In an account-based marketing (ABM) program, the marketing department measures and proves its contributions to revenue growth (and to doubters on the sales team, if that old-style lack of trust has survived the creation of a cross-functional revenue team) by leveraging various metrics and key performance indicators (KPIs) that demonstrate the effectiveness of their efforts in driving revenue.
We’ll outline examples of 5 quantitative measures that the Revenue Team should gather, monitor, report, discuss, and improve upon that are linked through a chain of causation to bringing in more revenue. And measures where the responsible function of the revenue team is marketing.
We’ll explain each measure, how it is calculated, and provide one actionable step for each one.
The metrics for the Revenue Team to track across functions and review together at least monthly are:
1. Lead Conversion Rate (LCR):
a. Measure: The percentage of leads that convert into paying customers.
b. Calculation: Divide the number of converted leads by the total number of leads generated, then multiply by 100 to get the percentage.
c. Actionable Step: Marketing and sales leaders collaborate to define and prioritize high-quality leads through lead scoring criteria. By aligning on lead qualification standards, both departments ensure that marketing efforts are focused on generating leads that are more likely to convert, ultimately improving the lead conversion rate and driving revenue.
d. Summary: Track and analyze metrics such as lead quality and conversion rates, showing how marketing-generated leads progress through the sales funnel and ultimately convert into customers.
2. Customer Acquisition Cost (CAC):
a. Measure: The cost incurred by the company to acquire a new customer.
b. Calculation: Divide the total cost of sales and marketing activities by the number of new customers acquired within a specific time period.
c. Actionable Step: Marketing and sales leaders jointly review and optimize the allocation of budget across different marketing channels and sales tactics to reduce CAC. By identifying the most cost-effective strategies and reallocating resources accordingly, they demonstrate a commitment to maximizing efficiency and driving revenue growth while minimizing acquisition costs.
d. Summary: Measure pipeline velocity, indicating the speed at which leads move through the sales pipeline, reflecting the impact of marketing activities on accelerating sales cycles.
3. Customer Lifetime Value (CLV):
a. Measure: The total revenue a customer is expected to generate over their entire relationship with the company.
b. Calculation: Multiply the average purchase value by the average number of purchases per year and the average retention period in years.
c. Actionable Step: Marketing and sales leaders collaborate to implement customer retention strategies aimed at increasing CLV. By nurturing existing customer relationships through targeted marketing campaigns, personalized communication, and exceptional customer service, they demonstrate a focus on maximizing the long-term value of customers and driving sustainable revenue growth.
d. Summary: Assess account engagement metrics, including website visits, content downloads, and email open rates, providing insights into the level of interest and interaction with targeted accounts.
4. Marketing Influenced Revenue:
a. Measure: The total revenue generated from sales opportunities influenced by marketing efforts.
b. Calculation: Track the revenue generated from leads and opportunities that have interacted with marketing touchpoints before making a purchase decision.
c. Actionable Step: Marketing and sales leaders implement closed-loop reporting systems to accurately attribute revenue to specific marketing campaigns and activities. By effectively tracking and analyzing the impact of marketing on revenue generation, they provide visibility into the contributions of marketing efforts and reinforce the importance of collaboration in driving revenue outcomes.
d. Summary: Monitor customer lifetime value (CLV) and customer acquisition cost (CAC), demonstrating the long-term value generated by marketing efforts relative to the cost of acquiring new customers.
5. Sales Cycle Length:
a. Measure: The average amount of time it takes for a lead to progress from initial contact to closed sale.
b. Calculation: Calculate the average duration of the sales cycle by adding the length of each sales cycle and dividing by the total number of sales cycles.
c. Actionable Step: Marketing and sales leaders work together to streamline the sales process and reduce the length of the sales cycle. By identifying and addressing bottlenecks, improving lead nurturing strategies, and providing sales enablement resources, they demonstrate a commitment to optimizing efficiency and accelerating revenue generation.
d. Summary: Track revenue attribution, attributing sales and revenue directly to marketing campaigns and activities, quantifying the direct impact of marketing on revenue generation. By using these metrics and KPIs collaboratively with the sales team, marketing effectively demonstrates its valuable contribution to the sales process, fostering cooperation, alignment, and a unified focus on achieving common revenue goals within the ABM revenue team.
In contrast to a unified and well-aligned revenue team, engaging in unproductive conflict at work has detrimental effects on overall revenue performance. This is a breakdown in team chemistry. Team chemistry refers to the dynamic composition and interpersonal relationships among team members. It plays a vital role in a team’s ability to achieve its goals effectively.
