Product Marketers are responsible for Building Business using the product or products they represent. We need to figure out how to connect our product with the market that needs it. The end game is revenue — the lifeblood of a business. But typically product marketers do not have a revenue target — it is usually a lead target.
Leads are the start of the sales funnel. So, what happens once they are handed over to a sales team for qualification? it is worth knowing the whole sales funnel story, so we can hone our lead creation powers for maximum global domination. Lets take a look at the relationship between lead and revenue and what levers we can pull.
Technocrat appeasement statement: The details provided here are based on a B2B scenario and simplified for the scope of this blog. To avoid triggering an endless debate on definitions, funnel granularity and terminology I’m adopting the following terms for the sake of simplicity:
Addressable Market: the market defined by the Product Marketer deemed a good fit for a product.
Prospect: someone from the addressable market that demonstrates interest in your product.
MQL (Marketing Qualified Lead): This is a lead deemed sufficiently qualified by marketing to be worthy for handover to sales for pursuit.
Opportunity: An opportunity is a lead that has been accepted by sales because it has met the necessary qualification criteria by the sales person.
Sales: A sale is the successful conversion of an opportunity into a done deal by the sales person.
Introducing the Funnel
The sales funnel is a representation of what happens when a market is connected to a product of value. At any point in time a certain percentage of the market is interested in learning more. A percentage of that percentage might then be genuinely interested in purchasing that valuable product. At some point a percentage of that percentage will actually make a decision to buy that product. Yay, a sale.
These are stages in the sales funnel. Each stage represents the degree of qualified interest from a prospect. Each organisation defines what constitutes qualified interest, but I have added a brief summary of what happens when a prospect flows through the funnel.
Addressable Market > MQL: The Product Marketer runs campaigns to sift out prospects from the addressable market. This is actually the most exciting space for a marketer today. Techniques are evolving — technology is revolutionising this activity. Terms like inbound marketing, digital marketing and marketing automation now dominate discussion. This is something we can explore in another blog.
For now, lets assume all of those prospects you have successfully uncovered qualify as MQLs. The MQLs are assigned to sales.
MQL > Opportunity: A sales person assesses the MQLs and makes a decision on which are sufficiently interested to pursue as potential sales. MQLs that pass this process are converted into Opportunities.
MQLs that do not make the grade are usually turned back to marketing for subsequent nurture activity. Nurturing is an activity to keep the prospect ‘warm’ in case that mild interest changes to something more substantial in the future — where they can once again meet MQL status and be handed to sales.
Spoiler alert: if you thought sales converted all of your leads into opportunities then you are in for a rude shock.
The percentage of MQL that convert to Opportunity can vary wildly from organisation to organisation. From my experience I have seen a typical conversion rate of 20%. For every five MQL I have painstakingly uncovered, the sales team rejects four of them. This conversion rate is something to explore more as a means of improving marketing campaign performance.
Opportunity > Sale: This is the primary domain of the sales professional, where they practice their dark art of deal closing. The successful conversion of Opportunity to Sale = revenue. The Opportunities that fail to convert to sale are typically gone for good — lost deals. There is valuable intelligence here though. A Product Marketer will learn a lot by understanding why the deal was lost. This information can be used to enhance the product, service or sales enablement resources.
Again, conversion rates will vary greatly from one organisation to the next. A typical experience I have had in the enterprise B2B space is a conversion rate of about 30%. One opportunity in three successfully closes as a Sale.
Analysing the Funnel
Take a moment to think about how valuable it would be if you had access to historical funnel conversion rates for a product. You could estimate revenue potential for an addressable market. Or, if a sales target is assigned to a product launch then you could readily determine what share of the addressable market is needed to be successful.
To determine your conversion rates, get familiar with your CRM. Campaign reporting is common in most CRM and is typically an easy way to track what number of MQL are converted to Opportunities and which are then converted to Sales. Total revenue values can also be readily reported.
For example, if a product typically sold for $10,000 and some genius set a sales target of $1,000,000 for the year, then that would mean 100 sales. If the Opportunity > Sales conversion rate is 50% then that would mean we need 200 Opportunities in the pipeline. To get 200 Opportunities from pure marketing contribution (with an assumed MQL > Opportunity conversion rate of 25%), then we would need 800 MQL. All good right? If your addressable market is only 500, then…. Houston, we have a problem.
Optimising the Funnel
Getting a grasp of your sales funnel conversion rates is game-changing. Once you know your conversion rates and gather some intelligence around why MQL do not convert or why Opportunities don’t convert then you are perfectly placed to improve campaign performance.
Here are a few things within the control of Product Management and Product Marketing that are worth pursuing to optimise funnel conversion rates;
Effectively define addressable market — with research and validation. The right messaging to the right audiences will increase MQL capture rates from market efforts. It is also essential information to ensure target setting is framed within the context of what the market can accommodate.
Tighten the criteria for MQL — to better qualify a prospect before handing to sales. Steps can be taken to make prospects express more interest before engaging sales, thus lifting the bar to achieve marketing qualified status. .
Typically this reduces MQL volumes, but it does improve the MQL > Opportunity conversion rate. So it is not necessarily a great lever for business growth in a direct sense, but it is a great lever for improving the use of expensive sales resources, because less time is spent working on poorly qualified leads. This makes it a good business growth driver in an indirect sense. It also has a positive impact on the integrity of the MQL pipeline and the marketing teams reputation as a quality lead generator.
Improved Opportunity > Sales conversion — is the biggest lever of marketing campaign effectiveness. You have already invested substantially getting the leads into the pipeline. Improving the win rate delivers more revenue without costing you any more. Working on improving operations here is much smarter than just trying to increase your MQL volumes to grow revenue. You will spend more money capturing more leads. But, until you are satisfied the Opportunity > Sales conversion rate is as good as you can get it, then you are just wasting scarce funding.
Hmmm, we discussed at the start of this story that the Opportunity > Sales conversion is the domain of the sales team, not Product Marketing. So, what can Product Marketing do to improve that process? Well, here are a few examples of things you can do that will have a direct impact on sales conversion rates:
Improve value proposition — by ensuring you understand your Addressable Market, your buyer persona and the real value your products provide you ensure your value proposition message is on-key and the right kind of prospects are attracted to the business. Marketing messages that are off-key can attract lots of prospects, but looking for a solution you do not offer. Match your message with your products unique strengths.
Enabled Organisation — by understanding why Opportunities are lost you can find out what additional sales enablement resources are needed to ensure a better win rate. Perhaps it is information on the competitors strengths, or may be it is ensuring the product is explained in a meaningful way for buyers that don’t talk technical. Getting this right is the responsibility of the Product Marketer.
Other ideas? — there are all sorts of things that could be done to improve a marketing campaign if the sales funnel is analysed by the Product Marketer. What suggestions would you make to improve Opportunity > Sales conversion rates?
If you are a Product Marketer or Go to Market professional and want to sharpen your skills then Brainmates is here to help. The Ready, Set, Go to Market training course has been developed in Australia for Product Marketers and Go to Market professionals. More detail and course registration is available here.