This is the second part of a 2 part blog post on Annual planning for Marketing. If you missed the first post you can read it here.
With Sales targets for quarterly pipeline figured out we start to work on figuring out how much marketing activity is needed and what areas need marketing support. This will vary from business to business. There are a couple of ways at looking at what marketing does:
Help convert existing Pipeline supporting sales efforts
Convert Pipeline/prospects that are already in market (looking for a solution) into closed won deals
Create future demand/interest by seeding ideas with prospects that don't realize they have a need or don't currently have a need to enter the market
Some teams will need more future demand generation, some will need more Pipeline creation, while other need more support in Pipeline conversion, etc. The tactics and content that support this will vary. The first 2 have shorter cycles and can be seen directly in the funnel while the 3rd has a much longer cycle and needs more analytical prowess to properly model.
Marketing Influenced and Sourced
We need a model to measure and track marketing contribution to help us know what areas are efficient (budget ROI) and effective (pipeline generation) and what areas need tuning to ensure we can end the quarter meeting our commitments. There are a couple of schools of thought here. We'll discuss Sourced and Influence Models and a Hybrid approach.
Sourced Model
Old school organization will tend to Sourced logic for deals and pipeline. At best, it monitors the prospect that are "In Market" and converting them into pipeline. This implies sourcing (first team to get the lead to respond) is the biggest hurdle and thus sets which team should get credit. It's an all or none approach, which we all know doesn't describe the reality. Sale and Marketing are a 2 person relay team... can each member complete the race without the other? probably but it's a whole lot easier when both teams are running in their lane focusing on their specialty.
The Sourced model is simple to understand and calculate. However, the zero-sum nature of the calculation pits the Sales and Marketing team against each other in logic to claim sourced credit and doesn't encourage cooperation. In this case Marketing is held to Sourcing a % of the New Pipeline needed each quarter.
Sourced should mean which team kicked off this this latest set of responses that lead to a deal in the pipe. A simple rule you could use it to set a look back time window (i.e 1.5X the Average Deal Cycle). For our example let say our Average Deal Length is 60 days then we would look back 90 days and see what team's outreach/campaign/content was the first lead response to and that team gets sourced credit.
If you have the analytical skill, a better approach is to first determine what after how much time after a response should sourcing credit expire? After expiration, a new response can claim souring credit. This lets you avoids the problem of a team getting sourcing credit with a luck placement of an outbound activity that happened to at the beginning of the 90-day look back window, but there were previous consistent responses to another team's campaigns. (side note: it's important to time stamp the response date that initializes the Sourced credit as this logic will be used later for Average time for Lead to Pipeline)
As you can see we have to set up these arbitrary tiebreaker rules because only one team can claim credit. We expend a lot of effort working and reworking logic trying to satisfy all parties.
What is reasonable for marketing to source differs based on the size of the TAM, and the maturing on the market, and the contacts the sales team has. In our example, let's assume our TAM is fairly large and there are far more Deals to be had than the sales team could try to work and Marketing signs up to source 50% of new pipeline.
Q1 - $18.75M new pipeline Marketing sourced
Q2 - $37.5M new pipeline Marketing sourced
Q3 - $31.25M new pipeline Marketing sourced
Q4 - $43.75M new pipeline Marketing sourced
Influence Model
Some organizations will tend to want to better reflect the symbiotic relationship of Marketing and Sales and use Influence of pipeline and deals. This recognizes that getting Pipeline to closed won takes a lot of work beyond initial sourcing the lead. It needs both teams to work together, passing the baton at the appropriate time to get the deal across the line. Influenced means there were a minimal number of responses from that deal to Marketing Programs over the look back window (an agreed upon time period prior to Deal Close Date).
Note: depending on the timeliness of you data you may need to extend this a little past Deal Close date for those slow updating data sources to be taken into account. Depending on how long you make this look back window, it may secondarily give credit to activities to getting prospect in market but that may need to be a separate attribution exercise as it starts long before pipeline is created.
The minimal # of response should be based on an analysis of past deals... graphing deal size and deal duration to number of marketing responses on the deal. For this to work properly you need to have the buying group identified for each deal and count touches across prospects not just one. If you have the analytical skills, you should also put multipliers on more important responses (based on analytics not gut feel).
There is an implicit expectation that marketing is "touching" all deals whether it be passively by the contact consuming marketing materials like content or the website or more actively where marketing is targeting the prospects for outbound marketing. This serves to measure our focus on those touches is in the right areas.
Since Marketing should be helping with most deals, the bar will be set high on, and marketing signs up to influence 85% of pipeline.
Q1 - $85M pipeline
Q2 - $106.25M pipeline
Q3 - $106.25 pipeline
Q4 - $127.5M pipeline
This does make it harder to determining how to change budgets between teams since any deal or amount of pipeline could have been worked by overlapping teams and thus the math is murkier and harder to see if the effort was efficient. In this case, Marketing is held to Influencing a % of the pipeline.
Separating the impact of the overlapping efforts is very complicated. If teams can agree there is a net positive benefit then we can just focus on the % of deals influenced. We can try to monitor deal size and duration, and compare to deals without Marketing influence to gauge overall impact... but remember this only covers the effort for creating and converting Pipeline not creating future demand and getting prospect into market.
Hybrid (Sourced and Influence)
I used to be a big proponent of Influenced model but realize many times we tend to focus on what we are measured on and if we are not measured on Sourcing new deals then there will not be a deliberate activity to Source new Pipeline and can lead to missing targets because not enough new Pipeline was generated as the activity was not deliberately funded and measured. A third alternative is a Hybrid. Where marketing has both a Sourced Target and an Influence Target. The sourced portion represents marketing efforts to identify and engage new deals the sales team is not aware of (usually the wider end of the TAM). The Influenced portion represent the efforts to help a deal cross the line but were not discovered by marketing. It is implied that sourced Deals also get continued marketing to help it covert the pipeline to closed won.
