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

[Rahul 00:13]: Hi, my name is Rahul Sa.

[Rahul 00:16]: I’m the CEO and co-founder of For a revenue driven marketing company.

[Rahul 00:21]: 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.

[Rahul 00:31]: 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.

[Rahul 00:43]: Those CMOs that can make that shift will continue to thrive and those that can’t will move on.

[Rahul 00:51]: So for today’s conversation, I’m joined by two respected colleagues. What don’t I ask you guys to introduce yourselves to our audience?

[Chuck 00:59]: Great, thank you Rahul. Uh Chuck Boyton, I’m the CFO of Polly. Um, uh, 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 uh public solar company and then before that was the CFO of several other public and private companies including Intelli and Rahul, where we worked together about 15 years ago.

[Venkat 01:22]: And I’m uh Venkat Nagaswami, I run marketing at 8x8. We are a cloud provider for business communications.

[Venkat 01:29]: I came to this company as a result of my company Mariana IQ being acquired by 8x8. Mariana IQ was a deep learning for marketing uh platform and I started that as a as a result of some insight that I got uh when I ran enterprise marketing at Juniper Networks. This topic is very close to my heart, so I’m really really glad to be here.

[Rahul 01:49]: 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 uh and would love to hear and ask you some questions and get your thoughts on each one of those points.

[Chuck 02:02]: Sounds great.

[Rahul 02:03]: Awesome. Okay.

[Rahul 02:04]: 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 Spencer Stewart that said the median tenure of CMOs declined from 34 months to 28 months in the last five years.

[Rahul 02:27]: 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 at the CXO and the board level.

[Rahul 02:50]: What do CEOs, CFOs and the board expect from the modern CMO?

[Chuck 02:56]: Clearly, every business is designed or their mission is to make money and grow revenue. I mean, that is the the core tenant of every business. And the CMO had 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 and transact. And they play a really critical role in managing and creating that funnel so sales can go execute and close transactions.

[Venkat 03:25]: What’s happened over the past 10 years or so is rise of digital, rise of SAS, both of which contribute towards the increasing role for CMOs and marketing uh within B2B organizations.

[Venkat 03:38]: 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. And once people started getting that visibility and once the importance of marketing to a SAS company started going up, that put CMOs and and marketing uh in the prime position of having to deliver uh to the board and to um to the CEOs and CFOs.

[Venkat 04:03]: 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 5, 10 years, far more than what it used to be, let’s say 15, 20 years ago.

[Rahul 04:19]: So when you think about, when you create your corporate plan, how do you determine marketing’s expected impact on that corporate plan?

[Chuck 04:31]: Well, I think, you know, first of all, you 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 would 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 going to 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.

[Venkat 05:01]: As Chuck was saying, it starts off with the revenue plan. Finance has gives us targets based on regions and uh and segments. We sell to three segments, small, medium and large and we sell in about uh 20 geographies.

[Venkat 05:14]: So based on the revenue plan, finance gives us a booking 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, the dynamics of uh the segments, what is the timeline, does does it take from conversion from pipeline to final booking conversion? How big are the uh deal sizes, what’s the conversion rate? So we take all of these things and then uh figure out what the pipeline that we need to generate in each quarter by segment, by region.

[Venkat 05:46]: So that clearly defines a connection between the overall revenue goals that the company has to the marketing, the contribution that marketing makes.

[Rahul 05:56]: That actually dovetails into our rule number two, which is measure marketing’s contribution to revenue.

[Rahul 06:03]: Uh, so one of the recommendations that we make to CMOs is to specifically measure what, how they can contribute to the company’s revenue plan. And a mistake that I’ve seen CMOs make over 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.

[Rahul 06:34]: So Chuck, which KPIs as a CFO do you like to see from marketing?

[Chuck 06:40]: 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, um, you’re gonna, you’re gonna go through a bunch of detailed metrics that could be customer acquisition cost or cost per lead or cost per click or the detailed level. But at the Uber level for a CFO, it’s really what’s the return on the investment.

