GTM executive summary
- Buyers don’t think about whether they are interacting with Marketing or Sales—it’s just the brand. Yet, behind the scenes B2B organizations act as if these interactions are distinct, leading to both Marketing and Sales wanting to claim credit for the sale.
- This article—the first in a two-part series—is for Marketing, Sales and Revenue executives who are frustrated by marketing and sales attribution infighting, and seek a better way to demonstrate the impact of marketing’s contribution to growth.
- See Part 2: A better way to measure and communicate B2B marketing ROI for an introduction to a new measurement framework: the Marketing Income Statement.
The real and manufactured pipeline
The pipeline construct in B2B marketing has a dual nature. On the one hand, it is a true reflection of how buying groups move through purchasing hardware, services, and software. Concretely, it is true that companies, departments inside companies, and individual decisionmakers must be first made aware of a problem; then understand that a category of solutions to that problem exist; become aware of the vendors offering these solutions; at some point engage with the marketing and sales resources of one or more of those companies; and finally transact. Once they are a customer, they continue to update their experience of the company, perhaps adding services based on other perceived needs.
However, in most cases, the buyers and influencers who make up the customer buying group are indifferent to or unaware of whether they are interacting with a vendor’s “marketing,” “sales,” or “customer success” teams. To them, there is a brand, and that brand either meets or exceeds expectations, or does not. They simply want the best product and service at the best price, with the lowest risk (no one got fired for buying Company A) and do not want to jump through hoops to do so.
The reflection of this customer-centric pipeline inside the typical vendor is distorted but still relevant. For a typical B2B vendor—think Microsoft, Caterpillar, Oracle, Goldman Sachs, GE, etc.—the pipeline is divided into discrete stages, each made of either leads or opportunities, with different values and forecasted close dates. Typically, a “lead” is marketing’s responsibility, and an “opportunity” is owned by sales—but it’s critical to note that to a customer, these categories are irrelevant. This “lead / opportunity” split is a legacy of how B2B marketing and sales has typically functioned: Marketing “generates demand” and sales “closes deals.” The best way to think about “generated demand” in a software system is as a “hand raiser”—someone who has poked their head above water and can now be pursued. That hand raiser “becomes” an opportunity when they have been nurtured and developed, and at that point, the opportunity will gain momentum and hopefully turn into real revenue. Of course, leads and opportunities are both abstractions and simplifications of what is really going on.
We all want to measure marketing ROI
ROI (return on investment) continues to be a hot topic for B2B marketing and sellers, for obvious reasons. An accurate ROI (one that is non-duplicative, counterfactual, and based on a financial outcome) is extremely useful, because it allows all investments to be traded off against one another, particularly at the marginal or “last dollar” basis. If my marginal ROI for paid social is 1.1, and my marginal ROI for events is 0.9, then I should increase my paid social budget and decrease my events budget. Critically, ROI as an outcome metric allows marketing to be traded off against any other investment—at least in theory.
B2C companies are arguably closer to an ROI view of the marketing world. For large consumer brands like Coke, marketing mix models (MMMs) are constantly updated to provide ROAS (return on advertising spend) for various channels. The curves these models output are then used to remix dollars up, down, and across the funnel to maximize some objective—usually total revenue. However, MMMs are slow and prone to omitted variable bias—meaning that lurking, unknown variables, if left out of the model, can drive unrealistically rosy assessments of marketing’s performance.
B2B companies can’t generally use MMMs to measure marketing’s effectiveness (some try, and they “sort of” work, but that’s a topic for another day.) The same structural dynamics that lead to a pipeline view of the world make MMMs—which depend on large volumes of frequent time series data, including daily sales and marketing spend by region—ill-suited for B2B, namely:
- Long sales cycles (months to years, typically)
- Large transaction sizes, few transactions (chunkiness)
- Complex buyer groups
- Poor data quality when humans are involved (events, field sales, partner channels)
The pipeline, rooted in a database view of the world, is both a cause of and a solution to measuring ROI for B2B firms. It is the cause of the problem when it is taken too literally—that is, that the “lead” is a real thing that someone “generated.”
At some point in the foggy history of corporate marketing, “marketing attributed sales” became a commonly used term. This probably happened when someone in sales asked someone in marketing what value they were providing, which, by corollary, meant how many leads were being handed off.
Now, we commonly speak of “marketing attributed sales” as those opportunities that started with a marketing-generated lead. This means, concretely, that some individual at a buying group filled out a form, and was then “nurtured” until ready for handoff to sales as a “sales qualified lead.” In some cases, sales has to accept the lead for it to “count”—as a “sales accepted lead.”
There are three problems with this way of looking at marketing value. First, it assumes that marketing generated all of the “value” of the lead that it generated. This overstates marketing’s impact. However, this isn’t the biggest problem: All of the other value that marketing creates “under the water” is missed, because it’s not a part of the marketing software / CRM software that has largely come to define the B2B marketing organization. Finally, once a lead is “handed off,” marketing’s role is cut off, leading to both double-counting (marketing and sales both want credit for the deal), and a somewhat toxic “what have you done for me lately” adversarial stance between marketing and sales.
These dysfunctions have real negative impacts. Marketing’s insistence on taking full credit for leads—understandable given its typical fight to show value—drives a bias towards lower funnel behaviors that might not optimize long-run growth. The inability or unwillingness to understand how marketing drives value for all opportunities—known or unknown—makes assessing true ROI impossible. Finally, the “hand-off” concept itself creates an us-them duality that is nonsensical to a customer, and, once again, does not accurately capture marketing’s role in driving value.
Conclusion
Marketing and sales have a common goal: to drive revenue. Yet the most common marketing, sales and CRM tools today pit marketing and sales against one another to claim holistic credit for each sale. True B2B marketing ROI is achievable with the right measurement approach.
See Part 2: A better way to measure and communicate B2B marketing ROI and subscribe to our monthly Consulting newsletter so you don’t miss an insight.
