Revenue performance management touted as key to e-commerce

Integrating sales and marketing and pursuing customer leads to the end make for successful new revenue cycle, the CEO of Marketo said at the Enterprise 2.0 conference.

Before the Web, people bought cars by visiting dealer after dealer and taking test drives.

Nowadays, customers research their purchases online before even making a visit, and come armed with information. That empowered consumer has overturned commerce and requires businesses to create a new revenue cycle.

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Phil Fernandez, CEO of Marketo, a San Mateo, Calif., digital marketing company called for a new way of creating revenue last week at the Enterprise 2.0 conference held in Boston.

According to Fernandez, the long-standing method of chasing revenue -- relying on sales and ignoring marketing -- prevents companies from reaching their potential. Businesses need to integrate sales and marketing and make the most of every contact with customers, he said.

“Nobody is happy about the state of marketing and sales. We need to kill the old sales cycle and create a new revenue cycle,” Fernandez told the audience.

New review performance management options

The old revenue cycle consisted of a near-straight line between the lead and the customer, and led to chasing short-term deals and friction between sales and marketing because the departments never coordinated, he said.

Fernandez advocates a new approach, known as revenue performance management, or RPM. It enhances interactions with customers in a process that involves sales and marketing, Fernandez said. Focusing on accountability and measurement in accounting allows the marketing department to become a partner with sales.

“Soon we’ll be talking about RPM more than CRM or social collaboration,” he said.

Fernandez urged businesses to understand consumers’ shift to e-commerce to master revenue performance management.

The first step in the new revenue cycle, he said, is to create compelling marketing content on the Web and through social media, a process known as “seed nurturing.” This approach is necessary because of the way people now buy products.

Customers often start their shopping on the Web or through social channels. Buyers bounce around websites and solicit opinions from friends, he said. Soon, they form preferences -- liking a product simply by the way a seller interacted with them or because of the feel of a website’s tools.

“Are they interacting with you in the marketplace? Plant a lot of seeds,” Fernandez said.

Helping new revenue cycle leads to grow

The next step calls for nurturing leads. “You need to get buyers away from the stage where they’re looking at who they like to the stage where they’re ready to buy,” he said. This is the middle stage that uses the information the customer has forwarded through the Web and social media. “It’s amazing the fingerprints people leave behind,” he said.

The last step is closing the deal. Salespeople decide where to spend their time, trying to get the best prospects to become customers, Fernandez said. Statistics from the earlier steps can prioritize which prospects are “best” -- who is most engaged, who is mostly likely to buy something.

Underpinning this step is the need to recycle leads. If a customer isn’t ready to buy, the sales team needs to return that lead to marketing so the lead can be nurtured again in the future.

“It’s hard, not easy,” Fernandez said. “But if you do it, you’ll bend the arc of the revenue curve.”

Getting there requires a melding of sales and marketing, he said. Have marketing and sales get together in a company meeting room -- or even off-site -- and talk about what makes a lead and how it should be objectively defined. “When you do that, you start to see barriers fall,” he said.

For revenue performance management to succeed, it needs the backing of the CEO, the implementation of new business processes and the purchase of supporting technology, Fernandez said.

The companies best using revenue performance management have marketing contributing as much 55% to the revenue pipeline, whereas the least mature see marketing chipping in around 17%, he said. Also, companies using RPM to its fullest see salespeople spending nearly 70% of their time actively selling, he said.

“You’re finding buyers who want to buy from you, and they’re incentivized. Once you do that, the revenue becomes more predictable,” Fernandez said.

In Marketo’s revenue department, “You can’t see where sales starts and marketing ends,” Fernandez said. There, marketing makes as much as 50% of its income on revenue-driven quotas, he said.

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