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    Quota Management: How to Create Revenue Commitments for Marketing & Customer Success

    Ever wonder why sales is the only revenue team with territories and quotas? Today’s latest hottest best practice challenges this traditional status quo. In fact, one of the main symptoms that your quotas need a revamp is if marketing and customer success don’t have revenue commitments. 

    As someone whose team is quota-ed for producing 20% of booked business, I can personally attest how much more we focus on revenue optimization—rather than squabble with Sales over the definition of a Marketing Qualified Account.

    This blog will cover:

    • How quota management effectively orchestrates revenue performance
    • 5 kinds of quotas to consider
    • Addressing the all important topic: Sequencing
    • Building a scalable process in 3 steps
    • 7 ways to craft winning quotas
    • The quota management maturity curve

    How Quota Management Effectively Orchestrates Revenue Performance 

    Done right, sales performance management (SPM) orchestrates, motivates, and incentivizes your entire revenue organization, positioning all teams to optimize revenue performance—marketing, sales, customer success/client service, and sometimes product. (SiriusDecisions and Aberdeen both predict a 3X revenue multiple annually from this kind of cross-team coordination.) 

    That’s why every effective SPM strategy and technology roadmap incorporates these three pillars. But many organizations overlook one of the three prongs: Orchestration—a data-based, insights driven approach to five different disciplines:

      1. Quota management 
      2. Territory management
      3. Capacity planning
      4. Sales planning
      5. Sales forecasting. 

    When you’re thinking about quotas, it’s important not to commit the fatal error of only involving Sales. Digital marketers, demand generation managers, renewal managers, customer success specialists, and more all play significant roles in accelerating revenue performance.

    Consider Kinds of Quotas

    Before you can craft a blueprint for revenue teams’ success, you need to understand what kinds of quotas are out there. The type of quota that you use largely depends on your goals. Following are the five most common kinds.

      1. Volume. Volume-based quotas incentivize professionals to sell as many units or as much revenue as possible.
      2. Profit. This kind of quota reflects the margin or gross profit of an individual sales contributor, team, or product or services cluster.
      3. Activity. Activity quotas compensate revenue professionals, often sales or business development representatives, to complete a certain number of activities — such as provided demos, scheduled meetings, completed calls, or even sent emails. 
      4. Combination. A combined quota strategy might pair two or three quota types, such as profit and activity quotas. This generally happens when management wants to make quota feel more attainable.
      5. Forecast. With established territories, forecast quotas are based on historical performance of the revenue goal that region needs to hit in a set time period.

    Now let’s understand how to bring all of these pieces together.

    Address The All-Important Item: Sequencing

    Quota creation and management are part of a larger motion that must be completed before you can begin effective revenue planning, so nailing your sequence is an important first decision. 

    Generally speaking, planning’s components progress in one of two ways.

    Scenario 1: If you’re in an established marketplace. 

    In this kind of decision environment, your team is operating with mostly known quantities, and you’ll likely need to follow these steps:

    1. Target. Begin with the end in mind, probably with the revenue number that’s been given to you. What percentage increase does that revenue target represent? 
    2. Capacity. From that percentage increase, determine additional headcount that you’ll need to make the goal, using historical knowledge, data, and competitive benchmarks. 
    3. Quota. You likely already know what constitutes a realistic quota, since you’ve honed the craft while endeavoring to establish your market. Valuable reference points, once again, include historical data and competitive insights. Be sure you can track revenue across the entire customer lifecycle. For example, knowing how many net new customers you need will then tell you how many meetings and leads your marketing team must produce.
    4. Territory. Divide territories to realistically support those quotas, again using what you know, as well as any comparative and historical data that you have, across headcount. 

    Scenario 2: If you’re attacking a greenfield. 

    When targeting greenfield, you aren’t operating with many known quantities, so you’ll likely need to follow these steps:

    1. Target. Quantify your overall target in terms of revenue.
    2. Quota. Divide that number into individual quotas. You may reference prior experience for this as well as with your peers. Industry and growth-stage benchmarks are also highly recommended. Diving deep with your customers and quota-ing your client service team, for example, can effectively hone your product roadmap while priming your business to harness the cost efficiencies—5-25 times lower costs when compared to net-new acquisition—of expansion selling, and cross sell and upsell.
    3. Territories. Without historical data or an established market, it’s hard to know what size territories are necessary to set the team up for quota attainment. Again, benchmarks based on industry and company size are valuable.
    4. Capacity. Only after these steps are completed does it make sense to determine headcount.

    Build A Scalable Process in 3 Steps

    Spreadsheets do not work for creating quotas. Let’s say that again… 

    Spreadsheets do not work for creating quotas. And again...

    Spreadsheets do not work for creating quotas.

    Instead, follow these three steps to make your process algorithmic.

