’re generating enough pipeline for the bookings to happen from our sales colleagues. We look at the stages. Once we hand it over to the sales guys, we look at the stages and we look at the velocity at which the deals are going through the stages to look at whether we have enough. We have enough of a balanced pipeline. So those two sets of metric. Give us a sense of. and whether the company’s going to make our numbers.

As a public company, every quarter you set guidance to Wall Street and you say, where do you expect the business to land? Typically revenue, EBITDA, EPS, an earnings metric. And you want to have confidence you’re going to deliver on those numbers. And so there are certain businesses in Poly today that are turns businesses that basically customers order. It’s more of a churn. And you look at historical sales rates and look at, you know, how is that business performed historically and look at the linearity and effectively seasonality and apply judgment. And in a business that’s more of a direct sale, think of high end video. It’s typically a sales driven process where there’s a funnel and the funnel metrics, as Venkat said. And you look at the stages in the funnel and say opportunity to stage two, stage three, stage four, stage five to close transaction. And we’ll do a weighting of those. Now, where the CMO comes in, it’s critically important, is making sure that the business is doing a good job of getting the business going. And that’s where we’re going to be looking at the business performance. And that’s where we’re going to be looking at the business performance. And that’s where we’re going to be looking at the business performance. So we’re going to be measuring and managing that funnel. If we have a funnel that has a lot of stage five, but very little stage zero, that might mean that this quarter is fine, but next quarter is in really bad shape. And so the CMO’s job, in my opinion, is to really make sure they understand the nature of that funnel. And when things go off the track, what do you do? I look at every single day what our sales out is, how much are we selling out to the channel, and how much are we selling into the channel daily shipments. And I look at the track. And I look at the track. Are we tracking? Are we tracking? Are we on pace to deliver the results that we expect that quarter? In addition, weekly, we look at the pipeline with marketing, with sales, and say, what’s the nature of the funnel? What are the big deals that are going to convert or not? And a great CMO is in front of sales, in front of finance, ahead of time, saying, we have an issue, or boy, we’ve got opportunity. So that’s the cadence for the stages that I think are just critically important.

So for tellers, rule number five is to communicate marketing’s impact in the language of revenue.

I believe that this connection to revenue is what enables marketing to communicate its impact in the language that their strategic stakeholders understand, so the marketing can be perceived as a strategic engine of growth. I believe today, more than ever before, CMOs really need to speak that language and have the visibility and the capabilities to turn revenue goals into reality. I think that’s the key. I think that’s the key. I think that’s the key. I think that’s the key. The key is to make sure that CMOs are able to talk about their goals and to talk about their revenue outcomes. That doesn’t substitute for bad decisions or bad execution, but it will certainly help CMOs to be less perceived as a cost center. The key reason why I’ve had fun in this company and continue to have fun is the role of marketing and how central it is to the overall bookings and revenues of the company. And the key element of that is my relationship with the CEO. And the key element of that is my relationship with the CEO. About a year, year and a half ago when I started, he’d come to my desk, which unfortunately is only 20 steps away from his, come to my desk each day and ask me, how’s the pipeline going. He used to ask me three times. Now he asks me only once a day. And so I guess that’s an improvement. But what that demonstrates is that he recognizes the role of marketing and the importance of marketing when we, as they say, when marketing catches a cold, the company catches pneumonia. And so he understands the role. the role of marketing and how important it is, as opposed to, you know, rewind the clock 10 years ago, 15 years ago, marketing often was thought of as a boat anchor. It was just something that you had to do. Should CMOs have a quota, like salespeople? I believe they should. I mean, the quota could be elusive though, because many companies are different. If you’re a channel-led versus a direct or a, you know, a SaaS company versus a, you know, so, but yeah, I think there should be a quota and it should be measured based on effectively overall pipeline and funnel fullness. At 8x8, I get to get my job as a CMO if we meet the pipeline goals. And so having a target pipeline, or any target for that matter, for our case, pipeline, is a very important metric, not just for me as a CMO, but also for the entire organization, because it helps us focus our attentions on where we need to deliver for the company, on what we need to do for the company.

Revenue-driven marketing is a strategy for connecting marketing execution to the company’s revenue plan, and making sure that you make decisions, act, execute, and communicate everything you do in the language of revenue. Given that the most important thing that we can deliver to the company is bookings and pipeline, bookings and pipeline and therefore bookings, the most important thing for me is, when we talk about revenue-driven marketing, it helps us, focus the organization on the main thing that we’re measured on, which is pipeline.

As a CFO, Rahul, revenue-driven marketing is a mindset that I think is overdue. I mean, in the past, I’ve seen marketing be kind of a scattershot, or effectively like a shotgun approach to how you run your function as a cost center, and having the focus of revenue-driven marketing changes that to, I’m looking at the metrics of what is the return I’m getting on the marketing investment measured directly in terms of sales and end result of revenue and profitability. And as a CFO, those are the things you really, really care about. What am I spending money on? Is it spent appropriately that leads to growth of revenue and growth of profitability? And I think it’s a mindset that I think many companies really could improve, quite frankly. You really helped to provide some useful tips to help CMOs and CFOs. I think it’s a mindset that I think many companies really care about. What am I spending money on? Is it spent appropriately that leads to growth of revenue and growth of profitability? And I think it’s a mindset that I think many companies really care about. You really helped to provide some useful tips to help CMOs and CFOs frame their decisions, their actions, their communications in the language of revenue. So thank you. Our panelists talked a lot about how they’ve embraced the five rules of revenue-driven marketing and how that’s impacted their businesses. But there are several other reasons for embracing these rules. First, it makes the job of the CMO much more fun to speak the language of revenue. It also makes the job of the CMO to be much more strategic and effective. And I think that’s really what makes CMOs and CFOs so much more important than anything else. And I think that’s why CMOs are so important and essential. And I believe it is really the key to thrive as a CMO in today’s world.