Yesterday, Anna and I presented Data That Supports True Sales & Marketing Alignment at the Nashville Analytics Summit. Our session identified and contextualized the data we’ve used to unite SaaS sales & marketing to ultimately drive capital-efficient, predictable growth. Being married SaaS co-founders, one responsible for sales and the other for marketing makes us uniquely sensitive to the perils of finger-pointing as well as business upsides of alignment.
Get the SlideShare version of our Nashville Analytics Summit presentation deck, above.
Top-Down Importance of Sales & Marketing Alignment
The highest-level data point on a SaaS is the magic number or sales efficiency index. This answers the question of how many dollars it takes for you to acquire a dollar of annual recurring revenue (ARR). And while this is sometimes called sales efficiency, it’s really sales & marketing efficiency. The magic number is the highest-level reflection of alignment. I’ll back into that to illustrate how.
Two other high-level metrics that reflect on sales & marketing alignment are customer acquisition cost (CAC) and lifetime value (LTV). CAC looks at how many sales & marketing dollars it took to acquire a new customer, and LTV looks at how much customers spend over their lifetime with you. CAC is all about sales & marketing efficiency, while LTV is very much about sales & marketing quality. In many organizations, efficiency and quality are the axes that divide rather than unite sales vs. marketing.
Magic number, CAC, and LTV are the most direct reflections of a SaaS company’s growth potential and capital efficiency. They’re also the metrics most impacted when sales & marketing alignment is prioritized and intentionally designed into the DNA of the company and its data.
Four Watershed Sales & Marketing Alignment Moments
As I mentioned, Anna and I were married co-founders of a martech SaaS. She was responsible for sales, services, and customer success, I was the CEO and responsible for marketing and ops, and our third partner Scott was responsible for product and engineering. Needless to say, as we scaled that company there was a lot of pressure to have
Then we grew to the point where we needed a director of sales. And can you guess what he said was his top priority in his first leadership meeting? Yep, you guessed it, sales & marketing alignment. Despite being married, in martech, and fully aware of the perils, we were not aligned.
Like many SaaS companies, we were data-driven from top to bottom. Each team had a set of KPIs they were accountable to deliver. Back then, the problem was that each department was relatively siloed with KPIs myopically focused on department performance. Too little consideration was paid to broader business benefits. This was acutely true in sales and marketing.
Sales focused on activity metrics — calls, appointments, demos; and performance metrics — pipeline, bookings, up-sells, cross-sells, renewals. While marketing was riveted on volume — leads, traffic, inbounds, engagement; and efficiency in terms of ratios and cost-per-lead, -opportunity, and -deal. There were no shared metrics, which meant there was little incentive for alignment.
Watershed Sales & Marketing Alignment Moment #1: Lead Scoring
The first place we needed alignment
CPAL instead of CPL
Cost-per-lead is a pure marketing metric and one we completely did away with. Why? Because it didn’t matter to the business what we paid for a lead. All that mattered was what we paid for a customer (CAC). And yes, we could back into that with ten different funnel sub-metrics and ratios, or we could redefine the top of the funnel to focus on what we really needed.
Cost-per-assigned-lead (CPAL) was born out of sales & marketing defining and codifying our ideal customer profile (ICP) as a basic, automated, lead profile criteria. The most important thing here is that the criteria tied back to ICP and was mutually defined by sales and marketing. It was black and white — if leads met this basic set of criteria, they were assigned to SDRs who would work them through a standard process. From there, we would then compare deeper funnel metrics on MGLs versus sales-generated leads (SGLs) to make investment decisions and balance the overall effort (% SGL vs. MGL) for optimal return.
To give you an idea what CPAL criteria looked like (and how we were able to make it so black and white), here are some of those points:
- ICP Country Only (per list)
- Not an Agency
- $10M+ in Revenue
- Decision-making Role (per list)
- Verifiable Human
Using CPAL instead of CPL, we had faster market feedback on programs and spend that led to faster optimization and less waste. More importantly, we had an intrinsically aligned top-of-funnel data point that meant that every assigned lead was attended to equally. Sales trusted that MGLs were just as valuable as SGLs and CAC dropped more than 30% in subsequent quarters. Oh, and churn went down (LTV went up) in subsequent renewal periods because customer fit was stronger from the outset.
Watershed Sales & Marketing Alignment Moment #2: Ops Unification
Many SaaS companies have a marketing ops role and/or a sales ops role. We had both a sales ops person responsible for data and
Sales & Marketing Ops Role
In an intentional effort to reduce friction, improve efficiency, and unify data strategy, we created a unified Sales & Marketing Ops role. This person owned and managed the entire sales & marketing stack from lead origination to attribution to sales admin and analytics. He literally attended both the morning sales standup and the marketing standup every day. As a result, he listened, spoke, and cross-pollinated naturally.
Aligned Data Strategy, Scoring, Surfacing, Appending, NurturingBenefits of Combining Sales & Marketing Ops
Aside from improving communication and transparency, this shared role reduced redundancies, smoothed sharp edges, and increased lead velocity. This improved the customer experience and shortened sales cycles. It also led to watershed moment #3.
Watershed Sales & Marketing Alignment Moment #3: Unified Data Strategy
ion was uniquely positioned to collect and leverage data in its funnel. Our tool was
Again, we were uniquely suited to up-level from typical, marketing automation inferred data to declared data. Sales defined what they wanted to know, marketing got those answers from interactive tools that asked the right questions. The result was higher fidelity data used to more reliably surface buy-ready leads faster. That translates to less wasted sales team time, and faster lead velocity. And, again, that bubbles up to lower CAC (more efficiency) and higher LTV (better quality customers).
Watershed Sales & Marketing Alignment Moment #4: Shared KPIs
Here’s where it all comes full circle. Those lists of disparate, disconnected marketing vs. sales KPIs needed some connections to make them joint KPIs that the business could strive for. For example, where sales tracked pipe created and marketing counted inbounds, we switched to looking at inbound pipe (a combined reflection of both teams).
Shared Sales & Marketing Aligned KPI Examples
- Inbound Pipe
- Marketing Generated Pipe
- Normalized Closed-Lost Reasons
- Lead Velocity
- CAC, LTV, and Magic Number
Supporting the Case for Sales & Marketing Alignment
By now you can see that our approach to aligning sales & marketing ran deep — operations, technology, data strategy, metrics, and even reorganization. The extent to which you can unify the functions and incentives depends on your organization, stage, and appetite for disruption. But what we know for sure is that the results are worth the effort. Predictable, capital-efficient growth is the holy grail of SaaS success. CAC, LTV, and Magic Number distill that performance into metrics the institutional world instantly understands and values. But you don’t have to take my word for it. Here are five nifty reasons to get your sales & marketing hitched (see what I did there?).