Metric-Driven Sales and Marketing Alignment

[image source_type=”attachment_id” source_value=”13969″ align=”right” title=”Sales Analytics – InsightSquared” size=”medium”] I call it the age old Hatfield-and-McCoy feud of the business world. It isn’t Coke vs. Pepsi. Or Microsoft vs. Apple. Or Apple vs. Samsung vs. Google (these days). It’s Sales vs. Marketing.

Since the dawn of time, Sales is on one side saying “there aren’t enough leads”. And if there is a high volume of leads, they come back with the classic “the leads suck.”

On the other side of the fence is Marketing, glaring back and saying “You wouldn’t think the leads suck if you actually worked the lead quickly.”

It is an old conflict, but absolutely unnecessary. You can use sales analytics, metrics and service level agreements begin to defuse the feud.

Framework for defusing the feud

A Service Level Agreement (SLA) is a pretty old concept in business. It is a formal agreement between a service provider and the consumer that clearly defines with a metric how the service provider needs to perform. In this case, the primary service provider in the sales and marketing relationship is Marketing. Marketing is responsible for the service of providing leads to Sales.

Given this framework of using an SLA between Marketing and Sales, here are three methods for creating such an agreement (in order of increasing complexity).

Basic Service Level Agreement

The natural response to Sales saying “there aren’t enough leads” is to set a goal around number of leads marketing will provide each month. So for those marketers without a lead goal, step one is to set a monthly lead goal. This lead goal is Marketing’s commitment to the sales team, their service level agreement.

It is remarkable how many marketers I’ve met who don’t have a specific lead goal.

Putting the metrics to work: Find your Lead-to-Opportunity conversion rate. And find your Opportunity-to-Deal conversion rate. Group that with your business’ bookings goal and your average selling price for the year and you can determine what your raw lead goal should be. This raw leads goal can act as a simple SLA between Sales and Marketing and start to defuse the conflict.

Intermediate Service Level Agreement

There are lots of ways to create leads. And if you’re being judged on a pure volume basis as a marketer, you have lots of options at your disposal that allow you to deliver a high volumes of leads, with low quality.

So once you start creating a high volume of leads, the sales-marketing relationship will grow and change. It is likely, with a high volume of leads, that sales will start to complain about the quality of those leads (“These leads suck!”). And with that, it is time to create a quality measurement for the leads that the marketing team is creating. Often, these might be called “Marketing Qualified Leads.” Lead scoring comes into play.

The agreement, i.e. the SLA, between sales and marketing needs to evolve. Instead of the pure leads goal, you create a goal for a number of “high quality” leads (a.k.a. Marketing Qualified Leads)

Putting the metrics to work: The key here is determining your own definition of a high quality lead. This is where a tight linkage between your sales and marketing data is critical. Examine metrics like your Lead-to-Opportunity conversion rate and your Opportunity-to-Deal conversion rates for all of your leads. In turn, its time to slice and dice these leads. Explore your data. Are your conversion rates higher for specific lead sources or channels? (organic efforts vs. paid efforts vs. trade shows vs. list buys vs. cold calls). Are there specific offers or landing pages that convert from lead to opportunity more frequently (free consultation offers vs. white papers vs. demo requests)? It is imperative that you are able to explore your conversion rates to find the variables that leads to high conversion rates.

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But you can’t stop at the conversion rates. You need to minimally validate that these higher converting leads actually deliver the kind of average selling price you need to meet your goals.

Beware! Sometimes the sales team will think one source or offer is superior. Often times they’re correct. But there are frequently hidden gems in the data. Don’t stop at what the sales team thinks is best. Validate with your data.

Advanced Service Level Agreement

Which is better? High volume? High quality? It is hard to say for sure. Marketing needs some flexibility month-to-month to make these choices.

Why? Marketing can’t always control the quality of the leads in a particular month. Month-to-month and week-to-week it can be difficult to always go after high quality leads. The budget might be limited. Or marketing’s old reliable tactics might not be converting at the usual levels. Reality intervenes and marketing will need to balance their efforts between high volume tactics and tactics designed to bring in and nurture highly qualified leads.

In order to handle the messy reality of these tradeoffs, your marketing team needs an agreement with sales that provides them with tactical flexibility. To have this flexibility, the next evolution in sales and marketing agreement is a one in which leads of varying quality are part of the agreement.

What’s better? 100 leads that end up closing at a 2% rate or 4 leads that convert at 50%. Assuming equal effort from your sales team for both scenarios, you shouldn’t care. You end up with 2 customers in each scenario. So you can craft an agreement between sales and marketing that reflects this potential flexibility.

Putting the Metrics to work: To implement this advanced notion, don’t just isolate which leads are high quality and which are not. Instead, assign a value to each type of lead. The expected monetary value of a lead is the best place to start.

Derive this value from your historical performance. How much have we booked from this particular lead source? From this particular offer? Divide that by the total number of leads garnered and you have a value per lead calculation. Do that for each of your sources, offers or other key variables to calculate a full range of lead values for each lead type applicable to your business.

Using your bookings goal, create a “total lead value” goal for Marketing. Now marketing will have the tactical flexibility it needs to generate a mix of leads, if they can’t deliver all high quality leads, all the time.

What about Sales? Don’t they have an obligation here?

Of course they do. Sales has its own end of the bargain to keep and they are just as measurable. That means giving real, concerted effort to all of the leads marketing hands over and measuring that effort.

Sales needs to measure itself on metrics like 1) the percentage of new leads it works 2) how quickly it works each new lead and 3) how many activities it executes for each lead before marking it dead.

Marketing will hand over leads of varying quality. But even the lower quality leads will convert. Its a matter of putting in a baseline of effort on every lead. Sales can have its own SLAs around these types of metrics.

If the low quality leads aren’t worked, they have a 100% chance of not converting.

Make the Data Accessible

One last note around making your SLA successful.

If you have an agreed upon set of metrics and SLAs to help each other, then those need to be aggressively communicated. When it comes to communication, I believe in using multiple channels, as different people consume and absorb information through different means. Some people love to get everything pushed to them in email. Some people learn best when the data is verbally delivered in a  meeting. Some people want to consume it on their own terms in a reporting product or on internal wiki. Cater to them all so that every preference is covered.

Its important to clearly communicate both teams’ goals to each other and monitor progress towards these agreements with maximum transparency and accessibility for full accountability.

If you do, then peace may reign in your organization, just as the Hatfields and McCoys eventually found peace as well. They probably did not use an SLA to accomplish that peace though.

Want an easy way to calculate the metrics you need to create Sales and Marketing alignment? InsightSquared is the answer.

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In the “credit where credit is due” department, much of this blog post was inspired by conversations with Mark Roberge of HubSpot.