Sunday, May 30, 2021

Companies Take a More Holistic Path to Managing Revenue Growth

Changes in the business environment have led many B2B companies to adopt new approaches for managing their revenue generating activities. While the specific approaches vary, they all arise from the recognition that consistent organic revenue growth results from a combination of related activities. Therefore, it's important to treat such activities as components of a larger revenue generation process that must be managed holistically.

The need for a better approach to managing revenue generation and growth has been driven by the convergence of several factors, including:

  • The growing power and independence of business buyers enabled by an abundance of easily-accessible information
  • The need to provide outstanding experiences at every touchpoint across the entire customer lifecycle
  • The growing use of "as-a service" and other types of subscription-based (or subscription-like) business models
Meanwhile, the leaders of most B2B companies are under persistent pressures to provide organic revenue growth that is consistent, predictable and sustainable. To meet this challenge, many B2B companies have changed how they manage the business activities and processes that impact revenue generation.
The Rise of the Chief Revenue Officer
Some companies have responded to the growth management challenge by creating a C-level position that is usually called the chief revenue officer. The specific duties of the chief revenue officer - and the scope of his or her authority - vary across companies, but the CRO is usually tasked with managing most or all of the company's revenue generating functions. This will often include marketing, inside sales/business development, direct outside sales, channel sales and customer success/customer service.
Most of the early adopters of the CRO role were startup or early-stage SaaS companies. I have not seen any reliable estimates of how many or what kinds of companies now have a CRO. However, a LinkedIn search yesterday using the term "chief revenue officer" identified over 250,000 LinkedIn members with that job title.
The Emerging Revenue Operations Function
Some companies have sought to address the growth and revenue management challenge by creating a revenue operations (a/k/a RevOps) function in their organization. The RevOps concept is relatively new, and it's still evolving. So, as we'll see, companies have implemented RevOps in a variety of ways.
In a 2019 study report, SiriusDecisions (now part of Forrester) defined revenue operations as, ". . . a combination of sales operations, marketing operations and customer success operations teams that work together according to a set of defined operating principles to maximize revenue and performance." (Source:  Align to Win:  The Rise of Revenue Operations)
Research has shown that the use of RevOps functions is growing. In a 2019 survey of 2,462 B2B sales and marketing professionals by LeanData and Sales Hacker, 31% of the respondents said their company had a revenue operations group, up from 20% in the 2018 edition of the survey. Moreover, 27% of the respondents in the 2019 survey said they were actively building a RevOps function. That was up from 15% in the 2018 survey.
Both the LeanData/Sales Hacker study and the SiriusDecisions study identified three major models of revenue operations.
  • Virtual Alignment - Companies using this model do not have a formal RevOps structure or a dedicated RevOps team. In this model, individuals from each operations team (marketing, sales, customer success) agree to work with each other on a cooperative basis. SiriusDecisions called this model a "coalition of the willing."
  • Hybrid - This is a "somewhat centralized" model of RevOps. Companies using this model have at least two operations functions that report to a RevOps leader, while their other operations functions still report to their departmental leader.
  • Centralized - This is the most formal structure for a RevOps function. Companies using this model have s designated revenue operations leader in place, and some also have a dedicated RevOps team.
The following table shows the percentages of participants in the LeadData/Sales Hacker and SiriusDecisions studies using each model of revenue operations.

As the table shows, the most popular RevOps model in 2019 was virtual alignment, which reflects the relative newness of the RevOps concept. This also suggests that company leaders want to prove the value of RevOps before they make major changes in their organizational structure. As companies gain experience with RevOps, it seems likely that the use of a more formal and centralized RevOps model will grow.
Is More Needed?
Companies are hiring chief revenue officers and implementing revenue operations processes because they need to take a more holistic approach to managing revenue growth. These are steps in the right direction, but company leaders may need to do more to achieve their customer experience and revenue growth goals. I'll discuss what else may be needed in a future post.

Sunday, May 23, 2021

How Quickly Will U.S. Consumers "Move Past" COVID-19?

