Why doesn’t Revenue Performance Management (RPM) include Sales?

Hi Bob – I love the article on Revenue Performance Management! I want to take a second to slightly clarify Eloqua’s position on it (I’m the director of product marketing at Eloqua).

Sales people, sales process and sales technology are absolutely critical to a successful Revenue Performance Management strategy. In fact, the driving force behind RPM for many of our clients are sales executives looking for accurate long term forecasts or trying to determine the key ingredients to a healthy sales pipeline. For example, two of the most compelling client presentations on RPM that I’ve seen were by Iron Mountain (2 weeks ago at a Sirius Decisions conference) and Polycom (last year). In both cases, the presentations were given jointly by the CMO and VP of Sales.

RPM almost always starts with standardization of sales process and pipeline definition. CRM/SFA is thus a requirement and foundation for RPM. Without these investments, businesses tend to struggle to get a real return on their marketing automation platform. It stays stuck as a tool for executing email and never quite reaches the status of strategic investment that is critical to revenue production, and therefore RPM.

Jim, thanks for your comments, but I’m still a little confused.

You say that RPM is about marketing “joining the revenue party” and I’m fine with that. It’s a new and more strategic positioning for marketing … especially for B2B companies where sales takes the lead on revenue and marketing has been relegated to a support/tactical role.

But, I’ve also been hearing that RPM is a new “category” — which means a grouping of related technology providers. For that to happen, sales technology solutions should be part of the category definition. So far, it seems that Eloqua and Marketo are defining RPM to just include marketing technology. Two vendors don’t make a category.

If the strategy part of RPM includes sales, shouldn’t the enabling technology part also include sales-related tools? To this point, I don’t see any sales tool vendors adopting RPM.

Bob, you’re right to highlight the growing use of the Revenue Performance Management theme by some of the brightest marketing vendors around (it’s nice to see them agreeing on something so important).

But I also think you’re right to suggest that it ought to have a broader span than it currently does. This isn’t about marketing inviting sales to their party, or vice versa.

Alignment around revenue ought to be at the heart of how sales and marketing collaborates, and there’s a real danger that the opportunity might be undermined or high-jacked.

Like you, I’d like to see the CRM, Marketing Automation and Sales Enablement vendors marching forwards towards a common theme. In my world, that which contributes to revenue, whether directly or indirectly, is good.

That which diverts attention, or wastes effort that could be better applied to finding, winning and profitably satisfying customers is bad. And that includes creating or hijacking an otherwise promising category and having it serve an unnaturally narrow purpose.

This a a great discussion.

So far, the discussion has been largely rhetorical though. Let’s make it a little more tangible.

As a sales development expert, I would help a client develop a staged, criteria-based visual pipeline to determine exactly how many opportunities must be in each salesperson’s pipeline and what they must be worth in order to achieve the revenue targets, while considering average sales and closing percentages for each salesperson. In many cases, this information comes from the marketing people. Next, I would develop the KPI’s to fill the first stage of the pipeline – the measurables that sales management must hold their salespeople accountable for. Both the pipeline and the KPI’s should be integrated into CRM. Ideally, the next step would be to identify the marketing KPI’s necessary to help the salespeople achieve their KPI’s. This is not being done enough because the people in my space, the sales experts, gurus, consultants, trainers and strategists tend to focus on what they know and do best, rather than integrate a holistic solution.

You’re right. It’s time.

Great post and great comments. I’m all for tools that help the organization (not just marketing) better manage revenue performance. Dave outlines KPI’s and approaches sales has used for years in making sure they have healthy pipelines and are managing revenue through the pipeline effectively.

Many of the new tools focus more on the marketing side.

The issue is really broader than this (for example, ask any product line manager their view/role on revenue (and P&L) performance of their product line.

As has been suggested, it’s time not to look at RPM from a functional point of view, but look at it from an overall organizational point of view, defining KPI’s and processes for all parts of the organization concerned.

As the new buyer forces increasing integration of marketing and sales, it’s critical that our processes, metrics, and compensation systems are more aligned.

