Benchmarking the Revenue Funnel

Transcription

1 Benchmarking the Revenue Funnel CHEATSHEET This cheatsheet will help companies understand why it is critical to benchmark, and which revenue funnel metrics are key starting points to draw comparisons. It also includes four external revenue funnel benchmarks based on FunnelWise research. What is Benchmarking? To benchmark is to test something in order to develop a standard. Benchmarking is also measuring something against that tested standard. Most organizations are working to continuously improve processes using some form of the Plan > Do > Check > Adjust cycle. For some, the check is a formal, documented process, but for others it could be more loosely defined and not documented. Wherever a company falls in the spectrum, it helps to have a check to adjust and improve. Revenue Funnel Science creates a framework for the marketing and sales demand workflow, and an important building block of that framework is benchmarking. The practice of benchmarking involves reviewing and measuring what happened yesterday in order to take actions that improve results for tomorrow. To Benchmark or To Not Benchmark Without benchmarking marketing and sales efforts, companies might find they don t have a complete view of the funnel and experience "tunnel vision." When companies compare recent marketing or sales campaigns against previous results, it allows them identify where to improve, achievements to scale upon and existing gaps or overlaps. funnelwise.com info@funnelwise.com

2 Known Engaged Qualified Opportunity Closed Won Revenue Funnel Benchmarks Dissecting the Revenue Funnel Dissecting the revenue funnel is important before going through the various ways to benchmark it. A revenue funnel is the business process that organizations use to generate, transition and nurture prospects from marketing through sales on the journey to becoming a customer. Benchmarking can occur at every stage in that journey. The top stages of the funnel are typically owned by marketing, then a middle stage represents the handoff from marketing to sales, and finally the bottom stages are owned by sales. The process of benchmarking can be applied to each stage within the funnel, although the benchmarks themselves will vary due to the natural differences between marketing and sales activities. Yet each stage has these in common revenue funnel metrics. Companies need to analyze the following metrics to determine the average and ideal performance results for each stage of the funnel: Net New Movement The average and best volume of prospects entering a specific stage Conversion Rates The average and best percent of prospects that moved forward successfully Velocity The average or quickest speed prospects move from stage to stage Aging The average or shortest time a prospect has sat in a stage Establish Standards or Criteria Companies can benchmark several ways and might want to factor in seasonal trends or patterns. This way, they aren t comparing performance against periods of time that do not represent the norm. The examples below are some ways to benchmark based on past results. Use average or above average performance Create a percentile (e.g., , 89-80, 79-70) Establish a grading structure (e.g., A, B, C, D) Marketing and sales teams could be meeting goals, but not grading well against benchmark criteria. It s similar to winning a basketball game despite all the players shooting below average. Benchmarking says, We know you can do better. In the business world, missed shots means missed revenue. 2

3 Past Performance Analysis Slicing the metrics of data segments by funnel stages is one way to compare against past performance. Below are examples of how marketing, sales and anyone responsible for revenue can analyze performance using these types of benchmarks. Marketing Common marketing benchmarks include comparing campaign or program results against previous results, with the time frame selected for what makes most sense (e.g., monthly, quarterly, annually or specific time frames for the campaign). For example, if marketing attends an annual trade show, the team would want to benchmark the best performing trade show, set a goal to supersede that benchmark and put a plan and budget in place to attain it. Benchmarking provides a formal process to confirm if the event met, exceeded or fell short of its revenue goal. Benchmark Example Sales Rep Conversion Rates to Closed Won 30% 32% 45% 50% 31% 30% Jake SEP Kay OCT Fred NOV DEC Sue Lynn JAN FEB Ed Sales Sales might want to benchmark how sales development reps (SDRs) or sales reps are performing. They can even set criteria based on the rep s experience and time with the organization, as newer team members might take longer to close deals. Newer reps might experience slower velocity or lower conversion rates until they fully understand the product or service and business processes. Sales might also want to draw deeper comparisons of sales rep performance by a product or service. This type of analysis might show where a salesperson is grading well with one product over another. Benchmarking this type of criteria may point out inconsistencies in training on products or services. Meaningful Data Segments Businesses vary but should all benchmark in a similar fashion. They each have specific data segments that are meaningful to their business or industry. Companies need to keep aware if certain product lines or services are experiencing growth or decline. While they might want to benchmark in an aggregate view year over year or quarter over quarter, it is just as valuable to break the data down by regions or geographical territories to find areas to improve and scale upon. 3

