Preparing for any board meeting is stressful and a big part of that stress comes from the inability of the CMO to answer pointed questions about revenue contribution. Today’s boards are more savvy and fully expect marketing to grow up and behave like a business unit, not just a cost center. It can be an uncomfortable conversation.
Two Types of CMOs
The pressure for metrics including ROI is here to stay for marketing. Nowhere is this change more apparent than in the direct revenue contribution and resulting metrics being tasked to the enterprise CMO. They are being asked to directly contribute to revenue and to show exactly how that contribution has occurred and will occur. And, quite frankly, it is an uncomfortable place for many CMOs given their lack of experience and training in this new direction. In this sea of change, I see two types of CMOs:
- CMO #1 has dug her heels deeply into the traditional sands of marketing or is just pretending this shift is not occurring. This CMO is motivated by negatives and specifically by the question – “What are we getting for all of this marketing spend?” This CMO does not see a role in direct revenue contribution. She sees her role in revenue as one of high-level, generic influence. Sales sells and marketing markets. There is a clear distinction.
- CMO #2 is leading the change of transforming marketing from a cost center into a revenue center. This CMO is motivated by the ability to fully leverage people, process and technology and answer the question – “What revenue impact is marketing making on my company?” This CMO helps the company approach revenue as a “Revenue Team” built on ONE unified process across sales and marketing versus maintaining silos and chasms between sales and marketing. Further, this CMO acts and sounds like a VP of Sales in the way they run their business and report and forecast revenue.
Metrics That Matter
Let’s examine CMO #2 to understand how she approaches metrics by looking at how this CMO prepares for a quarterly board meeting. First, even before the board meeting occurs, there is a series of meetings (based on a symbiotic relationship already established) between the CMO and the VP of Sales. In this company, revenue is actually a joint presentation between these two executives. They jointly work on and plan the revenue number and how to achieve it. The CMO presents first, followed by the VP of Sales and it is a complete picture of how the company has and will achieve the number. Here is a summary of key metrics presented by the CMO:
- Reporting on Past Performance
- Total revenue directly sourced by marketing
- % contribution to the sales pipeline sourced by marketing
- # and dollar amount of opportunities sourced by marketing
- Close rate of marketing sourced deals
- Review of budget, forecast and actual for leads and opportunities sourced by marketing
- Reporting on Forecasted Performance
- A precursor to the VP of Sales presentation
- # of leads forecasted to fill the funnel based on established conversion rates
- # of marketing sourced opportunities forecasted to get to closed business sourced by marketing based on established conversion rates
- Spend required to achieve forecast based on established funnel conversion rates from inquiry to close
In addition, this CMO was able to pull this report out of current systems with minimal effort. Further, just as any executive can gain 24×7 insight into sales through the CRM system, executives can gain the same 24×7 insight into the revenue impact of marketing through the marketing automation system, dashboards integrated into the CRM and/or scheduled reports.
Five Barrier Busters
What does it take to become CMO #2? First, this move only occurs when key executives and the board recognize there is a better way to drive revenue and second, that marketing has a key role in the initiative. Driven by new buyer behavior, new SAS marketing technologies, and a need to change the old way of selling, marketing can and is accepting new accountability for revenue. That said, the transition can be tough. Here are five Barrier Busters we see revenue-focused CMO’s deploying to ensure a successful transition:
- Invest in marketing automation to gain the closed loop reporting and forecasting for marketing sourced revenue.
- Re-define, re-skill and re-incent the marketing team around revenue.
- Add a lead qualification team to the marketing organization.
- Create a bi-directional, synergistic working relationship with sales.
- Understand that moving from a cost center to a revenue center entails more science and less art. Science is just the quantification of the art but art is what drives the engagement with the customer and the purchase motivation.
So what kind of CMO are you? If you are still CMO #1, you’d best expand your horizons and learn how to leverage people, processes and technology to make a revenue impact. Otherwise, you will be wading in the unemployment line as the sea change in marketing pulls you under.