Pipeline coverage needs are shifting all the time–the status quo of 3x coverage has now expanded to 5x and beyond. We talked with Jon Miller, CMO of Demandbase, to get his take on pipeline coverage and how to keep up with your team's needs.
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In the world of B2B SaaS, generating pipeline coverage is a crucial aspect of success for sales and marketing teams, and that’s become more true now than ever.
What used to be a pretty safe coverage model of 3x pipeline, has gotten more complicated and nuanced as the market has shifted. Now, the pipeline coverage needs of most teams have increased closer to 5x, and as we heard during our Spring ’23 Pipeline Summit, it isn’t as simple as just declaring WE NEED MORE PIPELINE!
To shed light on how we should be thinking about our pipeline needs, we had the opportunity to speak with Jon Miller, a marketing legend and founder of Marketo and current CMO of Demandbase.
In this session, Jon shared his insights on pipeline coverage, sales and marketing alignment, and effective marketing strategies amid the changing landscape with our CMO, Maura Rivera.
With sales cycles becoming longer and more stakeholders involved (Buying Groups, have you heard of them? Jon has, and he’s ready for this next evolution in buying!), sellers are facing challenges in today's market.
As marketers, it is essential to provide them with sufficient pipeline coverage. Jon emphasizes the distinction between new business pipeline and expansion pipeline, highlighting the need for adequate coverage to achieve future goals.
I think it's worth reminding ourselves that primarily we're talking about new business pipeline, not just expansion. When it comes to pipeline coverage, we need to calculate it based on our bookings goals, sales cycles, and win rates. Understanding these metrics and doing the reverse waterfall math allows us to determine the amount of pipeline we need."
When it comes to calculating pipeline coverage, Jon explains the common approach used by most companies. This involves analyzing bookings goals, sales cycles, and win rates through reverse waterfall math to determine the required pipeline. However, he cautions about the importance of clear communication between marketing and sales teams regarding the type of pipeline being discussed.
When do you know you need to recalculate? Easy. Anytime any of your pipeline metrics (win rates, deal size, and sales cycle length) deviates from your average by more than 5%, it’s time to take another look.
To recalculate, Jon dropped a simple but solid formula for recalculating that we know we’ll come back to time and time again.
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If you need $3M of new business revenue in Q2, and your win rate is 20%, you need $15M of net new pipeline. Maybe you’re coming into the quarter with $8M of open pipeline, so you actually need to generate $7M of new pipeline to have that coverage.
But then the question becomes how many opportunities you need to open, which depends on your Average Sales Price (ASP). Most of us are seeing ASP drop in this tough market, so it’s time to recalculate that as well. If your ASP went form $15K to $10K, and your win rate dropped from 25% to 20%, you just went from needing 466 opps to 700—that’s a big gap that you need to factor into your pipeline coverage modeling.
Jon acknowledged that the current market conditions have necessitated a shift in mindset. With sales cycles getting longer and win rates declining, generating more pipeline has become even more crucial. He shared eye-opening statistics from a recent benchmarking report, emphasizing the need for increased pipeline creation to match the evolving sales landscape.
These kinds of data points can make it hard for marketing teams to focus, but now is the time to tighten up your channels and do fewer things better, not more with less.
Jon challenged this mantra many of us have heard ad nauseam, “Do more with less.”
Instead of expecting individuals to work harder, he suggested finding ways to work smarter. This may involve doing fewer activities but executing them better and leveraging more intelligent strategies. Account-based marketing (ABM), for example, is one approach that focuses resources on high-value accounts, maximizing efficiency and results.
I don't like the phrase do more with less. I think it's just asking people who are already working really, really hard to work even harder somehow. The definition of insanity is just doing the same thing and expecting different results. Even worse is doing more of the same thing expecting different results.”
Jon discussed the limitations of measuring pipeline sources individually and the need to shift towards team-based metrics to build stronger alignment across all areas of your organization. He encouraged embracing the concept of team-sourced pipeline, where all teams share a unified goal. By eliminating finger-pointing and acknowledging the interdependencies between teams, organizations can foster a collaborative environment focused on collective success.
Regarding compensation and bonuses, Jon emphasized aligning them with the team-sourced pipeline metric. He explains that rewarding individuals based on team performance promotes a sense of unity and shared responsibility. While individual metrics can still be measured to improve performance, the primary focus should be on driving overall team success.
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