B2B Revenue and the (Ir)relevance of the Funnel

Originally published in Forbes Business Development Council Traditionally, one of the core concepts of sales and marketing is the sales funnel through which companies are supposed to move prospects from awareness through consideration to engagement, and finally to purchase. Here are three examples where this breaks

1. How does funnel make sense if 67% of the sales cycle is completed on digital channels before contacting the company? 
2. Opportunities from existing customers in the case of cross-sell & upsell start at the bottom of the funnel. 
3. In case of ‘booked’ revenue, typical opportunities don’t get created most of the time, so funnel is not even in the picture here. 

 

Is the B2B Sales Funnel relevant anymore?

  One of the main issues with the sales funnel, especially in the B2B industry, is that the customer journey is no longer linear. Prospects no longer enter at just the top of the funnel. Customers come in at any stage and often jump stages or move back & forth between them. Since customer acquisition has changed within the B2B sphere, the sales funnel is a bit outdated.  What happens in a conventional sales funnel? Marketing generates a bunch of leads and passes the qualified ones to sales who then attempt to win the deals. Several B2B companies offer not only many solutions, but solutions that involve long-term engagements with their customers. For such organizations, winning the deal is only the beginning. In certain cases, Key Accounts are further identified which are given additional attention.  In order to bypass the inconsistencies that the ‘sales funnel’ approach brings, a shift in perspective might be necessary. What if B2B sales and marketing are seen from the perspective of distinct revenue streams?

The 4 streams of revenue for a B2B Company

There are four primary sources of revenue for any B2B company.

1. New revenue – Opportunities from new customers
2. Renewal revenue – Renewal opportunities from existing customers
3. Booked revenue – Revenue contribution from existing contracts for a multi-year engagement. This is different from renewal revenue in the sense that product/services have to be delivered to realize the revenue. Opportunities rarely get created in the CRM for this stream of revenue.
4. Cross-sell/ Upsell revenue – Cross-sell and Upsell opportunities from existing customers. 

The approach to each of these revenue streams is different. Depending on which of the four sources contribute to the most revenue in your organization, the approach changes. The major revenue streams will determine the sales and marketing strategy, and corresponding sales and marketing tech stacks. 

Which revenue stream is dominant in your industry? 

 

Industries/ Revenue Streams	New Revenue	Renewal Revenue	Booked Revenue	Cross/Up Sell Revenue
Mid to Large Business Services	5-10%	5-10%	60-70%	10-20%
Mid to Large B2B SaaS companies	15-25%	65-70%	5-10%	15-25%
Mid to Large Manufacturing/Industrial	20-30%	5-10%	60-70%	10-20%
Small companies / Early stage solutions	30-50%	30-50%	10-20%	10-20%

  Depending on the industry and size of an organization, its dominant revenue stream varies. 

• For Mid to Large Business Services such as IT, Professional, Staffing, Marketing, Outsourcing, the dominant source of revenue is ‘Booked Revenue’
• For Mid to Large B2B SaaS companies, ‘Renewal Revenue’ should be prioritized 
• For Mid to Large Manufacturing/Industrial, ‘Booked Revenue’ is the most dominant source 
• For Small companies – Early stage, commoditized or undifferentiated products/solutions- ‘New Revenue’ and ‘Booked Revenue’ dominate revenue streams. 

  A point to note in all these different types of industries, cross-selling and upselling are often the second leading source of revenue. This stream is also the biggest contributor for the account growth.  

Revenue streams should shape your sales and marketing approaches.

  Depending on which revenue stream is most dominant in the industry, the sales and marketing approaches should change. Each type of revenue stream requires different teams and different aspects of sales and marketing to be prioritized. This does not mean that there is no overlap between the sources of revenue or the sales and marketing approaches they require. However, it does imply that optimizing and streamlining them can help your ROI.  

Winning the CFOs approval: How to Present RoI of a Key Account Management Software

 

What should companies seek in a revenue platform?

  An ideal revenue platform enables a business to efficiently and effectively manage its revenue streams. Such a platform should have several key features that make it the go-to solution for businesses looking to optimize their revenue streams. 

1. New Revenue Platform

If you are looking to increase revenue from ‘New Revenue’ sources, it’s necessary to have a specialized tool that can help convert more deals by finding more leads with the aid of prospecting tools.

Sales Tools for New Revenue

A perfect sales tool for optimizing new revenue streams should ideally have

• Sales automation for repetitive tasks
• Visual sales pipeline management to track deals, manage sales stages, and monitor progress.
• Customer relationship management with a centralized database 
• Sales forecasting with insights for revenue forecasting and trend analysis.

Gong is a great example of this – it uses AI to analyze sales conversations and give you data-driven advice on how to close deals faster. Such a platform captures and analyzes data from customer interactions to help sales teams make data-driven decisions. In case of large deal sizes, a platform like DemandFarm’s Opportunity Planner makes large deal management easier. Such a platform provides a systematic and collaborative approach to planning and closing large, complex enterprise deals. This is done by integrating proven sales methodologies with strong stakeholder management to enable faster deal closures. 

