Blog Feature

By: Lindsey Graff on July 14th, 2016

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Should Marketing Teams Be Accountable for Revenue?

Inbound Marketing & Sales | Strategy

CostCenterProfitCenter

What is Revenue Marketing?

For many years, business leaders have thought of their marketing departments as cost centers. Marketing people buy ad space, generate creative, engage on social media, etc. - all activities that generate awareness and are usually never tracked to sales. Sure, they generate leads that become sales, but most companies don’t track marketing dollars out/sales dollars in - at least not well.

Revenue Marketing, a term coined by the Pedowitz Group in their book, The Revenue Driven Marketer, is the idea that marketers should be held accountable for more than awareness and leads. It's a way to turn your marketing cost center into a profit center.

They define revenue marketing as:

“The combined set of strategies, processes, people, technologies, content and results that:

  • Drop sales ready leads into the top of the funnel
  • Accelerate sales opportunities through the sales pipeline
  • Measure marketing based on repeatable, predictable and scalable contribution to pipeline and revenue
  • Improve the ROI of the sales and marketing continuum”

With the availability of marketing automation tools like HubSpot’s attribution reporting, it’s now easier than ever for marketers to prove their value by demonstrating how their efforts contribute to revenue. It’s now possible for marketers to measure what touchpoints move leads down the funnel so they can optimize their efforts and accelerate sales.

Beyond taking credit for their work in generating sales and speeding up the process, revenue marketing has another big benefit: it aligns marketing and sales teams around one singular goal: revenue generation.

So much of the disconnect between marketing and sales occurs because the marketing team is focused on vanity metrics. They’re trying to increase the number of Twitter followers, send emails that generate high click-through rates, boost the number of AdSense impressions they’re getting, etc. All of these goals are great, but have little impact on the bottom line.

As soon as marketers turn their focus to metrics that actually move the needle, they’re more aligned with sales, more focused on generating the right leads and nurturing them until they are qualified. When they receive credit for doing this, they’ll work harder. When they work harder, sales teams have more, qualified leads to sell to. It’s a cycle that has the potential to generate huge returns.

How do you hold marketers accountable for revenue?

I know what you’re probably thinking, "That all sounds wonderful but how do you actually measure marketers’ contributions to revenue and hold them accountable?” With the disclaimer that every organization is different and revenue marketing strategies will vary accordingly, I’ll do my best to answer the question...

The Pedowitz Group advocates a complete overhaul of sales and marketing operations in order to start measuring marketing contributions to revenue. They say the “key building blocks” for revenue marketing are:

  1. Strategy

  2. People

  3. Process

  4. Technology

  5. Content

  6. Results

At Denamico, our approach focuses the most on results. The first step is understanding what metrics contribute to the bottom line. Then, you set up team and individual goals aimed at improving those key metrics. If you hold each team member accountable for those goals, revenue is generated and progress is made.

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So what are those key metrics?

The first metrics every executive and marketing team member need to understand are Cost of Customer Acquisition (CAC) and Lifetime Customer Value (LTV). If you don’t yet have these numbers to reference, use this free ebook to learn how to calculate them. (Or contact us and we'll be glad to give you a free CAC/LTV Assessment)

Once you understand your CAC & LTV, you can allocate your funds more wisely toward a marketing plan that focuses on bringing in more money than it costs. This way, your plan will yield maximum ROI that you can use to expand your efforts and ultimately bring in more revenue.

To get more granular, your marketing team should set up a funnel that represents the buyer’s journey.

At the top of the funnel: Which tactics generate awareness? Which tactics generate leads?

At the middle of the funnel: Which tactics cause prospects to choose you over your competitors?

At the bottom of the funnel: Which tactics close deals? (They may need to work with sales to answer this, which helps marketing & sales alignment all around.)

First, scrap any marketing efforts that don’t contribute to these goals. Next, find the best way to measure conversion from one step to another.

What you would want to measure for each phase might look like:

Awareness: Site traffic

Leads: eBook downloads

Interest generated: Demo requests

Sales: Deals closed

What percentage of your site traffic becomes leads? What percentage of your leads request demos? What percent of your demos close deals?

Check out more information on matching your marketing content with stages of the buying cycle and corresponding metrics here.

When your marketing team is held accountable for improving these conversion rates between buying stages, your salespeople get more leads and close more deals - more revenue is generated.

The limitations of Revenue Marketing

Although technology has made it possible for us to measure how marketing pieces affect revenue, the most successful marketing teams do more than that...marketing teams are traditionally one of the most innovative groups at any given company.

If marketers were held accountable - even compensated - solely for revenue generated, they might be less likely to take risks. Marketers need to have the freedom to try new things - to throw spaghetti at the wall and see what sticks. Great marketing almost always grows from something real, something human, something emotional. If your marketing team is so focused on the mechanics of conversion rate optimization, creativity dies and your marketing results will slowly start to die with it.

It’s all about striking a balance: marketers need to move the needle by generating more awareness and nurturing more leads through the funnel. While being held accountable for these key metrics, they should also have monthly and quarterly goals that speak to factors more loosely tied to revenue - Did they try one crazy idea? Did they make customers happy? Were they great team members?

Though we definitely advocate a results-driven approach to marketing management, I think it’s important to figure out what balance works best for your specific company goals, culture, and employees.

What do you think about revenue marketing? Is your marketing team accountable for revenue?

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Editor's Note: This post was originally published in March 2015 and has been updated for accuracy and comprehensiveness.   

 Image by Tracy O via flickr, licensed under CC by SA 2.0