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
Introduction
Rahul Shasta: Hi, I’m Rahul, co-founder and CEO of a stealth-mode startup focused on revenue-driven marketing. Before this, I’ve had over 20 years of experience in B2B marketing, and one thing I’ve seen in the past few years is the increasing pressure on CMOs to be more than campaign tacticians. They’re now being asked to be strategic drivers of revenue growth. Now, this is not a trivial change, and today we’re going to talk about the five rules of revenue-driven marketing. Now, with me today, I have two stellar panelists who’ve had tons of experience on both sides of the marketing and finance table. Chuck Boynton, who is the CFO of Poly. Chuck, tell us a little bit about yourself.
Chuck Boynton: Thanks for having me, Rahul. It’s great to be here. My name is Chuck Boynton. I’m the CFO of Poly, a publicly traded company. We do video, voice, and headset products. I’ve been a CFO for a long time at a number of different public and private companies, including SunPower, a solar energy company, and a number of years ago at Intel. So, thanks for having me. Great to be here.
Rahul Shasta: Awesome. Venkat Nagaswamy, who I’ve known for a while. Venkat, you want to tell us a little bit about yourself?
Venkat Nagaswamy: Yeah, thanks for having me, Rahul and Chuck. So, I learned my marketing at the school of eBay, and since then I’ve been a marketer for some consumer companies. And then, most recently, I was the CEO and founder of a deep learning for marketing platform called MyntIQ, which was acquired, which is how I find myself in my current role. So, thanks for having me.
Rule 1: Align Marketing to Revenue
Rahul Shasta: Thanks, Venkat. So, let’s just get right into it, right? So, Rule number one: align marketing to revenue. Now, Forbes and Heidrick & Struggles recently did a survey of CMOs, and one of the things they pointed out was the tenure of a CMO has actually declined in the past decade. It’s now down to two and a half years, which is one-third the tenure of a CEO. And a big reason for this, in my opinion, is the changing expectations of a CMO from being a tactical player focused on, “Hey, how many people did I get to this event?” or “How many people came to my website?” to being a strategic driver of revenue growth. Now, Chuck, let’s start with you. As a CFO, what is your expectation of your marketing counterpart?
Chuck Boynton: Well, thanks. I think the key objective of every business is to make money and grow revenue. And the CMO is an integral part of making that happen. We can’t sell something without a lead. We can’t sell something without awareness. And that’s what marketing does. We have to have top-of-funnel leads so that we can ultimately have the sales team convert that to sales and revenue.
Rahul Shasta: Right. Venkat, let’s hear from you. You’ve had a lot of experience on this. What’s your take on this?
Venkat Nagaswamy: I completely agree with Chuck. And I think the rise of digital and SaaS has made marketing’s role even more front and center in any B2B organization. And with the rise of tools like Salesforce and other things, marketing is extremely measurable today. I get asked by my CEO at least twice a day, “What’s the pipeline?” It is always, always front and center, which is unlike even, let’s say, 10-15 years ago, when I was at eBay, where we were still struggling with a lot of these elements. But today, the expectation of marketing is to deliver pipeline, to deliver results. For instance, when we start off our planning, we start off with, “What’s the revenue plan for the company?” Which we then decompose by region and by segment. And we convert that to a bookings plan. And the marketing’s target then becomes a pipeline target based on the conversion dynamics that we have, the conversion timelines we have, the deal sizes, conversion rates. All of those things give us a very specific marketing target, which is the pipeline target that we have. So, today’s marketing is all about delivering results.
Chuck Boynton: That’s exactly right. The way we budget, as well as we start with our AOP, the annual operating plan. So, what do we expect the industry to grow by product, by geography? How much do we want to grow? Do we want to take share? Do we want to grow with the market? And then we look at how much marketing spend we need to support that growth. So, is it 2% of sales, 5% of sales? It really depends on the business, but we always start with the revenue targets.
