Symptoms of a Sick Sales Funnel

Can you believe that the sales funnel is 112 years old? Hmmm. Seems like a lot has happened since then. No wonder the ole’ funnel is showing signs of wear. IDC research shows that the time it takes for tech companies to create a B2B customer has increased by 15% in the past year. Is it time for a fresh approach?

The sales funnel first appears in a 1925 book by Edward K. Strong called The Psychology of Selling and Advertising. Strong attributes the funnel’s invention in 1898 to Elias St. Elmo Lewis, a sales manager for National Cash Register (NCR). St. Elmo Lewis, who later helped found the Association of National Advertisers, called his sales funnel AIDA for the four stages of “awareness, interest, desire, and action”.

The traditional funnel uses an industrial era paradigm that treats a buyer like a widget. With the right machine, a vendor can manufacture that widget into a product called a customer. In the industrial model, the marketing team works awareness at the upper funnel when buyers aren’t too interested. As soon as there is serious interest, marketing sends the “lead” down the assembly line, handing off to a sales rep whose must fabricate an opportunity and produce revenue.

The problem is…the traditional funnel doesn’t work that well anymore.

Alarming evidence of sick sales funnels show up in the data. Tech vendors now take an average of 19 months to create a large account customer, an increase of 15% in just the last year. Some of this lengthening is certainly due to uncertain economic times. Greater risk aversion has increased the size of the average buying team from 5 people to 6. But we can’t blame everything on the economy. Buyers, IDC finds, don’t like this slowness. They want vendors help to shorten the cycle. According to the IDC Buyer Experience study conducted earlier this year, buyers want to push for a 40% reduction in the time to buy.

Poor funnel health also shows up in unsustainable conversion rates. Research from IDC’s 2011 Tech Marketing Benchmark and 2011 Sales Productivity Benchmark reveals that it now takes over 1000 marketing awareness targets to get one sale.

Symptoms of a sick funnel. Beyond the data, tech vendors are experiencing the effects of their sick, out-dated, funnel approach. Here are some common symptoms companies complain about. Does your company experience any of these symptoms?

1. Bickering: Sales and marketing teams bicker over the number & quality of leads.




2. Bad Data: You don’t have the right data to judge performance, predict the pipeline, and refine strategy




3. Wrong Tools: Sales people don’t have the tools needed to sell, in spite of the fact that they have access to a tonnage of content.




4. Failed sales: Sales people fail to convert most leads. Marketing has no idea what sales plans to do with leads.




5. Funnel Gaps: Prospects fall out of the pipeline, but you’re not sure when or why




6. Silos: Sales team thinks it’s a waste of time to provide feedback to marketing and your marketing team rarely seeks input from sales.




7. Missing Messages: You can’t nurture buyers because you lack the right content
   

We need a new funnel framework. Much has changed since the sales funnel’s 19th century invention. Business is far more sophisticated. The Internet and social media have dramatically changed the way buyers buy. IDC CMO Advisory has guidance for a funnel makeover in the form of a new Customer Creation Framework.

Here’s an introduction to that framework in an IDC webcast called, “Transforming Lead Management: How the new buyer is killing your funnel (and what to do about it).” (The webcast is recorded. Register and you can get the replay.)

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Building the Big Tech Brand: Dell and Xerox

The last two years have been hard times for tech marketers: there has been major pressure to transform execution, coupled with a significant reduction in the rate of budget growth. This is truly the "We are being asked to do more, with less" situation that marketers casually complain about. But this time, it is reality.

Despite the headwinds, I have been very impressed with the major brand campaigns that Dell and Xerox have been able to execute.

Both Dell and Xerox have spent billions for a major make-over of their product portfolios: acquiring and developing significant Services and Software capabilities. So much has changed at these companies that the brand perception no longer matches the product reality.

Brand perception simplified is: "What do you think of, when you think of Dell?" And, "What do you think of, when you think of Xerox?". When I think "Dell", I think of several cardboard boxes of new PC gear lying in my driveway, fresh off the UPS truck. When I think "Xerox", I of course think "copiers".

Changing a company's brand perception is extremely difficult if not impossible. For how many years has our US auto industry been trying to change the negative brand perception for a now vastly improved product line? It has been, arguably, two decades. And still today, the brand perception does not yet square with the product reality.

If it doesn't square up, you have to make a big move. The CMO's of Dell and Xerox really had no choice but to undertake a major brand re-fresh and re-vamp. They needed to have brand perception start to match the product reality.

