CMO

Revenue Performance Management (RPM): Strategy, Technology or the Real CRM 2.0?

Bob Thompson gives readers the lowdown on CRM’s evolution and why RPM might be the answer to those lingering customer insight bugbears


Bob Thompson

My how our industry loves acronyms. Especially if they include an ‘M’ – usually meaning Management which, unsurprisingly, requires some new enabling technology. Or, append ‘2.0’ on the end to breathe new life into an aging idea. That has certainly helped with Sales 2.0 and CRM 2.0.

Now Revenue Performance Management (RPM) is on the rise. In my view, RPM is a technology-enabled strategy to increase total revenue productivity. Period. It's not any more complicated than that. For most companies, sales and marketing resources are a significant share of sales, general and administration (SG&A). If you get more revenue from the same SG&A, that's a good yhing in today's world where growth is tough to achieve.

Should you pay attention to yet another acronym, or just go about your day and wait for RPM 2.0 to emerge? Being a good consultant, the answer I have to give is, ‘it depends’. If you care about the overall revenue productivity of the company, then ‘yes’. If your boss insists you just maximise your own department's metrics – in marketing, inside sales or fields sales, then ‘no’.

However, if you decide to ignore the concepts behind RPM (the acronym itself is optional), you might want to dust off your résumé and look for a new job. That’s because RPM superstars are leaving their competitors in the dust.

RPM is a technology-enabled strategy to increase total revenue productivity. Like Enterasys, a fast-growing global provider of enterprise networking solutions. According to senior vice-president of Worldwide Marketing, Ram Appalaraju, RPM has enabled Enterasys to get better visibility of future business, optimise investments in marketing campaigns and ‘significantly’ improve staff productivity – all critical business issues if the company is to attain ambitious business goals.

But Appalaraju is not just concerned with process optimisation, which seems to be mainly what RPM proponents are pitching. If you think about revenue productivity holistically, you should consider the complete prospect/customer experience. That includes providing more relevant offers, where RPM can certainly help. But customer service/support is also a factor in loyal relationships which helps drive revenue from existing customers.

The Enterasys RPM journey started several years ago with a Marketo implementation to manage segmented marketing campaigns, while using other tools independently for search engine marketing, sales automation and so on. Now they think of Marketo as a platform to 1) integrate disparate tools across the buying cycle, and 2) provide a dashboard with analytics to aid decision-marketing.

Strategy, Technology or Buzzword?

I know what you're thinking:‘Vendors are pushing RPM, so here we go again. Another buzzword designed to sell software’. Frankly, that's exactly the sceptical stance I took when I started researching RPM.

Despite massive investments in CRM, marketing and sales automation technologies, most companies don't really manage the end-to-end process for revenue production. Marketing has one set of goals, metrics and tools, while sales has another. This misalignment is more prevalent in B2B organisations, where the dysfunction manifests as marketing getting rewarded for generating leads that the salesforce ignores. Simply put: silos are a bitch.

The result (for the CEO) is that some of the precious SG&A investment is wasted, which impacts the top line, bottom line, or both.

Still, this approach has worked for a long time. Why change now? First and foremost, the customer is going to break down your silos, whether you like it or not. Some experts estimate 50-70 per cent of the buying journey is being completed before a prospect engages with a sales representative. That's forcing companies to engage with marketing programs much earlier, which has spurred a huge interest in content marketing. Business performance expectations are also driving change, and in some cases new leaders. Shareholders don't care about your internal problems. The bottom line is growing revenue as effectively and efficiently as possible. It's management's job to figure out how.

Phil Fernandez, Marketo co-founder/CEO and author of a new book Revenue Disruption, insists RPM is not about software:

“Revenue Performance Management is a set of ideas about how companies can grow and accelerate revenue growth by taking advantage of these very broad changes in the way buying and selling takes place in our economy.”

This ‘disruption’ has been caused by buyers using the Social Web to research and find solutions. Fernandez maintains RPM is a strategy to become more competitive and grow faster by embracing this shift, not fighting it.

Taking a more analytical slant, co-founder and CTO at Eloqua, Steve Woods, says:

“Revenue performance management is a systematic approach to looking at revenue, identifying both the drivers and the impediments that make your revenue either come in or fail to come in, measuring them and then pulling the right levers to drive more growth and optimise that topline growth.” Woods, author of his own RPM book Revenue Engine, argues RPM should be about understanding digital buyer behaviour earlier in the buying funnel and connecting the dots to sales results. If you can do more of the things that engage buyers (such as content marketing) and drive qualified leads, you'll get more sales at the end. You don't have to read between the lines much to realise revenue analytics requires a technology backbone to manage a very complex set of activities from demand generation to closed deals.

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So, yes, RPM is a strategy – a plan to increase revenue productivity. But plans are something you can write down and talk about. In practice you'll need technology to make RPM work, along with a few other changes I'll discuss later. For now let me just say it's not enough to declare something a strategy, then go about installing software and hope for the best. That approach didn't work for CRM, and it won't work for RPM, either.

Not everyone is enthralled with the term RPM. David Raab, one of the smartest guys around in marketing technology, says he rarely hears the term used except by vendors and a few consultants. But he agrees the “underlying concept is certainly important”. Whether RPM becomes a full-fledged technology category is hard to say at this point. Raab contends CRM vendors could move in "rather than letting the MA/RPM vendors take over such a critical reporting function". My take: Maybe later. Because right now CRM vendors are too busy re-positioning as Customer Experience Management (CEM) solutions.