4 Beyond Internal Benchmarks Internal benchmarking is a great place to start. However, for companies ready to compare their performance against external data, they can purchase reports based on the following: Industry Business size Competitors Geography FunnelWise conducted research and determined four key benchmarks specific to revenue funnels. While every company has different sales cycles and funnel stages, these four insights can serve as a starting point for external benchmarking: The best performing marketing organizations have: percent or more of their MQLs convert to qualified sales opportunities. 2. Opportunities that are influenced by MQLs win at a higher rate than opportunities that are not influenced by MQLs. The best performing sales organizations have: 3. Bottom-of-funnel process inconsistency of 10 percent or less. 4. Win rate variance of 10 percent or less across team members. Source: FunnelWise research from 50 companies with more than 500,000 marketing qualified leads and more than 150,000 opportunities owned by 1,300 salespeople. 4

5 1 MQL Conversion to Opportunities The best performing marketing organizations have 30 percent or more of their MQLs convert to qualified sales opportunities. A marketing qualified lead (MQL) is a lead that is generated and has shown enough interest to be passed on to sales for further follow-up. Both marketing and sales are responsible for communicating about prospects who have moved into this handoff stage. Benchmarking the conversion rates at handoff stages is beneficial as this is where issues often occur and leads might get overlooked or not receive the proper follow-up. Based on the research conducted by FunnelWise, companies experiencing conversion rates below 30 percent should look at the processes in place for this stage and determine where improvements are needed to increase conversion rates. For example, they can determine if SDRs or sales reps are providing feedback to marketing on lead quality. This allows marketing to investigate which lead sources or campaigns are creating viable leads versus ones generating leads that disqualify or need more nurturing. Low conversion rates could also be due to the SDR or sales team not having enough bandwidth to properly follow-up with the volume of qualified leads (see Pro-Tip below). Organizations experiencing conversion rates of 30 percent or more at an MQL stage should also determine why in order to improve upon the success. It is important to note, only 20 percent of the companies in the research sample achieved a 30 percent conversion rate or more. Lead Routing Pro-Tip Boost MQL conversions with an improved lead routing strategy. Download our ebook, co-written with Lean Data Lead Traffic Control for Your Revenue Funnel. 2 MQL Win Rates The best performing marketing organizations have opportunities that are influenced by MQLs win at a higher rate than opportunities that are not influenced by MQLs. Another key benchmark to review is MQL win rates. Most companies have marketing filling the top of the funnel with leads. When those leads become a qualified opportunity, they have been influenced by marketing content (e.g., blogs, ads, ebooks, white papers). However, SDR teams and sales typically are also tasked with finding their own opportunities. If non-influenced marketing leads are resulting in a higher win rate, then an organization needs to determine how marketing can improve the return on investment. Companies can track the win rates of opportunities sourced from marketing channels against SDR or sales teams. FunnelWise research has shown that leads influenced by marketing win at a higher rate than those not influenced. Marketing profiles and nurtures leads, which better positions these opportunities to win versus the leads not influenced by marketing. Marketing s investment should result in preparing those leads for sales success. 5

6 3 Sales Process Consistency The best performing sales organizations have bottom-of-funnel process inconsistency of 10 percent or less. When there is a high level of non-sequential movement in the opportunity stages (meaning, prospects are entering the opportunity stages further down in the sales cycle, moving backward in the funnel or skipping stages entirely), it is indicative of a process inconsistency in the bottom of the funnel. Sales measures the progress of opportunities, but the number of stages vary by company. Ideally, opportunities move sequentially through the sales cycle, but some skip stages and enter midway. Companies with large variance rates in process inconsistency should review how they manage the sales process. It is possible for a company to be achieving its goals due to high performing team members using their own processes while ignoring inefficient ones. Benchmarking can help identify the most effective processes for everyone to follow and achieve an even greater return. 4 Win Rate Variance The best performing sales organizations have win rate variance of 10 percent or less across team members. Win rate variance is the range of different win rates that result from different sales team members working similar opportunities. Sales teams vary in training, skills and knowledge, but often they sell a common product or service. Win rates will vary, but ideally they should have a variance of 10 percent or less, according to the best performing companies FunnelWise analyzed. Similar to the process inconsistency variance, companies with a high win rate variance can still be meeting goals. However, they need to evaluate why there is a variance across the team members. This could help identify gaps in training or determine how to improve the sales process based on sales team members achieving a higher win rate. 6

7 The Path to Benchmarking Revenue Funnel Science creates a framework for companies to build an awareness of the value and key steps to start benchmarking. However, companies may need to have other pieces in place to fully implement a process and achieve results. Revenue Funnel Science Maturity Model Depending on the size of an organization, it may use a funnel reporting tool, like FunnelWise, to capture and slice metrics to gain insight. Companies might be manually tracking data in a spreadsheet. Automating funnel reporting can streamline this process, and when evaluating software, consider tools that also provide benchmarking and optimization services. To learn more about Revenue Funnel Science and its maturity model, download the ebook that describes these key steps that ultimately help companies achieve revenue results. DOWNLOAD EBOOK funnelwise.com info@funnelwise.com