How HubSpot Uses Service Level Agreements To Align Marketing & Sales
If you are a HubSpot sales manager, you will get an email every night from your friends on the marketing team. This email includes a chart outlining how marketing is performing against its monthly goal to deliver a pre-defined number of quality leads. The underlying strategy and alignment of the two teams that results from this shared information has been a major contributor to the company's growth in the past six years!
If you have been following Hubspot, the #1 marketing automation solution worldwide, for a while, you will know that the company is somewhat fanatical about their growth! Only a few weeks ago at their yearly Inbound conference, the founders of HubSpot, Dharmesh Shah and Brian Halligan, shared with an audience of 19,000+ marketers, sales people, journalists, and agency partners that HubSpot is now helping 21,000 customers in 90 countries to grow using inbound marketing, lead generation, and sales enablement.
One of the best testimonies to their dedication to growth is the recent announcement of their Growth Stack, which includes HubSpot's marketing, sales, and CRM software. Why? Because aligning your sales and marketing teams with each other will make them more efficient in closing any loops — amplifying their successes rather than working against each other.
Aligning Marketing & Sales Is Crucial
It is no secret: marketing and sales have not always been the best of friends. Sales people get frustrated with marketing for delivering too few or poor quality leads. In fact, sales often ignores marketing efforts and recreates up to 85% of the collateral that marketing already has created. On the other hand, marketing feels separate from sales.
Without proper alignment, the marketing strategy often becomes ineffective due to a lack of good definitions and agreements. A formal Service Level Agreement between the two teams could alleviate many of these issues. In fact, only 56% of companies who do NOT have an SLA in place feel their marketing strategy is effective, while 82% of those who do are confident in their marketing.
By definition, a Marketing & Sales SLA is a formal commitment between the service provider (marketing) and the end user (sales). In our case, it outlines precisely and exactly what sales can expect to receive from marketing, including a statement of a commitment to deliver a minimum number of leads per month that meet the predefined quality criteria.
However, not many companies have such an agreement. According to the State of Inbound Report 2016, only 22% of businesses have a formal service level agreement in place between their marketing and sales departments.
HubSpot's Internal Commitment To Marketing & Sales Alignment
At Inbound 2016, Melissa Miller, the Director of Marketing Operations at HubSpot, outlined how she and her team grew the HubSpot marketing team from tens of employees to hundreds.
Of course, there were a unique set of challenges, but for Melissa and her team, the number one priority was always clear: better align their sales co-workers to:
- Commit to specific marketing and sales goals (# of leads)
- Be able to hold them accountable
- Publicly share progress on hitting those goals with Sales
- Be transparent about the marketing team's performance
- Communicate openly and consistently with the sales team and other members of the organization
The team wanted to ensure that, if sales was having a tough month, they would be able to answer the question "Why?". Was it because marketing did not deliver the number and quality of leads? Alternatively, could it be unrelated to marketing (e.g., seasonality, economic change, competitive pressure)? With the right guard rails in place and data to back everything up, they set out to prevent any conflict in the first place.
Before implementing a service level agreement, Melissa did her homework. She talked with both marketing and sales management to find out what sales wanted and what marketing could deliver. Then she analyzed the mutual goals and identified the appropriate reporting tools to implement this.
HubSpot's Approach To Marketing & Sales Service Level Agreement
Depending on your company size, the number of marketing employees and salespeople you have, and your growth goals, you can approach your SLA in various ways. As an inspiration, here is how HubSpot does it.
Step 0: Define Everything
When the team set out to redefine the relationship between sales and marketing at HubSpot, they needed to make sure that all parties were on the same page. Before you dive head-first into your calculations, it is best to define your terminology first. This includes answering questions such as:
- What unit of measurement will be used for leads? E.g., Marketing Qualified Lead (MQL) or Sales Qualified Lead (SQL)
- How are these defined (add descriptions)? E.g., new people entering the funnel, leads marketing or sales deems qualified
- Which movable metric that marketing can drive will we be using? This metric has to align with the sales process — e.g., customers that are outside the reach of marketing, TOFU is not qualified enough
- What are the criteria for an MQL? What about an SQL?
- What information will sales reps receive and what is the expectation for sales to follow up?
While it was not mentioned in the presentation, now is also a splendid time to review the sales process, standardize it across the board, and make sure every person in the organization understands his or her role and responsibilities in it.
Step 1: Dig Up Historical Data
Now it is time to roll your sleeves up and dig into the data.
First, you will want to dig into your historical data to figure our your expected revenue per MQL. Figure out how long your average sales cycle is and orient yourself on that timeframe.
Step 2: Determine Your Expected Revenue Per MQL
To calculate the worth of your MQL, first pull the number of net new MQLs per month from the x last months (e.g., in the HubSpot example it was 800 total MQLs) and calculate the total MQL-influenced revenue (e.g., $80,000) and divide it by the number of MQLs. In this example, your MQL is worth $100.
Step 3: Determine Your Revenue Target
Now it is time to look forward and determine your revenue targets. To do so, ask yourself:
- What are my company's revenue goals this year (monthly basis)?
- What is the marketing team's contribution to these goals?
Let's say your revenue target is $100,000 and marketing contributes 75% to it. You then have a marketing-influenced revenue target of $75,000.
Step 4: Set Goals Based on Targets
Now that you know how much your MQLs are worth and what your revenue target is, you can back into those goals by dividing the marketing-influenced revenue target by the worth per MQL. This is the number of MQLs that your marketing has to produce. In this example, it is 750.
Step 5: Confirm Your Goals Are Realistic
Of course, setting goals is great, but you also need to verify that they are realistic. If not, the best-intended calculations are useless and will be disregarded by your team.
After you have determined your goals and have confirmed that these are in fact achievable, you need to ensure transparency and constant communication. You will need to build a way to report on your progress and how it measures up against your goals, to identify the right recipients (e.g., entire marketing team, executive team, and heads of sales department) and to set up a regular delivery system, such as the nightly emails. Push notifications probably work here better than pull notifications.
To ensure the success and organization-wide adoption of this, you will need to be sure to share your goals. Explain your reporting, set expectations and, of course, be open to feedback. Because your SLA will need to evolve as your team learns what works and what doesn't and as your business changes, you will need to be able to continually iterate to improve!
To close, Melissa had another insight: all this could become messy, especially if you have a large sales team, sell multiple products, have multiple leads per deal, or have a small sample size.
No matter how big or small your sales and marketing team is, it is necessary to communicate what sales wants and marketing can achieve. Be sure to bring everyone onto the sales page and formally agree on the number and quality of leads that marketing will need to produce every month to enable sales. Only if sales sees marketing as their supporter and enabler and marketing perceives themselves as the biggest service provider to the sales organization, both teams can start working with each other — feeding into each other and growing together.