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||September 2011, Issue 91|
"Pipeline Saves Lives": A Q&A About the Emerging Role of the CRO
Q&A from the webinar, Setting the Stage for the CRO, originally presented September 7, 2011. View the on-demand Webinar.
Eloqua Chief Revenue Officer Alex Shootman and Christian Patrik, Director of Solutions Marketing at Bulldog Solutions, spoke on a live webinar earlier this month, "Setting the Stage for the CRO." They talked about who the chief revenue officer is, why this role has grown exponentially, and what it means to align Marketing and Sales to increase revenue and efficiencies. Below is the transcript of the Q&A held at the end of their enlightening presentations.
Alex Shootman, Chief Revenue Officer, Eloqua: Last year we had a customer event with the heads of marketing from five or six organizations up on stage. They were talking about some of the principles they had put into place in their organizations. And we asked them about their background. And every single one of them had a math or an engineering background. Five or six years ago, marketing execs never would have had a math or an engineering background.
So what I see in the folks that are really successful in this job is they have spent some time somewhere in Sales so that they kind of understand the psychology of the sales side of the equation. They clearly have a marketing background, so they understand how to put the programs together. They understand the communications of the company and the importance of that—but what I see as the secret sauce is that they also understand the numbers. Look, we're in Sales and Marketing—we're all great at telling stories, taking one anecdote and running with it—but what these folks do a great job of is they get the anecdote and they say, great, now let's go see what the data tells us.
So in summary, broad experience in the front end of the business—but somewhere deep in there there's an inclination towards process and analytics.
Question: What do CEOs tell you is the most frustrating experience in managing Sales and Marketing?
Alex Shootman: What they're really frustrated with is they can't get one view of the truth. Let's just take the space that we're in—the software space. The average spend on sales and marketing in the software space is 38% of revenue. 38 cents of revenue is what these CEOs are spending on sales and marketing and they just want the answer to a simple question: "I'm spending this much money. What am I getting for it?" They can't get one view of the truth.
The second thing that they're really frustrated about is: So is that good? To the heads of Sales and Marketing, they're asking: "You tell me that we created all these leads and it converted to this much revenue. Is that good?"
If you think about their financial statements, they've got the ability to benchmark almost every part of their operation, but they don't have the ability to benchmark their revenue engine.
Those are the two things that I find that the men and women who are running the companies are most frustrated by. Number one is, I want one view of the truth across Sales and Marketing. Number two is, give me a benchmark for how I'm doing against other people.
Question: TAM (total addressable market) is not a new concept to us—but measuring it is. How does one go about doing so?
Christian Patrik, Director of Solutions Marketing, Bulldog Solutions: So total addressable market is an enduring concept but it's one that a lot of organizations have a hard time just getting a handle on. We do have a proprietary tool at Bulldog that we utilize to help get a lens on the total addressable market and it's part of our demand-gen DNA process that we use for on-boarding and part of the business case calculations piece.
But really in a nutshell: The first thing you need to do is get a line on what your markets are. So of all the markets, you've got your markets, and then underneath each market are the verticals. Underneath each vertical are revenue bands and each one of those revenue bands, you might look at companies that are $50 million to $100 million; $100 million to $500 million; $500 million to a $1 billion, etc. So for each one of those verticals and for each one of those revenue bands, determine the total number of organizations that are in each one of those bands.
You take the total of that number and that should give you a pretty good understanding of your total addressable market. Now this is for public companies. There's a similar methodology for government that we can look at, but for public companies and for those for which we have data, it's then taking that number and then looking at the size of the organization. There's a multiplier based on the number of decision makers and/or people that could procure, purchase or influence your product or service within the organization.
So your total addressable market, in its simplest form, is the total number of companies that can buy and the total number of people that can buy at those companies or that can influence. The next thing you do once you've determined that and you've removed the outliers is you push your database up against that and determine what percentage of the total addressable market you currently have.
Then to just kind of expound here, from there it's a building process. If you can gain 2% in a monthly timeframe—just adding 2% more of your total adjustable market in raw contacts to your database—you're in pretty good shape. If you can do better than that, let me know how you do it.
Question: Does your TAM fluctuate? Should it fluctuate?
Christian Patrik: Yes, your TAM's going to fluctuate quite a bit and for a couple of different reasons. One is that your market may shrink or expand. There might be a new need. There might be a new regulation. There might be a new vertical and/or your TAM may increase because, rather than just point products, you've added solution sales, which means that your TAM or the number of organizations that could purchase or procure has increased.
Subsequently, if you add a point product to what's typically a solutions-based organization, you would then have more transactional sales. You could probably go after a smaller audience, and your TAM will increase in that scenario as well.
Question: How do successful companies engage or incent sales and marketing groups or individuals to work in effective alignment?
Alex Shootman: That's a great question because one of the things that you all know is when you manage a team, it's what you're interested in that people get fascinated by. So you've got to be interested in the right things. A core from our perspective is particularly for the marketing organization to shift from being measured on lead creation to being measured on sales-qualified opportunity creation and eventually, revenue.
So what we see as a first step for organizations to really drive alignment is to move both of the organizations towards something common. The pipeline is the heartbeat of the organization. We say internally, "Pipeline saves lives." It's about creating and maintaining quality pipeline and so focusing both organizations on that metric. So if I were to pick one, I would focus them on the creation of sales-qualified opportunities as part of the pipeline creation.
Question: So during the two presentations you've both shown about 15 key metrics. If each of you had to pick only one metric as a key takeaway from today's presentation, what would it be?
Alex Shootman: For me it would be conversion rate, from the top of the funnel to the bottom, and from stage to stage. Of course, I want to see all the metrics because it gives me a big picture of what's going on, but ultimately if I'm measuring the conversion rate and if I'm benchmarking it, then I'm able to understand the part of the funnel where I can apply energy to improve business performance. So conversion rate would be the one that I would measure.
Christian Patrik: For me it would be sales and marketing efficiency—being able to measure the effective spend for your sales and marketing dollars and show that you have profitable revenue. If you can figure out what Alex's most important metric is (measuring the conversion rates within the funnel and then the true benchmark measurement of your sales and marketing efficiency as it pertains to revenue), if you get those two houses in order, you're in very, very good shape.
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Original Q&A has been edited for clarity and consolidation.
Marketing Watchdog Journal is a monthly newsletter from Bulldog Solutions, an online marketing agency that changes the way BtoB companies define demand-generation strategy, engage prospects and convert leads to customers. We welcome your feedback on this newsletter's content and design, and encourage you to share your ideas for topics you would like us to cover in future issues. Please send your comments or questions about Bulldog Solutions to Terry Flaherty, VP, Marketing Strategy.