Six Steps for Marketing Forecasting Done Right

As I wrote yesterday, in cases where the CSO lacks “bottom-up” visibility into future periods, highly accountable CMOs can fill the void with marketing forecasts.

These are not “traditional” marketing forecasts, which take the form of a top-down market size analysis. Those kinds of “forecast” can be useful for strategic planning, but do not have the sufficient granular, actionable data required to be an equal counterpart to the sales forecast.

In contrast, highly accountable marketing forecasts enable the CMO to make statements such as, “Next quarter, marketing will generate an incremental 30 new deals worth $4.0 million of bookings that are not currently in the sales forecast.” Done right, the marketing forecast gives the CMO the confidence to stake a portion of his or her compensation on meeting the goal, and the CSO relies on marketing’s input to make a valid forecast for the period.

The reason why marketing is uniquely able to make these forecasts is that marketing has visibility into the early stages of the revenue cycle.

Marketing knows how many leads will be generated in a given period, and how those leads move through various stages of lead nurturing and lead qualification before they become sales ready. Marketing knows which marketing programs will generate new leads, and how sales leads of that type historically perform. Marketing also knows how fast different types of leads move through the system. By knowing how many prospects are in each stage of the revenue cycle and understanding how prospects move through the various stages over time, the CMO can build a model that forecasts how many new leads, opportunities, and new customers the system will create in future periods. Combined with solid management oversight to ensure valid inputs and qualitative “sanity checking” of the conclusions, the result is a forecast that the entire company can count on to make decisions.

The methodology for making accurate marketing forecasts is simple in concept even though the details can get quite sophisticated:

  1. Model the stages of your complete revenue cycle
  2. Specify the types of leads you’ll want to track and roll-up
  3. Measure how each type of lead moves through the various stages (conversion percentage and velocity)
  4. Get accurate inputs for how many new leads of each type your marketing team will put into the system
  5. Model the flow of current and new leads through the various stages over time
  6. Review the results and apply management judgment to finalize the forecast

I’ll explain each of these in more detail over the next few days, and in the meantime, let me know how you are using marketing forecasting in your organization.