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

Article by on June 22, 2012 Editor's Pick 5 Comments

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’s 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 SG&A. If you get more revenue from the same SG&A, that’s a Good Thing in today’s world where growth is tough to achieve.

Should you pay attention to yet another TLA, 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 that you just maximize your own department’s metrics—in marketing, inside sales or field 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. 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 Ram Appalaraju, Sr. VP of Worldwide Marketing, RPM has enabled Enterasys to get better visibility of future business, optimize 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 optimization, 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, etc. Now they think of Marketo as a platform to 1) integrate disparate tools across the buying cycle, and 2) provide a dashboard with analyticss 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 skeptical stance I took about a year ago, 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. Sales has another. This misalignment is more prevalent in B2B organizations, 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 as 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 that 50-70% 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 that 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 that RPM is a strategy to become more competitive and grow faster by embracing this shift, not fighting it.

Taking a more analytical slant, Steve Woods, co-founder and CTO at Eloqua, 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 optimize that topline growth.

Woods, author of his own RPM book Revenue Engine, argues that RPM should be about understanding digital buyer behavior earlier in the buying “funnel” and connecting the dots to sales results. If you can do more of the things that engage buyers (e.g. 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 realize that revenue analytics requires a technology backbone to manage a very complex set of activities from demand generation to closed deals.

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 that 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.

The customer is going to break down your silos, whether you like it or not.

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 that “underlying concept is certainly important.” Whether RPM becomes a full-fledged technology category is hard to say at this point. Raab contends that 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 CEM solutions!

Manuel Rietzsch, Senior B2B Marketing Strategist at MarketStar, says currently RPM is a buzzword, but, like Raab, believes the ideas behind the term makes 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 that RPM can indeed move the needle on revenue productivity. Greg Forrest, Marketing Operations Manager at Concur says that 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 their 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. Jon Miller, Marketo’s co-founder and VP of Marketing, says their benchmark research found significant differences between companies that achieved RPM—a “fourth level” of revenue management maturity—and other, less mature companies. Only 9% 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 (e.g. money/budget)
  • Using metrics to manage a disciplined ROI processes, upfront planning, multi-touch attribution, and forecasting

Marketo’s research found that RPM firms enjoyed much higher win-rates: 40% of sales-qualified leads closed vs. 25% 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 this chart, RPM practitioners hit 102% of their target revenue plans, while others missed their targets by a wide margin.


Source: Marketo

In a 2011 study, Eloqua found major differences between best-in-class companies (about 20%) and the rest. Those adopting RPM strategies in 2010 grew faster than the S&P 500, as you can see in this chart.


Source: Eloqua

The ROI evidence looks solid, but I urge caution in concluding that 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 organizational “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 a 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 (Customer Experience Management). 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 organization 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 at a bare minimum salesforce automation, 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% 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 organizations feel they are all working to accomplish the revenue mission. Implement reward systems that keep everyone focused on the big goal, not just optimizing performance in each “silo.”

More than three years ago in my article on B2B Marketing 2.0, I wrote about the need to engage with social buyers and break marketing/sales gridlock. Progress has been slow. 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.

Futher reading:


Disclosure: This article was prepared through independent research. Selected companies are mentioned to illustrate specific capabilities and industry developments; no endorsement is implied. Please visit our sponsor page for information on companies that have supported the CustomerThink community in the past year.

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

  1. Jill Rowley June 25, 2012 at 6:52 pm #

    Bob – great article. My favorite line is “RPM is a technology-enabled strategy to increase total revenue productivity. Period.” The technology is CRM + Marketing Automation (at a minimum); hence why Eloqua and Marketo can’t say we’re selling RPM technology – we don’t have the CRM piece (our systems don’t have the SFA – opportunity / pipeline information – we have to integrate with CRM).

    There’s a June 2012 from Aberdeen Group – Revenue Performance Management Demystified. It’s a must-read to prepare for your RPM journey.

    “RPM is a process, an approach and a discipline. RPM depends upon solid underlying marketing processes, some level of process automation and instrumentation, and a degree of standardization or normalization of data.” RPM is a journey worth taking (with Eloqua as your Coach). Why? Because, Best-in-Class – the top 20% of companies in the marketing lead management report achieved the following performance metrics:

    *85% of marketing leads passed to sales are “actioned” vs. 27% for Industry Average and 5% for Laggard firms
    *22% year-over-year increase in marketing’s contribution to sales forecasted pipeline, compared with 7% and 1% increase for Industry Average and Laggard firms respectively
    *18% year-over-year rise in marketing’s contribution to company revenue, vs. 6% increase for Industry Average companies an no increase for Laggards

    Email me at jill.rowley@eloqua.com if you’d like a free copy of the Aberdeen report.

    Feel free to listen to some additional Eloqua client RPM stories at http://www.eloqua.com/revenue-performance-management/evidence.html

  2. Terry Flaherty June 26, 2012 at 5:27 pm #

    Bob – I agree with Jill – great article.

    I particularly like your inclusion of sales and marketing costs as a key element of revenue performance/revenue productivity.

    Benchmarking a company’s revenue productivity against others in their industry provides interesting insight into the issues (and resulting tactics) that a company should implement to improve revenue performance. For example, if you are growing faster than your peers, but your revenue efficiency is lower, the biggest impact would be to look at ways to increase process efficiency.

    We’ve recently launched a microsite http://revenueperformanceanalysis.com and series of reports that helps companies get this insight. The site compares the most recent annual revenue productivity/performance of over 500 US public companies and segments them into 14 B2B oriented industries. The industry-level report shows how companies compare against the industry revenue growth and efficiency averages, segments them into 4 performance quadrants, and provides insight into the specific strategies/tactics that are most relevant for each quadrant.

    The reports are available as a free download for anyone who is interested in understanding and comparing their current revenue performance.

    Terry

  3. Bob Thompson June 26, 2012 at 10:24 pm #

    Jill, thanks for your feedback and additional resources.

    A PDF describing the Eloqua Revenue Suite makes no mention of SFA.

    In my interviews with Marketo and Eloqua representatives, both agreed it was a strategy, but I found it difficult to figure out exactly what technology was required for RPM. I think both vendors need to do a better job explaining this to RPM prospects.

    A similar thing occurred with Social CRM. Vendors marketing themselves as “Social CRM” offered only part of the solution — e.g. the Social part or the CRM part — which confused the market as to exactly what was Social CRM. On top of that, consultants defined Social CRM several different ways.

    With RPM, there’s more consistency in the early goings that it’s a revenue optimization strategy first, and technology is the enabler. But there’s considerable haziness about exactly what the tech components are, and the marketing vendors seem to imply (by the lack of info about other solutions) that RPM is what they do.

  4. Bob Thompson June 26, 2012 at 10:32 pm #

    Thanks, I couldn’t see a sample report but like the idea. Revenue productivity analysis should be done at the company level, vs. industry peers.

    One suggestion — the site says that the reports are sponsored by Bulldog Solutions, Eloqua, and Demandbase. However, it wasn’t clear where the data would go. If the user’s responses will be sent to the sponsors (e.g. as “leads”) then I think it should be disclosed more explicitly on the registration form.

  5. Strategic Advisor October 16, 2012 at 12:31 am #

    Nicely explained post….great job :)

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