Building a Lead to Revenue Operating Model

Building a Lead to Revenue Operating Model
Michael Madden is the VP of Demand Generation at AlphaSense and was previously Director of Demand Generation at Marketo. In this guide, he lays out how to define lead-to-revenue stages and marketing to sales handoffs, how to think about attribution, and how marketing should own revenue goals (vs. lead-based vanity metrics).

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Questions covered in this guide

What does it mean to build an operating model?

The operating model defines the measurable, repeatable structure for everything that happens in marketing and sales – it helps you better understand what your conversion rates are at every step of the lead-to-close process. You need to understand all of the inputs in this model, so you can iterate and build something better.

Which parts of the marketing org does this apply to?

It applies squarely to demand gen and marketing ops – you want to focus on, “how do I help my sellers close more deals” because that’s how everyone wins at the company. 

It also applies less directly to product marketing and brand – even for “squishier” marketing sub-functions, there are pieces of work that are measurable that drive pipeline. For example, if I’m the head of product marketing, and I have someone on my team that’s focused on generating customer case studies and owning what our presence looks like on review sites, I can measure how those things influenced deals.

What are the lead-to-revenue stages to define?

Marketable customer and prospect database this includes everyone you can market to, whether or not you’ve had any touchpoints with them. 

Response or program success (Lead) – essentially just something happened in the system, and it was notable because they did something that was worth something. For example, you’re running a webinar program and someone attends, which would be a success. You’re running paid ads and someone clicks and fills out the form, which would be a success. You can call it a “lead” now, and from there it’s very clearly defined. 

Automated Qualified Lead (AQL) with multiple priority types – you don’t want your SDRs or AE’s just getting 1,000 leads that could be anything under the sun and not knowing how to prioritize them.
  • Priority 1’s “hand-raisers” – these are leads that said “contact me,” or they requested a demo or pricing. You should always follow up with these first, and they should have a very tight SLA around them, e.g. sales needs to get to them within 60 minutes (if it’s any longer than that, you just wasted the best converting lead).
  • Priority 2’s – meet ALL of these 3 criteria: 
    • ICP = true – this lead fits within your ideal customer profile, so it’s the right account. If you’re more sophisticated, have a set account score (established with predictive account scoring) that the new lead, who is associated with an account, has to be above. 
    • Target = true – the lead is from a person who would buy your product (a relevant role, with authority to buy). They’re the right person and they’re not a “junk lead,” meaning that they have a real email, phone number, and first name. You’re not building a complex scoring model here; it’s binary. It’s true or false; you’re either the right person or you’re not.  
    • High behavior score target – the lead has a high enough behavior score, having done a combination of things across various channels or programs, and has a score that’s high enough to where you say this is a warm lead (you’re not wasting your time if we pass it to sales).
  • Priority 3 (optional) – intent-based prioritization for outbound calling. These are all of the accounts where they aren’t currently being worked on by marketing but the account showed signs of intent. , There was an intent signal that showed people at this account were researching the products and services we sell, or our competitors sell. Have your outbound SDRs call them because they’re better off calling into an account that shows intent versus one that doesn’t.
  • Priority 4 (if you’re really sophisticated) – refreshing AE named accounts. In many organizations, AEs have hundreds of named accounts per quarter. What if they call into all their accounts in the first 15 days of the quarter, and 50% of them have garbage? Then we need a way to refill those buckets so they have better accounts to call. If you’re sophisticated enough to do it, you can constantly refresh your accounts using intent data. If 10 bad ones go out, 10 new ones go in.

Marketing Accepted Lead (MAL) – accepted by the inbound SDR, and they’re going to work it. The acceptance percentage should be 85-90% because ideally, you’re filtering out a lot of bad stuff at the AQL stage.

Marketing Qualified Opportunity (MQO) – occurs when the SDR works the lead and sets a meeting. This is where you start to use the opportunity object in your CRM to say, “the inbound SDR created this opportunity.” This is where you measure a conversion rate from MAL to opportunity. At this stage, there’s some timeframe that marketing and sales leaders define for how long sales has to accept or reject the MQO (e.g. 72 hours), based on criteria that a sales development leader could define. 

