How to Design a Sales and Marketing Service Level Agreement
- A sales and marketing service level agreement (SLA) defines mutual expectations for the vetting, transfer and follow-through of sales leads.
- There are 5 essential sections of a lead management SLA that make it effective in increasing lead conversions, accelerating sales velocity, and lowering lead leakage.
- The top 2 factors that increase lead leakage are transferring unqualified sales leads to the salesforce and poor lead recycling. Service Level Agreements can fix both.
Sales and marketing alignment is essential but that doesn't make it easy. A lead management Service Level Agreement (SLA) can help. But like the problem itself the SLA is both essential and not easy.
Forrester's SiriusDecisions did an alignment survey with business leaders and found that 58 percent of respondents rated their sales and marketing alignment as "poor." The analyst firm also shared that while lead management SLAs are critical, only 43 percent of survey respondents had them in place and only 11 percent of respondents reported having jointly managed SLAs.
HubSpot reported similar challenges in its State of Inbound report, which advised that only 22 percent of respondents said their sales and marketing teams are tightly aligned.
A lead management Service Level Agreement is not optional for companies that seek systemic, sustainable and predictable revenue growth. So, to do better, this post will share the 5 most important sections of a Sales and Marketing Service Level Agreement along with a template that can accelerate creating your own SLA.
Sales and Marketing Service Level Agreement Defined
But first, some context.
A Sales and Marketing Service Level Agreement defines each group's lead management objectives, responsibilities and performance measures.
Typically, marketing agrees to deliver a specified volume of sales leads at an agreed upon qualification. Sales agrees to respond to each lead pursuant to an agreed upon process which includes the timing, persistence, messaging and measured progress applied to all leads.
For example, the SLA may state that all leads will be fully vetted and scored by marketing before being transferred to sales. It may then state that sales will accept or reject each lead within 8 hours (or it automatically reverts back to marketing for continued nurturing or redistribution) and advance each lead to a Sales Qualified Lead (SQL) within 4 days (or again, it reverts back to marketing).
Sales also commits to returning stalled leads to marketing for continued nurturing (more on this in the lead recycling step below). If and when either side doesn't meet their SLA responsibilities, the CRM system flags the discrepancy, and a meeting ensues to resolve the variance or possibly implement a remediation plan.
So, with that understanding, here are the sequential steps to design a lead management Service Level Agreement that makes both sides of this relationships successful.
Define the Revenue Funnel and Lead Progression
Consensus is needed for SLAs, and that starts with context and understanding.
The SLA manages sales leads at every stage of the funnel so start by defining the revenue funnel and how leads transition as they make progress toward closure.
The biggest challenge will be to define a sales-ready lead. That's the numeric score that determines when the lead is serious enough to transfer to the salesforce.
Depending on your sales funnel methodology, that may mean defining a Marketing Qualified Lead (MQL), Automation Qualified Lead (AQL) and/or Teleprospecting Qualified Lead (TPQ). The best sales lead scoring methodology will be a measured combination of prospect fit and purchase intent.
It's essential that marketing and sales staff jointly define the sales-ready lead score. Also, recognize that the first time you do this is just your starting point. The team will need to meet periodically to apply learning and adjust the score calculation.
Clear definitions for each sales stage and lead progression status prevent misunderstanding and permit measurability.
Set Your Revenue Goal
This is the single most important target to rally around. It's the shared goal that unites marketing, sales and the C-suite. The revenue target is often set by sales. But if sales leadership expect marketing to commit to a portion of that goal then they need to get marketing involved during the planning process.
Define Marketing's Responsibilities
Marketing will be measured by their contribution of sales leads that result in closed revenues.
So, their commitment starts with their portion of the total revenue goal and works backwards to calculate the volume of leads needed to reach that goal.
The challenge here is to know your Lead-to-Revenue (L2R) conversion rate. That's the conversion rate for leads starting at the top of the funnel and going all the way to won.
You can extract this figure from your marketing automation platform (i.e., Adobe, Salesforce Marketing Cloud or other lead management system) and your CRM system. If you don't have the data, start with 1.5% and then adjust based on learning.