Senior B2B marketing strategist at MarketStar, Manuel Rietzsch, says currently RPM is a buzzword, but like Raab, believes the ideas behind the term make sense. Properly implemented, RPM-the-strategy could help improve marketing/sales teamwork, improve lead nurturing and in general waste less resources. At Forrester Research, analyst Jeff Ernst sees RPM as an evolution of thinking about Lead to Revenue Management, which is about managing the end-to-end process and engaging empowered buyers more effectively. He says RPM should be a "discipline to create an revenue engine", not a another technology category.

Does RPM Work?

Good case studies are appearing to illustrate RPM can indeed move the needle on revenue productivity. Concur marketing operations manager, Greg Forrest, says RPM (enabled with Eloqua's technology) has helped reduce their sales cycle and improve lead acceptance rates. While they can't yet tie directly to revenue increases, without the productivity benefits of RPM they would need perhaps three times as many employees to scale the business as planned. In addition, Forrest credits RPM metrics as a "huge win" in Concur’s budgeting and planning process, which enable better revenue forecasts. That's somewhat important for a public company.

More generally, vendor benchmark data suggests companies that practice effective RPM perform better. Marketo's co-founder and vice-president of marketing, Jon Miller, says its benchmark research found significant differences between companies that achieved RPM – a ‘fourth level’ of revenue management maturity – and other, less mature companies. Only nine per cent of companies achieved RPM maturity, which includes:

  • Multi-channel marketing campaigns that coordinate actions to each buyer in their journey, including after sales takes over
  • A single revenue team that passes leads and even resources back and forth (such as money/budget)
  • Using metrics to manage a disciplined ROI processes, upfront planning, multi-touch attribution, and forecasting.

Marketo's research found RPM firms enjoyed much higher win-rates: 40 per cent of sales-qualified leads closed versus 25 per cent for average companies. And it was three times more likely for a ‘name’ (raw lead from a web form) to result in a win in an RPM company. Over all, as you can see in the chart below, RPM practitioners hit 102 per cent of their target revenue plans, while others missed their targets by a wide margin.

The ROI evidence looks solid, but I urge caution in concluding RPM excellence is the only reason for these performance improvements. Although correlations may look impressive, they don't necessarily explain all the reasons for top performance. In my research, I find that top-performing companies are usually doing a number of things well at the same time. These organisational ‘habits’ are the key to sustainable performance, not the implementation of a single method or tool.

Is RPM the Real CRM 2.0?

If you've been around this industry for a while some of these ideas sound suspiciously like CRM. Yet marketing vendors seem bent to avoid that term. I can't blame them. CRM is such a huge industry, filled with vendors and consultants marketing hundreds of solutions. Saying a strategy or solution is CRM doesn't differentiate it much at all.

And marketing has never really warmed up to CRM, which has been more closely associated with sales and SFA. Instead, marketing vendors have been pumping out an array of solutions under terms like MRM, EMM and more.

Meanwhile, there has been some attempts to upgrade the inside-out, technology focus of CRM to a more strategic, collaborative strategy which some call CRM 2.0 and others Social CRM. But that's not going particularly well, either. Social CRM has become a grab bag of ideas and social applications without a concise industry definition. Some vendors are moving on to CEM.

All that said, to me RPM is the real CRM 2.0. Why? Because RPM is an integrated and collaborative approach to improving sales and marketing—what is what most CRM projects are about. Customer service/support, which ideally should be part of CRM, has a more natural place in CEM. Service experiences play a critical role in customer loyalty, which indirectly drives revenue over the longer term. RPM as it is being defined in the early goings isn't about the customer experience in any meaningful way. But who knows, there's always RPM 2.0.

Keys to success

I'll close with some brief advice on how to get value out of the RPM idea.

  1. Make sure that the executive in charge of revenue not only sponsors RPM but gets personally involved to ensure marketing and sales move towards ‘one revenue team’. In some cases, appointing a chief revenue officer might help signal the organisation that sales/marketing alignment is (finally) a top priority.
  2. Invest in the RPM backbone technology (yes, that comes from marketing automation vendors) but when you do, make sure that it plays nicely with other solutions you'll need in the RPM ecosystem. That includes salesforce automation at a bare minimum, but could also involve sales enablement systems, social marketing, content management, sales analytics, web analytics and more.
  3. RPM should be a transformative strategy. To make it into the top 10-20 per cent of your market, you'll need to set aggressive long-term goals and use metrics to track improvement at each stage of the buying process. This continuous improvement loop is what sets top-performing companies apart. If you're at low-maturity level, set interim goals while keeping your eye on the prize which may make take a few years to reach.
  4. Finally, and most important, RPM success is not just about numbers and processes. It's really about people working together. Create and nurture a collaborative culture where marketing, inside sales, field sales and other support organisations feel they are all working to accomplish the revenue mission. Implement reward systems that keep everyone focused on the big goal, not just optimising performance in each ‘silo’.

Now is the time for the industry to rally around RPM as a unifying concept for marketing and sales to work together to maximum revenue.

Bob Thompson is CEO of CustomerThink, an independent research and publishing firm focused on customer-centric business management, and founder/editor-in-chief of CustomerThink.com, the world's largest community dedicated to customer-centric business. Thompson is a popular keynote speaker, blogger and author of numerous reports, articles and papers including CrowdService: Harnessing the Wisdom of Crowds in Customer Service and Support.

Republished with permission from CustomerThink.com. Copyright CustomerThink Corp..

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