Sales Qualified Opportunity (SQO) – occurs when the AE accepts the MQO and they put a pipeline dollar amount behind it. This is the official handoff point in the lead to revenue model where marketing has handed a lead to a salesperson focused on closing business.  

Closed opportunity – a closed lost opportunity is lost, and you have to understand closed lost reasons. For closed won opportunities, you have to understand win rates by industry, employee count, revenue size, etc.

What treatment should you give to leads that fall out of the funnel?

Lead recycle path – use this to feeding timing misfits back in at the AQL stage later. Include recycling reasons such as, “the timing wasn’t right and they need six months”, “it wasn’t the right person (even if they were an influencer)”, or “they don’t have enough budget”. Use this when, technically they were a good person for marketing to market to, but it just wasn’t the right time. I like a 90 day recycle period where the lead can’t become an AQL again during that period, unless that lead signals that they’re a P1 hand-raiser and are ready to speak to sales.

Disqualify path – use this when the lead isn’t a buyer, and should never resurface as an AQL.

Roughly, what conversion rates should you look for from one stage to the next?

Conversion rates will depend upon the business – it’s not possible to say what conversion rates should be from lead to opportunity or opportunity to close.

Track conversion rates by grade – implement a lead scorecard with attributes that make a person or a lead a good account. Then you can track how the opportunities convert based on the grade you’ve given them. 

Internal handoff conversion rates should be high – if your processes are solid and repeatable, AQL → MAL should be high (85-90%) and MQO to SQO should be high (70-75%).

What types of marketing activities and channels should you focus on at the lead stage?

Acquire leads via digital channels:
  • SEO
  • Keyword paid search campaigns
  • Digital Advertising – usually on LinkedIn or Facebook

Acquire leads via sponsored programs and virtual events – in my experience, the fastest way of getting leads that have actually engaged with something, is to use sponsor programs. You’re squarely in front of your audience and you get lists of people that have opted in or engaged with your content. You’ll then receive the attendee list as well as the “no-show” list from the event. 

Note: you can email people who signed up for sponsored events as long as the language is correct at the event sign-up. For example, the registration form will say, “when you register for this event, we will share your information with our third parties and sponsors from this event. Is that okay? Check the box, yes or no.” If they opted in, you can email them. 

Purchased emails are NOT AQLs – don’t purchase lead lists, and don’t enter emails from Zoominfo into your marketing database; those aren’t marketing acquired leads.

Run campaigns to nurture leads in your database – leverage email marketing, events, webinars, digital campaigns, and direct mail to communicate with leads you have contact information for.

How should marketing be involved with an opportunity after it’s been passed to sales?

Sales team preferences vary – marketing owns the lead before the opportunity, or ideally before the salesperson takes it and commits it to pipeline. After that, there are some selling organizations that are very fond of marketing continuing to have touchpoints as long as it’s within the marketing brand. Other teams want marketing to completely stop once the lead is passed to the sales team.

Support sales with higher-touch campaigns – if marketing continues, it can get more personal in the context of a sales process.
  • More valuable email or direct mail, e.g. after an initial meeting, you could say, “thanks for the meeting today, I sent you a $10 Amazon gift card” to keep the conversation going.
  • More intimate events, e.g. roundtable events, dinner get-togethers.

How should you think about attribution?

Don’t do last-touch attribution – it’s essentially gaming the system because, under most circumstances, there will be more than one touchpoint on a lead’s way to becoming an opportunity. The last touch isn’t always the defining factor in what created a sales-ready lead or opportunity.

First touch based on lead acquisition channel. You should have a way of measuring pipeline and closed revenue based on which program channel or type acquired the lead. 

Multi-touch – based on the fractional share that several touchpoints are worth. Different touchpoints should all be worth different amounts. If clicking on emails is counted as a success, engagement with a batch email program should be weighted much lower than someone attending your webinar or someone visiting the pricing page.

What reports should you build to monitor regularly?

Lead to revenue model reporting – once you understand your conversion rates say, “we have to book this much revenue which means, we need X SQO’s, X MQO’s, X MAL’s, and X AQL’s. Now I have a lead requirement number of the number of AQLs I have to generate in any given month or quarter to hit my revenue number.” 

