I’ve yet to find an organization that claims its sales department acts on 100% of the leads generated by Marketing. But I’ve encountered plenty that hit a brick wall trying to get lead acceptance above 50% or 60%.
Low lead acceptance, however, is a symptom of a more basic problem. Though mismanagement is frequently suspected, the real issue more often lies in misalignment between the Sales and Marketing functions. Small differences in objectives, priorities and activities can put the alignment of these revenue functions a chasm apart once those differences are brought to life in the field. The cost – missed revenue and the real expense of misapplied resources – can be high.
An opportunity “vision test”
While CRM and marketing automation software may help improve effectiveness and productivity, they cannot repair alignment issues. A better starting point is to first answer the question: do Sales and Marketing each see the same market opportunity, and in the same way? It’s a safe bet they don’t. And, those differences magnify as they make their way through the organization.
Fortunately, there are straightforward methods that ensure that both Sales and Marketing not only see market opportunity similarly, but also apply their respective resources to effectively and efficiently go after it. One such alignment method is the RDA (aka RAD) sales and marketing coverage model.
Retain-Develop-Acquire (RDA) Coverage Model
A coverage model describes how a company organizes and matches its selling and marketing resources to identified market opportunity. Visualizing, sizing, valuing and scoping market opportunity in the same way aligns not only viewpoints, but also the deployment and utilization of resources. A coverage model jointly developed and agreed by both Sales and Marketing gives a firm a huge advantage: a shared view of market opportunity coupled with an integrated approach to tackle it.
The RDA coverage model views the universe of customers – both existing and potential – along two parameters: Potential Revenue (typically measured annually) and Share of Wallet (SOW) typically measured as a percentage of total customer budget. Breaking the market universe into logical segments (a 3 x 3 matrix is typical) yields:
- A quantifiable view of revenue opportunity by account size, say, Small, Medium or Large.
- A view of appropriate tactics based on account penetration, i.e. acquire new accounts, develop established but marginally penetrated accounts, and retain established and well-entrenched accounts.
The following graphic illustrates the concepts.
The RDA model has five strengths
- It provides an at-a-glance view of revenue potential compared to account penetration (SOW), grouping accounts into meaningful segments.
- It places buyers in one of three groups, each requiring a different focus:
- New accounts to acquire
- Existing accounts to develop and grow
- New accounts to acquire
- Existing accounts to retain and protect from the competition
- It forces Sales and Marketing to choose: segments to pursue, and associated tactics and resources to deploy them
- It requires a concrete declaration of resource coverage and tactical coverage to be applied to each segment
- It is scalable. The RDA coverage model can be used at global, country and regional levels, as well as applied to industry and vertical market views
Applying the RDA Coverage Model
First, gather and map the data. You already have the transactional data on your own customers. Third party sources, sales records, and predictive analytics can help pull together the data you don’t have, i.e. building a census of who the buyers in your market and how much they spend on offerings like yours.
Second, insist that Marketing and Sales leadership agree to two the fundamentals of coverage, and document their agreement in writing:
- The segments to pursue. Unless your firm deals in the billions of dollars not all segments can be covered. Segments must be selected, and equivalent weight assigned to choices, to assure alignment.
- The resources and tactics to apply to each segment. Determine the investment to make in each segment (largely personnel for Sales, and personnel and discretionary dollars in Marketing), and the nature and frequency of tactics and programs that will be deployed. The process, properly done, is interdependent and iterative with lots of back and forth. Sales and Marketing must both agree to each other’s plan, and commit to fulfill their respective obligations under it.
Finally, execute and monitor progress.
The first graphic below indicates two decisions that Sales and Marketing have agreed upon:
First, to invest no resources to acquire, develop and retain small accounts (the vertical band to the left), i.e. neither will provide coverage.
- Priority 1: invest heavily to ACQUIRE medium and large accounts
- Priority 2: RETAIN medium and large accounts (currently $1.4B)
- Priority 3: DEVELOP and grow existing business (currently $600M)
The second graphic below illustrates how resources could be apportioned across these segments by both the sales and marketing functions (expressed as a percentage of headcount and discretionary spending):
- Marketing may, for example, devote 65% of its budget to account acquisition, with 40 points of that targeted at generating new accounts in the mid-market
- Sales my devote the majority of its selling resources (55% in this example) to activities aimed at retaining the $1.4 billion it currently garners from established accounts, whereas 20% of the marketing budget may be sufficient for these segments
Properly aligning Sales and Marketing is not a one-time event, but a continuous process that requires patience and effort. The going is easier when a fundamental point of alignment is addressed: coverage, i.e. the opportunities each will pursue, together with the means and extent to which each will be targeted.