The right % of pipeline to sign up for Sourcing really depend on the size of TAM and the size of the sales team and their outbound activities and the definition of sourcing. I've seen this as low as 15% and as high as 60%. Influence metric is usually higher %'s as marketing is trying to routinely stay top of mind with prospects. But this can also vary based on the size of TAM and the definition on Influences (# of responses needed and if there are multipliers). It's all about optimizing the marketing budget and not trying to boil the ocean. It's best to start with historical data as a guild as this takes into account the variables in the previous year.
Use your Average Deal Size (ADS). Again if you sell multiple product and service various tiers of companies you'll want to break this up. In our example let's assume we are purely using an Influence model and our ADS is $75K. That means we need to Influence 85% of the deals in pipeline (Total Pipeline/ADS). I takes time to influence the deal and may cross quarters:
Q1 - 963 deals
Q2 - 1204 deals
Q3 - 1204 deals
Q4 - 1445 deals
Now depending on if / what you added "one level deeper" on the annual target... you will want to calculate both pipeline and Marketing Qualified Deals on that basis. This gives us our Marketing goals in terms on deals.
Deal based funnel vs Lead based Funnel
Now you need to convert your Pipeline to a measure of marketing activity. Many marketers will default to MQLs (Marketing Qualified Leads) ratios here. That is, how many MQLs were need in a quarter to generate some amount of new pipeline in the quarter. That is nearly right. But I would wager this conversion rate has a lot of variability from quarter to quarter. There are likely 2 things at play here:
There are multiple leads for the same deal
Time needed for Leads to become Pipeline (deals)
Think about this example, where we run a very well received marketing event. Many of the prospects (including a Microsoft executive) turns to MQLs and to Deals. Awesome! We decide to run a similar event and our targeting hasn't changed. This time we get another 2 Microsoft executive from the same division... has that identified any new deals? Likely no... it's still important that we identify more people that are part of the buying group at Microsoft but we need to recognize that while our event did find new MQLs it didn't identify any new deals and we should have examined out targeting (perhaps at an account level if not Buying Group level).
As discussed in previous posts the sales part of the funnel is deal centric, and it's best for marketing to align to deals as soon in the process as possible as well ,or find a proxy for doing so. Instead of measuring MQLs as a forward-looking indicator, use Marketing Qualified Deals (where you group prospects that belong to the same deal) or if that is too complex group by Marketing Qualified Accounts as that is closer to a Deal than a Lead is. This should give more consistent conversion rates to Pipeline.
Other things that you may need to account for that could make you conversion inconsistent are multiple products with different conversion rates, company segments that act very differently in the buying process, and big shifts in marketing during the year (i.e. once a year user conference).
Now we use the time stamp for the response date that initializes the Sourced credit and the Deal create date to get average time from Lead to Pipeline. If the average time from Lead to Pipeline is more than a quarter you may need to adjust the period you used to calculate your ratio of Marketing Qualified Deals to Pipeline calculation.
Marketing Activity Goals
We are nearly there. We now know how many deals or accounts we need to Influence (and source if that's what your company includes. Now we need to translate that to how much activity we need to generate those deals because while we hope our content is compelling we'll find we need to target a larger group of companies to have X% of companies respond.
Depending on how you have created your Company Hierarchy and how you group Deals... you can look back at your campaigning data for the passed year and see how many unique deals were opened, the number of unique Companies that responded, the number of Companies touched/targeted. Having the ratios between these will be handy to monitor. In our example, we are assuming our "in quarter" marketing will help create/convert pipeline, that is the time to deal from first response is well within a quarter. This gives you a ratio of Deals opened to Companies Targeted in marketing campaigns. I like to look at these at the quarterly level. But if you have a long look back window you many need to look at the number of account targeted in marketing and the number or Deal in the next quarter. This will be a little "squishy" since it depends on how many marketing campaigns are touching the company and the type... but if you are able to maintain consistency of touches by company (ideally by buying group) and pay attention to signals for companies that are in market this should solidify. Let say in our example we found we need to target 3X as many companies to get the deals in pipeline we are looking for:
Q1 - 2889 companies to focus on
Q2 - 3612 companies to focus on
Q3 - 3612 companies to focus on
Q4 - 4335 companies to focus on
You might want to set some minimums in terms of touches to consider that Company targeted (focused on by Marketing). Like with Sourced logic, if you have the analytical capabilities, you should look at multipliers on high value Channels (again high value base on statistically significant lift in terms on getting deep into buying stage). These focus companies should be coordinated with the sales team both in terms on which companies to include and when to ensure we are getting the target companies ready with marketing outreach months/quarter ahead of when the sales team wants to pull them into pipeline.
Now it's up to the demand teams to match up the right programs/content for the target companies. Grouping them can create Industry themes or workflow themes, etc. Monitoring the stage will point to different content for creating pipeline vs converting pipeline. Leverage the Demand team's expertise on this and if you have the Analytical skills, some analysis of which content works best in each stage will help you build a list of Next Best Asset.
It's also important to note the account to focus on only represent the Pipeline creation and conversion activities of Marketing. And not the creation of future demand. Those activities should have different content and metrics.
In the comments below, share any other planning activities you take for setting your goals for the coming year. And don't be shy about correcting any mistakes I may have made... I'm definitely not infallible.
I hope this will help you in your planning season and I wish you a prosperous new year.
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