September always brings a set of new beginnings. Another year of school has started. Football season has kicked off. Many of our clients are beginning (and finalizing) marketing plans and budgets for 2017.One major trend that continues to grow is for marketing organizations to own a quota for marketing sourced revenue. To drive this revenue, marketers use tools like the SiriusDecisions Reverse Waterfall Tool to determine the number of new inquiries (and metrics at other stages) required for them to reach their revenue goal. With volumes defined, marketers can then align their programs and budgets to support these goals.
As an example, one client has a marketing-sourced revenue goal of $40 million, with an average deal size of $150,000. Based on the organization’s current conversion rates, marketing needs to source 267 deals and approximately 24,000 inquiries. Next, marketing can look at its current cost per inquiry to determine the acquisition budget, and the expected costs and outcomes of programs to align its marketing plan with revenue goals.
Sounds simple, right? What can go wrong?
Actually, while the math is simple, there's plenty that can go wrong. Frequently, issues in reverse Demand Waterfall models and analysis result from using the wrong SiriusDecisions Demand Waterfall® conversion rates to drive the model. Clients often use external benchmarks as the basis for their reverse Demand Waterfall calculations. Building budgets and plans based purely on external benchmarks often leads to significant performance gaps. While benchmarks can be very useful for establishing aspirational goals for Demand Waterfall performance, your budget and plan also need to be grounded in reality.
In addition, building a plan based strictly on current performance doesn't account for the impact of planned process improvements, and calculating Demand Waterfall requirements based on actual performance often results in gaps between the number of inquiries needed and the number of inquiries the budget will support.
What's a marketer to do? Here's a six-step process that allows you to build marketing plans and budgets based on a realistic set of conversion data that accounts for both the current reality and a realistic future state:
To summarize, demand planning based on Demand Waterfall conversion rates is a powerful tool to align marketing budgets and plans with revenue goals. To achieve success, the Demand Waterfall conversion rates used to drive this model need to be aspirational but achievable. Don't bet your plan exclusively on external benchmarks. Base your Demand Waterfall conversion goals on a blend of current state, external reference benchmarks and identified process improvement impact to create a plan that makes 2017 a successful year.
Terry Flaherty is a Senior Research Director of Demand Creation Strategies at SiriusDecisions. Terry is a senior marketing executive with a passion for sales and marketing integration through effective demand generation. His background includes more than 15 years' experience delivering enterprise-level software solutions, including business process management (BPM), IT infrastructure management, business intelligence and application development. Follow Terry on Twitter @TFlaherty.