Calculating the L2R rate by sales stage will also show you where you have process flaws and are losing leads. This visibility is key to increasing lead conversions and reducing lead leakage. It's also important to calculate sales funnel velocity so you know the time required to achieve the revenue goal.
Marketing is also responsible for sales lead management processes up to the point of lead transfer to sales. That means agreed upon processes for lead vetting, scoring, nurturing, qualification and transfer.
That last process is especially important as the sales lead transfer form marketing to sales is the single greatest point of failure. To mitigate this risk, marketing must assure the lead is sales-ready (pursuant to agreed upon criteria or score) and that the sales recipient is properly notified of each distributed lead.
When working with clients, we typically document a lead handoff procedure in the SLA that uses a structured lead routing process, sends a CRM system alert or email to notify the salesperson, and creates a lead follow-up activity in the CRM system. That CRM activity then becomes the elapsed time counter to assure the lead is either accepted or rejected within a prescribed timeframe.
When leads are not accepted or rejected within the allowable time, the SLA may specify that the lead is either escalated to the sales manager, rerouted to another salesperson, or returned to marketing for continued nurturing.
The marketing commitment must be funded to be achievable. Marketing must know the cost per lead for various types of campaigns and have the budget to cover the acquisition costs for the agreed upon lead volume.
The SLA will fall short if marketing doesn't have the budget to acquire the agreed upon volume of sales leads or if they send more leads to the salesforce than can be properly managed.
Define Sales' Responsibilities
Once prospects are transferred to sales, the SLA defines their responsibilities for lead and opportunity management. For example, the SLA should define:
- The maximum allowable time to accept or reject the lead and what happens if that time limit is exceeded.
- The maximum allowable time for initial outreach to the lead and what happens if that time limit is exceeded.
- The methods, channels and content that should be used to contact the lead.
- The number of outreach attempts, the pause period between attempts and the total time duration before a lead is marked as unresponsive and returned to marketing for continued nurturing. Recognize some types of leads may merit more contact attempts than others.
- The criteria to disqualify a sales lead.
- The maximum allowable time to advance the lead from Sales Accepted Lead (SAL) to Sales Qualified Lead (SQL) status and what happens if that time limit is exceeded.
- The specific or minimum number of fields in the CRM system that the salesperson will update when advancing a lead to a SQL (i.e., sale amount, estimated close date, estimated sales win probability.)
- The definition of a stalled lead and criteria for when a stalled lead should be returned to a nurture marketing campaign.
The below sales table provides a summary example of sales responsibility follow-up and follow-through actions needed to advance each lead through the funnel.
Implement Real-Time Analytics
Reporting and analytics are needed to measure and improve SLA performance.
Our experience in working with clients is that dashboards are the primary information reporting tool. They can deliver real-time information and variance alerts that permit quick intervention. They are effective at highlighting process missteps, SLA deviations, stalled leads and lead leakage. Their early detection allows the biggest improvements in the shortest time.
Below is a dashboard we routinely use.
The right Key Performance Indicators (KPI) are needed to prioritize information, show measurable progress and highlight variances in real-time. It's essential that the SLA dashboard focus on the performance measures that most impact shared goals.
The SLA dashboard data is sourced from the marketing automation platform and the CRM system. The marketing system will provide most lead information and the CRM app will provide almost all data once the lead is transferred to sales.
A Lead Management Service Level Agreement Template
Consider the below SLA template as a starting point.
A few callouts.
First, you can create much more complex SLAs than the above template. However, our experience has been that more complexity does not translate to greater success. At least not in the beginning.
When working with our clients we have found it most helpful to begin with a one-page SLA that focuses on the most important information.
Second, pretty much all SLAs document marketing and sales responsibilities. The best SLAs document the prescribed actions or events when those expectations are not met. That includes things like sending CRM software alerts, escalating variance notifications, rerouting leads or knowing when to return leads to marketing.
Third, a sales and marketing service level agreement is never correct the first time. Schedule regular cadence meetings to review lead results, analyze variances and make adjustments.
Anecdotal feedback can be a good discussion starting point, but real reviews require data, such as the information in the SLA dashboard.
Our experience has been the first 3 or 4 iterations will deliver big improvements and then you can relax your cadence meetings to about quarterly.