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Metrics to Highlight Each Department’s Contribution To Revenue

So much has been written over the years about the “sales and marketing divide” – frankly it’s an exhausted discussion and one that’s never made much sense to me.

Don’t get me wrong; sales and marketing conflict exists in many organizations today. But in almost every organization I’ve encountered the success or failure of the sales and marketing teams are intertwined – these departments simply must learn to win or lose, collectively, as a team. Sales and marketing conflict stems from a lack of accountability from either a sales leader or a marketing leader, but to me the solution needs to come from the top (CEO) down. Here’s my recipe for solving these woes once and for all.

  1. Intelligently track a series of metrics around both sales’ and marketing’s contributions to revenue. This is not about creating an “us versus them” scenario – it’s about being intelligently and honestly informed on the role that each department plays at your company.
  2. Create incentives/bonus structures so that your sales and marketing teams succeed or fail together.
  3. Have your sales and marketing leaders jointly present all revenue related updates at your board, executive, and all-hands meetings. If you do this and your sales and marketing leaders are not on the same page, it will very quickly become apparent.

This post seeks to identify the process and metrics you can use to identify both sales’ and marketing’s contributions to revenue.

Start With Some Acknowledgements

Before jumping into a discussion around the metrics you’ll use to determine sales’ and marketing’s contributions to revenue, I think it’s worth having a discussion where you ask your leaders to make some common sense acknowledgements. This sets the tone that you’re here to have a reasonable, important discussion; not to argue over each person’s or department’s worth. There are four points that I like to start with that I think are universally applicable.

  1. The biggest shift in sales over the last decade has been buyer empowerment. According to Forrester, 57% of a buyer’s purchase decision is complete before a buyer ever talks to a sales rep. Online reputation management, product demo videos, product reviews – that’s part of the sales process that’s now typically owned by marketing.
  2. Your company could be selling to SMBs with an almost no-touch sales process, you could be selling to mid-market companies with a blended approach, or you’re selling to enterprise accounts with long and complex buying cycles. It’s worth acknowledging up front where your business tend to fall on this scale.
  3. Cold calling should always be a last resort. I feel strongly about this and am always curious why I often get pushback on this point. Anyone who has ever been tasked with cold calling will tell you it’s a brutal, frustrating gig. There is nothing at all efficient about calling someone who has shown no indication of wanting to talk to you, to attempt to sell them a product they may never have even heard of. When was the last time you bought a product like this? My point here is not that you can’t make the unit economics associated with cold calling work – it’s just that you’d be better off exhausting other channels before turning your attention here. Inbound marketing programs are designed to deliver better quality leads, more cost effectively and at a greater scale than cold calling programs.
  4. Acknowledge that some of the work marketing does may impact revenue, but it’s really difficult to measure. For example, investments in branding may be tough to quantify particularly in the short term. That doesn’t mean that this work isn’t worthwhile, but without a more direct tie to revenue we won’t waste effort trying to draw some lose correlations at this stage.

Here are the metrics I recommend tracking to help your organization better understand the role of the sales and marketing teams at your company. It’s worth noting that there aren’t any complex equations here, nor any singular metric that’s the be-all-and-end-all answer. Instead, looking at these metrics consistently and collectively should help everyone in your organization have a common understanding of each department’s contributions towards your revenue goals.

Lead Source Metrics

% Marketing Sourced Leads
Typically this is a pretty easy metric to track – any marketing automation of lead attribution tool can help here for inbound, online lead generation programs. If there are other marketing events or conferences that contribute significant lead volume, simply agree with your counterpart whether those leads should be attributed as marketing or sales generated.

% Sales Sourced Leads
Again, this should be a pretty easy metric to track. In most instances sales generated leads will need to be input into your CRM system by a business develop representative (BDR). The real struggle here is getting your BDRs to consistently input each and every lead they are working into your CRM. An easy fix here? If a deal is closed that’s not input into your CRM with proper attribution, no commission is paid on the sale. This works every time.

Conversion Rate Metrics

Marketing Lead to Customer Rate – What percentage of your marketing generated leads become paying customers?

Sales Lead to Customer Rate – What percentage of your sales generated leads become paying customers?

These two conversion rates are simply a useful barometer of lead quality and how efficient you are in turning each lead type into a paying customer.

Revenue Contribution Metrics

% Revenue From Marketing Sourced Leads – What percentage of your total closed revenue resulted from a marketing generated lead?

% Revenue From Sales Sourced Leads – What percentage of your total closed revenue resulted from a sales qualified lead?

These two metrics are perhaps the most important. That said, you’ll want to make sure that there are not significant differences in how you’re following up with each individual lead type to avoid built in biases in these measurements.

Product/Service Adoption – It’s worth acknowledging that revenue does not just come from new customer acquisition, but can also come from your organization selling additional products and services to existing customers. If that’s the case, I typically advocate for the sales team or a customer success team owning the responsibility of upselling existing accounts. One measurement that can be helpful though is attempting to quantify the impact of a particular marketing campaign focused on the adoption of a new product or service.

For example, your company has 1000 existing customers using product A. You also offer product B, and have seen about 5 accounts each month also buy product B without any marketing campaigns or efforts really designed to push product B. Holding as many other variables as steady as possible (seasonality, etc) run a marketing campaign then measure the uptick in purchases of product B that you realize. That should give you a good sense of the revenue gains the marketing campaign helped to deliver.

Conclusion

While these metrics are pretty straightforward, I believe that they are the right place to start in the sense that they are simple, relatively easy to measure, and collectively should give you a sense of each department’s contributions to revenue. Could you get more scientific in your approach – probably – but I’d argue that more time and effort spent hashing through this may only further increase the sales and marketing divide you’re trying to fix. And a word of caution – stay away from any arguments over marketing or sales “influence” – marketing and sales are both likely “influencing” almost of your sales by one means or another.

If you’re still struggling with sales and marketing conflict, a more drastic measure could be the solution; consider switching up your organizational structure. This can be a larger, more complex effort but is one that can result in huge efficiency gains. I have seen a number of companies move away from having “traditional” sales and marketing departments, instead forming cross functional “customer acquisition” or “revenue” teams. Imagine a team staffed with marketers solely focused on lead generation via paid search, with an inside sales rep specifically tasked with closing those leads. Any issues with efficiency or lead follow-up tend to melt away with this level of specialization and focus.

About the Author: Geoff Roberts is Co-founder of Outseta, a lightweight operating system for early stage SaaS start-ups.

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