Common Questions about Revenue Generation

There are two types of marketing. One is brand; the other is everything else. We say this because brand is very difficult, if not impossible, to quantify. We recommend that a budget be dedicated to brand marketing with the belief that it will be valuable even though it isn’t measured.

Every other marketing program should be tracked and judged for its ROI. The most common error made by new marketers is to subtract the cost of a program from the revenue it generated. However, to accurately determine the ROI, you must subtract the program cost from the gross profit margin, not the gross revenue. The very simple formula would look like this for $150,000 of revenue generated, with a 50% gross profit margin, and a marketing investment of $30,000:

(Gross profit – investment) or ($75,000 – $30,000)

1. Build an organization wide Revenue Generation strategy that starts with your corporate strategy and extends to revenue.
2. Build a structure and culture that can consistently execute the revenue strategy.
3. Provide tools for efficient implementation and metrics that track the evolution of the strategy resulting in higher revenue and lower cost.
4. Make Chief Revenue Officer Thinking a consistent and important part of the organization.

The purpose of activity reporting is to anticipate results instead of reacting after the fact. You’re checking to ensure that the sales reps are a) doing the right things and b) doing enough of the right things. It is NOT to simply “make sure they’re working”.The requirement on the company, therefore, is to know what those right things are, and to know the quantity it takes to achieve the desired results. METRICS RULE. For example, in order to book a sale:

• How many target prospects will lead to
• How many qualified prospects will lead to
• How many initial meetings will lead to
• How many proposals/quotes/demos will lead to
• How many Statement of Work contracts will lead to
• Buying Decision

The sales activity report is designed to ensure that these things are being done and the retention activities to keep a satisfied client. If you don’t know what the numbers should be, just start. Tracking will soon tell you the information you need to proactively drive your sales process.

All too often, firms review the resumes of potential sales reps searching for similar sales experience, and then interview the candidate with an eye toward a gregarious personality. They end up hiring someone they personally like and then spend untold amounts of dollars in training, motivating, coaching, and frequently re-hiring. What a company should be looking for is the proper strategic fit between the new hire and the position. It is critical that the company truly understand the profile of their customer and the customer needs.

Why is a customer buying from you? Is it based on price, on understanding the customer’s business, on technology expertise, on service? Is your offer based on individual selling or team selling? Does the selling involve developing strategy, creative thinking, tactical execution, or detailed implementation? Are you selling something that is new to the marketplace or considered a commodity purchase?

All of these factor into the type of person you hire. The skill set of the sales rep must match the position. Oftentimes a profiling tool is used to determine the behavioral styles of a candidate. Are they naturally strategic, tactical, detailed, visionary, cautious, and so forth. These tools can be extremely helpful, if the company has accurately done the upfront work of determining the profile most likely to succeed with that particular offer, buyer, and sales process. Do your homework before starting the interview process. Otherwise, the most gregarious candidate will win. And you will lose.

This distinction is critical to understand in order to deliver the right message to your client. The actual product (or service) you deliver is only one part of an offer. The entire offer includes intangibles such as your delivery method, how it’s packaged, the training, the level of risk, your company image, installation, the ease of consumption and so forth. The offer, then, is your promise. What is your company actually promising the prospect in order for them to be fully satisfied? Is everyone in your organization keenly aware of the each offer element? Are your sales/customer service reps all delivering a consistent and accurate message about your offer? If not, your offer is morphed with each rep and each sale and it will be impossible for your organization to consistently deliver on its promise to the customer.

We expect our sales and marketing leaders to both lead their teams to win the short-term revenue battles and, in their free time, work with the CEO to chart a course for the future (that might actually be in conflict with their own career).

However, the reality is that field execution of marketing, sales, channel management, leading field organizations, etc. is a highly skilled full time job that should have clear measurable short-term objectives.

CRO Thinking generates a long-term revenue strategy and plan that includes the direction, resources and support for the field execution. It is the bridge from corporate strategy to field execution. Like any good bridge, CRO Thinking allows resources including information to flow back-and-forth between senior leadership and those executing in the field.

Since the CRO is charged with applying their expertise in Revenue Generation, the corporation wins by having both short-term results and staying on course for achieving the long-term strategic direction.

If your organization is large enough for a fulltime CRO, s/he sits with the CEO to support the goal of “more profitable revenue”. If you’re not large enough, you at least need consistent CRO Thinking, so look outside the company for that expertise so that you can win The Revenue Game.

A Revenue Generation strategy is a top down, CEO endorsed, company-wide, strategy to achieve revenue goals. The sales and marketing strategies are a part of the broader picture. They are not stand alones.

A principle reason for failure to reach revenue goals is that “sales” is viewed as the prerogative of those specific departments. Yet the Revenue Generation strategy should encompass every aspect of the organization, which should be supporting the strategy. If they don’t, a myriad of circumstances can derail the strategy. For example:

• A CFO creates a compensation model that incentivizes the wrong behavior for sales reps
• A CFO creates terms for establishing an account that negate one of your value propositions
• A shipping clerk fails to recognize that your customer promise included delivery guarantees
• A production manager tries to cut costs on one of your detailed quality components
• A customer service rep talks to a customer and delivers a message that is very different from what they heard from the sales rep

In all of these cases, the employee was trying to do the right thing. However, without participation and an understanding of the overall revenue strategy, their “good deeds” cost the company untold dollars. A Revenue Generation strategy incorporates everyone, including marketing and sales.

Elaborate studies have been conducted to answer this question. The results indicate that most companies fall between a low of 2% (less than 1 hour a week) up to 20% (12 hours a week). Your reps are busy 40 hours…so what are they doing? Typically, things such as writing reports and letters, attending meetings, writing proposals and bids, cold calling from a list, following through on the production of a previous order, and so on and so on. What if you could put a structure in place that tasks most of those assignments to people who are cheaper, or better, at doing them and letting your sales reps, well…SELL?

The cost of sales/marketing is frequently the largest single expense number on a company’s P&L. Don’t let your own internal organization get in your sales reps’ way of making sales! Create a structure that give your reps 5/10/15% more selling time and you will enjoy a significant increase revenue. Start now.

The true answer to that question is: it depends. We’re asked about tools (such as CRM or sales training) on a daily basis. However, without a defined strategy and a defined structure for implementing that strategy, it is impossible to truly evaluate the best tools to use. In fact, if you don’t have a sales process in your organization, standard CRM’s will direct you into their pre-defined process. Without a strategy that clearly articulates your message, sales training will create one for you. Take control of your own Revenue Generation! Define the strategy, design the structure, and THEN select the tools.

When establishing metrics to determine marketing effectiveness, it’s important to determine the profit produced by customers over their lifetime, not just for the short-term purchase. In calculating the CLV, you’ll need to assess the customer’s average order, the average time between orders, the average revenue per order, and your gross profit margin of the product they order.

Without knowing the customer lifetime value, it’s impossible to gauge the ROI of your sales dollars. You would expect that a sale made today would generate revenue for a long time to come. Know what you’re truly spending, and what your return is, in order to make smart investment decisions.