I am impressed by several factors in their execution:

1) The Dell and Xerox CMO's were successful because they presented their case as not a marketing issue, but a company issue.

2) These marketers created the budgets necessary to start the Big job. Major shifts require major monies. Having studied marketing budgets for so long I am convinced there is just no way to do this by shifting around the marketing mix of the run-rate budget envelope.

3) They were able to do this during the time of a recession. With 20/20 hindsight: they get extra points for having a lot more marketplace "voice", during a time when so many other vendors were hunkered down, scared and quiet.


The era of the Big Tech Brand is coming.

Going forward, our IT Industry will be one of consolidation and scale. It will be a slower growth industry and so the marketing challenge will be one of competitive share gains in addition to new market growth. And perhaps most importantly, the merging or our Business IT with our Personal IT will favor the biggest and best brands -- as the power of consumer "pull" will become a major factor in the IT decision equation.


Think deeply about your brand!

Does it square with product reality?

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CMO's report universal lack of preparedness for key challenges

IBM released the findings of their Global CMO study yesterday and one of the primary conclusions is that CMOs feel unprepared to address key challenges. The most surprising thing is how consistent the feeling is across regions and vertical industries. CMOs generally face the same issues and report very similar levels of "unpreparedness" in the face of them. Top challenges include: data explosion, social media, growth of channel and device choices, and shifting consumer demographics, among others.

The findings are based on 1,734 structured in-person interviews with CMOs in large organizations conducted between February and June of 2011.Regional and vertical representation was reasonably well balanced. The sheer scale of the effort and the willingness of so many CMOs to participate indicate a role under siege.

In our research, IDC has learned that marketing is undergoing fundamental and painful transformations on several levels: new and expanding datasets, new channels and forms of communication, new tools and infrastructure requirements, new dynamic in customer acquisition, new pressure to prove business impact, new skills required for success. It is a multi-dimensional change that has many marketing leaders struggling to keep up.

The IBM study provides a strong basis for CMOs to educate their C-level peers on the challenges they face. However, by design, it does not offer practical models for addressing the issues. IDC has strong evidence that the customer data record is the fundamental design principle around which all customer facing activities and systems should be (re-)built. The customer record is increasingly the source for strategic insight, tactical planning, and performance metrics. Any marketer working in an organization without an enterprise customer creation process (with the requisite standards for customer records, data governance, and the infrastructure to support it) is set up for failure.

Unfortunately hardly any companies today manage customer creation as an enterprise process. We believe that this is the root of the universal "unpreparedness" revealed in the IBM Global CMO study. Having a practical model for implementing an enterprise customer creation process is the first step toward mastering all the key challenges CMOs and their marketing organizations are facing today.

ENTERPRISE customer creation is not something that only happens in marketing and/or sales. It encompasses every customer touch point over the lifetime of the relationship. It goes beyond the jurisdiction of any departmental leader and therefore must have C-level (CEO) endorsement and active support. It is the demand side equivalent of supply chain automation and we all know how WalMart conquered the world by mastering that side of the economic coin. On the demand side, the challenge is finding and forming relationships with prospective customers much earlier using channels and resources not traditionally thought of as marketing (or sales.) In addition the relationship needs to be tracked consistently from marketing to sales to finance, provisioning/fulfillment, support, etc - i.e. the customer data record must be uniformly defined and managed across departments. All the information associated with a customer record must be available to everyone involved in the process. It is a massive undertaking on par with the supply chain automation effort, but the reward is being months ahead of your competitors in terms of customer contact and relationship building – a key competitive advantage that will be very hard to displace.

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Spark by Marketo

Marketo announced a new sub-brand called Spark targeted at the SMB market. It's a testament to how successfully Marketo has transitioned from SMB to the enterprise space that it has to go back and offer a new brand for what used to be its primary market. The demand for marketing automation at large enterprises is driving rapid growth for all marketing automation companies, and Marketo is no exception. So much so that smaller prospects are starting to perceive the company and its target market as having outgrown them. Not so.

SMB is intrinsic to Marketo's heritage and the company has no intention of walking away. The Spark offering is more than just a "lite" version of its flagship product. The idea behind Spark is that it is a bundle of software and services to help small companies quickly adopt and become expert in the use of modern marketing automation technology. Marketo is dedicating expert staff to offer training, support, and mentoring for its Spark customers. The importance of this cannot be overstated as marketing automation requires a higher level of sophistication, analytical ability, and business process expertise than most small companies have in their marketing departments.

