When sales and marketing are aligned, revenue teams perform better, but instead of perceiving each other as a worthy or reliable partner, they regard each other as an unworthy or unreliable partner. Why is there a gap between sales and marketing when, in theory, they both want the same thing: to meet their revenue targets? It isn’t due to any inherent antagonism between sales and marketing, but rather to the fact that they are compensated (and so driven) based on distinct measures.
By rewarding salespeople based on company priorities, the sales credo “compensate for the behavior you want” helps firms align sales performance with company goals. If a corporation prioritizes multi-year deals, for example, a salesperson will be paid more for a two-year deal than for a one-year deal. When sales compensation is tied to corporate goals, salespeople are more likely to close the agreements that management desires.
The same principle should be used to marketing: compensate for the desired behavior. Instead, marketing is frequently compensated based on marketing qualified leads (MQLs), which is where the difficulty starts.
In principle, if marketing is judged on the number of MQLs it generates, your marketing staff will devote all of its efforts to providing the greatest possible leads for your sales team. This is rarely the case in practice. If MQLs are used to gauge marketing, then all marketing efforts will be focused on creating as many MQLs as possible, rather than the quality of the MQL. The issue is that, unlike a revenue goal, marketing gets to make up a MQL.
There’s no way around it: if a salesperson needs to meet a $100,000 quota, they must close $100,000. Marketers, on the other hand, get to define what a MQL is and can (and frequently do) tailor it to their own requirements. An MQL has been defined by a marketing team as any lead who opens and clicks on an email. Because each email generated additional MQLs, the team sent out five reminders for each webinar. Was the sales staff pleased with their performance? Obviously not. Marketing, on the other hand, was not pleased. The marketing team worked tirelessly to achieve its goal of producing as many MQLs as possible, only to have sales disregard them.
Unlike many other business issues, this one has a simple answer because pipeline development is a statistic that both sales and marketing teams can rally around.
Marketing can get off the hamster wheel of continually seeking for new MQLs and instead focus on which people or firms are ready to buy by measuring marketing on pipeline generated. Rather than focusing on quantity, marketing might concentrate on generating qualified leads. By removing MQLs as a statistic, marketing will be incentivized to nurture leads until there are clear signals that they are ready to speak with a salesperson, rather than creating a lead and moving on to the next.
Measuring marketing on pipeline ensures that the marketing team is focused on areas other than lead generation, such as ensuring a smooth handoff between sales and marketing, assisting sales in booking first and second meetings, and providing the sales team with the collateral and training they require. More crucially, connecting sales and marketing around pipeline development ensures that neither team can perform without the other. Because marketing cannot build a pipeline on its own, it must collaborate with sales to ensure that first meetings are scheduled and opportunities are produced. It forces the sales and marketing teams to perceive themselves as members of the same team, with the same goal in mind.
True, sales teams are judged on revenue rather than pipeline, and I’m frequently asked: Why not attach marketing to revenue rather than pipeline so that sales and marketing are working toward the same goal? Although connecting sales and marketing to the same goal is neater and more symmetrical, there are two reasons why marketing to pipeline is preferable to revenue.
To begin with, marketing has a greater influence on pipeline than it does on revenue closure. There are many things marketing can (and should) do to assist sales in closing a deal when an opportunity has been established, yet factors outside marketing’s control can derail a deal – the buyer is purchased or goes bankrupt, the key decision maker is sacked, or the salesman drops the ball. The marketing team has little control over these difficulties and may become resentful if their performance suffers as a result of them. It is reasonable to urge marketing to commit to a statistic over which they have control, such as pipeline, but it is unreasonable to link their performance to compensation.
The second justification for tying marketing to pipeline rather than revenue is that it is more equitable. By linking marketers to a number they don’t fully own, getting them to agree to pipeline as a measurement metric already demands a huge mindset shift. Marketers and sales share responsibility for pipeline, but they have enough control over it that being measured by it can be empowering rather than terrifying.
Pipeline generation, in my opinion, is the Goldilocks of marketing KPIs. The MQL is insufficient because it does not hold marketing accountable, whereas revenue is excessive since it holds marketing accountable for factors beyond its control. Pipeline creation is ideal in that it holds marketing accountable for the areas where it can have the biggest impact on revenue, rather than for those where it can’t.