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April 2011

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.Gleansight Deep DiveRevenue Performance Management: The Sales and Marketing Playbook Finally Has a Name Whether a byproduct of the fast-paced world of technology innovation or simply a result of language that lends itself so wonderfully to abbreviations, the use of business acronyms has reached dizzying proportions. Last year, a new term emerged from the lead management technology sector: Revenue Performance Management (RPM). In fact, some of the tier-one vendors are referring to their solutions as RPM platforms.

Is RPM just a flashy new marketing gimmick for describing something old or does it represent a fundamentally new approach to sales-and-marketing alignment? Following weeks of Zen meditation (and no small amount of market research), Gleanster has come to conclude that while RPM may not be an entirely new animal, the concept does sit on a higher rung on the evolutionary ladder and that widespread adoption would benefit most organizations. This Deep Dive explores what, exactly, is meant by RPM, how the concept differs from what came before it and why it’s likely to have staying power.

The business-to-business sales process has changed dramatically in the last 10 years. Companies don’t make purchase decisions; rather, people make purchase decisions. Gleanster research suggests that the average company struggles with revenue growth because they fail to engage their prospects with highly relevant and timely interactions. The one size fits all approach to demand generation simply doesn’t cut it anymore.

In fact, 87% of B2B marketers who participated in the Q4 2010 survey on Lead Nurturing

indicated that traditional marketing techniques (primarily referring to email, tele-prospecting, direct mail, and events) were not meeting performance targets set by the organiza-tion. Over 625 B2B sales and marketing respondents to surveys between November 2010 and March 2011 cited revenue growth as the number one priority for 2010 and 2011 (an overwhelming majority). Combine these two statistics, and it becomes obvious that traditional B2B marketing and sales techniques have become less and less effective at driving revenue growth.

Percentage of B2B marketers that say that their existing marketing techniquesare failing to meet the performance targets set by the organization

87%

About the Pie ChartThe data presented in the pie chart is derived from the December 2010 Gleansight benchmark report on Lead Nurturing. The data serves as the basis for this Gleansight Deep Dive, which provides analyst commentary related to a particular aspect of the topic. The objective is to provide additional perspective and illuminate certain key considerations regarding the implementation of the related technology-enabled business initiative.

To learn more about Gleanster’s research methodology, please click here or email research@gleanster.com.

Revenue Perfomance Mgmt: The Sales and Marketing Playbook Finally Has a Name 2

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The solution to this problem lies in unfamil-iar territory for most organizations because sales and marketing have traditionally been managed as separate functions within the organization. At the end of the day, the goal for both sales and marketing is to maximize revenue (and manage bottom line costs to maximize profit). Sales and marketing leaders share accountability for revenue growth. Yet, in practice (at least for the average organization), marketing is accountable for demand generation and sales is account-able for pipeline performance and revenue.

The concept of RPM breaks down these divisions of labor to align the organization around a common goal: revenue perfor-mance. In reality, marketers are charged with identifying or creating demand for a product, demand that should ultimately translate into sales and profitability.

This is easier said than done for many organi-zations because marketing is one of the last remaining functions in the organization to be run “by the numbers”. In a Q1 2011 Gleanster survey, 232 B2B marketing and sales respon-dents were asked to rank their ability to make data driven decisions on critical marketing and sales activities. The findings revealed that the average organization still struggles to integrate quantitative measurement and accountability into its marketing processes.

Perhaps the most revealing insight from this research relates to the existence of a

profound disconnect in quantitative decision-making abilities between marketing and sales even among Top Performers. Respondents indicated a lack of visibility and measure-ment at the top of the funnel as well as at the end of the funnel. Sales generaly does a good job of making data driven decisions, but marketing still struggles to close the loop and link campaign execution with revenue outcomes. The antiquated B2B marketing and sales processes have constrained organiza-tions from optimizing the process over time.

Two other critical trends make the concept of RPM compelling in today’s B2B marketing organizations: digital channels and data access. According to Gleanster research, the top three marketing channels for B2B and B2C marketers alike are email, the website, and search engines (SEO and SEM) – all digital channels. The reality of the situation is that buying and sales cycles are not linear processes. In a B2B environment, budgets get cut, initiatives get moved, and inten-tions can change rapidly. Digital channels allow companies to track implicit and explicit behavior which can then translate into more meaningful interactions across marketing and sales engagement. In many cases, that means potential opportunities must be kept warm for months or even years.

