How to Turn Your Marketing into a Revenue-Driving Machine

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When you look at your software company’s marketing department, how do you view it? Is it a cost center or a revenue-driving machine — an assembly line where a controlled amount of raw materials (marketing investment) predictably yields a certain amount of product (revenue)?

If you chose the former, you’re in the majority, says Nadim Hossain, the founder and CEO of predictive analytics company BrightFunnel, a startup backed by a who’s who of advisors and investors, including HootSuite CEO Ryan Holmes and ExactTarget CMO Tim Kopp. If, however, you selected the latter, congratulations — you’ve undergone a shift in mindset that is redefining how businesses leverage their marketing teams to drive revenue.

“Five years ago, it was much more difficult to determine the impact that specific marketing campaigns or channels had on revenue because the technology to track end-to-end conversion was immature or non-existent,” explains Hossain, who has served in various marketing positions at companies like Amazon, McAfee, Salesforce.com, and Bazaarvoice. “Now, with Salesforce.com, Marketo, Eloqua, and myriad other automation and production tools, it’s become much easier to monitor a marketing program’s performance.”

That doesn’t mean, however, that every business is leveraging that capability. And even those that are measuring performance often can’t tie it directly to revenue results.

“There’s still a mindset barrier that’s keeping some CMOs and CEOs from using those tools to tie marketing to revenue,” Hossain says.

“While the best organizations understand that marketing is more than just a lead generation function, there are many CEOs who still believe that marketing’s only purpose is to contribute to the top end of the funnel.”

3 Simple Tweaks to Change Your Marketing Mindset

Consider this scenario for a moment: If you had $100,000 to invest in marketing and had to choose between a handful of channel options (webinars, Google AdWords, and eBooks, for example), how would you allocate that money?

BrightFunnel’s product is designed to make that decision easier by connecting the dots between marketing data silos to generate predictive, actionable revenue insights. But Hossain says that executive teams can also help themselves by making three simple changes to the way they view marketing performance:

  1. Look in the rearview mirror before you move forward. Generally, a fast-growth company often feels like it can’t afford to look back. But in order to influence future results, Hossain says it’s critically important to study past performance. “The activities and tactics you executed last quarter are what influences revenue this quarter,” explains Hossain. “So if you want to plan for the future, you have to learn from the past. Did those Q2 and Q3 leads turn into revenue in Q4? Why or why not?”
  2. Group marketing results into cohorts. As you evaluate performance from prior months or quarters, Hossain says you should be grouping data into cohorts that allow you to determine which campaigns or channels succeeded or failed, or which months or quarters have generated higher quality leads than others. Those cohorts could allow you to see, for example, which percentage of leads from webinars in Q1 converted into customers, and how that revenue conversion rate benchmarks against performance in previous quarters.
  3. Plan better by working backward. Instead of setting a marketing budget and then determining how to allocate your spending, Hossain suggests looking at your revenue targets and working backwards. By doing that, you should be able to determine how many new customers you need to hit that revenue number; how many leads you need to generate to acquire those customers; and where you need to spend your money to achieve that lead volume. And from there, you can use tools with predictive analytics and scenario planning capabilities (like the one BrightFunnel offers) to understand the future return you can expect on marketing investments.

Ultimately, Hossain says, it’s all about more intelligent asset allocation.

“If you want to retire at 65 with a portfolio that’s worth $10 million, you can’t just blindly throw money into a savings account or 401k and hope you hit your number,” Hossain explains. “You have to work backwards from that $10 million to determine the investments you need to make to progressively help you reach your goal. There are numerous financial planning websites, such as Wealthfront, that can help you make investment decisions by prescribing the right asset allocation. At BrightFunnel, we want to do something similar.”

Pairing Marketing Results with Bottom Line Context

Importantly, Hossain says that tying marketing to revenue generation isn’t about just identifying the most cost-effective lead sources, or simply relying on the channels that generate the highest volume of leads.

It’s also about understanding context.

When it comes to assessing your performance, are you using the right metrics?

 

5 Key Sales and Marketing Metrics to Track for SaaS

In other words, if you pull lever ‘X’ and it generates revenue ‘Y,’ that’s great — but what does that really mean for the business in both the short- and long-term?