Back in March, I published a post describing the increasingly optimistic outlook for the U.S. economy in 2021. Then last month, I wrote about the equally optimistic outlook for marketing and advertising spending this year.

The optimism embodied in the economic and spending forecasts is largely due to a widespread belief that the COVID-19 pandemic in the U.S. will be brought under control in the near future and that this will unleash pent-up consumer demand that will drive rapid economic growth, increased consumer spending, and falling unemployment.

Three recent surveys have provided several important insights regarding the sentiment of U.S. consumers. These surveys explored how consumers are thinking about the overall state and direction of the U.S. economy, their spending plans, and their attitudes about returning to prepandemic behaviors and routines.

Consumer sentiment is obviously important for B2C marketers, but it also matters to B2B marketers. Consumers are at the end of many B2B value chains, and therefore consumer demand influences the revenue growth potential of many B2B companies. Boeing doesn't sell commercial airplanes to consumers, but the willingness of consumers to travel influences how many planes Boeing can sell.

The McKinsey Survey

Over the course of the pandemic, McKinsey & Company has produced an impressive library of resources addressing the public health aspects of COVID-19 and the pandemic's economic and social impacts. McKinsey's research has included periodic surveys of consumers and business executives.

The most recent consumer survey was conducted February 18-22, 2021. In this survey, 41% of the respondents said they were optimistic about the recovery of the U.S. economy, while only 14% said they were pessimistic. The survey defined optimistic as:  "The economy will rebound within 2-3 months and grow just as strong as or stronger than before COVID-19." The remaining 45% of the respondents had a mixed view, believing that the economy will be impacted for 6-12 months or longer and will stagnate or grow slowly thereafter.

Thirty-three percent of the respondents said they were already engaging in "normal" out-of-home activities (returning to stores, restaurants, etc.), and 75% of vaccinated respondents said they expected their routines will return to normal by the end of this year.

Fifty-one percent of the respondents said they expected to spend extra by splurging or treating themselves, and about half of these respondents plan to spend more in the near future.

The Gartner Survey

A January 2021 survey by Gartner paints a similar picture of consumer sentiment, although the overall tone of the survey report is more cautious. The report states:  "CMOs should plan for the possibility that consumers may take longer to resume prepandemic behaviors, even after they have received the full two doses of the vaccine." (Note:  At the time of the survey, the single-dose J&J vaccine had not been authorized by the FDA.)

Gartner asked survey participants how soon they feel their life could return to normal after being fully vaccinated. Forty-five percent of the respondents said in six months or less, 36% said they were unsure, and 15% said in a year.

Gartner also asked survey participants about their willingness to engage in several specific activities after being fully vaccinated. The following table shows the four activities that respondents were most willing to engage in. Note that none of these activities was identified by a majority of the survey respondents. And only 15% of the respondents said they would be willing to stop wearing a mask or go to large public gatherings, even after being vaccinated.

The Pew Research Survey

One of the largest recent surveys addressing the "when will things get back to normal" issue was a survey of a nationally representative panel of 12,055 U.S. adults conducted March 1-7, 2021 by Pew Research Center. In this survey, Pew Research asked participants the following questions:

  1. "Just your best guess, how long do you think it will be before most businesses, schools, places of worship and other public activities operate about as they did before the COIVD-19 outbreak?"
  2. "Just your best guess, how long do you think it will be before the job situation in the U.S. recovers to about where it was before the COVID-19 outbreak?"
The following table shows how the survey respondents answered these questions.

As the table shows, 57% of the respondents believe it will take at least a year for most businesses and other public activities to return to normal operations, and more than eight out of ten of the respondents (81%) do not believe that unemployment will fall to prepandemic levels for at least a year.
My Take
I wasn't particularly surprised by the caution identified by the Gartner survey, which was conducted in January. At that time, the vaccine rollout was just getting started, and the number of daily new cases of COVID-19 was still high. I suspect if Gartner conducted the same survey today with the same survey panel, the results would be quite different.
I was somewhat surprised that a majority of the respondents in the Pew Research survey believed that most businesses and public activities won't return to normal operations for at least a year. The Pew survey was conducted in early March, by which time the number of daily new cases of COVID-19 in the U.S. had declined significantly, and it had become clear that the vaccine rollout was going well.
Current data from the CDC regarding vaccination progress, current data from the TSA regarding the number of people flying, and the latest quarterly earnings reports from several large U.S. retailers indicate to me that the "return to normal" is progressing even faster than many of us anticipated.