This demands a holistic approach that aligns marketing and sales. The confluence of software-as-a-service capabilities and unlimited (and highly affordable) data storage

Making Funnelnomics ScalableFunnelnomics is a term frequently used to describe the data driven decisions that help optimize the buying and sales cycles. Even Top Performing companies struggle to gain a holistic view of the sales pipeline and justify decisions based on tangible performance data. RPM can only become a reality when data driven decisions can be made across the entire funnel. Most lead management technologies still lack out of the box measurement and analytics dashboards to transform execution into actionable metrics. RPM will be much easier to implement when standard-ized metrics provide a dashboard of the entire RPM lifecycle for rapid analysis and data driven decisions.

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capacity are serving to empower organiza-tions with robust, lower-cost-of-ownership technology solutions and the infrastructure that’s needed to make the data actionable.

What is RPM?Revenue Performances Management (RPM) isn’t really a fundamentally new concept. It’s more or less an evolution in the way organiza-tions should structure marketing and sales functions. Gleanster defines RPM as the process by which organizations maximize revenue generation through data-driven decisions that align sales and marketing, create highly relevant interactions with potential buyers, and establish repeatable metrics for ongoing optimization of the lead lifecycle, across marketing, sales and service.

What’s different about RPM?RPM aligns sales and marketing with a common metric and goal: revenue. That may seem obvious in hindsight, but the discon-nect that frequently divides marketing and sales stems from a lack of alignment in the way success is measured for each of the two functions. Few companies would argue the fact that marketing “should” be measured on revenue. Yet revenue attribu-tion on marketing campaigns was a challenge for 45% of Top Performers and 78% of Everyone Else in the Q1 2011 survey on Lead Scoring. So, what do Top Perform-

ers know that Everyone Else does not?

Let’s start by dissecting the fundamental attributes of RPM. How does an organization adopt an RPM approach? Figure 2 shows the four pillars of RPM, some of which have never been included in traditional B2B marketing lead management tactics. But like most initiatives, the foundation of RPM speaks to investments in people, process and technologies – all of which make the four pillars achievable.

PeopleOver the past few years, we have seen an increase in the number of job postings pertaining to sales and marketing alignment, marketing operations, and demand genera-tion, with titles like Vice President of Demand Generation becoming increasingly prevalent. Why? Simple. Companies are waking up the realization that someone needs to take ownership of RPM within the organization. These job descriptions and requirements typically sound suspiciously like a Vice President of Sales role. That’s understand-able, given that resources are accountable for, and incentivized by, revenue perfor-mance. The primary focus, then, is to inject measurement and continuous optimiza-tion into ongoing business operations.

ProcessAs previously noted, the buying and sales cycle is typically not a linear process. In order

Revenue Perfomance Mgmt: The Sales and Marketing Playbook Finally Has a Name 4

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to maximize revenue, marketing and sales resources need to be flexible enough to touch prospects and customers with relevant and timely interactions, no matter their stage in the buying process. RPM demands a holistic approach to prospect engagement. The lead lifecycle is not a handoff between marketing and sales. Rather, it’s an ongoing engage-ment with a potential source of revenue. It may be appropriate for marketing or sales to manage primary engagement responsibility at any given time in the process. As such, processes must be formalized and structured to ensure leads/prospects/revenue is closely monitored no matter where in the process that lead may reside.

TechnologyToday, there is an eclectic mix of nomencla-ture to describe the technologies that support RPM: demand generation technology, lead management technology, marketing automa-tion technology, and, more recently, RPM platforms. Most of the features and functions within these tools have become somewhat standardized. These include lead scoring, lead nurturing, multi-channel execution and CRM integration. Despite the maturity of some of these technologies, most solution providers fail to address two fundamental areas which throw a wrench into the automation of RPM:

1. Connectivity. Lead management tools are very good at managing and measuring engagement in email and web analytics, but these are not the only two channels organizations engage in. RPM demands a structured approach to measuring the effectiveness of all marketing channels. That means lead management technologies must also help integrate and analyze data from webinars, events, SEM, direct mail, etc.

2. Dashboards and Analytics. Despite all the progress we’ve seen in the area of data visualization, it’s still uncommon to see a single dashboard that provides RPM metrics across the entire lead lifecycle – from marketing to sales to service. In fact, 65% of Top Perform-ing companies indicate they still spend

“significant time” manually creating measurement dashboards and analytics for executive management (78% of these Top Performing organizations utilize a lead management technol-ogy). That needs to be automated to allow RPM to be a scalable tactic.

Technology plays a critical role in automating person-alized and complex engagement with prospects. But these tools are also a primary source of data for ongoing optimization and management.

