CustomerThink Founder/CEO Bob Thompson interviews Eloqua co-founder and CTO Steve Woods about Revenue Performance Management or RPM.

Interview covers the following topics:

• What is Revenue Performance Management (RPM)
• The Business Case
• Who Should Own RPM?
• Enabling Technology
• Biggest Obstacle to Success

Interview recorded April 11, 2012. Transcript edited for clarity.

Transcript

Bob Thompson:
Hello, this is Bob Thompson of CustomerThink. For this episode of Inside Scoop, I'm very happy to have a return guest, Steve Woods, who is co-founder and CTO of Eloqua. Now for those that don't know about Eloqua, it's a company that provides solutions for marketing automation, demand generation and B to B marketing.

Steve, welcome back to Inside Scoop. It's great to catch up with you again.

Steve Woods:
Great to be back, Bob. Looking forward to chatting.

Bob Thompson:
Three years ago,we had a great discussion on my Inside Scoop program. We talked about your book, Digital Body Language. This time, our topic is Revenue Performance Management, a new term or a buzzword that's been growing in the industry. You have a new book out that really outlines what you mean by it, and we're going to be referring to that in a little bit in our discussion today. The book is Revenue Engine, which you co-authored with Alex Shootman.

What is Revenue Performance Management (RPM)?

Bob Thompson:
Let's get right into it and start with some basics. What exactly is revenue performance management, and perhaps more importantly, can you explain why, as your book subtitle suggests, that you believe it's, "The next frontier of competitive advantage?"

Steve Woods:
Sure, glad to. At a high level, revenue performance management is a systematic approach to looking at revenue, identifying both the drivers and the impediments that make your revenue either come in or fail to come in, measuring them and then pulling the right levers to drive more growth and optimize that topline growth. So, the question, of course, is not "Is revenue important?" Of course it is. It's top of mind for every CEO out there? But (rather) why now is there a unique opportunity to instill a discipline that was not historically possible around driving and measuring that top line growth?

Bob Thompson:
Every company, especially public companies and most private put out reports that talk about their revenue. One would assume that they're managing it somehow. You use the term, "systematic," and you used a couple of other terms—I'm very intrigued with "drivers" and "impediments." You're implying that it's more of a disciplined approach to maximizing revenue. Can you elaborate just a little bit more about what you mean by this in practice?

Steve Woods:
If you look historically at where there was management before, it was generally at the very, very last stage, the sales process, where you have an opportunity: it's managed by someone in sales, and you march it through the final stages of deal closure and final investigation. And that's great, and we've built a lot of sales discipline around that.

What's possible today, though, is looking at revenue and identifying those drivers and impediments much further up, when the buyers first start doing their research, understanding the space, learning more about it, becoming more engaged, engaging others within their organization. And so, you have two factors coming into play.

One, we can understand buyer behavior much further up the buying funnel, which gives us a longer-term visibility into revenue. And two, related to that trend is the involvement of sales is actually being pushed later and later. Buyers tend to do a lot of their research now online, rather than calling in vendor salespeople.

So, the visibility that you get just by working with your sales team to say what opportunities are you working today and where do they fit into the sales funnel is becoming more limited. While our overall ability to get that visibility by looking at buyers and their behavior, what I talked about in "Digital Body Language," that is becoming more possible in today's world.

The Business Case

Bob Thompson:
OK, before we get too far down in the weeds, give me your pitch on why a CEO should spend some time really understanding this concept. What is it that's going to give him or her a competitive advantage, and I presume, more revenue for the resources they're putting into their company?

Steve Woods:
Looking at it from the CEO's lens, you have a bunch of dollars that you invest in running the business, and out of that, you hope to grow it, make it more profitable, make it more successful. If you look at that at a macro level, sales and marketing as a line item across a business is a big, big chunk. Some businesses, it's up to 40 percent of your total spend is going into sales and marketing. That differs by industry, but suffice to say in the majority of industries, your spend on getting more revenue is a big chunk of the CEO's overall spend and therefore . . .

Bob Thompson:
A big part of SG&A in general, right?

