No Such Thing As Revenue Generation

My last blog covered the false premise of marketing “demand generation”.  In this next entry, I’d like to debunk another myth, one which surrounds the sales function: Revenue Generation.  Many marketeers, sales professionals, and executives alike believe that sales is a magically skilled function in the business, and that sales teams are capable of generating revenue.  And it’s easy to make this conclusion.  Sales teams have sales reps who talk to customers and partners, and after some voodoo has been done in the field, a PO eventually appears.  Tada!  Time to ring the sales bell!  Revenue attainment is the traditional responsibility of sales, and orders are coming from sales, so therefore sales must be generating the revenue.  But in the same way that demand is not generated by marketing, revenue is not generated by sales.

Revenue is the by-product of a customer paying for goods or services.  It is the sawdust that is created by cutting the wood.  If you don’t have lumber that needs to be cut (customer demand), and don’t have the saw (products/services), then there can be no sawdust (revenue).  Viewed from this perspective, revenue attainment can more accurately be thought of as a fulfillment process, facilitated by the sales function.  Your sales reps don’t create the revenue, they coordinate the fulfillment of your products/services to customers with demand.  Collecting the sawdust is a positive end result achieved by extending a successful marketing strategy into the field.

If your business lacks a sound marketing strategy, or one that is not based on a thorough analysis (including target profiles, qualification, market share assumptions, value propositions, competitive positioning, etc.), the result will be a mismatch in the fulfillment of your products/services with the actual demand in the market, i.e. low and/or unpredictable revenue.  Once a solid strategy is in place, monitoring and adjustments still need to be made.  Even with the best analysis and predictive models, those estimates can never be 100% accurate.  You may have successful sales reps consistently at 100% of quota.  But, how many of your top sales reps close 100% of their deals?  Even the top sales reps can still have deals that fall through, which is why we still use the classic sales funnel and monitor a pipeline.  Too often, however, many businesses use the funnel and pipeline in order to drive sales people to perform unnatural acts in order to force a portfolio onto a customer where demand doesn’t truly exist.  That approach can only result in unpredictable revenue, or even returns and refunds.  Insightful businesses will instead use these tools to track the progress of the demand exploration efforts, and then re-calibrate the marketing strategy, tactics, and even the products/services themselves to match the true demand.

When marketing engages in demand exploration, and then successfully discovers demand that aligns to its products/services, then it’s cause for celebration.  Time to ring the sales bell!  Once the match has been identified, however, the rest is revenue fulfillment.  And that’s a very different thing than generating, or creating revenue.  Ultimately, the only things being created are lumber and saws:  demand (by the customer), and the product/service that satisfies that demand (by the company).  Sales teams  still perform a critical function by executing the marketing strategy in the field, and collecting the resulting sawdust.  But it is wrong to expect them to generate revenue out of thin air.

So what should we expect from our sales team and marketing tactics?  In the next blog, I will discuss two critical drivers of customers’ purchasing decisions:  education and relationships.

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