I have seen numerous posts and articles recently talking to and discussing how the marketing function should improve its planning and become more integrated with sales in the pursuit of successful growth.
Frankly almost all of these have filled me with horror. There was even one post from a well respected CMO, who described that the planning process starts once the CFO and CEO have confirmed the targets for the upcoming year. Well my first question would be how did they come up with those lovely numbers? Not wishing to jump to any conclusions but did they undertake a thorough analysis of:
- the market opportunity
- the company’s ability to win
- and how profitable new customer acquisition is?
A very effective approach to ensure that your target numbers are achievable is to apply the RWW model. This stands for:
- R = is the market opportunity REAL?
- W = can we WIN and win well against competition?
- W = is it financially WORTHWHILE?
So let’s take these three elements one step at a time
MARKET OPPORTUNITY
Ultimately this is all about product market fit. You will need to have:
- identified the market opportunity in terms of size of market and the number of customers who could potentially buy.
- split this by geography, sector, size and any other relevant criteria.
- confirm that these organisations have a well defined need, coupled with increasing pressures to act.
This will provide you with a view on what % will likely be buying over the specific planning period. Undertake this analysis and you can define the Ideal Customer Profile (ICP) as well as the key use cases for focus.
The final aspect is to ensure and validate that your solution will provide what customers need and will deliver on the expected outcomes. This confirms a strong product market fit.
ABILITY TO WIN
Once you have a strong view on the number of potential buyers, the next step is to determine your ability to win that business. This will be down to your ability to; identify and engage with those prospects and to then move those prospects through the sales pipeline to close.
Obvious factors that enhance win probability include:
- market distinctiveness / awareness.
- competitive differentiation.
- quality of the end-to-end marketing & sales process / pipeline.
A good way to test this is to analyse previous performance on demand generation and win rates etc. by scoring your organisation across a range of key criteria along the prospect buying journey. This will give you a view on future win rates as well as highlighting those areas that require improvement.
PROFITABLE BUSINESS
This starts with your pricing model. There are several aspects to this:
- the basis on which you charge for your service.
- the level and number of packages your offer and the competitiveness of your pricing model.
- the customer’s perspective and validating that they will receive an adequate return for their investment.
The final piece is understanding your own Customer Acquisition Cost (CAC) and how this relates to Customer Lifetime Value (LTV). The two key measure are:
- CAC payback period.
- LTV:CAC ratio.
This is a whole topic in itself, for another time I propose.
One final point, however is that it is imperative to make sure that you validate the value delivered with your customer and to develop a Value Benchmark tool that defines the metrics, methodology and expected uplifts for your most common use cases. This will help provide focus as well as improving win rates and customer retention once they are onboard. This really is a super-charged weapon.
It is only when you have gone through the above methodology that a company should lock in its sales targets and then the marketing team can start the planning process to work out how best to deliver the number of lead prospects / customers required.