After decades of operating in parallel, significant changes in technology and ROI requirements have caused B2B Sales and Marketing groups to revolutionize their relationship. This articles focuses on how these changes have created new opportunities for B2B lead generation and a more efficient customer acquisition team.
Traditional Marketing and Sales in a Siloed Existence
Sales and marketing teams are the two groups that drive business growth in mid- to large-size B2B companies. Traditionally they operate in separate silos that work like two funnels. Sales focuses on outbound activities, building networks, “turning over stones” and engaging prospects that produced qualified leads and new customers. Marketing develops and managed a company’s brand and advertising campaigns that hopefully led to inbound inquiries.
Many companies still operate like this today. These separate funnels create a tenuous relationship with new prospects, as both teams are working separately to gain and retaining customers, often with different messages. These disconnects are hidden when sales are growing.
However, real tensions between the Marketing and Sales groups can emerge when competitive pressures rise or the sales cycle takes a downturn. Are Marketing and Sales sending out misaligned messages that result in confusion in the marketplace? Does the Sales process continue with Marketing’s value message, or does it diverge frequently? Are Sales execs using different messaging because they know what works better or are concerned about the ability to deliver? Do the quality of inbound leads from ad campaigns and other Marketing activities meet Sales standards? These conflicts and disconnects are prevalent with a traditional siloed demand generation approach.
Seeds of Change in B2B Lead Generation
The past decade has brought fundamental changes to the relationship of sales and marketing teams. The proliferation of electronic channels, analytical tools, and ROI-focused boardrooms had driven a transformation in B2B lead generation activities.
Marketing has taken the brunt of the fallout, and its role has become much broader. On top of being responsible for events, promotion, branding and imagery, marketing teams are being driven to operate differently and provide more tangible ROI results. This has created a lot of pressure on CMOs and its own set of unique challenges. If Marketing fails to achieve a target ROI, they can lose in budget negotiations to numbers-focused sales teams.
Despite the added pressure, Marketing leaders have responded in recent years by assembling teams and campaigns that produce specific end results in the form of tangible sales leads. They have also evolved their skill sets to execute these lead generation campaigns. This has lead to a fundamental change in how Sales and Marketing works together.
Most importantly, the demand generation structure has evolved in leading B2B companies to drive new business in a far more integrated way.
The Heightened Role of Sales Development (SDR) Teams
The role of Sales Development is to personally engage new B2B sales leads using inbound and outbound channels.
Driven by new technology and ROI demands, Sales and Marketing teams are increasing investing their budgets to build out Sales Development teams responsible for generating and qualifying new B2B sales leads. This change has essentially merged the traditional sales and marketing funnels into one:
This approach brings cost savings, scalability, and a metrics-driven approach to more efficiently facilitate B2B lead generation. The Sales Development team is a central party in almost all new customer conversations. Companies may call it Sales Development, Inside Sales, Demand Generation, or Sales Lead Generation, but the business function is essentially the same — to acquire and qualify new sales leads from multiple inbound and outbound channels.
Inbound vs. Outbound Lead Generation Teams
Sales Development Representatives (SDRs) are the first level of human contact for new customer lead generation. According to Stephanie Kelly, Director of Account-Based Marketing at Terminus, “Sales Development is all about personalization, education, awareness, and helping prospects solve their problems with your solution.”
The SDR team is often split into Inbound and Outbound lead generation, although smaller teams may handle both.
Inbound teams work with inbound leads from phone calls, emails and direct messaging, and engaging opt-in leads (aka “marketing qualified leads”) from email and PPC marketing campaigns. They engage in two-way communication, but only with leads that have essentially been driven by inbound marketing activities.
Outbound teams conduct activities including cold calls, writing and sending out orchestrated email campaigns, and reaching out using LinkedIn, Facebook or other social media tools. This is essentially the traditional outbound Inside Sales role, but with a larger array of tools and channels. The Outbound SDR team may also be used to engage existing customers by distributing white papers, promoting webinars and inviting customers to networking and industry events.
The Role of Marketing
Marketing’s role includes setting up campaigns that that drive inbound activity to SDRs, and providing SDRs with sales and marketing materials to use in outbound campaigns. For example, they set up PPC and other ad campaigns that drive traffic to a specific web page with contact form, downloadable “lead magnet” or Sales Rep page with phone number.