Top image courtesy of Robert Couse-Baker via Flickr (CC).

Sunday, May 2, 2021

Why It Pays To Be Empathetic and Benevolent

Empathy became one of the hottest topics in marketing last year. Yesterday, I performed a Google search using the term empathy in marketing for the period of March 1, 2020 through March 31, 2021. The search returned over 5.5 million results.

Marketing thought leaders and practitioners have long recognized that empathy plays a valuable role in marketing, but the COVID-19 pandemic elevated the importance of infusing marketing actions and communications with empathy. In a global survey of marketing decision makers conducted last fall by Salesforce, 81% of the respondents said their prioritization of providing customers with empathetic, personalized messages had increased because of the pandemic.

Social scientists generally define empathy as the ability to recognize, understand, and share the thoughts and feelings of another person. To develop empathy, marketers need to put themselves in their customers' shoes in order to understand and feel what their customers are thinking and feeling. With these insights, marketers will be better able to create content and messaging that will resonate emotionally and rationally with customers.

Empathy is also vital for effective B2B marketing because empathetic marketing communications will signal that a company is worthy of a customer's trust. And trust is the single most critical component of strong, long-lasting customer relationships. To be clear, empathy alone cannot create trust, but empathetic communications will make customers more inclined to extend their trust.

How Trust Arises

Trust has been widely studied by psychologists and other social scientists, so we have a sound understanding of what creates a willingness to trust and how trust develops. Most social scientists agree that an individual's willingness to trust another person or an organization - and the level of trust that will develop - largely depends on the perceived trustworthiness of the other person or organization. Most scientists also agree that the trustworthiness of a person or organization is primarily based on three factors - ability, integrity, and benevolence.

Therefore, the willingness of a potential buyer or an existing customer to trust a vendor depends on whether - and to what extent - the vendor exhibits these three antecedents of trustworthiness. In the trust context, ability and integrity mean what they normally do, but benevolence has a special meaning. The essence of benevolence is putting the interest of another person or organization above your own.

Ability, integrity, and benevolence are equally important for the development of trust, but benevolence is the most potent source of differentiation because it is the rarest of the three trustworthiness attributes. Benevolence is rare, not because most companies are intentionally "malevolent," but because the importance of benevolence is usually underappreciated.

The Importance of Benevolence

There isn't a lot of recent research regarding the role of benevolence in business relationships, but a 2016 survey of 2,400 consumers by MECLABS Institute shows why benevolence is so important. For this study, MECLABS divided the survey participants into two equal groups. One group (the "satisfied customers") were asked to think about a company they were highly satisfied with when answering the survey questions. The other group (the "unsatisfied customers") were asked to think about a company they were very unsatisfied with.

When the unsatisfied customers were asked which of thirteen statements were true about their experience with the company, the most frequently selected statement was:  "The company does not put my needs and wants above its own business goals." In this survey, 60% of the satisfied customers said the company often or always puts their needs before its business goals, compared to only 16% of the unsatisfied customers.

This study also demonstrated how benevolence contributes to important and valuable business outcomes. MECLABS asked survey participants how likely they were to take several actions, and the following table shows the stark differences between the responses of satisfied vs. unsatisfied customers.

The MECLABS study showed that the "value chain" of benevolence works like this:  Benevolence contributes to a perception of trustworthiness, which enhances the development of trust. And trust contributes to a higher level of customer satisfaction, which leads to improved business outcomes.

So, practicing benevolence isn't only "the right thing to do," it's also a powerful driver of business performance. And empathetic marketing communications are a vital link in the customer trust value chain.

Top image courtesy of EKG Technician Salary via Flickr (CC).