Revenue operations function by bringing an organization's marketing, sales, and customer success departments together to ensure smooth end-to-end management. This approach is meant to "breakdown" any siloed activities between these teams.
RevOps brings teams together to provide users the best experience possible as they interact with various marketing, sales, and customer success touchpoints along the customer journey.
With this strategy, organizations seek to align and perfect prospect’s interactions with their teams and precisely determine the ROI in their departments.
A revenue operations approach can "act as a central point" from which a business can improve client acquisition, client satisfaction, recurring revenue, and other metrics that seek to evaluate how well a company is /how effective a business is at delivering to customers.
Every successful revenue operations approach needs a roadmap to guide professionals in the right direction to meet business objectives. With the help of AI and analytics tools, organizations can discover opportunities and improvement areas to determine their business's bottom line.
Not all metrics are created equal
Metrics help to evaluate and keep track of the current status of specific business processes.
While your operations team(s) implement various strategies to align marketing, sales, and customer success efforts and use these to drive revenue, making sure your teams pay attention to the right metrics is critical.
Vanity metrics look nice at a surface-level: they make a company look good and serve to validate a product or service. However, they are not tied to revenue and do not provide any information on ROI, customer value, or how successful your business is at delivering value.
These metrics look good on paper and often serve as "social proof" of the importance or the relevance of a company initiative – but the benefits stop there.
Examples of top vanity metrics include:
- Open rates for an email campaign
- Impressions, shares, comments, and number of followers on social media
- Organic traffic, page views, and bounce rate
- Cost per lead vs. Marketing Qualified Lead vs. Sales Qualified Lead
These metrics can provide a big morale boost to your marketing team and indicate a certain interest level in your content, but they cannot predict who converts to become a paying customer.
Measuring the metrics that matter
Your operations team should be looking at valuable metrics that often require time and reiterative testing to achieve.
The metrics that matter often provide enough data to help your team make sound decisions and take actionable steps to reach business goals.
If your business's primary objective is to increase revenue, paying greater attention to these is likely to bring your company closer to identifying and addressing the what, how, and why it is or is not achieving its revenue goals.
Metrics that matter for RevOps
To build a successful revenue operations system, measuring and observing the same value metrics is fundamental.
Metrics that serve as accurate revenue performance indicators include conversion rates, customer lifetime value, and sales cycle velocity. The results your revenue team attains can be accurately measured and equip your team with the data it needs to stay on course or refocus.
The central focus of RevOps is to increase business revenue. Without this, a RevOps strategy is likely unsuccessful and may require adjustments.
When measuring revenue, what exactly do you look for?
This will depend on the industry of your organization and the time period that you want to measure.
For example, in SaaS, annual recurring revenue (ARR) is the go-to way to measure revenue growth. In telecommunications, average revenue per user (ARPU) quantifies how much a company is perceiving. In the e-commerce space, monthly recurring revenue (MRR) is often used to measure revenue.
Why revenue is important
Just as important is assessing where the revenue is coming from and accounting for any changes in the product's pricing (s) or service(s) offered.
When identifying the revenue source, it is essential to determine if it is coming from new customers, returning customers, or any other source that may generate revenue.
Identifying how changes (including price changes) across your business impact revenue is imperative to calculating real growth. Determining how changes across your business impact revenue is essential to calculating real growth.
Mike Falahee, owner of Marygrove Awnings, explained how his company measures revenue performance.
"The most important metric for measuring revenue growth is Real Revenue Growth (RRG), as opposed to Nominal Revenue Growth (NRG). [For example], if your monthly revenue has increased by 15% over the previous month, then your NRG for the month is 15%. To find your RRG, you have to consider that you increased your prices by 5%. Subtracting this increase from your NRG (15%-5%) shows you that you have grown your revenue by 10% that month. Real Revenue Growth is standard for calculating the growth of your business."
The way your organization measures revenue performance will heavily depend on the product(s) or service(s). It sells, and the strategy your Chief Revenue Officer adopts to measure the effectiveness of the current plan in place.
Understanding your customers' satisfaction with your business and this impacts revenue performance is imperative for business growth.
When assessing revenue retention, focus on both gross retention and net retention as both will provide critical insights into how a business is growing.
Gross retention revenue (GRR) measures the percentage of recurring revenue obtained from current customers within a specific period. It includes any downgrades or cancelations in a product or service. The average GRR in SaaS is ~90%.
Net retention revenue (NRR) measures GRR, plus additional revenue, which comes in the form of "expansions" or new customers. A standard NRR growth rate is 90%.
Measuring revenue retention is vital to understanding if your customer base is interested in your products and services. The Net Promoter Score metric can complement this data set to get a full picture of how customers feel about their experience.
Customer churn measures the percentage of existing customers who are no longer using a product or service within a specific time period.
Every organization experiences customer churn, regardless of how efficient their customer retention strategies are. The best anyone can do to retain as many customers as possible, and a sound RevOps strategy can prove useful.
By incorporating customer success into the revenue operations equation, companies can ensure the customers their marketing and sales teams have worked to acquire stay, thus enabling sustainable business growth over time.
By providing guidance and addressing any challenges along the way, organizations can proactively work to decrease customer churn while prospects navigate the various stages of the customer journey.
Sales pipeline velocity
Having a structured sales process, or sales pipeline, in place can shorten the sales cycle. This, in turn, typically speeds up the number of deals that run through your sales team and increases the odds of converting more prospects into paying customers.
Pipeline velocity is a key factor responsible for driving revenue growth.
For this reason, it is essential that all other revenue operations teams, including marketing and customer success, learn sales enablement techniques that can positively influence a lead's probability of becoming a sales qualified lead (SQL).
Equally as critical is for sales teams to have a deep understanding of their buyer persona's pain points (including the reasons for why they need to purchase a product or service) and the common setbacks that can detract a prospect from stepping up and becoming a customer.
With a similar strategy, organizations can prepare specific actions plans that solve and answer prospects' most pressing questions and concerns.
Cost of customer acquisition
Customer acquisition is a substantial dollar amount that a company spends on marketing to acquire new customers.
To attain new customers, companies must invest in their marketing and sales efforts to attract the right type of audience.
Organizations that can align their company branding, product(s) and/or service(s), marketing message, and their acquisition channels can better attract and convert prospects into customers at a lower cost than companies that do not.
Simon Elkjær, Chief Marketing Officer of avXperten, a top electronics store in Denmark, shared insight into his organization's revenue growth analysis.
"If you want to measure your revenue growth, one metric you should constantly be checking is your 'cost of customer acquisition.' Knowing how much you spend and earn from your marketing strategies helps you understand what your customers need and, in turn, enables you to strategize more efficiently.
With this, you'll know [which] strategies are ineffective and [which] strategies you need to spend more time [on] and pour money into. You not only get to know your customers more, but you'll be able to save money as well."
Once your RevOps team identifies the current cost of customer acquisition, it can determine which strategies are working to retain customers and which seem to generate the greatest customer churn.
A revenue operations approach brings together the best marketing, sales, and customer success to focus and simplify an organization's strategies to address its customer base's needs.
Assessing revenue is critical to any RevOps strategy because it helps determine whether a business is positioned to grow.
Beyond measuring revenue growth, RevOps teams can assess their sales representative's efficiency, predictable growth, and organization's response to abrupt market changes to determine their action plans' effectiveness.