How Does Marketing Generate Revenue for your CompanySep 22, 2018 - Marcel Odena
The marketing department has traditionally been responsible for many functions in companies, from managing the website, maintaining the blog, sending mailings, merchandising topics, etc. But marketing is increasingly being asked to be accountable in terms of business generation ( sales pipeline ).
If marketing manages a monthly budget of 100,000 € (100k), how much revenue it generates for the company? how many sales are obtained thanks to the marketing contribution? and those sales that generate revenue for the company , whether they are single purchases or recurring income, as is the case with many SaaS (Service As A Software) companies, in which the service is provided month by month and they usually bill a fixed number every month. In these cases, we usually talk about the business metric called MRR: Monthly Recurring Revenue, i.e., what will be recurrently billed month by month.
For example, if marketing has a budget of 100k, and generates in a month an MRR of 10k means that at least they should spend 10 months of service until they invoice 100k and match the investment made to capture that business. Obviously to have green numbers they should spend more than 10 months, and keep that customer (that’s why in a SAAS is super-important to have a very low churn-rate ).
If, on the other hand, the MRR achieved by marketing was 50k, then in 5 months of billing this new customer the amount of the 100k invested would have been equalized, and with a few more months there would already be green numbers.
How to know when marketing generates business (pipeline)
To answer this question, the “when”, that is, in what conditions marketing generates business for your company, I think it is best to do the opposite way that a sale follows. The road is:
- A sale has been closed
- An opportunity is generated: a commercial proposal is sent.
- There are conversations with this lead (with a person): this can be, exchange of emails, meetings, some session to make a product demo, etc.
- A lead is obtained (the contact details of a potential buyer)
In my opinion, the contribution of marketing in the pipeline generation is clear in two scenarios:
- Marketing Direct Sales Pipeline: when marketing generates a lead that ultimately leads to a sale.
- Marketing Influenced Sales Pipeline: when marketing has not yet generated the lead, it has managed to influence the lead and the sale is closed.
How does this fit with the pipeline that generates sales? In companies in which the sale requires a certain human interaction (that is, they are not automatic registration services through visa payment), the sales department has a primordial function. Any sale that closes with great probability will be thanks to the sales department. That said, you have to be honest and attribute to marketing your merit percentage at the close of the sale.
1) Marketing Direct Sales Pipeline
The sales that are achieved thanks to a lead that got marketing I think it is sensible to say that it is a direct business generated by marketing (although as I said earlier sales has diligently managed the process of the sale). Although it is the sales department that has ultimately closed the sale, if it were not for the lead achieved by marketing, that sale would not have been closed.
For example, imagine that marketing generates a lead (in fact it is usual to generate hundreds per month) through a campaign in Google Ads, Linkedin Ads, by subscribing to the blog following the publication of an article, etc. If this lead ends in a sale, in an MRR of € 5,000 / month, this piece of business will be computed as a business generated by marketing.
2) Marketing Influenced Sales Pipeline
In this case, it is the sales department that gets the contact data of a potential buyer (a lead),through outbound methods to generate leads as explained in this article. The sales process starts and in parallel with the sales process that lead starts to interact with different marketing campaigns. For example, visit the web page and consume several connotations, that is, download several guides, sign up for a webinar, etc. In this case, the lead was achieved by the sales department, but marketing influences that lead during the process. And therefore the turnover of that sale, for marketing purposes, will be counted as a pipeline influenced by marketing.
This metric is very important because it comes to balance the other: marketing is important to generate many quality leads, Sales Accepted Leads accepted by the sales department, but also that actively contributes to push in the sales funnel (Sales Pipeline) to all those leads, with the objective that it contributes to generate turnover for the company.
Sales Pipeline Funnel
Once we have clear the 2 key metrics above we can calculate the metrics for each phase of our sales pipeline funnel. Each lead can generate a business opportunity. And that opportunity can have several states until it culminates in a sale. Well, we can add the turnover of all opportunities in state A, state B, state C, etc. And so see the turnover that is inside the sales pipeline funnel.
Well, this graphic, this funnel that you are sure you have imagined, we can calculate it for opportunities that come from leads obtained by marketing (direct pipeline), as well as for business opportunities influenced by marketing. And these figures will surely account for the contribution of the marketing department in terms of generating business for the company .