[Chuck 07:04]: 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, you know, 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?

[Rahul 07:36]: So how do you determine what exactly you’re going to measure and what’s hard about it?

[Venkat 07:41]: There are certain things in marketing that you can readily measure, certain things that you cannot, right? So for instance, uh a lot of our spending goes into direct response. and direct response marketing, given the the lack of relatively few touches that we have, we can measure it directly. Uh on the other hand, awareness metrics are harder to to measure. So nevertheless, what we do is we start off with pipeline and then we break it down uh the pipeline targets, and then we break it down by channel, uh which type from which lead source or campaign am I expected to get what kind of pipeline? And those and then there are sub metrics within that is what I measure, right?

[Venkat 08:15]: 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.

[Venkat 08:30]: Even in awareness we are getting better. One other thing that I want to point out is radio ads is is is a interesting area. Back in the day again, you used to do before and after 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 you based on instrumentation of the website, you can look at the traffic that came before and after.

[Rahul 08:54]: 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 with our audience. How do you determine how much money, how much budget to to assign to marketing?

[Chuck 09:07]: Yeah, and there’s many ways that 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 is 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, okay, well we’re going to grow at 9%.

[Chuck 09:44]: 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 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?

[Chuck 10:04]: The marketing piece is really the key because that’s the tip of the spear. If you don’t have the lead gen and the and the awareness and the campaigns to go generate those opportunities, sales can’t really sell and the channel can’t really sell. You start with that real that economic model. What’s the profitability I’m looking at with the given growth rate and it’s sort of a a timeless model that I’d say most companies follow that sort of general formula for budgeting and forecasting.

[Rahul 10:32]: Fortella’s rule number three uh for revenue driven marketing is to plan marketing mix around revenue. So CMOs need to determine which combination of tactics are going to best work for them. And you know in this digital first world, you have a lot of choices, you know, you could do ads, uh 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?

[Venkat 11:02]: So what we do is once we get the pipeline target, we said, okay, here is the pipeline target that we have and because we have good experience based on uh history in terms of lead sources, uh we know the the conversion rates etcetera 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 uh and some are within our control, right?

[Venkat 11:29]: a classic example for market uh is Google, Google search. The number of searches in Google is relatively flat for uh generic terms that people are searching for. Uh you do, you can bid on those and there is some degree of control that you have, but that overall searches itself is a given. On the other hand, when we do outbound uh marketing, email, phone calls, uh other kinds of outbound marketing, those are under under our control.

[Venkat 11:54]: So what we do is to first start off with places the most efficient way of that we know how and in our case, it’s it’s lead aggregators. So we take that and we fill up the bucket as much as we can. 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 the gap that we have, how much more do I need to do from an outbounding perspective or from things that I directly control uh uh that could make up the pipeline.

[Chuck 12:25]: 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 at a trade show that yields that’s the wrong target. And so you get a bunch of business cards and leads, but they’re not the right ones that convert or they run a program which you know, may, may not uh deliver the intended results.

[Chuck 12:47]: Um, 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 uh soccer team or football team as they may say there. And you know, it kind of got fast tracked through and 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 there’s many examples like that that I think are, you know, are are painful for both CMOs and CFOs when you see, you know, that amount of money wasted that could be put towards programs that actually drive revenue and drive bottom line results.

[Rahul 13:30]: So Fotella’s rule number four is to execute, measure, and adjust around your revenue goals.

[Rahul 13:37]: 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 of your current performance and some leading indicators of where you will end up.

[Rahul 14:03]: So the, which KPIs do you look at on a daily or a weekly basis that give you the confidence that you will, the company and you will make your number one or two quarters from now?

[Venkat 14:16]: The dynamics of each of our business in terms of segments are very different. When it comes to small business, leads that are created this like today will close for the most part within three to four weeks. I mean, as in revenue in the door, right?

[Venkat 14:30]: 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 to know. Secondly, I also need to know whether for mid market and enterprise, whether they’ll have enough pipeline in two quarters time when it’s when things would land, whether they’ll have enough pipeline at that stage or not.

