- Synergy Research reported that IBM had 7 percent of the cloud infrastructure market
- These major platforms probably only went all-in on flexbox fairly recently
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In a field like SaaS where there is no tangible product or service provided, your company has to come up with a different way to earn your place at the table; or in other words, gain credibility. All of us want to achieve success in our business ventures and enter the big leagues as fast as we can. A futuristic vision and ambition are great things to possess but as Lao Tzu said, every journey of a thousand miles begins with a single step. Therefore, we too as business owners must lay a solid foundation upon which our business can be founded and our goals reached.
This is where the mysterious marketing tool we hinted at in the headline comes in. it is the Pipeline Model, the SaaS industry’s version of the miracle pill!
What is the Pipeline Model?
Your clients will usually be able to tell you their quantifiable bookings or revenue goals but not their marketing goals. The most you will hear when you ask them about the current quarter’s marketing goals are qualitative deliverables like plans to attend a trade show, a new website launch, or a new partnership. They are unable to state their marketing goals intangible, quantitative terms.
It is important to clearly define your marketing goals in a quantifiable manner, and in order to do that they have to be calculated first. This is where the Pipeline Model or the Sales Capacity Model comes in.
They are a staple in the arsenal of every great VP of Sales at a SaaS start-up. They are a tool that helps them show the CEO and the CFO their plan and capacity to hit their sales target for the quarter or year. The model is indispensable as it helps the VP model the rate at which sales representatives ramp, the quota they can close, and calculate the effects of attrition and underperformance. The model can also be used to calculate how marketing activities act as the pipeline through which prospective leads turn into closed deals. A great model can lead to years of success and stability.
Remember that the Pipeline Model, too like any other marketing tool must be implemented at the earliest to reap its full benefits. Proper implantation can help you achieve and even exceed your sales target year after year.
Oh, yes please!
So what’s the purpose of the Pipeline Model?
- Clearly communicate to the CEO, CFO, and VP Sales that Marketing’s goals are interconnected with Revenue Goals to show alignment and accountability
- Calculate Marketing goals for a) Pipeline in monetary terms and units generated by marketing activities, b) First Meetings sourced by marketing activities, c) qualified leads
- Backwardly schedule when the pipeline needs to be created for the company to hit the sales targets
- Use these goals as the “Guiding Star” which determines how each marketer prioritizes their week. Everybody on the marketing team must have access to the dashboard which tracks the progress towards the sales target.
- Estimate the Marketing budget required to achieve those goals. Ideally, the model must be completed 6 weeks before the new quarter begins to help in budgeting.
What do you need to know to complete this model?
- The company’s Sales Targets for the current fiscal year as well as the next 18-24 months
- Key assumptions about your Average Deal Value for each prospect segment
- Key assumptions on your Sales Cycle Stages such as duration and conversion rates
- Key assumptions on Pipeline creation and what percentage Marketing will own and what percentage Sales will contribute from their own prospecting
- There is significant value in undertaking this process with your CEO and VP of Sales. The three of you sitting together and modeling the business and discussing and debating these key assumptions leads to the right conversations about the go-to-market strategy and your playbook.
This is insane!
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How do you use the output of this Pipeline model to achieve success?
- Update your Quarterly Marketing plan, Board Slides, and SFDC dashboards with these goals. Create two slides to make the model more digestible to the entire company. Here is what they typically would look like. The first one is an overall summary of the goals in both units and dollars. The second shows the “backward scheduling” for when pipeline needs to be created in order to achieve the Bookings or Revenue targets.
- Consult with your marketing team to determine the plan to achieve these goals and assign which marketing channel (email, events, SEO, Paid, webinar, web, etc.) will deliver what percentage of the overall goal
- Set the marketing bonus/incentives for the quarter based on these goals. The promise of a bonus for exceeding sales targets can be great morale and productivity boost for your team.
- Communicate to every member of the Sales team that this is how Marketing’s goals are set and how marketing is bonused. This creates the feeling that you are both on the same team.
- Track and report status each week. Take corrective measures if there is any lag. Ensure that everyone knows that Marketing takes these goals as seriously as Sales takes hitting their goals.
- Measure and update the assumptions in section 2 at the end-of-the-quarter. Perform a Post-mortem to understand if the assumptions got better or worse and what they mean for pipeline cover and budget.
- Rinse and repeat.
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