In this three-part series, Lou Shipley, Executive-in-Residence (XIR) at General Catalyst, provides practical solutions for tech CEOs to enable productive sales teams and cultures based on his experience building multiple successful tech companies, including Black Duck Software, VMTurbo, Inc., and Reflectent Software.
Part I: Sales vs. Marketing: Can They Really Co-Exist?
Aligning sales and marketing to beat your numbers and predict your business
Every CEO has experienced sales and marketing finger-pointing and bickering during senior management meetings — particularly after a missed quarter.
CRO — “We would have had a much better chance at making the bookings number for the quarter if marketing had produced more qualified leads.”
CMO — “We created tons of leads this quarter. Too many of the leads we handed off to sales aren’t being followed up on. We can’t control what sales closes.”
Is sales the problem? Is marketing the problem? Or, perversely, — and I have experienced this many times — is the organizational structure and compensation systems preventing alignment?
For example, if marketing’s incentives are based primarily on the sheer volume of leads it passes to sales — regardless of whether the company makes its bookings number — alignment is unlikely.
I’ve been through many end of quarter “it was their fault, not ours” blame-fests — and it’s no way for any CEO to live. Follow these three steps to gain alignment among your sales and marketing teams and across your organization.
1. Have a single version of truth.
Create a truly independent sales and marketing operations role, reporting to the CEO. That way everyone — CEO, CFO, CRO, CMO and COO — agrees not only on the bookings number, but also — based on past performance — the number of sales-qualified leads that marketing will produce, and the percentage of sales qualified leads the sales team will close based on average deal size in order to achieve the bookings number. Make sure you AGREE ON ALL THE NUMBERS UP FRONT. NEVER CHANGE THEM.
2. Establish a hard and fast, mutually agreed upon definition of a sales qualified lead (SQL).
Yes, this is likely to be a contentious, wrangling process, but it is essential and one of the most valuable things a company can do.
Sales, marketing and ops teams must take the time to sit down, examine the characteristics of leads that close and come up and agree upon criteria that must be met in order to attain the designation of sales-qualified lead.
Marketing knows at the outset of each quarter the number of sales-qualified leads (SQLs) that it must produce over the 13 weeks. It then can look at history to see what programs, campaigns, events and web/collateral content were the most productive leads that sales closed. It makes allocating time and resources much more efficient and streamlined.
Sales, in turn, knows from the get-go that if marketing produces the required number of SQLs, it is on the hook to deliver the bookings number.
Bottom line: Everyone is similarly focused.
No, it will never be perfect, but as you gain experience at understanding your sales and marketing math equation and fine tune it, your forecasting and your results will continuously improve.
3. Base marketing’s compensation primarily on generating sales qualified leads and making the bookings goal. Period. Full Stop.
The marketing team must live and breathe SQLs. When the marketing team is relentlessly focused on SQLs, it will sharpen its decision-making processes and prioritize activities it allocates resources to — demand-generation campaigns, trade shows and other events, premium content, web content, webinars, brand-building efforts, media placements etc. — based on SQL generation. Implement a tool that clearly traces lead attribution so the right team gets credit for creating the lead. It will force them to demonstrate how those activities — and to what extent — were influential in creating SQLs.
In short, gaining consensus, using SQLs created and closed as the measure of sales and marketing success, and concentrating everyone on the sales and marketing math equation are key consistently making your bookings number (which we know is what matters more than anything else).