Rule 2: Measure Marketing’s Contribution to Revenue
Rahul Shasta: Right. That makes perfect sense. So, let’s move on to Rule number two, which is: measure marketing’s contribution to revenue. Right, so if you’re a CMO and you’re at the table with the other C-suite executives, you really need to be focused on the strategic KPIs as opposed to just a tactical list of metrics that you look at. So, Chuck, again, as a CFO, what are your expectations of the CMO in terms of the metrics that they are presenting? What kind of metrics do you care about?
Chuck Boynton: Ultimately, I care about the return on investment. Marketing is a big spend category for us, and so we want to understand for all of our key marketing programs, what is the expected outcome, and then how do we measure the actual outcome. And for programs where we cannot measure them, they’re typically programs that we will either not fund or should not fund. Now, there are some exceptions for brand and things of that nature, but for the most part, we should be creating models to measure every one of our marketing programs.
Rahul Shasta: Awesome. And, Venkat, how do you manage this in your organization?
Venkat Nagaswamy: No, I completely agree with Chuck. Marketing, there are two kinds of marketing we do. There’s direct response, and then there’s awareness. Awareness is harder to measure, though not impossible, whereas direct response is easily measurable. So, we look at pipeline. That is the number one goal. And below that, we have sub-metrics. So, we’ll look at the pipeline we create by channel, and even within a channel—so, for instance, let’s take Google AdWords—within that, we’ll be looking at, “What is the spend we have? What is the cost per click? What are the conversion rates from the click to a lead? And from a lead to a qualified lead,” and so on. And so, we have metrics all through the way. So, that’s for direct response. On awareness, it’s harder, but like, for instance, in one of my previous companies, when we did radio ads, which is typically considered awareness, we used a variety of big data techniques to then go measure it, to look at website traffic before the radio ad was done and then after, and so on. So, there are ways to measure even awareness, though it’s much harder. So, as a result, we do focus most of our efforts on direct response.
Rahul Shasta: Yeah, and you mentioned channels and, you know, measuring each channel. That kind of takes me to the next rule, which is Rule number three: plan your marketing mix around revenue. Now, there’s a plethora of choices for marketers these days, all the digital choices. So, Venkat, how do you decide which one to use? How do you create that optimal marketing mix?
Venkat Nagaswamy: That’s a great question. And the way we look at it is we’ve measured each of our channels in terms of what I would call as efficiency, right? And we define efficiency as, “How many dollars of pipeline do I create for every marketing dollar I spend?” And based on that, we have a rank-ordered list of our most efficient sources. Now, we are constrained, however, by the inventory from each of these sources. So, we’ll take our most efficient channel and we’ll max it out. So, for instance, it could be lead aggregators. We know they deliver a certain amount of pipeline. We will max that out. And then we’ll go to the next one and the next one. And once we’ve exhausted all of our what I call as purely marketing-driven channels, if there is still a gap in terms of the pipeline that we need to generate, that’s when we deploy other techniques like outbound SDRs and other things to go bridge that gap. But we start off with our most efficient and then go from there.
Chuck Boynton: We’ve had some missteps there, though. We had a large sponsorship in Germany. We spent millions of dollars, and we couldn’t measure the outcome, and it turned out to be a really poor use of capital. So, it’s really important to do that deep-dive analysis on your different programs to understand what the real return is.
Rule 3 & 4: Optimal Mix & Execution
Rahul Shasta: Absolutely. So, which gets me to the next rule, which is Rule number four: execute, measure, and adjust around your revenue goals. Now, this is not easy, right? So, marketing’s impact is in the future. B2B sales cycles are long. So, how do you do this? How do you have that navigational dashboard that shows you where you’re going and whether you’re going to get there or not? What are the leading indicators that you look for? Venkat, let’s start with you on this.