Steve Woods:
Absolutely. So then the question is, am I, as the CEO, getting the best bang for that buck? And the challenge that you run into is without the visibility, it's often difficult to say, "OK, well I put this many dollars in, I know what it turned into, but could it have turned into more and why, and what worked and what didn't work?"

Revenue performance management gives you that visibility. It allows you to say, "OK, here is the overall funnel. We put this many dollars in to get people into the top of the funnel, we put this many dollars against moving them through the funnel, this is what's working, this is where it didn't work, these are the bright spots that we could focus more on."

And it allows you to say, "OK, well next year, I'm going to move the dollars that I invest in driving revenue around a little bit. I'm going to do more of the stuff that's working, I'm going to do less of the stuff that isn't working, and I'm going to move people at higher volumes at a faster speed through that buying funnel because I know what actually causes them to move."

And if you can get that understanding of the conversion rates and the volumes and the speeds and what causes those, then you've got the levers. You can tweak that and you can say, "All right, next year I'll invest the same amount, but I'm going to get 20 percent more revenue, 30 percent more revenue out of the same investment because I know what's working and what's not." And that's powerful.

Bob Thompson:
OK, bottom line, it's about total productivity of the marketing and sales resources. I love this idea because I think there's been a lot of silo optimization that I've seen in the time I've been in this industry, for more than 10 years. We spend money on marketing, we spend money on sales, customer service. Even with CRM technology, we really haven't done a lot to optimize processes that span silos.

And so, RPM seems to be getting at that and really driving it to more of a CEO level or a business unit level at the very least, to say, "How can we get the biggest bang for our buck?" as you put it so well.

But, bottom line is I'm going to spend some more money on technology if I'm the CEO. I'm going to have to deal with a few other issues that we're going to get into here in a second. I've got to still make an investment to make this RPM thing work. What do I get for it? I mean do you have any experience with some of your clients that would suggest they can get an X percent increase in overall productivity?

Steve Woods:
Sure.

Bob Thompson:
If you could tell a CEO that they could spend the same amount of money and get an extra three percent of their revenue, I'm sure they would be all over it.

Steve Woods:
Yeah, and the nice thing here is that's what revenue performance management is all about, so if we didn't have that, you would have to question things. And you mentioned just focusing in on the challenge of crossing the silos. It's a great one because that is a very common problem.

We work with Polycom, as one example. As they looked at the full RPM journey and where buyers went to from the early stages to the latest, they realized that one of their conversion challenges was getting the marketing responses through the sales accepted lead, kind of that hand off process across the silos. And because they had those baseline metrics and said, "That is our problem," they were able to put the work in there and make the investments. And as they did that, if you look at the bottom line results, which are top line results, lead flow is up 82 percent, sales revenues are up 34 percent. So, these are significant changes in deal flow, lead flow, revenue flow that are benchmarked and are measurable just by being able to say, "Look, there's a broken part of the process here, and we're putting all of this effort in and it's just flowing out the side. Let's just plug that hole. Everything's going to go a lot smoother."

Who Should Own RPM?

Bob Thompson:
I want to stay at kind of a strategic level for a moment. We've talked about the CEO or maybe a business leader that has responsibility for revenue. Is that the person, in your estimation, who should own RPM?

Steve Woods:
I would say generally, no. The CEO is an important stakeholder and certainly needs to bring the realization to the table that marketing and sales in 2012 are measurable disciplines. But your owner is what I would call the Chief Revenue Officer. And in some organizations, there is a person who has the title of Chief Revenue Officer on their business card. In some organizations, you've got a head of marketing, you've got a head of sales. So, in those organizations, what you need to do is have combined ownership between marketing and sales.

The CEO's involvement here is to push the head of sales and head of marketing to produce a combined pipeline projection report. And that simple act, saying, "Hey, Bob, hey, Sally, you two need to present the exact same pipeline report that looks at marketing's contribution, looks at the handoff, looks at sales contribution, forces all of the right decision-making so sales and marketing can break down those silo walls, can start to get the right common currencies between themselves, can get the right processes in place and actually start to put that common view of the buying funnel together, so they can present that metric.