Strong team chemistry is evident when team members not only possess the necessary competencies but also collaborate synergistically. Conversely, poor team chemistry is often observed when talented individuals struggle to work cohesively, resulting in underutilization of their skills. Instances such as team members neglecting essential roles or engaging in unproductive conflicts are indicative of issues with team chemistry. Are they getting mixed signals from the team leaders about tolerance for non-productive behavior?
When the one functional team second-guesses the value of another function’s efforts (sales second guessing marketing at the start of this article), it creates a divisive atmosphere that hampers collaboration and undermines trust between departments. This lack of cohesion leads to inefficiencies in resource allocation and diminishes the effectiveness of both sales and marketing initiatives.
Instead of focusing on driving revenue together, teams become mired in internal disputes, which wastes valuable time and energy that could be better spent on strategic growth initiatives. And consequently, lower revenue and possibly an erosion of the company’s overall competitive position.
Moreover, a culture of distrust and conflict also negatively impacts employee morale, productivity and job satisfaction, further hindering productivity and performance. And for customer-facing roles, this will play into our customer’s perceptions of our business.
In contrast, a unified revenue team that collaborates effectively across functions maximizes the impact of their resources, both human and budgetary, by aligning their respective revenue efforts towards common goals that are mutually supported. By working together cooperatively, such a well-aligned team leverages the strengths of each department to optimize marketing and sales strategies, leading to increased revenue generation and business success. That fosters a better team culture of cooperation and alignment that is essential for achieving sustainable and constantly improving revenue growth and maximizing overall revenue performance.
The heads of the departments implement by leading by example and demonstrating for the entire revenue team across functions the behavior they want to see, model the desired behavior. Leaders need to show the team members the way forward and how (across functions) they are committed to working together and creating a high-performance revenue team for all functional revenue stakeholders in the company.
The consequences of not working together as one well-integrated revenue team are significant for both organizational behavior and revenue performance. Firstly, without collaboration and alignment across functions, there is a risk of siloed behavior, where departments operate in isolation, leading to duplication of efforts, miscommunication, and inefficiencies.
This lack of cohesion not only hampers productivity but also impedes the organization’s ability to respond effectively to market changes and customer needs. Secondly, without a unified approach to revenue generation, there is a higher likelihood of missed opportunities and decreased competitiveness in the market. When departments fail to work together seamlessly, it results in disjointed customer experiences, leading to decreased customer satisfaction and retention.
In terms of executive leadership, the consequences of not prioritizing collaboration and putting aside ego are detrimental to overall company revenue performance. Executive leaders who prioritize their individual department’s success over the collective goals of the organization risk fostering a culture of internal competition and conflict. This leads to decreased morale among employees, as well as reduced trust and loyalty towards leadership. Furthermore, executive leaders who are unable to lead by example and demonstrate a commitment to collaboration may find it challenging to inspire their teams to work together towards common goals.
Ultimately, this results in missed revenue targets, decreased profitability, employee attrition (of our best employees first) and hindered growth for the business. The toxic team members will remain long after the A-players have left: unless the leadership team course corrects and coaches team members to success or drops the people having a negative impact. Therefore, it is crucial for executive leaders to prioritize collaboration, set aside ego, and work towards building a unified revenue team focused on driving collective success for the organization.
Our company’s executive leadership needs to identify the source of the distrust between the teams, work to reconcile and eliminate it (or who) from the process. Tough leadership decisions, but being at the head of a floundering team without taking decisive action will cause the organization to wallow in the dysfunction and eventually disintegrate. Purge the toxins decisively.
Where there is infighting or squabbling over the respective contributions of other teams, it’s crucial for functional leaders to lead by example and foster a culture of collaboration and accountability.
Firstly, leaders must demonstrate accountability for results by taking ownership of their team’s contributions to the overall revenue goals. This entails being transparent about successes and failures, acknowledging areas for improvement, and actively seeking solutions to overcome challenges.
Secondly, leaders should exhibit openness to being coached and improving by actively seeking feedback from team members and other departments.
By embracing a growth mindset and continuously striving for excellence, leaders set a positive example for their teams and encourage a culture of continuous learning and development. Thirdly, leaders must set aside departmental ambitions and egos to prioritize the overall revenue health of the business. This requires a willingness to compromise and collaborate with other teams, recognizing that collective success is paramount to individual achievements.
By promoting a collaborative mindset and fostering cross-functional partnerships, leaders mitigate infighting and promote a unified approach towards achieving shared revenue objectives. Ultimately, when functional leaders prioritize collaboration, accountability, openness to improvement, and the collective success of the organization, they create a conducive environment for effective teamwork and drive sustainable revenue growth.