Marketing is also responsible for traffic generation and setting up the tracking mechanisms (e.g. Google UTMs) that enable lead tracking and attribution downstream. Traffic sources may include radio, TV, banner, PPC, and social media ads, and other channels such as content syndication. These are arrayed in “marketing funnel” that bring targeted traffic into the “sales funnel”.
Moving Leads Down the Funnel
Once inbound leads hit the SDR team, they are evaluated then assigned (either automatically or with a team review) to individual SDRs to engage. The SDR’s job is to reach out, engage and pre-qualify these leads for a few basic criteria. The goal is to whittle them down to a population of real potential buyers. This outputs “pre-qualified sales leads”, which are essentially between a “marketing-qualified lead” and a fully “sales-qualified lead”. In other words, the SDR team’s job is to deliver leads that won’t waste a Sales Executive’s time and are likely to move the needle for the business.
Once these leads are identified, they are sent down the sales pipeline in the form of a scheduled sales discovery call or demonstration. The leads generated by SDRs allow experienced (and expensive) Account Executives to spend time qualifying and developing prospects, rather than wasting time and money canvassing randomly for new leads.
Sales Development Group Models
Companies design Sales Development teams based on their specific needs. According The Bridge Group’s Sales Development 2018 Metrics and Compensation Report, nearly 50% of organizations with Sales Development groups have blended (Inbound/Outbound) SDR teams, 25% run dedicated Inbound and Outbound teams, 20% have only Outbound, and 6% operate only Inbound teams.
Companies with over $100 million in revenue typically have dedicated Inbound and Outbound SDR teams, with high levels of specialization. For example, certain SDRs are only responsible for inbound email leads, or generating outbound leads with phone and voicemail. Smaller companies, or those with high-ticket / low-frequency complex sales, often use a smaller combined Inbound / Outbound team, and the team members are often more senior. An example would be information security solutions, where conversations quickly get technical and may require an engineering or data science background.
Many companies outsource B2B lead generation work to control costs, access new channels, obtain specific skills and technology, and leverage flexible staff and / or a quick turnaround. It is important to have a solid sales strategy and budget in place first before setting up any B2B lead generation function, whether outsourced or not.
The ROI of a Sales Development team’s activity is calculated by taking the number of qualified leads and multiplying it by the probability-adjusted average customer customer value (PAACV):
Qualified sales leads x probability of close x average value per customer = ROI
PAACV is the average probability-adjusted profits from each qualified lead.
Calculating PAACV requires an estimated Probability-Adjusted Close Rate (PA) of leads at this stage of the funnel. For most B2B companies, this probability of close generally falls in the 5-10% range, but it can vary significantly between inbound and outbound leads, the offering, industry, size of deal, etc. You can start with a reasonable average probability of close, then make it more granular later.
Average customer value (ACV) depends on the type of business. Generally speaking, you want to calculate of the average profit from the average customer in year one after signing a new contract. This lines up well with the normal Sales team’s incentive program which generally uses yearly increments. And it’s a reasonable maximum time to close for most B2B deals.
Other Challenges of Establishing a B2B Lead Generation SDR Team
Integrating Sales and Marketing functions with a combined SDR team can be complex. Changes will affect not just your staff, but also your business heads.
For example, the Chief Marketing Officer now has to feed a highly sales-driven team with leads. Lead tracking and attribution makes Marketing accountable for the quality of leads that are coming in the pipeline.
A strong Sales process is also required. Once the quality of leads rises, Head of Sales and Sales Executives will no longer be able to just “blame it on Marketing” if deals don’t close. Your sales process will likely require some optimization to maximize the ROI from the leads your new SDR team is producing.
You should consider how the team will get leads, what skills are required to engage and qualify leads, and the software, tools and data needed. You will need to recruit SDRs with the right skills and capabilities, then invest heavily in their product knowledge and process training. SDRs become the “voice of the company” and are on the spot to qualify and convert leads to fill the top of the sales pipeline. They must be well-trained.
Setting up this function can be highly technical, as well. Building an internal SDR function requires a very experienced demand generation leader who has done it successfully before, and can lead integration projects. You should be prepared to invest a substantial amount in technology and data to maximize success.
When building an internal SDR function, expect limited results for 3-6 months until the team comes fully online and effective. You can accelerate the process, and in many cases generate higher ROI and better leads, by outsourcing this work to a B2B lead generation partner.
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