Bob Thompson:
OK, but at a minimum, you would expect the CEO to be a sponsor and make this a key objective of the executives actually leading marketing and sales?

Steve Woods:
Well, it's the funny thing about accountability. Nobody, for their own purposes, wants accountability. The people who are driving revenue should be accountable, but the people that should be accountable are the CEOs. So, the CEO's role is to ask the right questions and demand the level of accountability that is possible in today's world. The people that need to stand up to that accountability are the heads of marketing and sales, and there are tools and techniques that they can use to get them.

Bob Thompson:
But it still sounds like you're saying the CEO shouldn't own it, but then you say that really, the CEO needs to actually own it to some extent. In my experience, you have two executives that are each individually charged with meeting their objectives. VP of marketing has objectives, VP of sales has objectives. Unless the boss of both of those executives does something to change how they're measured, what they're asked to do and to encourage them to work together and have a shared work process—which is really part of what RPM is about—nothing changes. So, the CEO can't be, at least in my experience, just kind of an interested bystander. He or she has to really take more of an active role. Would you agree with that?

Steve Woods:
Yeah, I do.

Bob Thompson:
How is that not "owning" it then? That's what I'm trying to get at here.

Steve Woods:
Yeah, it's the nuances of what we mean by ownership. If the CEO does not ask the tough questions and demand objective, fact-based answers around revenue and where it's coming from, then sure, you're not going to see the dynamic in an organization that maximizes that efficiency. Is the CEO out there buying the technology, implementing the business processes? No, that's not their role.

Bob Thompson:
OK, then let's get into that. Who is the owner of the more of the nuts and the bolts of RPM? It seems like most of the marketing automation industry – and there are few exceptions, but mostly it's been focused on B to B. How do we improve the lead management scoring, getting the right leads to sales, all that sort of thing. And the RPM movement, if I can call it that, has been led in the early stages by two vendors, Eloqua and Marketo, both promoting the idea. I like the idea, but who should lead this? Is it marketing because they have kind of the technology infrastructure, or is it sales, which at least in my experience, tends to have more clout in a B to B organization?

Steve Woods:
Yeah, it's an interesting point because if you look at where the two organizations have historically come from, sales has a long history of projections, forecasts, measurability, funnel, etc., and they come at it from a sales rep roll up perspective, generally. Marketing, historically, doesn't have that history and that discipline around projections and forecast.

What you're seeing now is an evolution of the discipline that sales is quite used to around forecasting, but moving way up the funnel into the earliest stages of marketing, now that we can start understanding, measuring and objectively analyzing buyer behavior. The reason that you're seeing the energy in the world of marketing right now is because that's where there's the green field opportunity to go from very limited measurement and accountability to great measurement and accountability.

Bob Thompson:
Do the sales executives get that now?

Steve Woods:
They do, yeah. You're seeing that in a lot of organizations. If I look at Taleo or Webtrends or folks like that, the sales organizations get and have seen and have experienced a world where marketing is driving at the same objective metrics. It's not a world where marketing says, "Hey, look, here's my pretty campaign, and look at the accolade and the award that I won." Marketing is saying, "OK, based on these objective metrics we put in place, here's the number of leads at this stage, that stage and that stage that I've delivered to you in the last quarter, here's my plan for the next quarter. How do we work together to improve this?" And as I've seen that change in marketing, the way that they coordinate the two groups has dramatically changed the group, too.

Bob Thompson:
You could make a case, at least in some companies, that RPM could be kind of a marriage of convenience. The CEO is asking both organizations to meet their goals, but for sales to meet its goals – we've seen this over the past several years and you and I have talked about it in lots of articles, written about how customers are making more of their decisions before they ever get in touch with sales. So, if sales executives understand that, then that's going to kind of drive them into the arms of marketing to some extent.

And it seems like the other trend, which would kind of make this marriage of convenience work – at least that's my theory – is that marketing has been trying to, I hate to say it, but to earn more respect in B to B organizations, to earn their keep, to get away from this reputation they have of a caricature of generating crappy leads that are thrown over to sales that they do nothing with. That is a caricature, but it's been a real problem, as well.

