The battle for sales and marketing alignment continues… So is the role of a chief revenue officer the answer businesses are looking for to come in and save the day? Alex Blyth investigates
Avinoam Nowogrodski is the CEO of Clarizen, a Silicon Valley software firm. He is recruiting his first chief revenue officer (CRO). “As the link between marketing and sales is becoming more crucial than ever before, the CRO role is becoming critical for fast-paced, cutting-edge companies,” he says. “I believe that for any successful modern day company, the position of CRO is a necessary element.”
He is not alone. More and more companies are creating this new CRO role. Alex Shootman, CRO at marketing automation provider Eloqua, recalls giving one of his first talks on the concept of the revenue engine to a room full of venture capital-backed CEOs. “It was early 2009, and before the talk, I did a little research on LinkedIn where I found fewer than 90 people with the job title chief revenue officer.”
Last summer, he went back to see if that number had grown. It had: There were over 300 people with the title of chief revenue officer, and today there are more than 500. It is clear evidence of the growing trend for companies to introduce this role. Online, marketing, advertising and media companies are leading the trend, but health, sports, and financial services are not far behind.
According to Paul Albright, CRO at marketing automation provider Marketo, one in 10 B2B companies already has a CRO, and there is a compelling reason for the other nine to follow suit. “It is only recently that organisations have had access to the metrics that allows them to see the value of what marketing does and to see them as revenue creators. Focusing on marketing can add 40 per cent to your sales in a year.”
So what does a CRO do?
The CRO is a curious hybrid. Part sales, part marketing, part customer service, part product development, part corporate strategy – it ultimately exists to balance the competing demands of these different areas of a business and ensure that all are focused on short and long-term efficient revenue creation. They are there to deliver profit to shareholders.
Nick Turner, a director within Deloitte’s consulting practice, has encountered many CROs in the past few years. He reports it is especially prevalent in markets that are highly competitive but where there is little to differentiate companies.
Turner explains, “These companies bring in chief revenue officers to determine a strategy that will increase marketshare, accelerate new proposition developments, increase collaborative working and gain a better understanding of true customer profitability.”
He offers an example of a subscription-based telecomms provider that introduced a CRO. “The client’s profitability was being undermined by the rate of attrition of customers during the installation phase,” he explains. “The company was never sure whether to focus on sales or service. The CRO was brought in to resolve the tension and did so, not only increasing customer profitability but also instilling a culture of shared ownership of the ultimate profitability of the business.”
Why the rise in CROs?
The tension between departments is nothing new. Anyone who has ever worked in sales, customer services or marketing will have plenty of tales to tell you about the wrangling between those uncomfortable allies. Yet the issue has been thrown into sharper relief by the emergence of the new buying process.
“The way we behave in our personal consumer transactions has bled into the way we conduct B2B decisions,” argues Shootman. “The buyer researches, taking their time to consider their options, and consulting reviews from experts or peers. This has completely up-ended the traditional relationship between marketing and sales in a B2B company. Marketing has to work much deeper into the sales cycle than ever before. Sales can no longer operate in isolation.”
It has also led to the emergence of a new breed of lead generation techniques. These techniques promise a great deal, and recent research from the IAB revealed 40 per cent of marketers say they will increase their budget on lead generation in 2012, but a startling 52 per cent of marketers believe they are not using lead generation techniques in the most effective way. For many organisations, appointing a CRO with an overview of lead generation is a solution to this problem.
Ultimately, though, companies are appointing CROs because they need revenue. In today’s tough economic environment, CEOs can no longer afford to have sales directors claiming they need more salespeople and marketing directors arguing they need more money for new campaigns. They need to understand exactly how the two disciplines work together and they need them to bring in more revenue. If they don’t do it their competitors soon will.
Potential benefits
The fundamental reason for having a CRO is to focus the business on revenue. “The addition of one role in a company will never fully eliminate cross-departmental angst,” says Richard Evans, director of marketing EMEA at marketing automation firm Silverpop. “However, aligning key organisations around the topline metric of revenue is a unifying factor, and ultimately it makes marketing as accountable in the revenue generation process as sales has been for decades. Alignment around revenue is a key way of dissipating the fog around marketing metrics and performance.”