Hi Bob,

Thought provoking discussion and article. On the surface, I believe RPM is a very worthwhile concept and strategic intent. It does have the potential to collectively bring into its’ newly created category other areas such as Sales 2.0, Sales Enablement, Content Marketing, and Marketing Automation. The alignment issue has plagued all of these areas and will continue to do so as long as organizations are unwilling to look at how businesses should be organized in the new social age. Everytime a new “square box” concept or category comes along, the first impulse has been to determine which “round hole” to slot it into – sales or marketing. One of the two takes perceived ownership and is so narrowly focused on making the square box fit into their designated round hole that alignment becomes a rarity. A secondary problem here is that sometimes these new labels and categories are reworked concepts of existing or previously tried concepts. Adding truth to that old adage, the more things change – the more things remain the same.

The larger issue in today’s changed business world is how RPM can foster new business models that are better suited for today’s new social buyers. The conventional structure of marketing and sales as well as other silos becoming burdensome anchors the tighter they are held onto. I think there is promise for RPM only if it can serve as a catalyst to create new business models that make courageous buisiness leaders change the fundamental structure that is at the core of misalignment.

Tony

RPM seems good, looks good, sounds good. There’s a business case for it. The idea will blossom when revenue accounting systems (ie the General Ledger chart of accounts) support internal collaboration in every sense of the word ‘support’.

A revenue dollar is a revenue dollar is a revenue dollar . . . except when department heads compete for each, and are given bonus incentives for “making the number.” Then each one is different. Mine is mine, and yours is yours. Want to create a culture of information hoarding and internal competition? Have your senior managers compete for the dollars! It happens every business day.

How Accounting categorizes revenue dollars tells me much of what I need to know about how “aligned” marketing, sales (inside, outside, and channel), customer support, post-sale service, and other departments will be in fulfilling customer need.

Revenue Performance Management is a great idea. In order for it to work, fundamental changes must be made to an organization’s accounting system. Otherwise, it’s just lipstick on a pig.

Bob, thank you for a stimulating post and an engaging discussion. Many parts of the organization impact revenue- customer service (especially for repeat biz), the product teams, etc. Of course marketing and sales are the key partners in driving profitable revenue but everyone in the company has this focus so what marketing must do is contribute and demonstrate its impact on revenue, and more importantly on customer acquisition and retention since we don’t market to buckets of revenue but rather customer and market segments. And typically in B2B, marketers don’t have the opportunity to negotiate the deal so they don’t control the actual “revenue.” What we do need to do is to connect, engage with and add qualified contributions to the pipeline that will convert quickly to sales opportunities that have a high likelihood to close. Marketing automation is about connection, conversation, engagement and consideration. Marketers have a hard enough time with measuring their contribution to the business as it is, the last thing we need to do is to confuse the issue with another category.

Laura, I certainly understand your point about confusing the issue with another category. At this point, it’s hard to tell whether RPM will catch on, and what it will ultimately mean.

At a minimum, RPM vendors will use it as a feature to differentiate themselves from other marketing automation vendors.

Perhaps it will be expanded to include a sales and even other parts of the organization. I’m hearing more these days about customer service reps up-selling. Clearly revenue is not just about what the marketing and sales functions do, but they are in front seat of the car with sales in the driver’s seat in most B2B organizations.

To me, the single biggest potential benefit of RPM would be to help marketing and sales work more collaboratively. If RPM is just a marketing tool, RPM will help the marketing ‘silo’ justify its existence but won’t optimize the company’s total revenue potential — which is the point of RPM after all.

We’ll only know whether RPM truly has legs when we can craft a crisp definition. When I re-read the Eloqua and Marketo definitions, I definitely found more clarity in Eloqua’s.

I struggled with Marketo’s, Revenue Performance Management (RPM) is a strategy to optimize interactions with buyers across the revenue cycle to accelerate predictable revenue growth. because I don’t view management of anything as a “strategy.” It’s management–that contributes to strategy–but it’s not a strategy. In addition, do people ‘optimize interactions,’ or apply effort to get specific, desired results from them? Finally, in today’s collaborative, socially-networked buying/selling environment, using the term buyers seems myopic and misses the boat on how people coalesce around moving ideas to action.

For me, Eloqua’s definition is clearer and much easier to grasp: Revenue Performance Management is a systematic approach to identifying the drivers and impediments to revenue, rigorously measuring them, and then pulling the economic levers that will optimize top line growth.

. . . And how I would re-word it:

Revenue Performance Management is a systematic approach to identifying what creates and stifles value exchanged between trading partners, measuring those factors and forces, adjusting strategy, and engaging in activities that are most likely to achieve revenue growth.

What a great lens through which to understand and manage enterprise risk!

I received this comment via email from a B2B sales expert who did not wish to be identified.