Lead Lifecycle ManagementAccording to Gleanster research, Top Performers are twice as likely as Everyone Else to utilize nurture marketing techniques. Nurture marketing allows companies to build relationships with prospects and pre-qualify these individuals before they are passed to sales. Top Performers also develop nurture marketing campaigns to capture sales-qualified leads that, for whatever reason, fail to close, to hopefully come back at a later time and sell to these already qualified opportunities. These techniques and tactics demand that organizations take a holistic view of the lead lifecycle from marketing to sales to customer service. Since all of these interactions represent potential sources of revenue for an organization, it makes sense to include Lead Lifecycle Manage-ment as a primary enabler of RPM.

Sales and Marketing AlignmentTop Performers are two times more likely than Everyone Else to share the defini-tion of a qualified lead between sales and marketing. Historically, coordinated efforts between sales and marketing has been known as “alignment”. But RPM differs from traditional best practices in that it calls for the marketing department to be treated in the same way as the sales department. The idea is: measure what matters, and hold both functions accountable for revenue.From an RPM standpoint, Top Performers are starting to incentivize marketers based on pipeline metrics rather than campaign performance. In fact, a small but growing number of Top Performing organizations are breaking down the division of labor between marketing and sales and approaching both functions as a

“Fundamentally absent from most sales and marketing operations is a continuous

improvement process across the entire lead lifecycle.”

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single entity, even hiring dedicated executive level roles that straddle both functions to make the vision for a unified entity a reality.

Data Driven DecisionsWhile Top Performers strive to make data-driven decisions across the entire demand chain, they still have a considerable way to go in some areas. The truth is, the top of the funnel is still difficult to measure for most organizations. How do you know exactly which campaigns performed the best? How do you benchmark a poor performing marketing campaign? What channels deliver the highest profit?

Top Performers demonstrate superior performance from data driven decisions, so it makes sense to inject data-driven decisions into every stage of the RPM process. In most cases, these organizations started measuring to improve their forecasting capabilities. New demands from marketing and increased targets can be met with predictable knowledge of how much it will cost to achieve these targets and the most efficient combination of channels to utilize in outbound campaigns.

Continuous ImprovementFundamentally absent from most sales and marketing operations is a continuous improvement process across the entire lead

lifecycle. This is largely what makes the concept of RPM sticky and unique. The Six Sigma and Lean Manufacturing approach have been transforming the business of Operations for years. Sixty-five percent (65%) of Top Performers (compared to 32% of Everyone Else) engage in “ongoing optimi-zation of sales and marketing processes led by executive leaders in marketing and sales.” A continuous improvement process whereby organizations define, measure, analyze, improve, control, and re-measure campaign effectiveness, channel mix, and sales operations will invariably lead to the maximization of revenue for the organization.

Maturity Framework for RPMGleanster research isolates Top Perform-ing organizations based on performance in revenue growth, bid-to-win rates, close rates, and pipeline metrics. But research on the topic of RPM suggests that even Top Performers can mature in some areas of RPM. For example, the average Top Performing organization still has very little visibility into the effectiveness of different channels and tactics at the early stages of the lead lifecycle. The following maturity framework defines different stages of Marketing and Sales maturity as organiza-tions move towards a holistic RPM approach.

Deep Dive Talking PointsWalk away with these 5 key takeaways:

• Revenue Performance Management is the process by which organiza-tions maximize revenue through data driven decisions that align sales and marketing, create highly relevant interactions with potential buyers, and establish repeatable metrics for ongoing optimiza-tion of the lead lifecycle, across marketing, sales, and service.

• Sixty five percent (65%) of Top Performing organizations (versus 32% of Everyone Else) indicated they engage in “ongoing optimi-zation of sales and marketing processes led executive leaders in marketing and sales.”

• Top Performers are twice as likely as Everyone Else to utilize nurture marketing techniques.

• 8 out of 10 organizations struggle to measure the effectiveness of marketing campaigns in the earlier stages of the lead lifecycle

• Continuous improvement and data-driven decisions differenti-ate RPM from other conceptual frameworks for marketing and sales.

Revenue Perfomance Mgmt: The Sales and Marketing Playbook Finally Has a Name 6

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Related ResearchRecently published Gleansight benchmark reports that may be of interest to senior industry practitioners include:

Lead Nurturing

B2B Precision Marketing

Marketing Asset Management

Social Media Monitoring

Customer Feedback Management

Mobile Marketing

Online Customer Communities

Enterprise Collaboration

The Gleanster website also features Deep Dive analyst perspectives on these and other topics as well as Success Stories that bring the research to life with real-world case studies. To download Gleanster content, or to view the future research agenda, please visit www.gleanster.com.

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