Streamlining sales and marketing metrics to increase customer value
November 5, 2020
Measuring impact lies at the heart of the alignment challenges facing sales and marketing. Where marketing has historically focused on engagement - whether that’s views, hits, or footfall – sales teams are, understandably, fixated on the end product, in terms of leads, deals, and revenue. It’s only natural that each side wants to prove its value in the most compelling way possible. Yet, this disconnect is one of the key reasons why the two sides often don’t see eye to eye.
Our commissioned research with Forrester Consulting backs this up, with two fifths (41%) of respondents agreeing that marketing and sales don’t measure success on the same KPIs, while more than half (58%) say aligning on KPIs is challenging, or very challenging. Unsurprisingly then, it’s something that many organisations are looking to improve, with over half (56%) planning to implement or expand initiatives to align KPIs in the coming 12 months.
Short-term vs. long-term horizons
It is often argued that sales and marketing misalignment stems from a difference in horizons, with marketing traditionally focused on long-term objectives, while sales teams think more short-term. It isn’t unusual for sales teams to complain about a lack of support in reaching their quarterly targets, just as their marketing colleagues are grumbling about a lack of engagement in long-term strategy.
Yet, as the customer journey has moved online and become less linear, these distinctions have become increasingly redundant. Research by LinkedIn last year found that the typical B2B sales cycle is now more than six months long, involving between eight and 13 different people. Defining objectives and targets is becoming harder and, as Alison Orsi, Vice President & Chief Marketing Officer at IBM, explained in our recent crossover Live with Sales Leaders and Live with Marketers discussion, requires a more open-minded approach.
“Actually, both functions need to be focused on short and long-term goals; how do I deliver revenue today, but also, how do I build a pipeline for the next 12 months? Both of those things have to happen. And historically, perhaps sometimes the long-term view has been the responsibility of one team and the short-term view of the other. But the goalposts have moved, and the integration has shifted, and we all have a role to play at every step.”
As well as aligning around horizons, sales and marketing should also agree on an overarching KPI that shows how both teams are impacting on the bottom line. This ensures the organisation has a meaningful view of how the function as a whole is performing, and how different elements are contributing to that overarching goal.
“The way we do it now at IBM is looking at the cost of acquisition (CAC) versus lifetime value (LTV),” explained Hans Dekkers, Chief Digital Officer & Vice President Digital Sales Europe, Middle East & Africa at IBM. “So, what's the cost of acquiring a client and what's its lifetime value and how do we improve that significantly?”
IBM isn’t alone in measuring CAC vs LTV, which organisations are increasingly adopting to show whether marketing investments are delivering for the business. A general rule of thumb is that the LTV should be least three times higher than the cost of acquisition, otherwise the business model isn’t sustainable. It enables sales, marketing and the wider organisation to see in simple terms what’s working and what isn’t, as well as how different metrics feed into that.
Jeff Davis, Keynote Speaker and Author of Create Togetherness, advises his clients to introduce a shared dashboard to show how the different KPIs are interconnected.
“So, you have a quadrant at the top showing cost of customer acquisition, lifetime value and percent attainment of revenue, because those are things that affect everybody. And then you funnel down into the other two quadrants, where you go into a deeper dive on metrics that are specific to marketing and sales.”
Adapting to changing times
But, as the events of 2020 have shown, you never know what lies around the corner, which is why flexibility is also key when setting objectives. Having a topline, strategic KPI should be a continuous requirement, however our panelists made the point that both sales and marketing should be continuously reviewing goals and targets, so that they match current challenges and opportunities.
As Alison Orsi puts it:
“In our team, we work with a small number of OKR objectives and key results that we think are the leading indicators of business success at the moment. And that might be focusing on a particular customer segment or a particular route for us at a moment in time, but they don't stay fixed. For example, right now, we're looking at the performance of events and the switch from face-to-face to digital, because that's been so critical in how we can contribute to the business.”
As with all aspects of sales and marketing, measurement isn’t an exact science, with a host of variables to consider. Both sides will always have their own markers of success, demonstrating performance for different campaigns and tactics. The key is bringing these together, so that everybody stays focused on what’s ultimately important – how their combined efforts contribute to the bottom line.
For more on how marketing can best demonstrate its impact through measurement, take a look at our guide on The Long and Short of ROI.