There are other, closely related, benefits. Shawn Naggiar is the CRO at marketing automation provider Act-On. He believes an important benefit of introducing a CRO is that it gives revenue generation a voice in the C-suite. He explains, “As CRO, I can take full control of the incentive plans for the sales and marketing executives. Typically companies hand this over to finance who tend to be focused more on cost reduction than on revenue generation.”
Shootman believes he has evidence that all this results in improved corporate performance. He says, “Over the past five years the Compound Annual Growth Rate (CAGR) in the S&P 500 was about 14 per cent. Our clients that have the highest levels of alignment between sales and marketing – very often as a result of having a CRO in place – achieved a CAGR over the same five-year period of 98 per cent.”
Getting it right
It is a compelling case, and one that we can expect to see more B2B companies considering in the coming months. But they would be wise to proceed with caution. Introducing a new person to the C-suite is usually a difficult time for any organisation; introducing an entirely new role will be even more so.
“Where there is most risk in this role is paradoxically where there is most value,” says Turner. “The CRO collaboratively engages with other commercial functions and provides a more balanced view of where value lies to drive profitability.
This can lead to the CRO duplicating other commercial roles. So it is critical to define a clear scope, outlining short and long-term aims, such as fixing an innovation glut or purging less profitable customer leads.”
You also need to invest in the right tools. Much like the pilot needs an altimeter, a turn and bank indicator, a vertical speed indicator, an artificial horizon and a compass, the CRO needs an insight into value, conversion, velocity, reach and return. Without this information they will be operating in the dark.
Shootman believes the greatest danger is selecting the wrong person. He says, “If you are seeing this as a glorified VP of sales, don’t do it,” he says. “CEOs frequently ask me whether they should make the VP of sales or the VP of marketing the new CRO. My answer is both or neither. It is more about the way the person thinks than the role they currently have.”
A window of opportunity
Once process, technology and people are in place it simply remains to address culture. “Now is definitely the time for marketing departments to make this leap to align themselves with sales, and the rise of the CRO job title shows it’s happening,” says Paul Everett, director of marketing strategy at The Marketing Practice. “But the window of opportunity won’t remain open for long. Unless marketing can prove they are completely aligned with sales to support an overall revenue plan then they’ll miss the boat and be stuck in second place again.”
Indeed this could be a rare opportunity for B2B marketers. As Adam Sharp, MD at marketing automation firm CleverTouch, concludes, “Too much of marketers’ work these days is just tactical promotion – download this and win an iPad. Focusing on revenue could allow them to engage in proper strategic marketing, where they know how many of which inputs generate the required outputs. It is that insight that will help marketers gain that coveted seat at the strategic decision-making table.”
Looking at the bigger picture
Case study: Denise Collela, CRO, Maxifier
In November 2011 Denise Collela joined Maxifier as the online ad optimisation firm’s first CRO. Previously she was CRO at Audience Science.
“Having a CRO allows you to look at more than just closing the deal,” she says. “Our sector is becoming more competitive and so we have to do more than just sign contracts. We have to deliver client training and customer service. We have to really engage our clients in what we do.”
She adds, “My role is a consultative one. I’m looking not just at our immediate needs, but also at what we need to do to meet our long-term goals. For the CRO role to work it needs buy-in from senior management. Up until now the job title has been popular in the US, but it’s rapidly becoming more so in Asia and the UK.”
Where the buck stops
Case study: Donald Hamilton, CRO, Improve Digital
Improve Digital is an online ad trading firm that was founded in 2008 and now has 62 staff across Europe. It hired Donald Hamilton as its first CRO in June 2011. Before then he was at DoubleClick and he spent several years at Claritas.
“Every B2B organisation could benefit from having someone with an overall view of revenue,” he says. “You need someone who has at least five years’ experience of a wide range of business issues. They need to have been at the sharp end of sales, but they must also understand how the technology you sell is used.”
He adds, “It’s not an easy job. In fact it’s probably the most stressful job I’ve ever had, as I’m the one who has to weigh up the competing demands and make the decisions. But the fact that we have someone doing that makes it very much more likely that we will achieve our revenue goals.”