The challenge for Marketo will be managing Spark as a sustainable business model. Typically the enterprise segment is much more profitable for software companies (SaaS or not). Large companies have more money, bigger projects, and greater potential for expansion into other business units. However, Marketo knows the SMB business well and has a subscription model revenue stream that's ramping up to the point where it can afford to support the launch of a down market offering until it starts to pay for itself. It is the rare company that can serve both segments well, but Marketo has clearly separated the two teams internally which IDC believes is absolutely critical for success.

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Key Findings From IDC's 2011 Tech Marketing Benchmarks Study

Between May 15th and July 31st, 2011, IDC's CMO Advisory Group fielded its 9th annual Tech Marketing Benchmarks Study. More than 100 tech companies representing about $850B in revenue responded, making this the CMO Advisory Group's most successful benchmarking study to date. The average revenue for companies in this data set is $9.5B, and these data include companies ranging from less than $500M to about $100B. Technology hardware, software, and services companies with both direct and indirect channel strategies are represented in the database. The following are some key findings from IDC's 2011 Tech Marketing Benchmarks Study.

Marketing investment growth in 2011 is lagging revenue growth at 3.5% and 6.5% respectively. Moreover, the 3.5% marketing investment change figure is significantly lower than tech marketer's sentiments in January of 2011, when they reported expectations of an 8% increase to marketing budgets. In past years, IDC's CMO Advisory Group has observed that marketing investment growth generally tracks revenue growth, but that trend has not re-emerged since the recession. Larger companies in particular are experiencing weak marketing investment growth. Companies with revenues between $3B and $9.9B are reporting marketing investment changes of only 2.1%, and companies with revenues greater than $10B are even less at 1.7%. Smaller companies are investing more heavily; companies with less than $500M, between $500M and $999M, and $3B to $2.9B in revenues have average marketing investment changes of 10%, 8.1%, and 7%. Services companies have the weakest marketing investment growth in 2011, however, with an average of -1%.

IDC's CMO Advisory Service tracks a series of key performance indicators that marketing executives should monitor closely in their own organizations. The following are some key observations on changes to top-line key performance indicators in 2011:

• Marketing Budget Ratios, which are calculated by dividing total marketing spend by revenue, are decreasing in 2011 because revenue growth is outpacing revenue growth.
•  IDC's Awareness-Demand Ratio, which calculates the total amount of marketing spend dedicated to awareness building activities versus demand generating activities is at 52%, which means that the focus this year has shifted to Awareness. Last year, marketers were favoring Demand.
•  Program-to-People Ratios, which show the percentage of total marketing spend that is directed towards programs, have increased year over year to 60%. The main contributor to the increase in this ratio in 2011 is the increase in Awareness generating activities such as Advertising, which are more program-spend heavy.

Digital Marketing Program spend--defined as display ads, search ads, email marketing, digital events, company web sites, search engine optimization, and social networks--continues to increase rapidly. In 2010 digital marketing accounted for 19.3% of total program spend, but in 2011 this number has risen to 26.4%. Advertising program spend, which includes display ads and search ads in addition to traditional advertising mediums, has also increased year over year. This finding is consistent with the overall increase in Awareness activities. Marketing organizations are also allocating more spend to web site content and development this year, which is now 8.2% of the total marketing program spend mix.

IDC's CMO Advisory Service has also observed changes to marketing staff allocations in 2011, see below for some highlights:

·    Web site content and development is not only a key area of program spend investment--marketing departments have also increased their staff allocations in this area to 5.6%. IDC believes that this is a positive change, since IDC's 2011 Buyer Experience Study revealed that the first place prospects turn to for information is a company's web site.

·      Marketing operations has experienced growth for a number of years, but this trend seems to be leveling off as the position matures. Marketing operations currently accounts for 5.3% of total marketing staff which is a decrease from last year's allocation. IDC does not believe that companies are actually reducing marketing operations staff; the cause of the year over year decrease is a combination of other staffing categories increasing more rapidly and an IDC taxonomy change to include a new category called marketing IT.

·       The CMO Advisory Group has been championing sales enablement for the past few years. In 2010 sales enablement accounted for 3.1% of the total staff mix, but since then this allocation has risen to 3.7%.

These are only a few of the findings uncovered by IDC's 2011 Tech Marketing Benchmarks Study. For more information, or to participate in upcoming IDC studies please contact Joseph Ferrantino at jferrantino@idc.com.

