Sales and marketing departments are notorious for their disdain for one another. They’re like the Turner and Hooch of business, except they usually don’t end up loving one another. But the story needs to end better: companies that had poor sales and marketing alignment saw a 4% decrease in sales in 2010, as opposed to a 27% sales increase in companies with that had a good sales/marketing relationship.
One way to get everybody in each team on the same page is by developing a service level agreement (SLA) for sales and marketing. The SLA formalizes the commitment that the sales and marketing teams make to meet shared goals for revenue growth.
It’s a two-way process: the marketing team commits to delivering a certain quantity and quality of leads each month or quarter to help the sales team meet its quota. The sales team then commits to follow up on those leads in a timely manne and to make a specific number of contact attempts before abandoning the lead.
To set up the SLA for the marketing team, start by asking these questions:
- How many quality leads does the sales team need to make a quota?
- What percentage of those leads is created by marketing? Your sales team may be doing some of its own prospecting, and therefore the marketing team isn’t responsible for 100% of the needs needed to make quota.
- What percentage of those leads is influenced by marketing? Even if the leads originate from another source, the marketing team may be required to nurture those leads until they are marketing qualified.
Once you’ve answered those questions for your company, computer the SLA based on the percentage of the pipeline that the marketing team needs to drive. But here’s a tip to make the SLA even more convincing for your sales team: Base the SLA in the units that are most relevant to a sales person – dollar figures.
How to Calculate SLA in Dollar Value
To calculate an SLA in dolalrs, take the percentage of the sales quota that marketing is responsible for each month. Then, calculate the value of each MQL to determine how many leads marketing must deliver to reach that total. Here is how to calculate the value of an MQL:
- Create a list of all campaigns or offers, such as webinars, demos and trade shows, which have generate leads in your pipeline. You can also segment your leads by type of customer, such as enterprise of mid-sized business.
- Pulle a list of recent customers and match them to the campaign or offer that generate their first visit or conversion. Then. calculate the average revenue per customer for each lead source (If you’re segmenting by type of customer, you can also calculate the average revenue per large vs mid-sized or small customer.)
- Look at the average close rate for each campaign offer. Then, multiply the average revenue-per-customer for those campaigns/offers against the close rate to determine the average MQL value.
- For example, if the average revenue-per-customer from a lead that converted on a is $160,000 and the average close rate is 1%, the value for each is $1,600
|MQL Type||Avg Revenue/Customer||MQL to Customer Close %||Value per MQL|
Base Every Decision on Real Data
Once again, it’s important to use data to determine the sales team’s responsibilities. take the question about the ideal number of contact attempts: even though your chances of successful connection increase each time you call a lead, those calls also have a cost associated with them: the sales rep’s time. At some point, the potential return for making additional calls will diminish. That’s why you need to determine the optimal number of times to call a lead based on the profitability of that activity. Here’s one way to find that optimal number:
- Start with Stale Leads
Select a portion of leads that had been in the sales pipeline for
at least a few months.
- Group Data
Look at your CRM records to determine how many times the sales team attempted to contact each of those leads before closing. create cohorts of leads that were contacted once, twice, three times, four times, etc.
- Make Estimates
Estimate how much each contact attempt costs your sales team. You can do this by estimating how many hours a month a rep spends making calls and the average number of contact attempts he or she can make each hour. Then, determine the cost-per-call by dividing the average hourly cost of a sales rep’s time by the average number of calls per hour.
Benchmark the profitability of these contact efforts by dividing the average revenue for each customer by the cost of calling a lead once, twice, three times, etc.
- Plot Data
Plot that data in a chart that uses the number of contact attempts as the X axis and the profitability score as the Y axis. Because additional contact attempts tend to generate more sales, you should see a line that gradually rises in profitability with the number of attempts.
- Note Results
Note where the lines level off – meaning the profit-per-customer isn’t increasing despite the additional contact attempts. this leveling-off point is the recommended number of contact attempts to use in your SLA.
Developing a service level agreement, though potentially time-consuming, can save a great deal of grief and misunderstanding from the two departments down the road. Plus, that environment promotes growth of the company.