Friday, October 1, 2010

Building Benchmarks - 3 Main Approaches

In order to build a high performance revenue management process, not only must it be instrumented and measured to allow you to understand current state, but it must be continually improved. As the market, technologies, competitors, and your own capabilities change, you must continually adapt, learn, and optimize.

However, to do so, it’s important to understand where in the overall revenue process you are performing well, and where you are performing poorly. This requires benchmarking your performance and guiding continual improvements in areas that are most in need or most critical for overall revenue performance. Over the next few posts, we'll look at ways to think about building these benchmarks.

Before we do that, however, we need to look at how we are approaching the challenge. Revenue performance benchmarks can be built in three main ways; against alternatives to ensure that the most effective and efficient way of accomplishing a tactical objective is being used, against a plan to ensure that each element of the revenue performance process is contributing at the required level, and against best in class companies to ensure that the performance levels being seen are maximized to the level that the best performers in your industry are seeing.

Against Alternatives

The best way to start with benchmarking is to look at individual components of the revenue process and ensure that each element of the process is performing as well as alternative options. To accomplish this, a clear comparison metric needs to be established that can be seen as equivalent. If, for example, a webinar and a whitepaper marketing campaign are being compared as alternatives, they can only be reasonably compared with a clear definition of what the outputs are.

If, for example, the immediate goal of the two marketing campaigns is driving marketing qualified leads for sales, then that metric allows a fair comparison. Metrics such as website traffic and raw inquiries will be too high in the funnel to be meaningful, and metrics such as sales pipeline movement or closed business will be too disconnected from the initiative to be useful.
For this reason, when benchmarking alternatives, only initiatives that are truly alternatives for each other in that they drive the same intended outcome can reasonably be compared. A humorous video that drives awareness cannot be reasonably compared to a webinar campaign that creates marketing qualified leads, and neither can be compared to an inside sales campaign that drives business towards close.

Against a Plan

To benchmark efforts across the entire revenue performance spectrum, we first need to develop a comprehensive plan that models the full buying process from beginning to end, and provides conversion metrics at each stage in the process. With this plan in place, the volumes, velocity, and conversion rates that are achieved can be compared to the planned rates, and adjustments can be made accordingly.

In building this plan, key gaps in revenue performance often become visible, especially at points where a transition between siloed groups takes place. Understanding these gaps, and planning efforts and investments to remedy them and bring the conversion rates within the gaps to a reasonable benchmark level can have a very positive effect on overall revenue performance.

While the ultimate goal is, of course, a plan that looks into the future and maps revenue efforts to company objectives, the simplest plan to get started with is an incremental adjustment of past performance. For this reason, clear dashboarding of the existing state is vital in building a forward looking plan.

Against Best in Class

With the comprehensive view of revenue performance that this planning effort allows, benchmarking can now be done against best in class companies. Although each business experiences a different situation, benchmarking revenue funnel metrics against best in class companies allows quick identification of potential areas of improvement.

With an industry vertical, similar realities of buyer dynamics and sophistication may allow insightful comparisons of funnel sizes, overall buying velocity, and conversion rates. Similarly, comparisons against other organizations that share the same general go-to-market strategy (such as through a free trial program), or are comparable in terms of deal sizes, may provide valuable insights in terms of conversion rates and response profiles to specific marketing or sales efforts.

Now that marketing automation has made analysis of the entire revenue engine more readily available, we are beginning to see the ability to provide cross-company and cross-industry marketing benchmarks that provide insight into what best in class performance truly looks like.

Each style of benchmarking adds value in its own unique way, and the more visibility you gain into the performance of your revenue engine, the more you are able to make needed optimizations and improvements.

Current State of Benchmarking?

As we begin a series of posts to look at benchmarking, how are you approaching the challenge today? Do you feel you have dashboards in place? Do you compare tactical alternatives? Is there a quarterly or annual plan that you measure your performance against across the entire revenue engine? Do you compare yourself to best in class benchmarks?
Many of the topics on this blog are discussed in more detail in my book Digital Body Language
In my day job, I am with Eloqua, the marketing automation software used by the worlds best marketers
Come talk with me or one of my colleagues at a live event, or join in on a webinar