Most of the CEOs I know are addicted: addicted to the daily sales report. I know I was. My excitement was palpable when the numbers were high, though it was equally frustrating when they weren’t. I could handle a poor day or two, but when a string of dismal daily reports delivered a dismal month I'd start to lose sleep. For many, 2009 contained a string of dismal months.
Gladly, times are a changin’ for the better, and CEOs are starting to spend in an effort to drive the sales numbers up. How will they allocate that spend? A lot of precious cash will be wasted if the budget is not properly balanced between sales on one hand, and marketing on the other. The proper balance between these two VERY different functions varies widely based on industry and product. There is no “one size fits all.” But there is just one decision matrix I use to diagnose whether the marketing budget is in balance with the sales budget. Here it is.
The Sales and Marketing Funnel
The process of identifying prospects and converting them to clients or customers is like a funnel. Marketing activities (advertising, direct mail, pr, e-mails, SEM, SEO) attract people to the company and the product/service. As they identify themselves, they enter the top of the funnel. The top is wide, so there is room for lots of prospects. Once these early prospects are in the funnel, the sales team connects with each one, qualifying them and building interest. Those that can't be qualified or aren’t interested get dumped out of the funnel. The remaining ones move down towards the small opening at the bottom. Sales then intensifies its work on those still in the funnel, working with them until they buy. When they buy, they come out of the funnel as a customer.
Funnel Overload? Where?
The first thing I do is to check the loading of the funnel. If it is empty from top to bottom, I know that the company is either unclear about who the customer should be, or is making no effort to market or sell, or an inept one.
If I observe a funnel jammed at the top, but very few prospects in the middle and bottom, I know their marketing is working well, but their sales process is not. The reverse can be true too, with a crack sales team being starved for good leads. This sounds simple to see, and it is, but only if sales processes are measured diligently. Many, many CEOs let their sales teams get away with lax reporting. Metrics are critical, and there should be regular tracking of the number of prospects entering the funnel, moving down the funnel, and converting to customers.
Proper Allocation of Budget
Re-allocating the budget between sales and marketing to get even funnel loading and a steady progression down the sales funnel is one good move to make. Unfortunately, it doesn't address the likelihood that the marketing and/or sales process might be terribly inefficient.
Tried and True Processes Drive Results
Both sales and marketing are 80% science, and 20% art. The sign of a well built sales or marketing process is that both costs and results for each activity are measured. Further, that there is ongoing testing to try process variations in the hope of continually improving. Another objective of testing is to prove that the process is repeatable and scalable.
For marketing, repeatable and scalable might mean that for every 1000 e-mails, 7.3% that express interest in us. Or that when we invest $5,000 per month buying Google keywords, we get $10,000 in initial orders, and when we invest 20K in Google ad words, we get 38K in initial orders. Or for each speech we give to our targeted audience, we average 25 sign ups on our e-newsletter. For sales, repeatable and scalable might mean that 45% of in-person meetings with prospects result in a request for a proposal, then 37% of those become clients. Or that 60% of new salespeople will produce $700K in sales within their first six months. All these numbers feels a bit like science, right? As though some sales and marketing scientist has run experiments and proven or disproven one hypothesis after another. Good, that’s one of my points.
Do You Have a Great Sales & Marketing Executive?
Every company needs a sales and marketing leader that excels at the 80% metric-driven portion of business development success. Companies can’t compensate for bad process with a charismatic salesperson or two. Don’t get me wrong, the 20% art—the art of the deal, the art of the close, the art of building and maintaining trust are important. Likewise, the power of an outgoing, charismatic sales person is very important. Yet it is not enough for consistent success and growth over time.
A one-time fix of the balance sales and marketing is not enough. The marketing and sales function is a machine that needs tending to all the time. The market and the competition are changing all the time. Predictable sales revenue and the resulting restful sleep of the CEO requires ongoing tending of the processes, making adjustments and tests month after month.