- Top 5 Reasons Users Prefer Vertify’s RevOptics over Spreadsheets - July 24, 2020
- Data Hygiene and The Cost of Doing Nothing - July 8, 2020
- Dirty Data: A Trickle, then a Torrent - May 6, 2020
Account-based Marketing(ABM) has certainly been a hot topic in recent years. While ABM has been around for decades(first coined by ITSMA in 2003), it really picked up momentum in 2015 with the rapid expansion of MarTech applications. According to a recent ABM benchmark study, 53% of respondents are in the exploring or experimental stage. The rest identify themselves as already running a more mature ABM program. ABM is the logical evolution as organizations look to align better and optimize revenue teams, so I’m not surprised by these response rates. If an organization isn’t running ABM, it’s thinking about it.
The benchmark survey also reports that respondents spend, on average, 29% of their total marketing budget on ABM, and 73% of them plan to increase their ABM budgets in 2020.
Having been a practitioner of ABM for a few years now, I’d like to impart some wisdom learned along the way through trial and error. Before any organization starts diverting existing marketing and sales resources to an ABM program, it needs to assess whether ABM is a strategy well-suited to its business model. If so, the next question becomes: What portion should you allocate to ABM in a way that ensures you achieve your revenue objectives?
Assessing ABM suitability: What does your data tell you?
Since the principle of ABM is aligning data-driven marketing with sales efforts toward a tightly defined group of target accounts, it begs the question of whether your available market opportunity even justifies ABM in the first place.
Three critical data points to consider:
- What’s your average annual contract value (ACV)?
- How long or complex is your sales cycle?
- What’s the size of your serviceable obtainable market?
Having a higher average ACV, longer or more complex sale cycles, and a smaller group of target accounts tends to be a better fit for ABM. Whereas, lower ACV, shorter sales cycles, and a broader available market might be ill-suited for ABM. However, many companies fall somewhere in between, i.e., moderate ACV and available market. In which case, the question turns to: Does a hybrid approach make sense, and how can you strike the right balance of budget, time, and resources? How does taking a hybrid approach impact overall deal volume and revenue?
“Having a higher average ACV, longer or more complex sale cycles, and a smaller group of target accounts tends to be a better fit for ABM.”
The math isn’t very complex; calculate how many opportunities you need to get into your funnel to achieve your revenue goals. Consider historical lead conversion rates, sales velocity, and win rates. If your lead volume at the TOF goes down, you need to offset this with higher average ACV, shortened sales cycles, or improved win rates.
This analysis can help you decide where in the funnel, it may be worthwhile to redirect some time and resources to ABM. In my experience, ABM hasn’t been a cost-effective use of resources for top-of-funnel(TOF) brand awareness and early-stage demand-gen campaigns. Trying to use ABM to draw attention from prospects who aren’t aware of your company or product can be an expensive and futile undertaking. Again, the intent of ABM is aligning marketing and sales activities towards highly qualified targets. Creating awareness among potential buyers that aren’t ‘in-market’ or in the very early stages of the buyer’s journey might be better left to traditional volume-based marketing activities.
ABM offers better ROI when focused on well qualified mid-funnel pipeline opportunities. Using well-orchestrated ABM plays to create valuable and personalized experiences for buyers to accelerate sales cycles can offset marketing spending fewer resources on getting leads into the funnel.
Nailing down your ideal client profile
Without an accurate ideal client profile(ICP), you can waste a lot of time and resources pursuing target accounts that are a bad fit. Developing an ICP should be conducted by both sales and marketing to eliminate any ambiguity. The process requires a fluid, iterative process that routinely reviews the attributes of existing clients and also evaluates sales opportunities that were lost.
“Developing an ICP should be conducted by both sales and marketing to eliminate any ambiguity.”
Analyze your most profitable clients to uncover their unique traits like why they use your product or service. How long was the sales cycle? What is their average lifetime value? If you’re using Net-Promoter score or other loyalty metrics, what is their score relative to other clients? Which channels or campaigns led them to you in the first place, and what were the customer acquisition costs? Ideally, you want to pursue target accounts that are the best fit for your offering, have higher average ACV, cost the least to acquire, the least to service, have shorter sales cycles, and the lowest churn rate.
Also, take the time to analyze the outliers; you may have clients that look like odd ducks. But upon further examination, they can provide ideas to expand your available market and target account list by identifying look-alike companies.
Balancing ABM with volume-based marketing
If you think your organization might be better suited for a hybrid approach, focus on sales velocity: a simple formula that measures how quickly deals speed through the sales pipeline to generate revenue.
Sales Velocity = (# of Opps x Avg. Deal $ x % Conversion Rate)/ Avg. Conversion Time [in days]
Sales velocity can provide insights on which TOF campaigns or channels are creating high-velocity leads.
Use this data to better segment target lists and double-down on the volume-based campaigns yielding the best-qualified leads. Sales velocity also reveals bottlenecks in your sales process and where deals are stalling. Use those insights to determine where to focus ABM tactics that get deals back on track. Finding the right balance isn’t always easy and it will take some time, but basing your decisions on data rather than emotion or gut-feel will get you there quicker.