As a disclaimer, I’m a “sales guy,” and may misunderstand marketing. But I often see discussions about marketing needs to be measured on revenue. I think revenue might be a component of a marketing metric, but I wonder as we aren’t focusing too narrowly on a metric. losing sight of the bigger picture. (Much of what I talk about in this post can equally be applied to sales focusing purely on revenue.)
Every function in the organization is accountable for developing and executing strategies and plans that are consistent with the overall corporation’s strategies, plans, and priorities. Clearly, revenue and earnings are top priorities for organizations, but they aren’t the only priorities.
If our primary in sales and marketing, our primary metric of success were revenue, then we would only invest in those big revenue generating opportunities. We would remain focused on those markets, products, customers that generated the biggest revenue. We would under invest in developing new markets or in supporting new products–which may become the future platforms for growth.
The business world is littered with carcasses of companies that invested on the “big revenue” generators and under invested in those areas that would have enabled them to grow/survive. Logos like Kodak, DEC, Wang, Blackberry, and dozens of others are testament to this. These organizations actually saw the shifts in business and markets. Kodak, as an example, had some of the leading patents in digital photography, but focused it’s investments in film, riding that to their “grave.” IBM risked extinction several times (first with mainframes), but shifted it’s investments to developing market opportunities in services, augmented intelligence, and other areas.
While those examples are dramatic examples of misplaced or bad corporate strategies and priorities, we see the same thing in marketing, sales, and other investments.
If we are driven purely by short term revenue, we will always be investing in our current big product, big markets, big customers. Yet our future, or even our growth opportunity may exist in other areas–new industries, new products, new customers.
Marketing and sales are accountable for executing the corporate strategy in the face of customers. As a result, they must be measured by their contribution/execution of that corporate strategy. They have to balance investments and focus across all areas (not necessarily equally) They assure they have metrics and goals in place that reflect that balanced performance and the support of the corporate priorities and strategies.
Good discussion topic. I don’t think marketing should be measured directly on revenue. Why? as David points out, for the long term health of the organization. I am reminded of the profound Peter Drucker quote; “The purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation.
He did not say sales and marketing, just marketing and innovation. However, he did say, first and foremost, the purpose of the business is to create a customer.
Sales gets credit for creating the customer because they are on the front lines orchestrating the value discussions to connect the customer’s business outcomes to their solutions capabilities. When the sales process is properly executed, the potential customer exchanges their capital (closed deal) for the business improvements your solution will provide.
Marketing should be sending the sales team after the right customers. As David points out, right meaning the potential customer’s aligned with the business strategies, not just the current base (cash cows). Remember the quote, Marketing and Innovation are the two primary functions. What if Kodak marketing would have taken an elite core of their sales team and focused them on potential customers looking to build a new business on digital innovations or better yet, helping them see they could build a new business on digital?
Should marketing be measured on revenue? directly, no. However, we all know they are indirectly measured, because if there is not enough revenue, the marketing budget gets whacked.
I have some ideas about how you measure the quality of leads from marketing in the b2b complex enterprise space as that is the only space I have any depth of knowledge. Reach out if you want to connect and thank you David for a good morning of thought on an important topic.
Good discussion, Dave.
I’m not a marketing expert, either, Dave, but I have worked with some very good marketing teams over the years, and I do know that “Marketing” is far broader than I often see it discussed on social (or in the circles I run with, I guess).
Depending on the size and type of the organization, there could be Marketing Research, Product Management including Pricing, Merchandising/Placement, Advertising/Promotion, Demand Generation (Content Management/Marketing, Social Media Management, Inbound Lead Gen), and Public Relations, to name the ones I can think of off the top of my head.
To me, it seems like Demand Generation teams should be doing scoring and following leads through to wins to be able to attribute revenue to their efforts, and have the data to diagnose what’s working and what’s not, and if not, where not and what the cause might be. But we all know that if you give the same great lead to 3 account executives, you’re likely to get different outcomes, so there’s a lot of noise in revenue attribution for Marketing that has nothing to do with how well Marketing did. To me, the data is most helpful for analysis to learn, and to get better alignment and eventually, better revenue outcomes for everyone.
Having said that, I think attribution, wherever *possible* is a good thing. Might be interesting to develop metrics similar to Sales Productivity (revenue/producer) for the various groups in Marketing and as a whole, with the deepest work for attribution being done for all facets of Demand Generation.
Mike, you bring up a vivid example, I think marketing should be measured on the things that are known to produce revenue–so there is a possible link to revenue, but the more important metrics are the things that marketing does that are known to produce revenue.
Suggesting there could be attribution, would also indicate, we should be measuring manufacturing on revenue/revenue growth, because without quality products, we couldn’t produce revenue. Or perhaps development/engineering, because without the products they design we can’t produce revenue. Or perhaps finance, because they provide the funding.
Everything we do in the corporation is to create and serve our customers, hence produce revenue. But the most effective metrics for each group are those things they directly influence.
Is Maths, a division of Physics?
Or, is Physics a division of Maths?
Now, the pedantic answer is there is no S, it’s Math.
There are many narrow answers to the best metric for Marketing, which is why I have always combined Sales AND Marketing together under one Accountable Leader, and measure Business results. If there is NO named leader, VP or Director, then the CEO OWNS Sales and Marketing Success AND Failure.
A wiser man than me once wrote:
“What gets measured, gets attention.”
[attributed to Peter Drucker]
So, be careful what you measure because it can become a distraction.
Portfolio Measures, I Was taught in my MBA, if I remember correctly by Prof. John Kay at London Business School, are best. But, he’s an Economist so he would say that, wouldn’t he?
Kaplan’s Balanced ScoreCard is a great Portfolio Measure, it has served me well. But there are many others.
ABC: Activity Based Costing, can be used to measure Marketing “Bangs for the Buck”. But, I have found that Revenue, like success, has a Hundred Fathers, and failure, apparently, is always a Fatherless Ba$tard.
Well said Brian!
What gets measured is what get’s done. So if you want to measure Marketing in revenue terms first consider: what impact will that have on Marketing’s activities, and will it really deliver what you want?
Second, and to one of the points above, both Sales and Marketing comprise a diverse range of “actors” with different mindsets and responsibilities. My colleague at Sheffield Hallam University Dr Simon Kelly recognised this in his doctoral thesis. Effective Sales and Marketing departments (ie those that perform above sales target) have good integration between these different actors, in terms of how they communicate, respect one another and share information. Any measurements that are put in place should reward and support this diversity.
Thanks Janet, clearly it’s critical that Marketing and Sales are aligned in their priorities and have complementary metrics. Otherwise we drive dysfunctional behaviors in the organization.