Updated: Jul 15
Before ABM; before all of the other B2B marketing catchphrases reinvented by technology vendors – ‘customer experience’, ‘content marketing’, ‘sales enablement’ – there was the ‘demand waterfall’. Or as we thought of it at the time: the ‘sales funnel’.
In 2012, when it evolved to better reflect how it was actually working in practice in thought-leading companies, it became the de facto way to look at the roles of Marketing, Field Sales and Teleprospecting/ Inside Sales/ Business Development Reps in the lead acquisition to close process.
One of the reasons, it became so popular in the 2010s, reflected two realities of the tech industry at this time:
The emergence of subscription, rather than license-based pricing (e.g. SaaS) resulting in greater competition and lower margins, was shifting company focus gradually away from being ‘the best’ technology towards sales-led growth and market dominance to drive market valuations, and
Marketing KPIs were shifting dramatically from ‘soft’ (or ‘vanity’) metrics (e.g. awareness or event attendance) to ‘hard’, financially-oriented metrics, such as ‘MQLs’ and ‘SALs’ – and sometimes even pipeline value – to tie them closer to target business outcomes.
This process has continued to be accelerated by the dramatic shift in purchasing power to the customer, enabled by the internet’s democratisation of information. As customers continue to self-educate and qualify potential suppliers without engaging directly with them until very late in their decision-making process, the strategic focus on the sales funnel has evolved to become more customer-centric and marketing’s role in filling it has grown. This has resulted in strategic need for Marketing to understand the ‘buyer’s journey’ and the end-to-end ‘customer experience’. In the late 2010s, this culminated in definitions of market segments of very few companies, or markets of one: hence, ABM, or Account-Based Marketing. None of this is new, (see Don Peppers and Martha Rogers, 1998) but it has become significantly more customer-experience focused rather than sales-centric.
So how do buyer journeys, sales funnels and marketing tactics align to drive better outcomes? In a nutshell, what does Marketing need to do differently?
Agility, Velocity and Time to Value
The business challenge of focusing scarce sales and marketing resources on the opportunities most likely to result in a profitable sales has always been there of course. Frameworks like the demand waterfall, along with segmentation and buyer profiling (see my blog here) are useful models for thinking about how business targets, usually expressed as sales revenue targets, turn into operational goals for Sales and Marketing. These in turn drive the right tactics to deliver measurable outcomes.
To manage business performance effectively in a fast-moving, global economy it is more important than ever to understand the dynamics of your marketplace, react quickly to changing market circumstances, as they affect your business and understand the levers to pull to drive a fast and predictable return on sales and marketing investments.
For example, the basic premise of the SiriusDecisions demand waterfall model is that enquiries turn into leads qualified by marketing (MQLs) that are accepted by Sales (SALs) and worked on to create meaningful sales leads (or ‘opportunities’) – SQLs (or SQOs) – that they eventually close. So far, so straightforward. It follows then that if a certain number of opportunities are won, at an average order (win) value then we can model how many SQLs are needed to achieve the sales target – and work back to determine how many leads marketing needs to create. This is illustrated below.
The first column is used to define the segment that has the revenue, or order intake (bookings) target – the sales goal. The rest of the model uses historic data, forecasting and internal discussion to determine how this target will be achieved. The factors to be considered are:
percentage contribution from existing customers versus ‘new logos’
percentage contribution of leads sourced by marketing versus sales
conversion rate of leads through key funnel stages agreed by sales and marketing – for example, how many MQLs become SALs; or close/ won rate for SQLs
average order value
average elapsed time to close/ won for an SQL with an expected order intake target assigned by sales
This is just a model of course, but it provides some targets for leading indicators that help with both planning tactics and with course correction as the financial year unfolds in reality. Without a forward looking model, companies are reliant merely on sales forecasts (commit, upside etc) and, when they inevitably find they are not as accurate as the CFO would like, these lagging indicators of buyer behaviour tend to lead to short term decision-making to course correct: like cutting costs in marketing; or believing the sales demand for ‘more leads’ - rather than understanding what a quality lead looks like and baking it into an SLA.
As buyers self-educate and begin to start exploring solutions to their business challenges, they begin to engage on and off-line. This is where their buying journey collides with your sales funnel. By understanding what kind of companies and behaviours you are looking for and what content and messaging (see my blog here on content and brand) is appropriate for different stages and different buyers, you can drive the right actions to accelerate the buying journey to successful close. This requires the operational use of the above type of model so that it captures data points in real time and takes real time action.
In part 2 I will look at measurement and attribution models for performance management.
This is the fifth in a series of Blogs on B2B marketing strategy. The first focuses on the need for marketing execution to be focused on driving clear business outcomes which are clearly defined in the marketing strategy and anchored in a well-articulated business strategy. It argues that the role of marketing tactics are to get the right message to the right person in the right place at the right time. The second article focuses on the role of brand strategy and the value proposition in creating the right message. The third considers messaging and personas in the context of targeting the right person. The theme of determining who the right person is continues in my last blog. This leads us on to the right time, discussed here.