Part 2 of the series: A B2B CEO’s Guide to Navigating the COVID-19 Revenue Reality
In a world that has struggled to make sense of the COVID-19 pandemic, you, too, are likely working to better understand the roles that your team members will play in the recovery.
As you will recall from our last blog, we noted that such cross-departmental realignment is nothing new. For years, industries that faced digital disruption were forced to optimize their revenue-producing expenses in order to survive. The same can be said for all industries in the face of the current global pandemic.
This unique challenge is coming on the heels of a B2B buying process shift already underway. In a study by the Harvard Business Review on the B2B buying journey, it was noted that 65 percent of customers already know exactly what they want before they have their first conversation with your sales professionals. And in the Forbes “Build A Compelling B2B Customer Journey” report, it was found that, on average, B2B buyers are 57 percent of the way through the buying funnel by the time they call.
What does this mean to your business? Quite simply, the buyer is in control, and your marketing department—often historically relegated to the tactical execution of “softer” tasks—will need to take a stronger role in direct revenue production, and in more actively guiding high-value buyers to the point that they are ready for sales conversations.
Sales: A Brief History
For the better part of this century, companies selling products and services to other businesses (B2B) often relied heavily on their sales forces as front-line foot soldiers to bring in revenue. In this rear view, marketing played a supporting role — creating brochures, managing events, sending emails, and managing the company website. The message: Sales is king, and marketing is staff. This model worked for decades with many companies, although recent data suggested it was already time for change.
Compounded by the impact of COVID-19, it’s abundantly clear that a new approach is needed right now. In the non-contact, remote-by-default marketplace, your sales teams are going to struggle for face time, and that face time will be different and less personal, even with current video technology. Too, many buyers simply will not be ready to purchase right now.
That’s why there’s no better time than now for you, as CEO, to revisit the “truths” that underpin your company’s revenue sources and explore options that can offer revenue growth while minimizing costs. It will require you to look at sales and marketing together as a single, breathing organism, and to rethink how work is done and where accountability lies. You need to find a way to point your generously compensated sales resources toward optimal revenue prospects, while leveraging efficient marketing channels to help you close business with lower value clients and prospects, conquer new markets, or unclog valuable prospects stuck in your funnel.
Self-Diagnosis: Do I Need to Realign?
Ask yourself these questions to determine if you should make some changes in your sales/marketing roles and responsibilities:
- When deciding levels of marketing investment, do you focus on the revenue and EBITDA you receive from marketing, or are you more focused on a percentage of revenue as a benchmark target? We often hear CEOs focused on “X” percent of revenue as a goal for marketing, simply because that is the industry benchmark. However, that approach can be completely self-defeating. I’m not suggesting that cost control is not important; instead, I would implore you to look at total ROI-per-dollar-spent as the metric for marketing investment. You don’t want to be average, so you shouldn’t be aiming for the middle from the start. You want to be above average in revenue performance, so your marketing investment should be driven based on profitable revenue performance. It can be hard to measure, but if the leadership team agrees to put this approach into practice, it can be done.
- Does your marketing team routinely deliver a subset of your revenues? If not, why not? Does marketing own any revenue lines? Have you explored transitioning certain customer segments or margin-level clients to marketing to either acquire, or retain/upsell more cost-effectively? With the right team and processes, it is possible. If you have a subscription business, are you giving marketing the lead role for cross-selling opportunities and renewals? I have seen situations in which sales not only owned all subscription renewals, but actually was hitting the phones early in the renewal cycle to make costly renewal calls for $400 annual subscriptions. After factoring the cost of renewal, one would have to wonder how profitable those renewals actually were! I recall one situation in which we first attempted to make a change in that process but were told that we couldn’t change, because we would “hurt commissions for sales personnel.” Ultimately, we implemented a compromise in which marketing would “own” renewals up to the point of expiration, and sales personnel were refocused on higher value clients for whom the sale was harder to achieve, but the value and profitability was substantially higher. We replaced some sales personnel who could not make the transition, but the end result was a smaller, higher skilled, higher-paid salesforce driving significantly larger lifetime-value deals. The bottom line: We earned more revenue per dollar spent in the combined sales and marketing expense lines.
- Who speaks to you, your leadership team, and your board about revenues? Do you routinely include marketing as part of the conversation? Or is your head of sales the one doing all the revenue talking in those meetings? Also, is the head of sales really equipped to speak to the revenue streams delivered by marketing? Experience suggests that sales leads will focus on bigger deals and pipelines, often skipping conversations about the less glamorous but totally relevant metrics and performance necessary for profitable lower value revenue delivery. Though I agree that those high-value deals are critical and deserve time for discussion, the engine that consistently delivers baseline revenue results is key as well. Both need your attention, and your focus.
- Does your head of marketing report directly to you? The reporting relationship of marketing speaks volumes about the perceived value of the function. In the B2C world, the Brand Manager (typically a consumer marketer) often owns full P&L responsibility. That manager is entrusted with decisions about target market segments, product priorities, channels of distribution, pricing, and promotion. These high-visibility roles report directly to the CEO. In the B2B world, I have observed situations in which marketing was considered a staff function reporting to a business unit head, or a sales lead, or possibly a COO. Marketing leadership needs to sit at the leadership team level, and to be empowered to offer a market-based, outside-in point of view that can drive business today and tomorrow.
- Do you ask marketing what the next priority segment, product, or channel of distribution should be? If not, who is making those decisions? Is that person a market-based outside-in individual? Sales personnel are very good at stating a given client’s needs, but they often struggle to identify emerging trends. Product folks often look to sales for their inputs, or they focus on solutions borne of technology, regardless of clear client need. With the proper focus, authority, and processes, marketing can offer the company the insights necessary to make market-based growth decisions.
Can marketing solve all your needs? No — but neither can finance, HR, sales, product, or any other department, in isolation. However, if you are not leveraging your marketing function in both strategic decision-making and tactical sales execution, odds are the value this function is contributing isn’t optimized. And, if that is the case, you likely have an opportunity to increase the ROI from your combined sales and marketing investment.
In our next blog, we’ll take a deeper look at a smart approach to cost control.