    1. Tech back the night. Produce quotas using your automated system.
    2. Download and pivot the information. It’s common for management to create a top-down summary of predicted performance, or for the field to build a bottom-up model with the same data. Sometimes, teams produce both.
    3. Compare the outputs. Gradually work towards realistic quota targets using both, or all three, approaches.

    Awesome, you now have your process! 

    Apply These 8 Ways to Craft Winning Quotas 

    According to a McKinsey survey of 12,000 sales people at 90 businesses, only 40% used quota management best practices. Now is a great time to get ahead of your competition.

    1. Plan for the win. How you craft a sales plan depends on whether you’re selling into a greenfield situation or an established marketplace. (There’s more about this topic in the Sequencing section!) Inefficient assignments squander revenue in the near term, and tarnish your revenue team’s trust and productivity over the long term. 
    2. Update the tools in your toolbox. Brace yourself: 83% of companies still heavily or moderately use spreadsheets for quota design. Spreadsheets also make dissecting meaningful information impossible. Over time, spreadsheets are literally unable to scale, as inconsistent data sources proliferate. That impacts your (in)ability to confirm data accuracy, consolidate data across regions, or view global performance by brand, product, location, vertical, team, or season. 
    3. Work backwards to set activity goals. Enhance decision making by leveraging AI to predict key metrics including ideal ramp times, quota targets and seasonality in sales. Companies that “peanut butter spread” quotas across similar roles see 14% less quota attainment than organizations that assign quotas based on territory-specific opportunity, so be sure that your quota science is actually scientific and data-driven.
    4. Calculate top down and bottom up models. Top down models may not give enough weight to a sales team’s historic data and proven abilities, while too heavily prioritizing the board’s sometimes unrealistic expectations.
    5. Waterfall it. Waterfall modeling sets your target goal at the highest level, then passes the model down each level of the dimension hierarchy. Each level can make confidential adjustments before passing the model along. This methodology works particularly well when planning is decentralized, incorporating input from regional and business line leaders. 
    6. One is not done. Create iterative snapshots of your plans, and model important “what-if” scenarios and monthly forecasts. Make sure you analyze side-by-side comparisons across your teams. Our favorite pro tip is to run all three top-down, bottom-up, and waterfall methodologies. Then, compare and tweak outputs until your results are similar.
    7. Learn with the machines. Deep learning built into state-of-the-art tools can dramatically uplevel the accuracy of your quotas, and overall forecasts and plans. For example, sales intelligence will tell you if too many deals rolled over from last year, and your pipeline is too soft.
    8. Communicate like a pro. One in every four salespeople who leaves voluntarily, leaves because of unachievable quota, according to SiriusDecisions. Unfair quotas—or even the perception of inequality—can prompt resentment, drama, and even a mass employee exodus faster than you can say, The Queen’s Gambit.

    While the following best practices will characterize a holistic methodology and process, the exactness of your unique company’s revenue science depends on its sequence—so be sure to use what you learned in this blog.

    The Quota Management Maturity Curve

    Breaking out of data jail happens in the following three phases.

    1. Collaborative. Gone are the days of Sales siloes. Revenue optimization requires leadership to get everybody in the room: Pre-Sales, Inside Sales, your marketing counterpart responsible for demand generation and digital marketing, the owner of the product roadmap, and whoever leads the team responsible for upsell and cross sell.

      It goes without saying that all contributors need one view of digestible data that lends actionable insights. This requires you to seamlessly integrate your existing tech stack—including but not limited to your Customer Relationship Management, Human Capital Management, Enterprise Resource Planning, Operational Sales Management, Advanced Quota Planning, and Incentive Compensation Management solutions with other enterprise systems. 
    2. Continuous. In days past, you updated sales plans and quotas once a year—maybe quarterly if you were extra on point. But Forrester research shows the modern revenue team has to reschedule the schedule and meet continuously to analyze and adapt plans. That means at least bi-weekly. As Mary Shea, Principal Analyst at Forrester said, “Annual or even quarterly planning is now a thing of the past. It’s important to have a continuous, data-driven approach to planning — to innovate and stay ahead of the competition.”
    3. Automated and data-driven. Speaking of the need to course-correct easily and often, the pinnacle of this maturity curve involves having the tools to proactively monitor and continuously optimize sales plans with changes in business conditions to course-correct in real-time. Often, you can enhance decision making by leveraging artificial intelligence to predict key metrics including optimized territories, ideal ramp times, productivity targets, and seasonality in sales. 


    According to McKinsey, organizations that institutionalize the best practices we’ve just discussed realized one-time revenue improvements of between 20% and 30%—and later annual increases of 5% to 10%. 

    Now, on to better quota management! To learn more, access our whitepaper, “How to Orchestrate Revenue with Better Quota Management.



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