In the world of healthcare, “CMO” has a totally different meaning than Chief Marketing Officer. Sometimes when sharing my background, professionals in different industries will confuse me as a Chief Medical Officer. While I certainly don’t meet the qualifications for that distinguished role, if I were to put on a medical hat for a day and do a check-up on your marketing and sales teams, I think I could learn a lot with one simple diagnostic question:
What are your conversion rates?
The overall health of your sales funnel can be tied back to this simple question. In any industry, conversion rates have a strong correlation to the quality of your company’s messaging and positioning. Dropping conversion rates are often an indicator that your messaging needs some immediate attention.
The game of producing mass amounts of leads has changed. The playbook for your funnel can’t revolve around a primary focus of simply driving a bunch of leads. The shift (finally) is toward quality, and even more importantly, the velocity of the leads through your pipeline.
Since everyone seems to use slightly different vocabulary on lead stages and B2B conversion rates, let’s first level set on the language I’m using:
- Lead to Opportunity – The conversion from a qualified prospect interested in your product (SQL) to a discussed closed timeline who has the resources to buy (Oppty)
- Opportunity to Close – The conversion from someone interested in buying (Oppty) to a signed deal (Deal Won)
You should continually be thinking of ways to optimize your funnel. To risk stating the obvious, this has two significant benefits. First, your customer acquisition cost (CAC) and overall unit economics will improve. Perhaps most importantly, your buyer will have a better experience. For some reason, the go-to answer to fix the funnel has become generating more leads, instead of generating better leads at higher conversion rates. This doesn’t make sense because it is a broken, inefficient process for all.
Industry benchmarks are always helpful to compare conversion rates. You can find some very helpful benchmark resources online, but remember, these are specific to your industry and the channels you’re using. The most important thing is to understand what is best in class, and how you’re stacking up. As a general rule of thumb, if your conversion rates are half of what is considered best in class, you need to take action. I would almost go as far to say, stop focusing on top of funnel and put your resources to mid-funnel, messaging, and improving your lead velocity. Why keep pouring more into a bucket with a giant hole in the bottom?
At ExactTarget*, we knew best-in-class conversion rates were around 20% (which is also a good benchmark for many diverse software companies). If we ever dipped below 10%, it was “all hands on deck” to retool our messaging. Let me give a real world example of where I made this mistake. At one point, our tech platform had made major advances, and we were eager to share this with the world. However, I made the mistake of making our primary message too aspirational. We wanted to transition from being perceived as an email-marketing tool to a comprehensive digital-marketing platform. We called this a “digital-marketing hub”, and while we had a strong vision for this, specific messaging was not resonating with our customers. Nobody was waking up in the morning to buy a digital-marketing hub (yet); rather, they wanted to buy email, mobile, web, or social solutions. Of course, these tactical features became our hub, but we needed to meet the buyer where they were in the process. The key lesson was that your messaging needs to be firmly anchored in “what you do” and why your customers are seeking you out.
If your sales funnel needs to be revived, I have three core recommendations for improving your messaging:
- Create an ideal customer profile
- Map out the buyer journey
- Focus on your key points of differentiation
A prerequisite to these recommendations is knowing and understanding your data. If you don’t know this, you’re not alone. According to the B2B Lead Generation Report, approximately 25% of demand-gen marketers don’t know either. You need to have an accurate version of the truth as the first step.
Create an Ideal Customer Profile
One basic aspect that affects the quality of your funnel is how you are qualifying your leads. David Cummings, co-founder of Pardot, has blogged about creating an ideal customer profile (ICP). I also believe this is a terrific exercise to determine whether you are fishing in the right pond, how you define a Sales Accepted Lead (SAL), and how you can most efficiently spend your marketing and sales teams’ time. Here are a few questions David asked to create Pardot’s ideal customer profile:
- What’s the typical company size and geography?
- What’s the target job title?
- How much money should they already spend on a related element?
- What’s the required technology stack?
- What are some other defining characteristics?
By focusing on your Ideal Customer Profile, you are intentionally identifying the right leads, not just more leads. We are all seeing the shift in B2B marketing to Account-Based Marketing, a movement led by Terminus in Atlanta. At the core of the ICP exercise is the “account-first” thought process. This sounds obvious, but it is remarkable how quickly you can deviate from this without continual focus.
Map out the Buyer Journey
Maintaining a customer-centric perspective is essential for ensuring your marketing activities and content are aligned with what your customer actually wants. David Skok’s recent post on maximizing your sales funnel for customer acquisition and solving blockage points emphasizes a customer-first approach.
Focus on your Key Points of Differentiation
If you don’t know how you stack up against your competition and what differentiates you from the pack, you will have a hard time winning over your customers. When I work with companies, I use three simple questions to pull together a positioning framework. Each question needs to be answered with three clear, concise bullets:
- Who are you?
- What do you do?
- Why are you different? (This is the most important!)
Much of the core messaging comes back to each of these questions. Leading your company through this messaging exercise is one of the most critical roles you will do as a marketing leader. If you’re having your own identity crisis, how do you expect others to know what you stand for?
Recently, I came across a startup positioning template from April Dunford of RocketWatcher that is worth reviewing.
The MUST Do’s to Revive Your Marketing:
I’m continually struck that messaging is the most under-appreciated aspect of marketing. Literally, everything flows from clear, concise messaging. I think most of you would agree, but the reason it often gets de-prioritized is because it is viewed as such a complex process. And frankly, it’s tough to know where to start. So, I wanted to finish with the “MUST” do’s for your company’s messaging:
- Measure your funnel conversion rates & compare with best-in-class conversion rates.
- Understand your company from a customer’s perspective, and identify customers who match your ideal customer profile (Quality > Quantity).
- Simplify the core elements of your messaging (specifically your key differentiators).
- Test your work with a few friendly customers, and implement what resonates.
Minor adjustments in each of these areas can have a massive impact. In fact, I’m increasingly convinced that simple and compelling messaging is the #1 most important thing that marketing leaders are ignoring, yet it’s simultaneously the biggest lever and opportunity for them. Not only is quality messaging critical to your sales funnel, it is the heartbeat of the entire company.
*Denotes a former Battery investment. See here for Battery’s full list of all investments and exits.
This post originally appeared on Tim Kopp’s blog CMO to VC.