So, would you agree with that, those kind of forces are going to help to bring the two organizations better, somewhat independently of whether the CEO takes an active role?

Steve Woods:
Yeah, I think you've nailed the trends the right way. And I think the piece that I would add into that that allows those trends to converge is the common currency. If the definition of a crappy lead or a good lead is purely subjective, then you can never reach an agreement. You will always have marketing saying the leads were fine, you will always have sales saying the leads were crappy, and never the two shall meet.

What allows those trends to converge is the objective data-oriented definition of what's a good lead. If marketing and sales can say, "Look, here are all of the activities that buyers can and do take. What are we going to look at to say this is a good lead, this is a bad lead?" then you've got an objective definition. And marketing's role is to deliver a certain amount of great, good, medium and bad leads. And sales' roll is to take that delivered set of leads and convert them to revenue.

Enabling Technology

Bob Thompson:
In the time we have left, I want to make sure we talk a bit about technology because there are some trends that I'm a little bit concerned about in the industry.

Now, let's start with marketing. This RPM idea, I have heard it pitched as a strategy, which is really what you and I have been talking about here. The tools are needed, but we're not really talking about it as another industry category.

But I've heard it referred to as an industry category, as well. So, I wanted to ask you when you look at the kinds of technologies, whether from Eloqua or other companies, that companies really need to make end-to-end RPM work, how would you outline what some of those types of solutions would be?

Steve Woods:
At the base level, you need to understand the buyer. You need the ability to understand that digital body language that we spoke about it at length last time, and really get a sense of who is this buyer, based on their activity?

From there, the next piece that you need to put together is that common currency layer. So, you'll hear this talked about, in terms of lead scoring, most commonly. But if you really take a step back and say, "OK, what are we trying to do with lead scoring?" we're trying to take that digital body language and translate it objectively into where is this buyer in the buying process?

And if we can do that, then we can start modeling our funnel and saying, "OK, well here are the people who are at these stages of the buying process and are at these qualification levels." And when you can do that, then you can start to layer on the what's next piece. These leads, we're going to send over to sales and we're going to have a conversation with them. These leads are not ready yet. We're going to bring them back into marketing and do certain other processes to them. That's what you'll hear talked about as lead nurturing and sales enablement. Get them out to sales if they're good, keep talking to them through marketing if they're not good yet.

Once you've done that layer, we've built the digital body language, we've understood where they are in the buying process and really modeled it, we've got the what do we do next levers happening so that we can start tweaking them, then you can start layering the analytics on top. And the analytics have to look at this very cleanly modeled view of the buying process or you've got a garbage in, garbage out problem and you're trying to analyze at a very macro level granular, messy data. And that falls down every single time.

But if you analyze this nicely modeled buying process, then you can start to understand, hey look, we've got a lot of people at this stage, but an incredibly poor conversion rate to the next stage. Or we've got a fine conversion rate, but the velocity is way too low. They're taking months to get there. How do we start changing some of those metrics? What investment would we need to do? OK, let's do that investment. Did it work and did we see the revenue we were expecting at the end? So, you've got a combination of layers of technology, all the way from understanding the buyer to putting some analytics around the levers.

And baked into that, as you alluded, you've got a lot of business process changes that need to take place. You need to think holistically about that buying journey, rather than hey, we're going to blast out a campaign that's kind of creative.

Bob Thompson:
Right, well here's the question that I have, though. We talked about this when we met up in San Francisco a few months back. Obviously, Eloqua offers much of what you just described from understanding the buyer to nurturing and analytics. But there are other players in the market that do that and those that also support the sales rep. There are analytics vendors that specialize in understanding the pipelines and forecasts. There are sales enablement companies that specialize in content management. And, of course, there's the big guerrillas of sales automation. When I think about all of the tools involved in this end-to-end process, I definitely see why there's a need for kind of a layer to glue it all together. But if that's the category, there's a lot of other companies that could be part of this RPM framework . . .

Steve Woods:
Absolutely.

