A Customer Marketing leader reached out to me last week with a question I get a lot during budget planning season:
"How can I make the case to my boss that we need to invest more resources in Customer Marketing?"
“Resources” is one of the “Three R’s of Customer Marketing” that all of us never get enough of. The other two are: Respect and Recognition.
The reality is that all three of these are only gained when we can demonstrate our impact on our company’s revenue growth. But for today’s post, let me recap the conversation we had about justifying more resources.
Her first instinct was to benchmark her company against peers:
“What if I get data on other similar-sized companies to show that they spend X% of revenue on customer marketing and their Net Retention Rate (NRR) is YYY%, compared to our spend and NRR, then it would show that we’re underinvesting in Customer Marketing?”
In my days advising CMO’s on this topic at Forrester, I found that most C-level executives don’t respond well to arguments based on industry benchmarks. They hear you talk about how others are spending more in their function than they are, and all they hear is “Wah, Wah, Wah, my friend Becki’s parents bought her a new bike, so I think you should buy me a new bike too.”
Your executives are too smart for this. They know that if you use a metric like Net Revenue Retention as a benchmark, different companies have different revenue models, so expansion comes in different ways. Some are seat-based, so expansion comes as their number of total employees (i.e. Zoom, Slack) or call center employees (i.e. Zendesk) grows. Whereas others sell a full-suite of enterprise software so NRR comes from cross-selling and expanding the number of components a customer uses as they mature in the business processes that you’re helping them automate.
Her second instinct was to take what some industry guru has declared should be invested, such as SaaStr founder Jason Lemkin’s “10+10 Rule”, in which he claims that 10% of renewal revenue AND 10% of expansion revenue should be invested in Customer Marketing.
As much as I would LOVE for every company to follow the 10+10 rule, when senior executives hear something like this, their first inclination is NOT to just adjust budgets to match the guru’s claim, but to question what the company has gotten from the investment they’re already making in Customer Marketing. After all, doubling what you spend on something doesn’t guarantee that you’ll get double the return, especially when you can’t even measure the current ROI.
So how should you make the case for more resources in Customer Marketing? The only way I’ve ever done this that has caused executives to lean in and take me seriously is by measuring the influence that current Customer Marketing efforts are having on all forms of revenue.
This starts with coming up with your revenue influence model (we’ve built a Customer Influence Model into SlapFive’s Customer Marketing Software platform). Talk with your Marketing and Sales leadership to agree on what the most effective Influence Events are, and agree on their relative influence (1-to-100 is a good scale to use) on closing new logo deals, driving adoption, fueling expansion, and/or ensuring renewals. Influence Events are way more than just customer reference calls, they include things like these, where I’ve given each a sample relative weighting:
- Customer referrals that resulted in new opportunities – 80
- Customer reference calls conducted for an opportunity – 50
- Customer content used to fulfill a reference request – 20
- Customer site visits conducted for an opportunity – 70
- Prospect participation in customer webinars – 40
- Prospect consumption of customer content during sales cycle – 20
- Customer consumption of customer content during adoption – 30
- Customer participation in upsell/cross-sell/expansion campaigns – 40
Then log every time one of these events happens and associate it with the Opportunity record in your CRM. With that data in hand, you can then go to your execs and answer your executives’ biggest questions with data like this:
- “Customer Marketing influenced $__ million in revenue this year, which is __% of total revenue.”
- “Customer Marketing influenced $__ million in expansion deals this year, which is __% of expansion revenue and __% of total revenue.”
- “Our win rate when there was customer influence on a deal is __% whereas our win rate when there was no customer influence is __%.”
- “Opportunities that are influenced by customers or customer content have an average sales cycle of __ days where those without influence have an average sales cycle of __ days.”
- “Opportunities that are influenced by customers or customer content have an average deal size of $__ thousand where those without influence have an average deal size of $__ thousand.”
- “Here is a list of our top 25 customers ranked by how many deals and how much revenue they influenced.”
By being able to measure the revenue influence of what you are already doing, you are in a position of power to say “If I add one more person at this FTE cost, we can generate __ more influence events, which will translate into $__ million more in renewal revenue, $__ million more in expansion sales, or $__ million in new customer acquisition revenue.”
I asked the Customer Marketing leader:
“How many of these blanks are you able to fill in today?”
What I heard back? Crickets.
She’s not alone. I don’t know of any Customer Marketing leader who can fill in any of these blanks. But being able to do so is the only way we can elevate the Customer Marketing profession, and earn the Respect, Recognition, and Resources that we crave.
Measuring the impact of Customer Marketing is one of many burning issues we’ll be discussing at CustomerX Con next week in Boston. You can attend in person or virtually, click here to learn more and register.
Please comment below if you have any questions or feedback on revenue influence and justifying our Customer Marketing functions, I’d love to hear from you.