[Venkat 14:55]: We look at number of leads that come in, we look at quarter to date pipeline and then we compare that with what did we do last quarter? And we look at what what did we do relative to the targets a year ago this quarter, so that that gives us the seasonality within the quarter. And we also look at the pacing within the quarter. What’s the how, what did I do last week relative to 90 days that the past 90 days, that gives me the trend that we are going.

[Venkat 15:22]: So those metrics give me a sense of whether I’m going to make the pipeline numbers this quarter. That still doesn’t tell me whether the company is going to make the number in future quarters or not.

[Venkat 15:33]: 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 uh the sales guys, we look at the stages and we look at the velocity at which the the the deals are going through the stages to look at uh whether we have enough, we have enough of a balanced pipeline. So those two sets of metrics give us a sense of whether I’m going to make my number and whether the company is going to make my our numbers.

[Chuck 16:01]: 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, um, Ebi da, EPS, you know, an earnings metric.

[Chuck 16:12]: 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 uh sales rates and look at, you know, how is that business performed historically and look at the linearity and effectively seasonality and apply judgment.

[Chuck 16:35]: And on the 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 as Venkat said. And you look at the stages in the funnel and say, opportunity, uh to stage two, stage three, stage four, stage five to close transaction and we’ll do a waiting of those.

[Chuck 16:54]: Now, where the CMO comes in, it’s critically important is 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.

[Chuck 17:10]: 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 through the channel and how much are we selling into the channel, daily shipments. And I look at the tracking, are we tracking, are we on pace to deliver the results that we expect that quarter.

[Chuck 17:33]: 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 that’s the the the cadence for the stages that I think are just critically important.

[Rahul 17:58]: So Fortella’s rule number five is to communicate marketing’s impact in the language of revenue.

[Rahul 18:04]: 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 as a strategic engine of of growth.

[Rahul 18:19]: 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 revenue outcomes. That doesn’t substitute from bad decisions or or bad execution, but it will certainly help CMOs to be less perceived as a as a cost center.

[Venkat 18:40]: The key reason why I’ve had fun in this company and continue to have fun is this uh is how the role of marketing and and 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.

[Venkat 18:57]: About a year, year and a half ago when I started with it, he’d come to my desk, which unfortunately is only 20 steps away from his, uh 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, you know, when when marketing catches a cold, the company catches pneumonia.

[Venkat 19:25]: And and so he understands the the the role of marketing and how important it is. As opposed to, you know, rewant the clock 10 years ago, 15 years ago, marketing often was thought of as a as a boat anchor, it was just something that you had to do.

[Rahul 19:39]: Should CMOs have a quota like sales people?

[Chuck 19:41]: I believe they should. I mean, it it the quota could be elusive though because many companies are different. If you’re a channel led versus a direct or a, you know, SAS 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 and funnel fullness.

[Venkat 19:59]: At 8x8, I get to keep my job as a CMO if we meet the pipeline goals. Um and so having a target pipeline or any target for that matter and for for our kids pipeline is a very important metric, not just for me as a CMO, uh 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 deliver for the company.

[Rahul 20:26]: 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.

[Venkat 20:42]: Given that the the most important thing that we can deliver to the company is bookings and pipeline, uh 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 are measured on, which is pipeline.

[Chuck 21:00]: As a CFO, Rahul, revenue driven marketing is a is a a mindset that I think is uh overdue. I mean, in the past I’ve seen marketing be kind of a scatter shot 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 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 and uh growth of of profitability. And I think the um it’s uh it’s a mindset that I think many companies uh uh really could could improve, quite frankly.

[Rahul 21:51]: You’ve really helped to provide some useful tips to help CMOs frame their decisions, their actions, their communications in the language of revenue. So thank you.

[Rahul 22:05]: 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.

[Rahul 22:22]: It also makes the job of the CMO to be much more strategic and essential. And I believe it is really the key to thrive as a CMO in today’s world.