Don’t Confuse Sales Activity with Victory

In his initial three years on the job, Mark Roberge grew the sales organization at HubSpot to more than 60 salespeople and more than 2,800 customers. How did he do it? He attributes his success in part to managing by metrics – not by gut instinct.

Considering that the HubSpot marketing-automation platform was created and designed by a group of graduates from MIT, it’s no surprise that Roberge is a fan of the science of sales management. As he explained in an HBR.com blog post, he had never run a sales team when he first came to HubSpot. “I didn’t know the conventional techniques that sales managers use. Instead, I relied on my background as an MIT-trained engineer to create a system of hiring and development that relies on metrics and quantitative analysis.”

In a Q&A with the producers of the Sales 2.0 Conference, Roberge revealed that his favorite metric to hold sales teams accountable is Customer Lifetime Value divided by Cost of Customer Acquisition (CLTV/COCA).

“That ratio is a big metric in SaaS [Software-as-a-Service] and applies to most sales organizations,” says Roberge. “The mistake we made early on, and that perhaps others make, is putting too much emphasis on the initial revenue stream and not putting enough emphasis on what it took to get that revenue stream and how it evolved over time.”

In sales, activity is often confused with victory or, at least, an indication of probable victory down the line. A sales VP might love to see lots of leads coming from marketing, for example. But which deals should you push into the pipeline first? And which among those leads are going to turn to yield the best return for your company in the long run?

“While it makes us feel good to focus on leads that move aggressively into the pipeline, those might not become big deals over time,” he says. “There are other deals that are a hell of a time to get in and through the pipeline, but once we get them, they’re extremely valuable deals.”

Roberge describes as an example a scenario in which two reps sign a $10,000 deal. One deal cancels after 15 months, and the other remains a customer for three years and upgrades.

“In a traditional hunter model, reps would be compensated for that deal in the same way. But clearly the second one was more valuable,” says Roberge.

Roberge says that tracking metrics can help managers put some science behind the numbers that reps typically complain about. “When I hear complaints from sales reps, I have a way to see whether or not lead quality is actually down,” Roberge explains. “If a rep says, ‘These are terrible leads,’ I can say, ‘Well, what do you mean by terrible?’ If they say, ‘I tried these two leads and they suck,’ I can look at the data and see that these leads in that vertical actually convert to opportunities at a very high rate. You cannot argue with the data.”

And sales teams are in greater need of better-than-ever leads. Why? Because the sales team is no longer a customer’s first touch point with a company. In fact, up to 57 percent of the sales cycle is already complete by the time today’s customer talks with a sales rep. That means that even the best sales scripts and highest levels of product knowledge won’t lead to success.

“Today, prospects can go to a Website and get all their questions answered and often can download a product and use it for free for thirty days. So the relationship between marketing and sales has to tighten up,” Roberge says.

Many organizations are starting to hold marketing more accountable for ROI on lead-generation efforts. The marketing team at HubSpot, for example, has a quota for generating a certain quality and quantity of leads each month to hand over to the sales team (which has its own quota). Roberge says that this kind of alignment is the future for competitive sales organizations.

“In this Sales 2.0 world, the salesperson’s job has changed somewhat, as well,” Roberge told OpenView Labs. “Salespeople have to be much more up-to-speed with exactly what’s going on within marketing, because by the time they talk to a lead, that lead is usually two-thirds through their sales process.”