“Marketing’s relationship with revenue isn’t always about achieving the lowest cost-per-lead, or maximizing the amount of revenue generated per dollar of marketing spent,” Hossain explains. “It’s also about a variety of other factors, like the velocity of your return on investment.”

For example, let’s say one channel returns $5 on every dollar you spend, but it takes 6 months to achieve that return. On the other hand, maybe another channel yields $3 per dollar spent, but you see that return in just two months. Ultimately, Hossain says, companies need to decide which of those scenarios is better for your organization.

“A higher return isn’t necessarily better if it’s delayed,” Hossain says. “What if you go out of business if you miss your Q4 revenue targets? In that scenario, the $3 return per dollar spent makes much more sense, because it puts a premium on getting a faster return and keeping your business afloat.”

Hossain acknowledges that making that kind of evaluation isn’t easy and, without the right data and predictive analytics, scenario planning can be an imperfect science. But that’s exactly what his company’s software is designed to address.

“The problem our software solves is very complex, but our company’s mission is simple — to give marketers the revenue insight they need to make more intelligent investments,” Hossain says. “We’re trying to connect the dots between two things that have been historically disconnected, and move companies into a new era that fuses marketing’s activities with the bottom line goals of the business.”

Photo by: Thomas Claveirole

  • Love the post – thanks for sharing the insights.

    In my experience most of what you’re talking about is unfortunately either never done at all, done on a napkin, or involves massive Excel spreadsheets that needs full-time staff to keep up.

    After witnessing multiple companies struggle to dance between measuring where they’ve been against where they want/need to go I’ve come to the conclusion that one of the key reasons they fail is because the data is so difficult to wrap your hands around.

    It’s ultimately flow data, and revenue “velocity” as you describe it is not simple to think about, because of the time parameter, especially when you have so many other moving parts to think about (team, budget, channels, content, sales alignment, etc, etc).

    And playing what/if with funnel velocities is practically impossible – our brains are just not wired that way – it’s a very counter intuitive exercise.

    Even if you do get the data and the system in place to start playing with velocities, and be able to slice and dice it by regions, product lines, customer types, deal sizes, etc – it’s only one of multiple levers a marketer can influence: 1) size of the funnel 2) conversion rates 3) velocity 4) deal size 5) predictability.

    Most marketers choose to formally optimize 1 and 2 because it’s measurable, 3, 4 and 5 being more a function of their market.

    But even before you get to the conversation about these metrics you need to have a fully deployed and operational custom lifecycle process in place so you can believe the data.

    My point being that there is often so much more work to do before we even get to velocities. How do you bridge that gap?

    How do you work with companies as an analytics vendor, where so much depends on the quality of data (ie their existing systems setup + business process)?

    • Grant – thanks for your thoughtful feedback on this post!

      You are spot on about some of the challenges marketers face. The point of view BrightFunnel takes is that a lot of this insight is unavailable precisely because it requires massive Excel spreadsheets/pivot tables, extracted from Salesforce and manipulated.

      So at a very basic level, we’re automating that through software. To take just one scenario, it’s hard for marketers to track accurately what Opportunities are sourced by a given campaign. We automate that through various rules. It’s complicated enough to make a smart person’s head explode, but not too complicate for software algorithms, thankfully. We can look at Campaigns responed to by all Contacts associated with an Oppty for example (and perhaps limit to last 12 mos).

      Regarding your point about data quality, that’s a key issue we’re tackling as well. Many people are in the “clean your data” business, which is great. But the reality is that “bad data quality” sometimes is a symptom of growth / process change. And even if it’s not, it’s human nature. So in the above example, let’s say sales reps don’t attach Contact roles to Opptys. As a result, Campaigns can’t get tracked accurately. We’re building BrightFunnel to be robust against such scenarios, so a marketing manager can get the right alerts / run the right audits to fix things or get visibility into them.

      So while I agree there are some basics that have to get done before meaningful analysis, I think it’s a doable set of things. We’ve found that anybody who is using Marketo, Eloqua or Pardot, say, for a few months has the sufficient minimum process/data quality in place.

      Feel free to reach out to me directly – my email is [first name at company]. Would love to chat further at some point.

      Nadim

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