Venkat Nagaswamy: Yeah, that’s a great question, Rahul. So, the dynamics are different by the segments we go after. We have a small business segment and a mid-market and enterprise. For small business, the leads typically convert to bookings within the quarter, whereas for mid-market and enterprise, it takes much longer. But in either case, we look at daily and weekly metrics. So, for instance, we’ll look at, on a daily basis, “How many leads have we generated?” And, on a weekly basis, we’ll be looking at, “How is the pipeline quarter-to-date compared to previous quarters and previous years at the same time and relative to our target?” “Are we pacing at 90%, 100%, 110%?” So that we can get a get a feel for what the trend is. And then we look at the other things that we talked about earlier, the conversion rates and so on, so that we know how we’re pacing within the quarter. And then, we also have to make sure that we have a balanced portfolio of pipeline for future bookings. So, we’ll also be looking at the velocity of deals through the sales stages to understand how the pipeline is maturing to bookings.
Chuck Boynton: We do something very similar. I’m a public company CFO, so I have to give guidance to Wall Street every quarter. So, it’s really important that we have confidence in our ability to hit the numbers. So, for what we call our “turns business,” which is more direct orders, we look at historical sales rates, seasonality, things like that. For our sales-driven funnel, so our high-end video, for example, we’re looking at the funnel. The CMO has to understand what that looks like. We have to understand the coverage. If we don’t have three or four-to-one coverage, we’re probably going to miss the quarter. And so, we use that to manage the business. So, if we see a problem, a hole in the funnel, the sales team and the marketing team can jump on that early in the quarter, not late in the quarter.
Rahul Shasta: Right. How often are you looking at these metrics?
Chuck Boynton: For the turns business, it’s daily. So, we have a daily sales out, sales in to the channel. And for the pipeline business, we review that weekly with marketing and sales.
Rule 5: Communicate in the Language of Revenue
Rahul Shasta: Great. So, that gets me to the last rule, which is Rule number five: communicate marketing’s impact in the language of revenue. Now, this is a very important rule because, as a CMO, if you want a seat at the table, if you want to be looked at as a strategic growth engine as opposed to a cost center, you really need to speak the language that the rest of the C-suite speaks. So, Venkat, what has been your experience on this front?
Venkat Nagaswamy: Yeah, absolutely. As I mentioned earlier, my CEO asks me about pipeline every day. And my CEO recognizes that the pipeline marketing generates is critical for the bookings and the revenue of the company. In fact, if you go back even before my time here, when we didn’t have a very strong marketing engine, we struggled to hit our bookings numbers. The moment we had that in place, we’ve been hitting our numbers. So, marketing’s role is well-recognized.
Rahul Shasta: So, Chuck, here’s a controversial question for you: should the CMO have a quota?
Chuck Boynton: I think so. How you measure it, maybe it’s overall pipeline, maybe it’s funnel fullness. So, you can debate what the right metric is, but yes, the CMO should have a quota.
Rahul Shasta: And, Venkat, do you have a quota?
Venkat Nagaswamy: I absolutely do. It’s the pipeline quota. If I don’t hit my pipeline quota, I am not doing my job. And that is recognized across the board. In fact, that pipeline is a critical metric for the whole organization because it helps focus everybody, not just marketing, on how we are going to deliver the bookings for the quarter and for the year.
Rahul Shasta: Right. So, to summarize, revenue-driven marketing is a simple but powerful strategy to connect your marketing execution to the company’s revenue plan so that your decisions, your actions, and your communication are all in the language of revenue. Chuck, what’s your take on revenue-driven marketing?
Chuck Boynton: I think it’s long overdue. I think marketing has sometimes been seen as a cost center where they do a lot of scattershot programs, hope for the best. And now, we’re in a world where we can measure the ROI on our marketing investments directly in terms of sales, revenue, and profitability. And that’s exactly what we should be doing.
Rahul Shasta: Fantastic. Well, thank you, Chuck, and thank you, Venkat, for your wonderful insights today. And, for the audience, I’d say that if you embrace these five rules of revenue-driven marketing, your job as a CMO will not only be more strategic and essential, but it’ll also be a lot more fun. And it’s key to thriving in today’s world. Thank you for joining us.
Confidence: 100%