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.

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

  1. nick rowney November 16, 2010 at 12:14 pm #

    Yes and No to this one.Dave seems to have missed the point completely around retaining a client for life. Maybe he doesn’t think that is sales, yet we all know that selling to a client you have is the most effective use of time.

    Secondly it is not Marketings job to generate sales, they are there to make people aware, interested, informed, excited.

    The greatest sales force are happy clients who recommended you (never pay for leads it cheapens the the relationship)some of my best leads came from clients.

    Networking is a time consuming and tireless job but it is the real way to develop opportunities as you never know who you will meet and who they know. This is a 24/7 way of life.

    And lastly it is EVERYONE’S job in a business to help promote and sell the company no matter what their position and the sooner businesses understand that the better.

    For more information http://bit.ly/akpzb0

    Regards

    Nick

  2. Bill Gustafson November 16, 2010 at 12:27 pm #

    I have been involved in selling in many different industries over the years. I do not think the general process of selling has changed but the method for deliverying the message has clearly moved and I believe it will continue to do so. The changes in technology have required the adoption of the curent method of communication. I have watched it move from face to face to phone to fax to email and now the more instant constant contact communication. It is the way the customer has moved and to sell you must follow their lead. The intelligent approach is to market through several modes and in diferent ways then after a reasonable period step back and pay attention to the results. Then refocus your efforts on those areas that produced sales. I would not increase the sales force or time in an area until I saw reason to believe it was working. Focusing resources before you have evidence of the correct appoach is wasteful and inefficient. That is how you end up with your 40 and 50% numbers. I like your article, keep it up.

  3. Allan Himmelstein November 17, 2010 at 6:08 pm #

    It depends upon the business and there should always be a balance and mixture. Selling Services has become very difficult to cold call for results, whereas cold calling product sales still has many benefits. Social Media is not cure all, and networking helps but can waste a lot of time if not done right.