Stated Alignment Between Sales And Marketing Is No Longer Sufficient To Drive Revenue Growth And Goal Attainment – SLAs Are Mandatory
The relationship between sales and marketing has historically been compared to the situation with the Hatfields and McCoys — constant battling, arguing and feuding that has gone on for generations. Today, things are a little better.
Recently, sales and marketing people have realized that if they want departmental success, they have to work together. Ask CEOs if they think their marketing and sales teams are aligned, and the answer is generally yes.
However, HubSpot Research found that only 26% of respondents report having a documented service-level agreement (SLA) between the two departments.
Many CEOs recognize alignment between sales and marketing is one of the secrets to successful revenue growth, but it’s clear most CEOs still don’t know how to make that alignment happen.
If you’re looking to better align your two revenue-generating teams, it’s going to take more than talk, meetings and planning. It’s going to take major steps and changes to the way you do business.
Service-level agreements (SLAs) between sales and marketing represent one of those steps.
Here’s what to consider when creating your first SLA to align sales and marketing effectively and efficiently.
What Is An SLA Between Sales And Marketing?
Simply, it’s a contract or an agreement that specifies exactly what marketing will do to support the company’s revenue goals and exactly what sales will do to support the company’s revenue goals. Both marketing and sales leadership agree to all of the terms, conditions and parameters so that complete alignment around execution is now contractually agreed to.
When it’s created by representatives or leaders from both teams, you get very tight alignment and agreement on exactly how sales and marketing are going to execute. You get tight alignment and understanding around exactly what’s expected from both teams, and you foster an environment of open and transparent conversation, collaboration and co-creation.
Here’s exactly what should be included in your sales and marketing SLA.
Agreement On Definition And Vocabulary
Sales and marketing people do talk a different language. Marketing cares about leads and visitors, while sales only cares about sales opportunities and closed new customers. Marketing wants to know about attribution and lead source, while sales usually attributes all success to their efforts.
This has to change, and the SLA provides the format for getting both teams to agree on any and all terms that are necessary for improving revenue generation.
Let’s start with some of the basic and obvious ones. These are our definitions, so you can change these to fit your organization.
Contact Or Inquiry – A new name added to your prospect database as a result of marketing activity.
Lead – A new name added to your prospect database that has expressed some level of interest in your company, product or service as a result of some activity or action taken with your company.
Marketing-Qualified Lead (MQL) – A person who has taken specific action, like visited a specific website page that typically indicates interest, completed a form or requested information from you. They also provided additional information that allowed your lead qualification model to kick in and classify them as more than a lead but as an MQL.
Sales-Qualified Lead (SQL) – A person who has requested to speak with or interact with a salesperson or, in some cases, a person who has demonstrated through their interaction with your marketing that their level of interest, pain or engagement is higher than that of an MQL.
Sales Opportunity – A person who has spoken with your sales team, and your salespeople have qualified them via a conversation as to their level of interest in doing business with your company. They have the pain, they are a good fit for what you do and you are talking to power.
New Customer – A person who has signed your agreement, contract or paperwork.
Unfortunately, more vocabulary needs to be defined. The stages of your sales process should also be defined in your SLA, so that when marketing and sales are talking about sales opportunities working through this process, clear visibility exists as to where those people are in the process.
You might want to consider gaining consensus and agreement around the prospect’s buyer journey and how those stages are defined and discussed across sales and marketing. The Cyclonic Buyer Journey™ stages are a good place to start if you’re looking for a model that goes further than the traditional sales funnel and better represents how people buy today.
Once you have these terms defined, you can move on to setting goals and agreeing on performance-based metrics.
Setting Quantitative Goals And Objectives
Here are some examples of the metrics you’re going to need for the SLA:
- Monthly new customer goal (if you care about the number)
- Monthly new revenue goal (dollars)
- Number of marketing-generated leads
- Number of sales-generated leads (assuming you have sales reps who are responsible for generating their own leads in addition to those marketing serves up)
- Monthly revenue from marketing leads
- Monthly revenue from sales leads
- Average revenue per new customer
- Total lead-to-customer close rate
- Marketing lead-to-customer close rate
- Sales lead-to-customer close rate
- Average sales cycle length in days
You’re going to want to do some calculations with these numbers.
Take your sales quota or sales goal for the year and multiply it by the percentage of revenue expected from marketing-generated leads. This will give you the marketing-sourced revenue goal.
Take your sales goal for the year and multiply it by the percentage of revenue expected from sales-generated leads (if you have this), and you’ll have the sales-sourced revenue goal.
Take that marketing-sourced revenue goal and divide it by the average revenue per new client number, and you’ll have the number of new customers needed to hit your sales goal. If you have sales-sourced leads, you’ll have to run the same math.
Now take the number of new customers and divide it by the average lead-to-customer close rate, and you’ll have the number of leads needed to hit your revenue goals.
You can take the calculations for the marketing side one step further and incorporate quantity and quality into these metrics. The above calculations provide you with a quantitative volume goal of marketing-generated leads. However, we know that not all leads are created equal, and as a result, some may be considered higher- or lower-quality than others.
For example, a decision-making executive might be a more valuable contact than an intern. If that’s the case, you can do the above analysis for each subset of leads, and set up separate goals for each type/quality level.
Want to take it even further? Measure in terms of value, instead of volume. For example, a CEO may be worth $100, while a director is worth $50 and a manager is worth $40. You can apply a similar model on the source of the lead. For example, whitepaper download leads might be worth $10, webinar attendee leads worth $50 and demo request leads worth $100.
These value numbers should not be arbitrary; they should be based on close data. If demo leads close faster and more frequently than whitepaper-sourced leads, then the value for demo leads should be higher.