Marketing Tools for New Revenue

A perfect marketing tool for optimizing new revenue streams should have features including:

• Lead generation capabilities through various channels
• Marketing automation for repetitive tasks
• Customer segmentation to create targeted campaigns
• Analytics and reporting to track campaign performance, analyze trends, and identify opportunities for optimization.

A tool such as HubSpot is an all-in-one marketing, sales, and customer service platform that helps businesses to grow and manage their customer relationships. Such a marketing tool enables businesses to create and track campaigns, analyze performance, and optimize their marketing strategies. 

2. Renewal Revenue Platform

Sales Tools for Renewal Revenue

The sales approach to increasing renewal revenue involves prioritizing customer success. Anticipating customer needs and providing flexibility is vital to this. For optimal renewal revenue, a sales tool must have automated renewal reminders to send out reminders when it’s time for customers to renew. Second, it should have a database of customer information so you can target offers that are tailored to their needs. Additionally, you should be able to customize your pricing and discounts, and get analytics and reporting to help you forecast future revenue and spot trends. Customer Success platforms like ChurnZero ensures subscription -based business can reduce customer churn and increase revenue by providing data-driven insights. The platform provides automation tools to help businesses deliver a personalized and proactive customer experience. 

Marketing Tools for Renewal Revenue

An ideal marketing solution for optimizing renewal revenue will have features to accommodate automated renewal reminders, customer segmentation capabilities to enable marketers to target renewal campaigns. Analytics and reporting from such tools aid customizable incentives to prompt customers to renew their contracts.   Totango, while not strictly a marketing tool, is one such customer success platform that helps businesses to increase customer engagement and retention.  Tools that integrate with other business tools, such as marketing automation tools, can provide your business with a holistic view of the customers’ journey. 

3. Booked Contracts Revenue

Sales Tools for Booked Contracts

For Booked Contracts, the sales approach involves maintaining good communication and customer service to ensure that a contract is implemented smoothly and successfully.  Specialized Key Account Management tools like DemandFarm come in handy to identify whitespaces and harness key relationships. With multi-year contracts, ‘Booked Contract’ revenue is all about delivering on the agreed terms to get the revenue. Key Account Management tools can help sales teams and account managers in the following manner:-

• Improved customer insights: Sales teams gain a better understanding of their customers’ needs. This can be used to personalize offers for efficient implementation of booked contracts.
• Targeted communication: Targeted communication with customers, ensures that they receive timely and relevant information about their contracts and renewal options. This can help to increase customer loyalty.
• Performance tracking: Key Account Management tools like DemandFarm can provide contextual insights and analytics that help sales teams and account managers track the real-time performance of their contracts and identify opportunities. This can optimize booked contract revenue over time.

Marketing Tools for Booked Contracts

The marketing approach in this case involves brand marketing, thought leadership and collaborations with partners and influencers.  Marketing tools for ‘Booked Contracts’ ought to focus on Account-Based Marketing and Intelligence to inform marketing campaigns. Such tools would enable marketers to segment customers based on their interests, behavior, and demographics to create targeted campaigns for contract renewals.  ABM tools like DemandBase help businesses identify high-value accounts using AI and data analytics. Performance analytics and reporting from such tools enable businesses to measure campaign effectiveness and make data-driven decisions through targeting specific customers.   

4. Cross-sell and Up-sell

Sales tools for Cross-selling and Up-selling

For ‘Cross-selling and Upselling‘, increasing the quantity of initial purchase decisions and identifying additional needs of a customer are top priorities. Key Account Management tools can help build strong, long-term customer relationships to achieve this.  Digital KAM tools like DemandFarm provide improved customer insights which can be used to assess their cross-selling and up-selling needs and capitalize on white space opportunities.  Such platforms provide a complete view of the customer, enabling sales teams to identify cross-selling opportunities and offer complementary products or services to increase revenue. Additionally, by analyzing the customer’s usage patterns and identifying their needs, key account management platforms can help sales teams identify opportunities for upselling. Intelligent insights into customers’ businesses and their pain points, allows sales teams to identify whitespace opportunities through which tailored solutions are offered to increase revenue.

Marketing tools for cross-selling and upselling

For starters, marketing approaches that help cross-sell and up-sell should focus on brand marketing, thought leadership, product marketing, and collaborations with partners and influencers. This ensures that the customer is aware of additional products, features, and customized upgrades that they can add-on to their existing business with an organization.  Account-Based Marketing tools also prove to be an effective way to increase cross-sell and upsell revenue. An ABM tool like Terminus ensures a predictable pipeline and impacts revenue by moving away from traditional marketing strategies focused on leads to ABM strategies with a larger focus on customer retention or top accounts.  Don’t forget that the revenue platform changes based on the dominant revenue stream! An ideal revenue platform should be able to adapt to the changing needs of your business and provide the specialized tools required to maximize your revenue streams.  

Bottom-line!

  Wearing a funnel lens to all streams of revenue will turn out to be misleading. Your business strategy will have to change, adapt to and depend on the sources of revenue mentioned earlier. Assessing the type of B2B company and what share of the revenue comes from which source takes over the traditional sales funnel thought. So, the typical role of sales and marketing also transforms to cater to the revenue stream. The best way to go forward will be to identify the dominant revenue streams in your company, and align marketing & sales towards maximizing those sources.