B2B Revenue Leaders: Are You Making This Costly Mistake During an Economic Downturn?
Economic downturns can be challenging times for B2B organizations, but they can also present an opportunity to find more scale in commercial models and drive more efficient, sustained growth.
When Demand Dips, Orchestrate Commercial Efficiency & Drive B2B Marketing Effectiveness
For most revenue leaders, when budgets tighten, there is an inclination to pull back in marketing and broader market development efforts before cutting back in demand capture and sales channels. This typically arises because of a sense of comfort with things like deployed quota and direct, last-touch attribution. Regardless of the driver, it is most often the case that a proportional rotation toward the bottom of the funnel can lead to a more inefficient model.
There is an interesting parallel of this dynamic within the B2C world, where many companies over-rotate towards down funnel tactics like search and affiliate because there is a sense of “certainty” around the ROI. The reality though is that this often creates poorly balanced efforts across the funnel and the down funnel marketing becomes increasingly less efficient. We often call this “falling prey to the measurement trap” because the comfort of feeling you have a sense of direct ROI does not necessarily mean the tactic works on its own, without the upper funnel support.
Our recent work with clients, as well as a wealth of emerging research points to the opposite. Investing in brand-building tactics and market engagement more broadly builds emotional connections and demand that can be captured when economic conditions turn more positive. In the B2B context, the commercial structure is a bit more complex. While the same tools for demand capture are often parallel (digital, social, direct CRM, etc.), upper funnel efforts can be more complicated. The true demand capture channel is actually most often a sales channel rather than a marketing channel.
Sales Productivity is Dependent on the Demand
For B2B, the demand capture element in the commercial model must extend all the way from the marketing through to the sales force.
During good times, B2B revenue organizations typically rotate towards a linear add sales capacity model. Enough demand exists in the market to keep each deployed sales resource ‘fed’, and the quickest way to grow is to simply add capacity. Here lies the parallel to the B2C world. In tough times, the urge is always to keep capacity in place, fearing an inability to capture the demand that does come through, rather than investing in the demand for the future. A technology industry CRO painted this anecdote during a recent discussion:
“Over the last couple of years, we’ve been building out our sales force to meet the demand we were receiving, but just as we thought we were reaching the right balance, the demand in market stalled some. Deals are getting delayed and our inbound is at about 70% of goal. Our biggest issue right now is feeding the funnel of the capacity we have in place.”
Essentially, sales team metrics become less efficient based on the market downturn. But, if that fact then leads to budget pullbacks up funnel, then amplifies the efficiency loss further as the demand spigot turns off. This often leads to a pack mentality in enterprise sales organizations and increases the tensions between sales and marketing.
Leverage Sales-Marketing Integration Differently
This is the opportunity for B2B revenue leaders to separate themselves from the pack by thinking and acting differently. Recognizing that sales capacity is by definition less productive in tough times is a perfect opportunity to invest in marketing to make it more productive. Here are three reasons why:
- Demand Creation is at a Premium
Marketing plays a crucial role in any B2B organization’s commercial model, helping to build brand awareness, drive demand, and nurture leads. Cutting marketing spend during a recession can make the sales capacity that exists that much less effective, reducing the ability of sales teams to reach new prospects and close deals. Your best sellers will appreciate a commitment to market engagement when other companies pull back.
- Organizational Scale Opportunity
A recessionary period can be the perfect time to find more scale in your B2B commercial model—deepening the connection between marketing and sales. When demand is down, organizations can focus on building their marketing infrastructure, enhancing their digital presence, investing in new technologies to support sales effectiveness, and improving their lead generation programs and processes. By doing so, they can build a stronger foundation to support sales channels for productivity growth and position themselves to capture market share when economic conditions improve.
- Retain Market Connection for Rebound
In addition to strengthening the commercial model, maintaining a strong marketing presence during a recession can help to reinforce an organization’s brand and build trust with customers and prospects. Going quiet and stopping promotions can create doubt in the minds of potential buyers about the organization’s commitment to the market and the value of its offerings. Sales can also play a supporting role in this process by turning more time and energy to market development. Ultimately, it provides sales teams with tailwinds when market conditions improve.
Tactical Steps for B2B Revenue Leaders
The starting point is to build a go-forward business case built on the dynamics of the efficient, go-forward model. This acts as a guide for decision-making as demand pulls back and adjustments need to be made, and ensures that all changes are in line with the go-forward vision. For smaller growth companies, this may be taking this opportunity to build the first meaningful market segmentation for differentiated sales and marketing approaches (think SMB vs. Enterprise), for larger companies it might include operational elements like recognizing the shortcomings of geo-based territories and dynamically. The beginning point of this exercise always utilizes the tension of yielding more with less to drive creative thinking. That exercise almost always leads to the role marketing can play in increasing overall commercial efficiency.
Next, it is critical to recognize that the upside from the changes in the go-forward business case are likely not going to be realized immediately. Where possible, use the downturn to ease into the transition. For example, if a new segmentation is deployed and fewer enterprise sellers are needed, let the natural attrition (voluntary or otherwise performance-based) help reshuffle the deck to where capacity is deployed.
Finally, ensure marketing is truly interconnected with the sales force and responds to individual channel issues. For instance, if in your large enterprise segment, ABM plays may be a great way to support account expansion sales plays to drive revenue growth when market demand stalls. This should increasingly be driven by interlocking goals and KPIs. Gone are the days when the lead funnel exists fully separate from the sales funnel, and bringing marketing and sales closer should also include more holistic views of measurement and performance reporting. Ultimately, in B2B, the marketing approach must link to the sales channels distinctly, and bringing marketing to the table in the model transformation is critical to identify the key scale points.
While it may be tempting to cut B2B marketing efforts during a recessionary period, doing so can hinder an organization’s long-term growth and success. Instead, CROs and B2B revenue leaders should view it as an opportunity to find more scale in the commercial model and strengthen the marketing infrastructure. This can help support the efficiency of sales channels and weather future downturns. By focusing on marketing as a key element of the commercial model during difficult economic times, organizations can emerge stronger and more prepared for the future.
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