Sales and Marketing are on the same team. Okay, let's be honest: At most companies, it doesn't actually feel that way. According to a Corporate Executive Board study, 87% of the terms Sales and Marketing use to describe each other are negative. Sales calls Marketing arts-and-crafts and irrelevant, and Marketing calls Sales simple-minded and incompetent. Don't you think it's high time we stopped all this childish name-calling?
At HubSpot, we're lucky. We've had a great relationship between Sales and Marketing ever since the company was founded. CMO Mike Volpe and SVP Sales Mark Roberge were a team, and that alignment trickled down through the whole organization over time -- so much so that now we have strong alignment between a marketing head and a sales director for each of the company's buyer personas/segments.
But it wasn't actually luck that got us there. It was a conscious decision to work together and set goals and create agreements between the two teams that helped align these traditionally acrimonious teams. In this post, we'll talk about how to achieve harmonious sales and marketing (we like to call it SMarketing) alignment, and will focus on one of the most critical steps: creating a sales and marketing service level agreement (SLA). To make this easier for you, we've also just launched our new template to help you calculate the marketing side of your SLA. Download it for free here!
3 Steps to Sales and Marketing (SMarketing) Alignment
Step 1: Get Marketing to sign up for a number.
As a marketing department, not only should you have a concrete goal in order to drive your strategy and reporting, but you should also make sure you're setting a concrete, numerical marketing goal that aligns with the sales team's mentality. Sales is driven by quota -- a numerical goal that ties directly to their compensation and job security. By signing up for a similar, related numerical goal, it shows that Marketing is being held accountable just like Sales and feels the same pressure to hit that concrete goal.
Step 2: Communicate, celebrate, and address the achievement (or lack thereof) of those numerical goals.
Communicating how each team is tracking toward their goals maintains transparency, addressing when either team is not reaching those goals confirms their importance, and celebrating when the teams do hit their goals keeps them motivated. Check out the reports you need to keep Sales and Marketing accountable for these goals (also, more on this later). And speaking of accountability ...
Step 3: Come to an agreement between the two teams about what each is accountable for to the other.
This is what we call a Sales and Marketing Service Level Agreement (SLA) and it details both the marketing goal (such as number of leads, number of qualified leads, or revenue pipeline) and the sales activity (follow up with leads generated by Marketing) each team commits to in order to support the other.
Coming to an agreement based on concrete, numerical goals makes it much easier for these two traditionally opposing teams to work together. Don't have a Sales and Marketing SLA in place? Here are the four steps to creating one.
How to Create a Sales and Marketing SLA in 4 Steps
1) Calculate the Marketing Side
In order to calculate the marketing side of your SLA, you'll need the following four metrics, which you can gather from your marketing analytics tool and your CRM:
- Total sales goal in terms of revenue quota
- % revenue that comes from marketing- vs. sales-generated leads
- Average sales deal size
- Average lead to customer close %
Then it's time to do some calculations:
- Sales quota * % revenue from marketing-generated leads = Marketing-sourced revenue goal
- Marketing-sourced revenue goal / average sales deal size = # customers needed
- Customers / average lead to customer close % = # leads needed
How to Reevaluate the Marketing SLA Every Month
Over time, a variety of factors can change the numbers used in your calculations. It's a good idea to recalculate the Marketing SLA periodically -- either every month or every quarter. To do so, create a spreadsheet that tracks your SLA calculations by month, which should include the following metrics:
- # marketing-generated leads
- # of those leads that became customers
- Revenue from those closed customers
- Total revenue closed that month from marketing-generated leads
- Total revenue closed that month
You will also need:
- Average sales cycle
With the above metrics, you can calculate the metrics used in your original calculation on a monthly basis:
- # marketing-generated leads that became customers / # marketing-generated leads = lead to customer close %
- Revenue from closed customers / # of marketing-generated leads that became customers = sales deal size
- Total revenue closed from marketing-generated leads / total revenue closed = % revenue from marketing-generated leads
To determine which values to use in calculating the coming month's SLA, you'll want to take an average of 6-12 months, allowing for your average sales cycle. For example, if your average sales cycle is 3 months and you're calculating the SLA for March 2013, take the average of the values for the period June-November 2012.