Revenue planning reports (based on opportunities):
  • How many meetings were booked?
  • How many opportunities do I have?
  • What’s my pipeline, and what stages are all the open opportunities in, so I know what’s likely to close versus what’s not going to close in a month or in a quarter?
Cost reports:
  • Lead cost modeling – know your cost per Target, cost per AQL, cost per MQL, cost per SQL, and cost per closed won.
  • Pipeline to cost ratios – how much pipeline do I generate for every $1 of spend? For example, if I have 20% win rates and my pipeline to cost ratio is five to one, I’m only getting one dollar out for every dollar I put in, and I’m not very efficient.
Reporting on pathways
  • Website reporting – you want to have really clean and buttoned-up reporting on your website traffic.
  • Lead routing reporting – make sure this is done efficiently so no leads are left behind. You’ll want to make sure you have fail-safes built in to alert you when leads are languishing.

How should marketing and sales share revenue goals?

Marketing sourced vs. marketing influenced – marketing sourced means that leads are acquired through the marketing program, marketing influenced means that in the 90 days before or after an opportunity was created, there was a marketing touchpoint (a much softer metric).

Marketing should be responsible for sourcing a % of leads:
  • ~15% starting out – smaller companies and startups have a tougher time spinning up the marketing motion, so the percentage will be lower starting out. But if your sales org is mainly focused on building an outbound muscle without a marketing function scaling in parallel, it’ll hurt your retention and your reps won’t be as productive. 
  • 60-70% eventually – ideally marketing should own 60% of the revenue, and at 70% you’ve “made it” and you’re a great marketing org.
  • Partner business – might own 5-10%, depending on how the structure is set up. 
Factor in where sales development sits (could be sales or marketing):
  • Marketing – inbound SDRs are more likely to sit in marketing, and it can make sense for them to be close to the marketing programs. It tends to be an “easier” culture since it’s not ultra-competitive. 
  • Sales – sitting closer to sales makes sense for the promotion path to AE. 

What goals should marketing sign up for, and how should they track progress toward those goals?

Marketing should sign up for a revenue goal based on sourcing – where was the lead born? Marketing’s bonus should be based on hitting that revenue goal. 

Track the other inputs in the lead to revenue model, but it’s not enough to hit the lead number – steps along the way like lead and opportunity creation help you gauge whether the marketing team is tracking towards a goal. But, marketing should be on calls with sales leaders talking in terms of pipeline.

How should you track and measure the success of different marketing programs?

Use vanity metrics to understand where buyers are interacting with you – open click-through rates, impressions, likes, etc.  help you and your team understand where the focus could be. But this shouldn’t be the metric you use to finalize where the focus should be.

Look for cost-efficient channels – for digital, look at costs and cost ratios (what’s your cost per lead, target, or new name). Look for success in cost-efficient channels: emails and webinars are (nearly) free.

If you’ve built your attribution model correctly, you’ll be able to see what channels are worth – as someone progresses to an opportunity. You’ll be able to decide where you should invest more and which channels aren’t worth it for you. 

What types of lead and account scoring should companies do, and how should they use those scores?

Lead scoring is a measure of “online body language” of leads over time – lead scores should factor in both positive and negative inputs.
  • Enhance scores for things like checking out a case study.
  • Degrade scores for things like visiting the jobs page or unsubscribing.
  • Degrade scores for inactivity; you don’t want to mark a lead as a high priority if they visit your site for the first time in 6 months, and that visit happens to bump them over some lead score threshold in a cumulative formula.

Predictive account scoring is a measure of potential account value – that score helps represent who your absolute best accounts are, which accounts are predictively more likely to buy than other accounts, stay with you as a customer, and pay you more money. Thousands of different inputs could factor into a score. 

Predictive account scoring co-exists with your Ideal Customer Profile or ICP (which defines where you’re good at selling) to factor in other account-specific information (e.g. is this company being sued, in which case they’re not a good target). You can make marketing decisions based on account score; in the case of digital ads, you could say that you’re only going to run them for account scores of 80 and above, plus the ones that are showing intent. 

