Marketing Automation Summit

Defending Your Spend

Building a Credible Spend Model

January 13, 2009 2Marketing Automation Summit

Today’s Speakers

Malcolm FriedbergPrincipal, Lead Targets

Bill OdellVP Marketing, Helpstream

January 13, 2009 3Marketing Automation Summit

Agenda

Overview The traditional approach What is a “credible” spend model Key model components Case study Final thoughts Q&A

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The Credibility Problem

“How do I know that marketing is really contributing to sales?”

- VP Sales, or- CEO, or- Investor, or…

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The Traditional Approach

Marketing budget is a set % of

total revenueTypically handed down by the

CEO/CFO

Quarterly spend tied to expected sales rampLinked to financial/profitability targets

Spend allocated to traditional activitiesPR, Events, Direct Marketing, Search,

Staff

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A Credible Spending Model

Provides a framework for

marketing budgetsIncludes defensible metrics and

benchmarks

Demonstrates how marketing delivers revenueLinks spend specifically to sales

generation

Specifies how marketing is measuredTracks marketing performance over

time

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Key Spend Model Components

Pipeline modelDefinition of what your pipeline

should look like Conversion rates

What your pipeline conversion rates should be

Cost metricsWhat should pipeline marketing costs

be Industry benchmarks

How does your model compare to like companies

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Case Study: Company Profile

SaaS B2B Application Software

Company

$1,500 average monthly

subscription rate

Marketing to SMB companies

Sales cycle of 45-60 days

Marketing mix: PR (80%), SEM

(20%)

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Case Study:Pipeline Specification

Inquiry

LeadProspect

Oppty Sale

Conversion Rate

Cost

Inquiry = Name of an individual who has requested information

Lead = An individual who has interacted with the company and fits target profile

Prospect = An individual who has seen a live product demonstration and been articulated to sales a specific need for the company's solution

Opportunity = A company with an individual with an assigned budget and timeline to make a purchase decision

Sale = Account who has made a purchase

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Case Study:Conversion Rates

Inquiry to Lead

Lead to Prospect

Prospect to Oppty

Oppty to Sale

Inquiry to Sale

Conversion Rate 33% 20% 50% 30% 1%

CostInquiry to Lead = Expect 1/3 of all inquiries fit target customer profile

Lead to Prospect = Expect 1of 5 Leads articulate a specific need for the product

Prospect to Oppty = Expect half of Prospects to make a purchase decision

Oppty to Sale = Expect to close ~ 1/3 of forecasted opportunities

Inquiry to Sale = Expect 1% of all inquiries to result in a sale

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Case Study:Cost Metrics

Cost per Inquiry

Cost per Lead

Cost per Prospect

Cost per Oppty

Cost per Sale

Conversion Rate

Cost$35 $105 $525 $1,05

0$3,500Marketing Costs Included: Direct marketing, SEO/SEM,

Events, Content syndication (not PR, analyst relations, staff/overhead)

Sales Costs not Included: Did not include direct selling costs or commissions

Rule of Thumb: Cost per Sale should approximate 2x monthly subscription revenue or ~ $3,000 – for this company

January 13, 2009 12Marketing Automation Summit

Case Study:Benchmarking Data

Inquiry

LeadProspe

ctOppty Sale

Conv. Rate 33% 20% 50% 30% 1%

- Co. A 33% 60% 10% 40% 0.8% - Co. B 33% 20% 25% 30% 0.5% - Co. C 37% 22% 35% 20% 0.6%Cost $35 $105 $525 $1,050 $3,500 - Co. A $22 $67 $111 $1,111 $2,778

- Co. B$50 $152 $758 $3,030 $10,10

1 - Co. C $25 $158 $307 $878 $4,388

January 13, 2009 13Marketing Automation Summit

Case Study:Benchmarking Interpreted

Inquiry

LeadProspe

ctOppty Sale

Conv. Rate 33% 20% 50% 30% 1%

- Co. A 33% 60% 10% 40% 0.8% - Co. B 33% 20% 25% 30% 0.5% - Co. C 37% 22% 35% 20% 0.6%Cost $35 $105 $525 $1,050 $3,500 - Co. A $22 $67 $111 $1,111 $2,778

- Co. B$50 $152 $758 $3,030 $10,10

1 - Co. C $25 $158 $307 $878 $4,388

January 13, 2009 14Marketing Automation Summit

Case Study:Phasing it in

$/Inquiry

Conv. to

Prospect

$ /Oppty

Conv. to

Oppty$/Sale

Conv. to

Sale

Client

Q4 2008

$65 33% $3,283

6% $13,131

25%

H1 2009

$40 33% $1,584

8% $5,868

27%

H2 2009

$35 33% $1,061

10% $3,535

30%

Benchmarks

- Co. A$22 33% $1,111 6% $2,77

840%

- Co. B$50 33% $3,030 5% $10,1

0130%

- Co. C$25 37% $878 8% $4,38

820%

January 13, 2009 15Marketing Automation Summit

Final Thoughts

Defending your spend is a win:winClear alignment between spend and

sales Defensible spend requires a “spec”

Must have a defined model with metrics

Benchmarking is criticalSpend is contextual to industry and

competitors Must be realistic about timing

Will build to ideal spec over time

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Questions

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For More Information

Malcolm FriedbergPrincipal, Lead Targets

Bill OdellVP Marketing, Helpstream