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Don't Fall in the Trap: Count Customers, Not Revenue.
By Laura Patterson is president and co-founder of VisionEdge Marketing, Inc.
Tuesday, 5th April 2016
 

My first professional jobs were in sales " selling financial services, office supplies, and software, I literally carried a bag and in two of the cases I owned marketing as well; 

One of my first mentors, an accomplished sales person who regularly exceeded his quota told me, 'It’s just math, whether you are on the sales side or the marketing side, it’s a matter of working the numbers, they may be different numbers but at the end of day the numbers are what brings in the revenue.'

Nearly 30 years and many deals later, I can say there is still a great deal of truth in this advice.  Marketers and sales people are both on the demand side of the equation. Marketing jointly and equally shares the responsibility for generating revenue with our very important partners in the sales organization. 

Phil Kotler articulated the responsibility of marketing to achieve profitable revenue growth derived from acquiring and retaining profitable customers in his 1999 book, Kotler on Marketing: How to Create, Win, and Dominate Markets.

Marketing’s Role in the Revenue Equations Needs to be Customer-Centric

Many marketers today are focused on the “work of marketing.” Their numbers are related to marketing activity and output, such as open rates, click through rates, downloads, shares, mentions, and so on. The math calculates awareness and qualified leads. Today’s executives expect more than awareness and a higher number of qualified leads from marketing " they want a measurable return on their marketing investment and they want marketing to be able to communicate how it is relevant. The microscopic scrutiny on marketing that has put marketing in the hot seat has also brought the topic of revenue generation into sharper focus.

But here’s the rub " and the trap. As a marketer, we don’t market to buckets of revenue. Focusing on revenue is an internal point of view and the job of marketing is to help the company be customer-centric and to focus on what customers need and want, how to engage them, and how to create the best customer experience. The questions that marketing needs to ask to help the company acquire, keep and grow the value of profitable customers are:

  • How many customer “deals” " both net new and additional business from existing customers " are needed to achieve the revenue target?
  • How many of these is marketing expected to drive?

Armed with information about the state and size of the target market, their needs and wants, and how our offer best meets these needs and wants, we can develop strategies and programs designed to connect with these customers, increase and accelerate their consideration, and motivate their conversion to purchase.

Marketers should focus on customer-centricity

Customer-Centric Marketing Math

Key Performance Indicators (KPIs) are a primary variable in marketing math.  Without these, it is nearly impossible to connect marketing to the revenue equation. As a marketer, you must set KPIs and program performance targets that will enable you to measure your impact on revenue.

For example, let’s say you need some number of net new customers for a business unit by the end of the year. Before you can set a target for the number of customer deals that marketing will generate, you will need to know the typical sales cycle type, the average deal size, the typical conversion rate of opportunities to deals, and cost to acquire a net new customer for this business unit.

This information can then be used to establish a target win rate number for marketing generated opportunities, the cost per new customer, and the potential marketing generated revenue.  Because in most companies marketing doesn’t negotiate the final contract, the important number is the win rate, the actual number of customers acquired, and not the revenue number. With the back end of the equation, you can now work the front end of the equation and set a performance range for how many customers/prospects a program must engage, and a target conversion rate and cost for these.

Driving revenue for the business means working the numbers, then tracking and reporting on the performance to the numbers. Taking a customer-centric view rather than an internally oriented revenue-centric view, and “doing the math” facilitates the creation of a marketing organization that is relevant, can measure its value, and more importantly affect revenue. 

A good marketing plan starts with customer-centric math as the basis of marketing objectives and marketing KPIs. Use our Accelance® application to build a customer-centric marketing plan.

Laura Patterson is president and co-founder of VisionEdge Marketing, Inc., a recognized leader in enabling organizations to leverage data and analytics to facilitate marketing accountability. Laura’s newest book, Marketing Metrics in Action: Creating a Performance-Driven Marketing Organization (Racom: www.racombooks.com ), is a useful primer for improving marketing measurement and performance. Visit: www.visionedgemarketing.com       

Disclaimer: Any VEM information or reference to VEM that is to be used in advertising, press releases or promotional materials requires prior written approval from VEM. For permission requests, contact VEM at 512-681-8800 or info@visionedgemarketing.com. Translation and/or localization of this document requires an additional license from VEM. Note: All content within this website is property of VisionEdge Marketing. Any use of materials, including reproduction, modification, distribution or republication, without the prior written consent of VisionEdge Marketing is strictly prohibited. Reprinted with permission.

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