Nice article. I vehemently disagree, however, with what Eloqua and Marketo say about RPM and with your conclusion that sales needs to join the fun if the strategy is to work. What I don’t want to do is appear to be counterproductive by ruffling feathers or to make enemies by writing why I think the idea of RPM is just more gobbledygook from technology vendors aimed squarely at marketing and sales folks who can’t figure out what is wrong with the traditional approach to revenue generation.

Back to the practical…

At one of my clients, inside sales reports to marketing, not sales. Their role is to schedule appointments for outside sales and they are doing that quite well (number of appointments is what they are measured on) and being compensated accordingly. However, they have an ungodly number of opportunities that have not achieved pipeline velocity because the appointments are not qualified. Clearly (to me), if the inside salespeople were to be compensated on appointment quality rather than quantity, there would be fewer new appointments scheduled, but most of them would be of a high quality and salespeople would feel more confident about following up and following through. Of course, a measurable definition of what constitutes a quality appointment must be developed.

In my opinion, this challenge falls under ROM, but based on the definitions of RPM above, this work would be consistent with Eloqua’s definition (they use Eloqua and are slaves to the data but are clearly missing the bigger picture) but not with Andy’s, where he adds, “identifying what creates and stifles value exchanged between trading partners”.

If inside sales reported to sales rather than marketing, we would have fixed this for them a year ago, it wouldn’t be an issue, and marketing would be back to marketing. But since inside sales reports to marketing, and sales, not marketing, chose to engage us, the territorial barriers are in place and these two groups of campers are not playing well together. Looking at this another way and bringing it back to Bob’s original article, why isn’t sales in on the fun? It’s like the boys telling their parents that “girls are icky”. Sales is icky.

So in this particular case, the remedy is for the CEO to do what CEO’s don’t usually choose to do and that is to call a family meeting and lay the law down. But CEO’s don’t do that because they expect their leaders to resolve things like this on their own. And when the leaders can’t play in the same sandbox, they develop silos, play solitary games, and don’t learn from each other.

Sales isn’t in on the fun because Marketing doesn’t want them to be in on the fun!

Dave, thanks for sharing your story. A great example that tech along won’t get people working together.

There has been some discussion recently about a Chief Revenue Officer as the senior leader that would help resolve these sorts of issues. The theory goes that if one executive has responsibility for both marketing and sales, it is more likely they’ll work towards a common goal.

Of course, the CEO could fill this role, but as you pointed out this may be impractical in many organizations. Do you think appointing a Chief Revenue Officer would help?

I like the idea – in concept.

On the other hand, I’m afraid that it adds another layer of management – which no organization needs, and the CRO may not have the respect of either sales or marketing, depending upon which path he/she took to reach that position. Other than that, I love it!

Steve Woods of Eloqua wrote an article about RPM here:
Revenue Performance Management: Align Marketing and Sales to Optimize Top-Line Growth

It’s also part of a 50-page e-book which can be downloaded (no registration required) at: Strategic Roadmap for Digital Marketing.

May I weigh in here? Digital Sales Doctor is a new blog about “applying internet technology and management science to what really matters… ideal sales opportunities and revenue.” I have some conclusions regarding RPM that might add value to this discussion.

You are correct – the marketing technology vendors got it wrong. They looked at revenue performance through the lens of a Chief Marketing Officer. They sell to CMO’s so I don’t know if this was intentional or not.

Your buyers mental buying process did not change – he didn’t suddenly evolve – he just moved to a digital sales channel. What is occuring on the internet is a SELLING process.

Tha is why there is no such thing as a sales and marketing alignment problem… it is all a PROCESS problem. Marketo, Eloqua, SalesForce.com, and all the other “industry leaders” have been applying new technology to new customer behaviors… with outdated revenue processes. (Pulling tractors with oxen)

So, you are absolutley correct, the early RPM proponents missed the most important element of RPM – it is a selling equation not a mass marketing equation.

In fairness to Jon Miller, a brilliant individual; his premises were ALL correct, but his approaches, processes and tools are outdated. Is he selling to his lowest common denominator – the CMO? Our group works only with the CEO or the top REVENUE officer.

I am completing a short video “Moneyball for Revenue Creation: How to apply technology and science to what really matters… WINS and Ideal Sales Opportunities”. Email me or send me a LinkedIn invitation if you want this foundation post prior to the launch of the blog. This post has my core arguments for new thinking in revenue creation.