Use Revenue Engineering to Make Revenue Generation Deterministic
- Research results show that Best-in-Class marketers (i.e., the top 15 percent) use Revenue Engineering 5X more frequently than their lower performing peers.
- The research also finds that those marketers who apply Revenue Engineering acquire 2.5X more leads for the salesforce, source 3X more of the sales pipeline and achieve a 1.98X higher Marketing ROI than their peers who do not use this technique.
- Also known as Revenue Performance Management, this predictive model depicts the company's revenue progression in a Lead-to-Revenue sales funnel. The funnel shows the sales stages, conversions and velocity for all leads as they traverse the sales cycle. It displays real-time revenue visibility and date-based predictability. And most importantly, it permits What-If analysis, pro forma forecasting and the manipulation of leads with marketing programs to improve or accelerate the funnel and grow revenue.
Make Revenue Generation Visible, Predictable and Deterministic
The Marketing Transformation Report shared one difference among performance archetypes that stood above all others. The research found that an average of 22 percent of all marketers use a revenue engineering model. However, that figure is extremely skewed by archetype. Adoption by the Best-in-Class marketers was 90 percent. That's a whopping 5X higher adoption when compared to lower performing peers.
While adoption among the top performers was overwhelming and consistent, the naming for this operation varied. Marketers use interchangeable terms such as revenue engineering, revenue performance management (RPM), revenue waterfall, revenue engine, prescriptive revenue, or predictive revenue analytics. Regardless of name, the models work the same.
When we compared the top marketing performance measures among those that used this model (aka Revenue Engineers) with those who did not, the differences were significant but not surprising.
Those participants that applied prescriptive revenue analytics outperformed those who did not by more than 2 times in all three measures. Performance results with this magnitude of difference are very unusual and should not be ignored.
How It Works
This revenue generation method uses a visual and interactive model to depict the Lead-to-Revenue progression.
The model is displayed as a sales conversion funnel that shows each sales stage, the volume of leads or opportunities in each stage, and the conversion and duration metrics between stages.
It shows how and how many leads traverse from top to bottom. It permits What-If analysis and lead manipulation to show how different marketing programs may impact certain leads in the funnel.
The model brings visibility, predictability, and deterministic engineering to revenue generation.
The below example shows sample sales stages and stage to stage conversion factors.
The model calculates the sales stage conversions and durations of leads and opportunities pursuant to many variables (i.e., customer type, opportunity type, salesperson, region, line of business, product). That enables it to identify stalled leads, illustrate the factors that impede or accelerate lead progress, and show the levers that will improve or optimize funnel throughput and top line sales growth.
Here are 6 ways we use this model to help clients accelerate and grow revenues.
Engineer revenue to a targeted result
The lead to revenue funnel can be reverse engineered (i.e., turned upside down). You can start with a revenue projection and then show exactly how many leads need to go into the top of the funnel to achieve that financial target. Because you know your lead-to-revenue conversion rate and velocity, you know exactly what must go into the top of the funnel to get the desired revenue out the bottom of the funnel by a specified date.
Predict revenue shortfalls with enough time to act
By tracking the volume and velocity of all sales leads and opportunities in each stage of the revenue cycle, you can identify if any sales stages don't have enough volume to achieve the revenue target. This is essentially an early warning system that forecasts financial shortfalls weeks or months in advance of the period-end.
This early notice can allow enough time for marketing to offer remediation solutions to prevent the future revenue shortfall. When integrated with a Marketing Playbook or best practices, marketers can select campaigns or other demand generation plays based on their known funnel velocity to meet date-based targets.
For most marketers, revenue impediments go undetected until it's too late. However, marketing shifts from reactive to proactive when it has advanced notice of financial shortfalls and the actions to resolve them before the period has expired.
Reduce lead leakage
Lead leakage occurs when qualified sales leads are not followed up timely or at all and are subsequently lost. This revenue generation model brings visibility to valid leads that are not being followed-up or followed-through. These are often displayed in a neglected leads dashboard or report.
In most B2B industries the average lead leakage is between 5 and 15 percent. But most companies don't know this because they don't track it. Reducing lead leakage creates an immediate and significant upside revenue opportunity.
Get an accurate sales pipeline
Because this predictive model tracks all leads and knows from historical data how fast each type of lead should traverse the funnel it can detect stalled or dead leads and opportunities that are falsely inflating the pipeline.
You can then intervene with offers, inducements or tactics to unclog and advance stalled leads. Or you recycle them to earlier stage nurture campaigns for continued education and engagement until they become active.
Get revenue visibility beyond the current period forecast
A marketing strategy best practice is to forecast sales results beyond the current period. In fact, with a lead-to-revenue model marketers can predict sales performance at any future date as far out as the average sales cycle duration.
So, if the average sales cycle is 180 days, you can look to the top of the funnel, see the revenue cycle conversions and forecast the number of deals and dollars that will close in 180 days.
This is another example of an early warning system that delivers advance notice if early stage leads are insufficient to meet future sales targets. Recognizing the deficit 180 days in advance allows for more options than recognizing it several days before the period-end.
Lower marketing costs
The lead to revenue funnel calculates the conversion success, cost per lead and cost per customer acquisition for every type of lead.
By knowing the cost per lead for every type of campaign and the volume of leads needed to achieve a sales target by a specified date, marketing can dynamically select the campaigns that deliver the needed speed at the lowest cost.
Most marketers measure campaigns solely by conversions. But more advanced campaign portfolio management considers other factors such as cost per customer acquisition and conversion velocity (i.e., speed). For example, certain types of campaigns, such as Pay Per Lead, are generally costlier but acquire more qualified leads that enter the sales cycle at a deeper stage and thereby close more quickly. If the sales goal is at risk halfway through the period, marketing can procure these later stage leads only as needed.