Bob Thompson:
. . . at least that's the way I would draw it. And yet I never really hear -- except with maybe a couple exceptions lately -- analytics, sales enablement or SFA vendors talking about RPM. So, I guess the quick question I have in the time we have, is that something you feel is important, an idea and a term that's more widely adopted by the marketing, sales, sales enablement, SFA industry?

Steve Woods:
Absolutely, and it's interesting because you've hit on one of the macro trends that we're really seeing play out, which is as people at revenue organizations try and do this, what they need to do is have all of these tools seamlessly working together. You've definitely nailed that trend. And we're seeing that across the entire customer base. That doesn't mean that one vendor needs to do it all. That's certainly not a viable strategy in 2012. But the vendors need to play well together. And luckily, technology makes that a lot more possible nowadays.

What we've really focused on to enable that, we've built what's called the App Cloud, which is an open ecosystem of all of the vendors that share this kind of insight into buyer behavior. To give you a tactical example, one of the things that you will do as a marketing organization to educate buyers are things like webinars. And you might use GoToMeeting or ReadyTalk or WebEx to run your webinars and that's all great, but the buyer understanding you get out of knowing, OK, they're registered, but did they attend, did they attend for five minutes, did they attend for 50 is incredibly relevant.

Bob Thompson:
That's a great example. And if you integrate, don't have the right buys to tie the stuff together, then now you've got these isolated examples of technology that are part of the process, but you lost the insight from it.

Steve Woods:
Yeah, if that data is sitting in an Excel spreadsheet on someone's desktop over in marketing, it's gone. It doesn't roll up into the same picture. So, what we've invested in very heavily is the App Cloud and the supporting technology, which allows you just to drag and drop WebEx in as an app or drag and drop GoToMeeting in as an app, and then have that data bubble in as part of your scoring out rhythm and your data visualization.

Bob Thompson:
That's encouraging to me. So, is there a URL that our readers could go to to learn more about this App Cloud?

Steve Woods:
Absolutely, AppCloud.Eloqua.com, and you'll see a wide variety of vendors there.

Biggest Obstacle to Success

Bob Thompson:
Eloqua has been one of the pioneers in RPM strategy and technology. What's the biggest obstacle, in your experience, to companies actually moving forward and getting somewhere with this RPM idea?

Steve Woods:
I think one of the challenges is people are really looking for the quick magical pill. Hey, I can get some simple, pretty technology. It costs me a grand a month. It says it's going to solve all those problems and magical money will fall from the sky. This is a challenge where you need to change the way you think about your buyer, change the way you think about your process. You need to make sure that you've got the right technology, great, but you need to make sure that you have really thought out and planned what you're doing and what your buyers actually want from you and what your content strategy is. And if you go into it with the mindset of I'll slap in some simple technology and the whole RPM vision will unveil itself to me, you're not going to achieve the success that you're hoping for.

The people that are achieving success, the folks who are increasing top line revenues by 20, 30 percent in big, real companies are the folks who are saying, OK, let's think about this differently, let's make sure that yes, we picked the right piece of technology, but we've got the right people staffed up, we've got the right motivations, we think through compensation plans for our sales team and how those need to evolve and change. We think through the metrics that we need. And if you think about it on that level, yes, the journey becomes a little bit more challenging, but the output at the end of the day is orders of magnitude better.

Bob Thompson:
Well, we could probably spend another hour talking about how to do this well, but I have a shortcut actually. I wanted to spend 30 seconds to talk about your book because to our readers, I definitely recommend the book by Steve Woods and Alex Shootman, called Revenue Engine. I would call it more of a how-to; it definitely covers the concept, but it's not just a pure strategy book. And I like that you really get into some of the specifics about doing the analytics, benchmarking, some of the implementation issues that companies really need to deal with. It's very well written and I think it'd be helpful to people as they try to learn how to be successful with RPM.

Steve Woods:
Thanks, Bob.

Bob Thompson:
Steve, it's always a pleasure to talk with you. And RPM, I'm very excited about it. I think it's one of those things that's going to need some time to really be adopted and to mature in the market. I appreciate the work that you and your colleagues at Eloqua are doing to help make it real.

Steve Woods:
Thank you for hosting today. My pleasure to be here.