Brian Carroll

B2B Marketing: Do you know how much your CEO really invests in demand generation?

If it’s almost unheard of for your sales team to make a cold call thanks to a sales pipeline bursting with steaming-hot leads generated by your marketing department, skip this post.

If it isn’t, I strongly encourage you to read the following article, which initially appeared on the MarketingExperiments Blog. It’s written by Dave Green, the Director of Best Practices, Applied Research at MECLABS, the parent company of MarketingExperiments and InTouch.

I’d like to hear your thoughts about what Dave has to say, and what your organization is (or isn’t) doing to ensure marketing does its job so sales professionals can do theirs.

For most of us, the phrase “demand generation” conjures up things like campaigns, social media, trade shows, and the corporate website.

But what about sales prospecting?  Despite all the newfangled marketing automation tools, most CEOs increase the funding for demand generation by authorizing the expansion of the sales organization.

Surprised?

You shouldn’t be. Books like SNAP Selling, SPIN Selling and Solution Selling for years have been teaching sales people to generate demand, one conversation at a time. Most companies don’t call what sales people do “demand creation” or “demand generation.”  No, we’ve given it more pedestrian names, like “sales prospecting” or “cold calling.” But, really, what’s the difference?

The percent of the sales budget spent on demand generation. 

Efficient sales teams spend 10 percent of their time prospecting. They network. They get referrals. They leverage LinkedIn and InsideView. You know. All those really cool things Anneke Seley and Brent Holloway have written about in Sales 2.0.

But sales teams for many companies spend 20 to 30 percent of their time prospecting.  And even 40 or 50 percent of time spent prospecting is not unheard of. As the percent of time spent prospecting increases, the return on investment generally decreases.

Multiply any of those percentages of time by the total sales budget and, in most companies, money indirectly (and maybe inadvertently) allocated by sales for demand generation is at least as large as the entire marketing budget. And it could be five times larger. Or more.

Think about that.

It’s not like sales people like to cold call. They would prefer to talk to people who have a problem the sales person might solve. But you have to find those people. And cold calling is time consuming and often demoralizing. So why do sales people do it?

There’s one simple reason: they have no choice. Marketing rarely generates a sufficient volume of truly qualified leads. So sales people have to pick up the slack.

The case for a larger sales force

Against this backdrop, how hard is it for sales leadership to make the case that the way to increase revenue is to hire more sales people?  Or, in challenging economic times like these, how hard is it for a CSO to suggest cutting the lead generation budget rather than the sales budget?

Given all the cool developments for marketers in the last few years, marketing departments should be on the march. Instead, there are a lot of marketing departments that have low lead-to-sale conversion rates. Of those with good conversion rates, few are really delivering a pipeline volume that makes a huge difference to the CSO.

It doesn’t have to be this way. Not anymore.

There really are better returns on investment dollars than sales cold calling, which is a financial baseline that every marketer needs to understand. So for this year’s planning process, step one should be to estimate the current cost of sales prospecting and what the revenue capacity of that sales force might be if each sales person spent more time selling and less time looking for leads.

Dave’s insight certainly challenges marketing departments. So what are your thoughts? Do you think CEOs expect too much of sales and too little of marketing when it comes to generating demand? Who in your organization is most responsible for demand generation and do you think that responsibility is wisely placed?

I look forward to hearing from you.

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  1. | #1

    Brian,

    We see this a lot when re-engingeering sales process for companies. CEOs are always quick to throw bodies at the problem of feast and famine sales. This is absolutely one of the MOST EXPENSIVE way to try and address scaling sales output. But typically, they don’t know what else to do to make the sales team more effective and efficient.

    Certainly, prospecting takes a lot of the sales person’s time – which eats into the time they could be spending negotiating and closing deals – hence less output – but let’s not forget there is alot of other low leverage activities across the sales process that sales people are being asked to address either formally or informally including:

    - Clerical and secretarial duties
    - Fulfillment duties
    - Account and Client Management
    - Creation of Proposals
    - Prospecting
    - Negotiating and Closing Sales
    - Etc.

    All of these are time eaters. At a high level excellent sales people we see are often not good at generating sales opportunities. They can do it, but it is an inefficient use of their time. They make more money, and the company makes more money when they are on the higher leverage skilled task of negotiating and closing deals. But due to the lack of well designed sales process in a lot of companies sales people are running all of the place from job to job doing not just prospecting, but other low leverage tasks that take up 90% of their time from actually selling – again such as literature fulfillment, data entry, proposal and quote creation etc…in B2B solutions sales environments the details of a solution sales proposal alone can swallow you whole.

  2. | #2

    You make a an excellent point. We need to look at how we can maximize the effective selling time of our sales team. If we don’t, we’re generating revenue at a higher expense than necessary. It’s pretty easy to measure expense-to-revenue ratio and the lower that is for marketing and sales, the better.

  3. | #3

    I’m surprised at how many “sales” people don’t know how to sell. I worked at IBM where we were trained in consultative selling which as you know is a sales process designed to build a relationship through the sales cycle, empathy and generally supporting the client in identifying key areas that could be improved through a specific product or service.

    I run a couple of companies at the moment, they’re still young and I still have the control in expenses, marketing, advertising etc….so I deal with many of the cold calls in regards to advertising etc…

    And I can’t believe how companies can hire people, instruct them to get the propect to say yes three times at the start of the conversation and then proceed to bore them with how great they are at doing x,y,z all things completly irrlevant to my business needs.

    I believe the way forward is partly through inbound marketing by becoming a publisher of new and fesh material and consultative sales training.

    I believe within a 6 month period companies would find themselves in a completly different situation in regards to cost per sale, or even cost per lead.

  4. | #4

    This a great article with some very useful stats. The industry that I work in, some sales teams spend 60% of their time prospecting, however, when they generate customers they are very loyal. So the prospecting is usually worthwhile.

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