A Work in Progress with the Demand Waterfall: Getting to Holistic Funnel Analysis
By this point, most B2B marketers hold the SiriusDecisions demand waterfall as sacred.
It’s our playbook, our barometer of success and our sanity check when others might try to draw us into old school measurements. But before we go patting ourselves on the back for implementing the waterfall, we should make sure we’re using it the way it’s intended.
I recently had the pleasure of attending Terry Flaherty’s session at the 2014 SiriusDecisions Summit on Next Generation Waterfall Diagnostics. Part thought leadership, part marketing therapy session, Terry’s presentation outlined a Myers-Briggs-like personality test for assessing the health of your demand waterfall based on some key diagnostic questions. The hypothesis being that everyone’s funnel is different and by examining conversion rates and trends, marketers can shine a light on the specific personality disorders that could be impacting revenue health.
Some of the key diagnostic questions the session outlined were:
Will the current waterfall support revenue goals? How are we performing against our peers? How are we doing compared to last year? What are the key points that are restricting growth?
Assessing the Demand Waterfall
Marketers today are fortunate to have a framework for answering these questions but getting the hang of holistic
demand waterfall diagnostics can take some work. As Terry pointed out, assessing the heath of your funnel based on individual metrics can lead to false conclusions. This seems pretty obvious yet so many marketers zero in on a single metric, expecting it to be the silver bullet.
For example, a revenue shortfall is blamed on top of funnel volume when, in reality, it’s a combination of poor lead qualification and disciplined pipeline management that leads to inflation. Or an over production of “qualified leads” is applauded when really it indicates problems with lead scoring that ultimately indicates quality issues. The waterfall is like the human body, complex and interconnected. It is rarely a single metric that tells a story and Terry cautioned the audience that waterfall diagnostics must be holistic – we must explore the interrelated impact.
The analogy extends to other marketing metrics and I will admit to falling into this trap many times throughout my career. When analyzing campaign performance, if we look only at a single metric, we negate others that might indicate success. For example, a program that is deemed a failure because of a high CPL (cost per lead) might be a leader based on lead quality or opportunity influence. A low volume program might surprise us when examined on the basis of net new names added to our funnel. No one metric is ever the silver bullet.
Similarly, the demand waterfall and its associated conversion and trends must be analyzed alongside lead qualification standards.
How are inside sales call volumes tied to the volume of leads being qualified and passed to field sales? How does the number of call attempts impact lead to opportunity conversion rates? Is there a correlation between inside sales incentives and poor down funnel conversion rates? Does our process incentivize the right behavior and truly align marketing goals with sales performance metrics?
The Key to Success with the Demand Waterfall?
It’s no wonder that holistic waterfall analysis is tricky business. In addition to the framework itself, none of this can happen without tight marketing and sales alignment. These types of diagnostics cannot happen in a vacuum. Shared definitions, process and goals are critical to making the waterfall a meaningful system of measurement.
For successful symptom identification and resolution, marketing and sales must have one view of the truth when it comes to the metrics that matter. The most successful organizations will not only embrace this framework and apply rigorous diagnostics, they will take a top-down approach where these indicators become the common language for assessing the overall health of the business.
Read more about marketing and sales alignment in this guest post from Matt Heinz.