Modern B2B Marketing

July 14, 2008

The Revenue Cycle: A New Model for Explosive Revenue Growth

Posted by Jon Miller

Traditionally companies have talked about and analyzed the ‘Sales Cycle’. The problem is that the sales cycle looks at only a portion of the complete revenue process. This presents two main problems:

• Insufficient to manage and guide growth beyond the current or subsequent quarter. The Sales cycle can usually predict revenue in the short term, but because the sales forecast is based on what a specific account will do at a specific time, the forecast for future revenue becomes increasingly inaccurate. Asking the sales organization — which by definition is focused on revenue in the near term — to predict revenue in future quarters is typically highly misleading. For this, a company should look to the function that is inherently focused on the long term: the marketing organization.
• Inefficient processes result in reduced sales effectiveness and wasted marketing budget. The traditional model of a sales cycle that begins when sales accepts a marketing lead or contacts a prospect directly results in waste and inefficiency. It means as much as 50% of sales time is spent on unproductive prospecting even as reps ignore 80% of marketing leads. The resulting lost sales productivity and wasted marketing budget costs companies at least $1 trillion a year. The sales cycle mentality also ignores the fact that before, while, and after sales interacts with a prospect or customer, marketing has been and will continue to touch the prospect with marketing messages via the website, campaigns, advertising, and PR. Ignoring this is like ignoring the ambiance at a fine restaurant — even if the food is good, if the ambiance isn’t in sync the whole experience is off.

CEOs and marketing and sales leaders who care about revenue need to recognize that the sales cycle mentality is making it harder for them to meet and exceed their revenue goals. Instead, they need to focus instead on the complete “Revenue Cycle“, which starts from the day they first meet a prospect and continues through the sale and beyond to the customer relationship. This is important since when marketing and sales coordinate their activities as part of a unified Revenue Cycle, companies get better at properly identifying and prioritizing opportunities, and better quality leads result in easier and better quality sales cycles, with more wins and ultimately more revenue.

Enabling the Revenue Cycle

The Revenue Cycle means more than just tacking marketing onto to the front of an existing sales process; it requires coordinating marketing and sales activities throughout the entire cycle to generate maximum impact. The old model of a linear handoff from marketing to sales must give way to an intertwined model where both organizations jointly own prospect relationships and coordinate their activities. To use an analogy, imagine a fighter jet that first ran with just the left engine, then turned that engine off and lit up the right engine. That’s pretty inefficient compared to lighting both engines and going full speed!

The Revenue Cycle requires collaboration between marketing and sales activities, but of course this is easier said than done. (Even my own organization, which is laser-focused on achieving this goal, finds new challenges every day on our journey to holistic revenue cycle management.) The key challenge is that each function works differently, thinks differently, and has different usage requirements (aka “Sales is from Mars, Marketing is from Venus“).

Viva la Revenue Revolution

Companies that can figure out how to coordinate marketing and sales in a way that respects the different strengths and needs of each function will experience what I’m calling a Revenue Revolution. The Revenue Revolution occurs when marketing and sales stop pointing fingers, cease working within their own silos, and unite to create dramatic improvements in marketing ROI, sales productivity, and most importantly top-line growth. I invite any readers who care about revenue to join in and demonstrate their own commitment to marketing and sales alignment by signing the Revenue Revolution Manifesto at http://www.marketo.com/revenue-revolution.php.