Will Scully-Power: Managing Director, Datarati


Why tie marketing compensation to revenue?

I thought this piece from Christine Crandell was great, and is shaping how we as marketers will be measured in the very near future.

Today, most Marketing compensation plans are comprised of a base salary and a performance bonus. However, in well-aligned companies performance bonuses are comprised of two elements; a quantified marketing-generated revenue objective and a longer-term qualitative marketing goal.

Marketing team members need to recognise that directly producing revenue is a central part of their job, though not their only responsibilities.

The Marketing roles which have the greatest direct impact on revenue are product marketing, sales/channel enablement, demand generation programs, field marketing and channel marketing and their compensation plans should reflect those responsibilities.

As a result, performance plans should include metrics specific to that role and to each individual team members’ function in it. The metrics I use in developing performance plans are:

Marketing Role Alignment Metrics
Qtr/Qtr and Yr/Yr
Product marketing
  • Pipeline and close rate by product line
  • Revenue booked
  • Margin by product line
Field marketing
  • New lead follow-up days outstanding by AE and territory
  • Field-produced pipeline production
  • Associated close rate by region
Marketing programs
  • Demand generation conversion ratios
  • Marketing-produced pipeline production
Sales training
  • Percent of sales force current on training
  • Role-based proficiency scores on key soft skills (i.e., discovery, negotiation, etc.)
Sales/field enablement
  • Response time to field requests
  • Sales force satisfaction and effectiveness scores
Customer Advocacy
  • Renewal rates
  • Customer satisfaction scores
  • Percentage of customers serving as references and evangelists

Marketing’s contribution to revenue goals, as reflected in performance bonuses, should be both measurable and time bound.

For example: “produce leads that result in $20M in Marketing-generated pipeline each quarter,” or “deliver sales training that shortens the new hire productivity ramp so they close their first sales opportunity within 90 days of hire date”.

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4 Comments so far
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Thanks for reposting this part of the interview. I am a huge believer tying marketing compensation to company review and have a more detailed article in the works. In the meantime, keep writing about alignment and check out a podcast on this subject.

http://rods.libsyn.com/index.php?post_id=547240

Direct download: Christine_Crandell_Part_2__November_2009.mp3

Comment by christine

I agree with most of what you said. Marketing does have to quantify its contribution to revenue but not in such a way as to jeopardize its mandate for long term strategic focus. As for compensating marketing personnel for revenue attainment, comp always drives behavior so it is wise to financially reward that which you want more of.

Comment by Christopher Ryan

Some very good points being made here. I still see the problem on the leadgen side of things as being too much focus on quantity vs quality. Everyone wants quality, but when the metrics are set for marketing’s bonus comp, you see “quantity of leads produced”. Since CEOs and Sales execs don’t really understand marketing’s role, they set comp targets that produce the wrong results.

Christine and I have been ranting about this issue for months. Rather than wait for the change in how B2B marketers will be measured, they should take the lead and set them. Alignment has to be driven by the VP of Marketing.

If they want real recognition and greater credibility with the sales team (and hence with the CEO), then focus on results that the sales team will say “wow” to. If sales does not buy-in enthusiastically, then there will never be alignment.
Henry

Comment by Henry Bruce

Chris and Henry make great points. CMOs and VPs of Marketing should take the lead on this. To do so will increase their credibility with sales and management. I talk more about this at http://www.sandhill.com/opinion/daily_blog.php?id=29&post=

Comment by christine




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