Should marketing carry a quota on revenue?
The answer is yes according to Joe Payne, CEO of Eloqua, a marketing automation software vendor (far left in photo, below). Approximately 30% of the Eloqua marketing team’s pay is contingent on Eloqua achieving its revenue objectives.
I recently spoke with Joe Payne at a panel discussion on sales and marketing alignment.
But Joe, shouldn’t marketing be compensated based on sales qualified leads (SQLs) or sales accepted leads (SALs)? I asked after the panel.
Joe noted that he wants marketing to be aligned with the corporate goals. SQLs or SALs are not money in the bank. Joe’s concern is that marketing is savvy and can game the system by persuading sales to accept leads.
Joe should know. Unlike most CEOs, Joe’s background is in marketing with stints at MicroStrategy, Coca-Cola and Procter & Gamble.
But how can marketing influence the sale after the lead has been passed? Joe believes that marketing can play a strong role by creating tools such as ROI calculators.
Personally, I would be reluctant to adopt Joe’s framework especially given the high 30% rate:
- If marketing was gaming the system, a high rate of disqualification of accepted leads by sales would quickly set off alarm bells for sales management and senior management.
- Once a lead is passed to sales, marketing loses control of the lead. Lead leakage beyond marketing’s control can take its toll: leads either contacted too slowly or not all, leads who suffer from a poor sales experience, or falsified documentation in the system indicating lead follow-up that didn’t transpire. Unfortunately marketing is unable to plug these leakages that may occur in the sales department.
- Marketing’s role in demand creation and nurture marketing dwarfs its role in helping to close leads. Yes – marketing can influence closed sales through tools and collateral but its role is much diminished. Put it this way, if tools and collateral were that important, why do few (if any) organizations gauge their influence on the sale or ROI?
- The telequalification team is not significantly bonused on revenue and is closer to the sale than marketing. According to a recent survey by Phone Works, the inside sales team responsible for telequalfication is most often bonused on the quality of leads (58%), appointments (54%), number of leads (50%) and pipeline contribution (42%). Only 35% of organizations used revenue as a factor in determining bonuses (down from 65% in 2007).
Let’s be fair, especially during this recession. Give marketing a quota but on metrics within their realm such as sales qualified or sales accepted leads.
Photo Credit: Robert Lesser’s photo of (l to r) Joe Payne, CEO Eloqua Corp.; Frank Falcone, Senior Product Lead, Microsoft Dynamics CRM, Microsoft Canada; Ajay Sirsi, PhD, Associate Professor, Marketing, Schulich School of Business; (missing) Rick McCutheon, President, FullContactSelling (April 27, 2009).
Hi Robert -
I’m Joe’s CMO at Eloqua. You’ve posed a great question. As the guy who’s got 30% of his bonus tied to revenue targets, I can say that it really gets you focused on what matters — closing business. I think marketers often think about all they ways they can influence the flow of leads at the top of the funnel. But there is so much we can do to influence opportunities that are being worked by sales. Joe mentioned ROI calculators. We also work on reference programs, testimonials, product marketing, competitive intelligence, and lots of other sales enablement tools for each stage of the sales process. As you suggests, marketing can and does influence the whole sales funnel now. It’s time marketers think hard about the bottom half of that funnel. They can make a huge impact.
Robert, it sounds like the 30% of pay based on Eloqua hitting its revenue target works for Eloqua and might work for other B2B companies. Not sure how it would work in B2C though.
One advantage of this approach is that marketing execs get really focused on not just demand creation, but as Brian says, following the lead all the way through to completion. I used a similar tactic at a very large systems integrator where we spent a lot of time generating leads, but also a fair percentage of time on deal support–divining and executing marketing tactics to drive deals all the way through the funnel.
These processes work great when SFA apps are tied into marketing automation apps so that deals can be tracked through the funnel and marketing campaigns can be tagged to each customer to discern touches along the way to contract signing.