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The Customer Cloud: The Killer App for the Social Enterprise

The old two-step marketing and sales model for customer creation is dead. Today we have a three part model: Socializing, Marketing, and Sales – with socializing taking on increasing importance and marketing being redefined in the process. That’s a good thing for customers but it makes the market more competitive for sellers. Companies have to seek out and engage with both existing and potential customers in radically new ways outside of explicit business contexts with resources previously not thought of as customer facing.

This activity is going on today at a furious pace, but it is highly fragmented. With the introduction by Salesforce.com of Data.com and the social ready rebuild of Database.com at Dreamforce, as well their Chatter and CRM capabilities, customer interactions will come together in what is emerging as the Customer Cloud – the first killer app for the social enterprise.

The Customer Cloud will evolve into the source of record for all account and contact data because it can provide the Holy Grail of the customer creation process – the unified customer record. As a result, it will be the centering point for all customer interactions. It is definitive because:

• It is self-regulating – contacts update their own data via social tools such as LinkedIn, Facebook, etc. greatly improving data accuracy and timeliness
• It is real time – individuals have a vested interest in updating their social profiles asap
• It has practically infinite scalability and reach.
• It is equally available to all customer facing functions from marketing to sales, as well as fulfillment, finance, service and support, etc.
• It provides insight into relationships – account contacts can be sustained and expanded even in the face of departures, and corporate hierarchies can be better understood and tracked.

A unified customer record provides the basis for breaking down the discrepancies, decay, and dysfunction that currently plague (or prevent the implementation of) enterprise customer creation processes, especially in B2B. It offers companies the potential to coordinate all of their customer facing activities around a single source of information – the lack of which has been the Achilles Heel in all previous efforts in CRM, data warehousing, and other valiant attempts to unify customer facing functions.

Thus at Dreamforce, the announcements of Data.com and the social data readiness of Database.com are major strategic milestones for Salesforce.com. With the addition of the Radian 6 social monitoring last year, this neatly rounds out a very strong play for leadership in the battle to deliver the Customer Cloud and provide the customer facing infrastructure of the future that will be build upon it.

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The Four Stages of Data Driven Marketing

Who is your customer? It is a deceptively complex question that a surprising number of B2B companies cannot answer. The difficulty stems from several causes:

• Inconsistent definitions for customer attributes (account name, industry, segment, organizational hierarchy, contact name/email, etc.)
• Fragmentation of the data across multiple databases and applications
• Departmental perspectives on customer relationships
• Lack of an enterprise customer data management approach

The impact of all this is a severe slow down in decision making and an inability to optimize critical processes in customer facing functions, most poignantly in marketing and sales. The solution is to define customer creation as an enterprise process – not something that happens only in marketing and/or sales – and the implementation of data standards and governance to support it. This enables marketing to be data driven, but there are four distinct stages of data driven marketing and not all of them lead to success:

1. Stage One – Fast Failure. This stage is characterized by response-based decision making. Marketing decisions are based on response data from marketing systems – web hits, landing page registrations, and myriads of other campaign performance data. All of this is important, but leaves marketing unable to tie any of its activities to key business metrics such as revenue performance.

2. Stage Two – Slow Failure. This stage is introduces conversion-based decision making. Marketing and sales systems are integrated along with customer data definitions and structures. This provides a quantum leap forward for both sales and marketing. However, marketing is still one degree of separation from linking its activities to business performance. Sales pipeline is a good proxy but it is no substitute for the critical business data that comes from the next two stages.

3. Stage Three – Measurable Success. At this stage marketing finally is able to measure contribution to revenue. However, it is not enough to rely on initial contract data alone. Account A that closed for $1 million and account B that also closed for $1 million may be very different in terms of margin and lifetime value. Account A may have cost $250,000 to sell, install, and support where account B cost $500,000. If that's the end of the data set, then of course marketing should bring on more account A profiles.

4. Stage Four – Market Mastery. At this stage marketing understands the long term profitability of customer relationships. If over time account A buys nothing more and account B upgrades and expands its investment by millions of dollars at improving margins, marketing can refine its activities accordingly and begin to drive overall business performance.

The key lesson is that marketing is greatly influenced by the depth of data available to it. At each stage in IDC's data driven marketing model, new data can completely change all facets of marketing activity from strategic targeting and messaging to tactical campaign investment and roll out plans. As a result, it is crucial for companies to get to Stage Three as quickly as possible and remain ahead of competitors on the journey to Stage Four.

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