What are the key tools in the Martech stack?

Marketing automation – this is your central hub for everything that marketing builds out. This tool should integrate with all of your others to manage all kinds of campaigns (email, digital, direct mail), events and webinars, scoring and operational workflows, tracking and reporting, and BI.

The main players are:
  • Marketo – I’m biased; I grew up in Marketo. For me, Marketo is the most complete solution. Marketo is the platform that can serve anyone using it: SMB’s or large enterprises. 
  • HubSpot – good for smaller businesses because it’s a good tool and the interface is very friendly. It’s not quite an enterprise solution yet though. Where it doesn’t do well is when it comes to multichannel and nurture, scoring, and taking the lead that’s from top of the funnel and actually moving it down to being “sales-ready.”
  • Pardot – (owned by Salesforce) is a sales platform, not a marketing company. Salesforce wants to spin it that way, but Salesforce doesn’t even use Pardot; they use Eloqua.
  • Eloqua – (owned by Oracle) was a great product until they offshored all of its development, and then there was no longer any real innovation.

CRM – marketing automation works best when integrated with a CRM, e.g. Salesforce, Sugar CRM, Hubspot.

Campaign & channel tools:
  • Webinar Provider e.g. ON24
  • Direct Mail Provider – e.g. Alyce 
  • Chatbots – e.g. Drift or Qualified. Intercom is a customer support chat tool, but it isn’t great at sales and marketing. 
Account-based & outbound tools:
  • ABM specialty software – e.g. Terminus, Demandbase. These tools can help with running ABM campaigns.
  • Sales development tools – Outreach or 6Sense are tools that help with account-based sales. 
  • Web personalization – e.g. Mutiny. They allow you to personalize any headline paragraph, CTA on your website based on who someone is, where they work, what account it is, or what industry they’re in. It’s done with reverse IP lookups as well as integrations with Salesforce and Marketo.  
  • Video consumption tracking – e.g. Vidyard helps you track video consumption, and you can feed that information back into Marketo and score it. 
Reporting & data tools:
  • Reporting and attribution – Marketo has a reporting platform, but others are Bizible, BrightFunnel, or Full Circle Insights. If you are wanting to be more advanced, you can get a BI tool like Looker, Microsoft’s Power BI, or Tableau.
  • Lead routing – no lead left behind, especially as your sales team gets bigger. This will sit in either marketing ops, sales ops, or both. Check out LeanData.
  • Data enrichment – e.g. ReachForce or Clearbit. You can put a data enrichment tool on all of your forms and its lead enrichment on a lead form. That way, when someone puts their email on a form, it enriches that data upon form completion and tells you where they work, along with that company’s revenue earnings and other details. 
  • Intent data Bombora is my favorite intent data provider. They’re a data company, not really a software company, so their models get used by other software companies. 
  • APIs for lead list processing – e.g. Integrate. Once you get to a point where you’re acquiring a lot of leads, you need APIs (vs. manual uploads) that allow you to process mass quantities of leads, verify them against your own database, and verify that you’re getting emails that are deliverable (not fake).

What are the most important pieces to get right?

Hire collaborative people – demand gen is a highly collaborative relationship-based job where you have to work across many different teams and personalities. You can’t have a demand leader who’s narrowly focused or who doesn’t want to regularly talk to salespeople all the way up and down the ladder.

Invest in your marketing automation tool – get the right one for how you want to grow your company because it’ll help you scale. 

Invest in marketing operations (vs. burning through ad budget) – if you just start running campaigns, the marketing team won’t really know what’s working and they won’t have a way of measuring it. You want to be able to track it from the beginning. 

What are the common pitfalls?

Lack of sales or executive support – you won’t get anywhere if sales leaders don’t trust marketing or believe in marketing. 

A lack of focus on testing – a lot of people just do things that are based on their gut instinct and say, “this is how it’s going to be.” You need to test and be willing to admit when you were wrong.

A lack of empowerment of creativity – you don’t want leadership to be breaking people’s work apart and rewriting it because they can’t let go of their vision for what something should be. You have to hire a leader who encourages creativity and is willing to teach people over time.

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