Note: You can exchange month for the timeframe used in your business (quarter, year, etc.). Just make sure you use the same time frame for both Sales and Marketing to maintain alignment.
Take it One Step Further: Consider Quantity and Quality
The above calculations provide you with a volume (quantity) goal of marketing-generated leads. However, we know that not all leads are the same, and as a result, some may be considered higher or lower quality than others. For example, a CEO may be a more valuable contact than an intern, or someone who requests a product demonstration may be more valuable than someone who downloads a free ebook. If that's the case, you can do the above analysis for each subset of leads and set up separate goals for each type (quality level) of leads.
Take it EVEN FURTHER: Measure in Terms of Value Instead of Volume
After you've made the calculations for the various types (quality level) of leads, you can either set goals in terms of the number of leads at each level, or give each type of lead a value tied to the revenue it brings in. For example, a CEO may be worth $100, while a director is $50, a manager is $40, etc. Or a demo request may be worth $100, a product webinar registration $80, an ebook download $30, etc. To measure in terms of value instead of volume, skip the step of converting revenue goal into customer number and do the entire calculation in terms of currency.
2) Calculate the Sales Side
The sales side of the SLA details the speed and depth of follow-up for marketing-generated leads. At HubSpot, we had an MBA student do an analysis to determine the optimal number and frequency of follow-up attempts for each lead. If you have the ability (time and resources) to do that, that's fantastic, but I'm sure many businesses don't. In that case, InsideSales.com has done extensive analysis, and has found that:
- The first 5 minutes are critical to higher contact and qualification rates. If leads are responded to in fewer than five minutes, the odds of contacting them are 100x higher than waiting 30 minutes.
- The recommended number of follow up attempts is between six and nine calls, depending on the lead type. By making six to nine attempts, you get 90%+ value out of the lead.
What if not all leads get 1:1 Sales follow up?
Not all leads may be fit to send to Sales immediately. Perhaps they need to meet some minimum level of quality which is only reached after Marketing nurtures leads to a certain action or level of activity. That's perfectly fine -- as long as your leads get some immediate follow up. The first moments after lead conversion are critical in maintaining a relationship with your leads, and either Sales or Marketing should make contact immediately to start building that relationship, make nurturing easier, and set up the sales rep for success later on when they do reach out.
Factor in Sales Rep Bandwidth
While, ideally, you may want your sales reps to make six follow-up attempts for each lead, they may not simply have enough hours in the day to do so given their assigned lead volume. So you will also need to factor in the number of leads they're getting (based on the Marketing SLA), how much time they spend on marketing-generated leads vs. sales-generated leads, and how much time they have to spend on each lead. You can also explore ways to automate some of their follow-up (particularly the email follow-up) in order to maintain depth of follow-up without adding extra time for each rep.
3) Set up Marketing SLA Reporting
Now that you have your SLA goal, it's time to track your progress against that goal ... daily. Graph the goal line by multiplying 1/n (where n = # days in the month) by your monthly goal to determine what portion of your monthly goal you need to achieve every day, and graph that cumulatively throughout the month. Graph your cumulative actuals on the same chart. We call this a Waterfall Graph, and here's how you can easily create your own.
4) Set up Sales SLA Reporting
For the Sales SLA reporting, you'll have two graphs -- one monitoring speed to follow-up, and the other monitoring depth of follow-up. To graph the speed of follow up, you'll need the date/time the lead was presented to sales and the date/time the lead got their first follow-up. The difference between those two times is the time it took for Sales to follow up with a particular lead. Take the average for leads in a particular timeframe (e.g. by day, by week, by month), and graph it against the SLA goal.
To graph the depth of follow-up (i.e. number of attempts), look specifically at leads that have not been reached (connected with), since the goal of the follow-up is to get a connect. For leads over a certain timeframe (e.g. one week, two weeks, one month) that have not gotten a connect, look at the average number of follow-up attempts made, and graph that against the SLA goal.
The final step is to review these metrics on a daily basis to monitor your progress, and make sure both Sales and Marketing have access to the reports for both teams' side of the SLA. This maintains accountability and transparency, and allows for the teams to address issues or congratulate each other based on the undeniable results.
Have you struggled with any particular step of implementing a Sales and Marketing SLA? What other best practices have you found in creating an SLA at your organization? Share them in the comments below!