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A Tale of Two Benchmarks

March 27, 2012 | By Alden Cushman

Here’s a tale of two benchmarks, both SiriusDecisions customers. We recently benchmarked their marketing and sales budgets; both have annual revenue of less than $50 million, are primarily software vendors, and have similar average selling prices and sales cycles.

Here’s a tale of two benchmarks, both SiriusDecisions customers. We recently benchmarked their marketing and sales budgets; both have annual revenue of less than $50 million, are primarily software vendors, and have similar average selling prices and sales cycles.

The first customer reported average revenue growth and gross margins. Investment in marketing as a percentage of revenue was lower than average, as was the investment level in sales. The customer indicated a focus on large enterprise accounts and that the majority of revenue came from existing customers, so the sales organization had a noticeable named account structure (accounts are already known).

Our analysis of the first customer’s marketing budget revealed an almost 50/50 split between personnel and programs, with no investment in marketing systems and tools, and only slight investment in outside service providers. The marketing function’s primary focus was to support and enable the named account-based sales organization. We analyzed the marketing budget allocation and determined that the customer should:

  • Establish stronger processes and agreements between marketing and sales
  • Evaluate systems and tools to improve efficiency
  • Emphasize sales enablement, retention and loyalty initiatives
  • De-emphasize awareness and demand creation activities

However, we pointed out that if corporate strategy shifted to focus more on acquiring new customers, marketing investment would need to increase to afford the new initiatives required in awareness and demand creation.

A Very Different Picture

The marketing benchmark for the second customer revealed a very different picture, reporting much higher-than-average revenue growth and slightly lower-than-average margins. Investment in marketing and sales was above average. The customer focus was maintaining a healthy mix of revenue from large enterprise and small-to-midsize accounts; the majority of revenue was from new accounts.

Our analysis of the marketing budget revealed a higher percentage allocated to programs, a lower percentage to personnel, and investments in marketing systems and tools as well as outside service providers. The investments in marketing technologies and outside agencies resulted in better leverage of staff; however, marketing struggled with clear reporting metrics and key performance indicators for the full impact of marketing on sales. The marketing function’s goals and tactics allocation appeared to be split between lead creation and sales enablement, unusual for an organization of this size.

We analyzed the marketing budget allocation and determined that the customer needed to emphasize more awareness and demand creation programs to meet sales expectations that marketing would source a high percentage of the pipeline. We advised marketing to communicate with sales that it was more important to focus on improvements in one particular area (e.g. demand creation) and establish best practices and reportable metrics before trying to support lower-in-the funnel sales enablement activities.

Analyzing Benchmark Results

As so often is the case, you get what you pay for. One organization can be content with moderate growth and a marketing function that’s reactive to a strong sales organization, while the other can be designed/funded for much higher growth and a marketing organization that’s empowered to source considerably more than half of the sales pipeline. A cursory analysis might indicate that the two organizations are simply at opposite ends of the same benchmark peer set and that, when combined, they have a balanced impact on the average numbers for organizations of that size. However, the benchmark data and analysis actually reveal much more: These are organizations with different corporate goals and strategies that need to be supported by different levels of marketing/sales investment and budget allocations.

Alden Cushman

Alden Cushman is Practice Director, Benchmarking and Analysis, at SiriusDecisions. He’s worked for more than 18 years as a market researcher, competitive intelligence manager, product marketing manager and analyst. Follow Alden on Twitter @AldenCushman.
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