Now set up your SLA for marketing not based on the number of leads but on the value of the leads generated. If the lead-to-new-customer conversion rate is 10% and your monthly sales goal is $100,000 in new revenue, then marketing needs to generate $1,000,000 in marketing lead value to fulfill their part of the SLA.
Agreement On Process And Expectations
We talked a lot about the marketing side of the SLA, but when it comes to process and expectations, this is where the sales side of the SLA comes in.
The sales side of the SLA should detail the speed and depth of following up with marketing-generated leads.
According to the InsideSales.com Fall 2016 Response Audit Report:
“If leads are responded to in fewer than five minutes, the chances of actually contacting them are 100x higher than waiting 30 minutes. On average, only 7.7% of leads are contacted within the first five minutes.
“In terms of follow-up, the best practice in the above report is six phone calls, three voicemails and three emails, for a total of 12 touches. That seems excessive to us and our guidance is generally one email, one phone call and one email.”
I’m not a fan of best practices, but I am a fan of doing what’s right for your business, your prospects and the experience you’re trying to create. Going too far with outreach has the potential to create bad feelings and negative impact on your brand.
However, setting these expectations and getting the sales team to commit to whatever frequency and touch sequences you create is part of their agreement in the SLA.
Just like all marketing leads are not created equal, not all sales leads are created equal either. It’s very possible that your SLA documents play for different kinds of leads. This does not mean you can ignore lower-quality leads, but it might mean lower-quality leads are nurtured via automation while higher-quality leads are touched by a rep in the first 30 minutes after the lead is identified.
Use Of Technology (CRM And Marketing Automation)
The SLA will be most effective when sales and marketing have a way of communicating and sharing lead data, which is why CRM and marketing software integration is an important part of the SLA.
In addition, not only do the two systems need to be integrated, both teams should also state how and when they will be used.
For example, sales may be closing a deal, but they do not indicate this in their CRM in a way that is configurable with marketing software. As a result, marketing fails to capture accurate conversion data.
CRM and marketing software configuration settings will differ, but both teams need to take the time to train on how to use the systems your company has and ensure the two are working together to produce accurate reporting.
While marketing automation and CRM are requirements for platform technology (this is how we describe the basic marketing and sales tech requirements), other tools and technology might also find their way into your SLA.
For example, if you’re using Drift for chat, you’ll want to define how sales handles conversions via chat from the website. Who will monitor the tool? How quickly will your team respond? How are those leads qualified? What does the handoff process looks like (if there is one)?
Rhythms, Reviews And Metrics Tracking
Hang in there, your SLA is almost done. Next, you’ll need to set up the tracking. One way to do this and provide visibility into both sales and marketing is to set up dashboards.
Here is a detailed list of data elements we typically recommend that clients consider for their SLA dashboards:
- New contacts vs. goal
- New MQLs vs. goal
- New SQLs vs. goal
- New sales opportunities vs. goal
- New customers vs. goal
- New revenue vs. goal, this month and YTD
- Average sales cycle (days), month by month
- Conversion rate - MQLs to SQLs, month by month
- Conversion rate - SQLs to sales opportunities, month by month
- Conversion rate - sales opportunities to proposals submitted, month by month
- Conversion rate - proposals submitted to new customers, month by month
- Sales opportunities by source - email, organic, chat, paid, referral, social, events, rep-generated
- Customers by source - email, organic, chat, paid, referral, social, events, rep-generated
- Sales activities - calls, emails, discovery meetings, diagnostic meetings, recommendations meetings, proposals submitted (this month vs. last month)
The last step is agreeing to how the sales and marketing teams will work together.
We recommend short 15-minute huddles Monday through Thursday to make sure marketing and sales are facing no obstacles for the day and that everyone is clear on priorities. If obstacles exist, identify how to handle them.
Next, we recommend a weekly 30-minute meeting on Friday for both teams to get together and share feedback on the execution from the week. What is working? What is not working? What needs to be adjusted? What feedback is sales getting from prospects that needs to be shared with marketing? What adjustments does marketing need to make to execution to improve performance?
Data that is relevant on a week-to-week basis can also be shared with the team to identify any changes that should be made in real time based on this data.
Finally, hold a 60-minute meeting once a month to review all of the data and the previous month’s performance in detail. This should include 15 minutes spent on adjusting the marketing and sales playbooks to make sure you’re working to improve performance around the key metrics in the upcoming months.
Once all of this is documented and agreed on, get leaders from both marketing and sales to sign the agreement. The signatures are symbolic of the agreements and mutual understanding included in the SLA documents. Everyone is agreeing, everyone participated in creating the obligations in the document and everyone is clear about what’s expected from both parties.
This is just the first step. Realizing sales and marketing alignment is going to require ongoing discipline and constant monitoring, but the SLA does provide a backstop for the expectations from both teams and both leaders. It also sets clear, quantifiable measures of performance that help attain the desired alignment.
If you want to grow revenue, you need an SLA between sales and marketing. SiriusDecisions reports that “B2B organizations with tightly aligned sales and marketing operations achieve 24% faster three-year revenue growth and 27% faster three-year profit growth.” It’s no longer an optional part of growth.
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Posted By Author Mike Lieberman, CEO and Chief Revenue Scientist
Mike is the CEO and Chief Revenue Scientist at Square 2. He is passionate about helping people turn their ordinary businesses into businesses people talk about. For more than 25 years, Mike has been working hand-in-hand with CEOs and marketing and sales executives to help them create strategic revenue growth plans, compelling marketing strategies and remarkable sales processes that shorten the sales cycle and increase close rates.