What is a Bowtie Model? Part II
As we shared in the previous post, knowing and understanding the bowtie specific to your company is one of the most important elements of marketing success. Your marketing strategy and the tactics to support that strategy won’t deliver the expected results if you cannot accurately assess what you’ve delivered. If you are a Marketing leader, this is how you get a budget. Once you can point to bottom-line results as the outcome of budget spend, it’s much easier to ask for budget and receive approval.
At this point, you’ve mapped out your lead-to-close process so you can accurately track all stages of the buyer journey and your marketing and CRM systems are working together, allowing the bi-directional sharing of information. You’ve agreed with your counterpart (either Marketing or Sales) to the definitions for each stage of the overall funnel (inquiry, Marketing Qualified Lead, Sales Accepted Lead, etc) and started to build your bowtie model. As a reminder, we want to leverage data specific to each stage to build the model. This model will show you the volumes required at each stage to meet the company booking or revenue goals. Your funnel model can be fairly straightforward and simple or incredibly complex:
Simple: If either you or your company are new to modeling the buyer journey, we recommend you start with a simple funnel. To get started, you’ll need current volumes for each of the stages for a set period of time so that you can calculate conversion rates, the current split between sales and marketing in delivering at each stage, and the bottom line revenue or bookings goal for the company. Once you have these inputs, you can leverage the model shared in the last post to build a bottoms-up model to understand what is needed at each stage.
Complex: If your business is fairly complex in nature, with revenue sources coming from multiple products, channels, or geographies, a more complex model will yield more accurate results. To get started, you’ll need the same data as you would with the simple model however, you’ll also need the split between where the bookings will come from (your install base - current customers buying more of what they own or new products - or net-new prospects who are new customers to the company), geographic splits, channel splits, and product splits. Additionally, if your company has a longer sales cycle, you will need to build in lag time between the top of the funnel and the bottom. Once you have a clear understanding of each of the inputs, you can build a bottoms-up model so you can see what is required at each stage by geography, product line, or channel. Additionally, you can overlay sales capacity models, marketing models, etc. to build a dynamic model specific to your business. Companies generally do this once they have a working funnel model in place and have the data, people, and processes to back up the more complex modeling.
To pressure-test models, I always recommend you build a bottoms-up model, build a top-down model, and then meet with cross-functional leaders to review all data.
Building a top-down model starts with how many inquiries Marketing believes it can deliver based upon current or proposed budgets, from where these inquiries will come, and conversion rates throughout the funnel. Based on this data, you will see how many wins you believe your team can deliver. Review this data against what’s required from the bottoms-up model and you’ll quickly know if there is a gap between the two that must be addressed through the budget, resources, or optimization.
Building a bowtie model should always be done as part of a cross-functional team and not in a silo. These are the metrics by which success of both Sales and Marketing will be held, so it’s critical leadership from both teams has reviewed and accepted all data, assumptions, and outputs. I recommend sitting down to review all data inputs, requirements for the next year, and all assumptions. You may end up with multiple models based on different assumptions and requirements. Working with your CEO, CFO, or other executive management, you can make decisions that lead you to a final model.
Once you’ve agreed on and have the systems in place to support your model, ongoing reporting and optimization are critical. Use your bowtie metrics for weekly reporting. In doing so, you’ll quickly know whether or not you're on track to meet monthly/quarterly/yearly sales goals. If you’re watching and reporting these numbers on a weekly basis, you’ll also better understand the seasonality of both your business and how prospective customers behave at any point and time, allowing you to optimize your overall go-to-market strategy. Once you have a history for each stage, you’ll know how each stage performs relative to your own internal benchmarks.
The bowtie model is the most important tool in Sales and Marketing leadership’s arsenal and can make a considerable difference in the overall success of an organization. Building an effective model requires significant cross-collaboration between teams, systems to support the collection of the data, a management team that understands the value of reporting on the data, and it drives a tighter relationship between Sales and Marketing (one source of truth).