@Brian thanks for augmenting my discussion with Joe with more details and salient points. I hope that you exceed target and your accelerator kicks in!
@Paul given the enormous power that B2C marketers have in stimulating demand, I would say that a quota for a B2C marketer may make even more sense than in a B2B context.
I agree that all marketing should be held accountable for results, with a stronger focus on Online Marketing.
As someone who has worked in both sales and marketing, I would say that the bonus approach is essential for marketing.
As for sales, either bonuses or commission can work as incentives.
At our firm, we foster a sense of team work because EVERYONE at the firm has part of their compensation based on the performance of the company. This really gets everyone focused and feeling connected to our company goals. It creates incentives for everyone to work hard, too.
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I think marketing can have goals for SLAs and SQLs and also have bonuses based on revenue, as marketing should be responsible for both.
For marketers at Eloqua, and other companies who are selling a solution to marketers like Marketo or Hubspot, marketing is often tied closer to the sales process- as they are often speaking to prospects about how they are are using their own tool. I’m not sure if this is the same for other industries, where sales teams would look to sales engineers for most of this insight.
I think the great part about using a marketing automation tool with a CRM is you can clearly see where there are issues in your funnel. By looking for these weaknesses, an organization can use data to determine if sales and/or marketing is not working, and then adjust.
If marketing is not incentivized on company revenue, sales can blame marketing for the quality of leads or their readiness to buy (passed too early in the buying process). Instead, by holding both teams accountable for the same numbers, they are forced to work together to achieve the same goal.
I think everyone should have a variable element to their salary based on something like revenue (commonly called a bonus vs a quota). Absolutely. However I think it’s better if you can tie it closer to an individuals or departments specific deliverables – this could indeed be based on SQLs or SALs for marketing – lead gen – GOOD lead gen – is after all one of their most important objectives. Giving them a quota – which to me implies part of the revenue plan (as in “sales quota”) is maybe a good idea too. If mktg puts together a plan showing how many leads they will deliver and how much revenue will be driven by theses leads, then shouldn’t they be prepared to put their money where their mouth is. After all, everyone in sales has to accept a quota which they have to meet, regardless of whether or not mktg manages to deliver the leads they promised to deliver.
A Marketing bonus can only be effective if the total sales cycle is not long. If your sales cycle is 2 years then the risk for giving a bonus based upon SQL or SAL is too big as the relation between the lead and the actual sales becomes less clear: too many factors influence the sales process afterward.
Frankly, I think a quota would be hard to make work in marketing. There are too many variables at work.
You can be great at marketing but you need a great sales team that is motivated to make the calls and follow-up on the best prospects consistently.
In the tech industry, where I have been for 15 years, there are other departments that greatly affect customer retention. It is not all about sales and marketing.
Do you have good, proactive customer support? Are your developers striving hard to improve the product or service? Do the system and network administrators keep the trains running on time so to speak?
I think a sound solution is to have bonuses based on a company performance. That is, everyone in the company has a stake in customer acquisition and retention. Everyone feels a sense of, “hey, we are doing this for the customer.”
I have seen transitions right before my eyes where developers or system administrators, who traditionally are sometimes a bit aloof from the concerns of end customers, suddenly taking a great interest. It is not just the money but they are suddenly business people with a more direct stake not writing some code for an application they may think is cool or not. Regardless, now they are keenly aware there are human beings using these applications.
When you have a company bonus system you soon have a feeling of we are in this together and resent the lazy. Anyone who does not shape up, ships out. The team cannot tolerate laziness for long if the size of their pay checks depends on you doing your job. Before they could sort of let it slide.
Thanks all for the comments.
The key question for me is: when does the level of compensation at risk become onerous? Is 10% reasonable for marketing? How about 30% or 40% or 50%?
As the percentage increases, marketing’s compensation structure becomes akin to sales.
The second question: what level of risk is reasonable for marketing to bear on outcomes that they may or may not be able to influence?
Take a look at this fascinating article written on this subject in the B2C space:
http://bit.ly/9fJ4G