CEOs and Boards of Directors: Should your marketing team be paid on variable compensation?

Mike Volpe, the CMO of HubSpot, recently published this article entitled “CMO Warning: Don’t Tie Marketing Incentive Compensation to a Metric.” Mike shared six reasons why tying marketing compensation to a metric could have adverse impact on the marketing team and the business.

I shared the article with my Sales Operations colleague who is often championing for metrics-based compensation for marketing, and she asked me “So what do you think?”

When I paused to think about it, what I realized and shared back with her is that for performance-based marketing compensation to have a positive impact, you would need these five things to be in place:

  1. Strong Marketing Leadership - to communicate and manage the program
  2. A clearly documented & agreed to MQL Definition with sales
  3. MQL goals aligned to the business plan, based on revenue targets, forecasted win rate & forecasted MQL-to-Opportunity conversion rate – I have discussed a planning process for this here
  4. A plan for how the MQL numbers will be attained – I have discussed building a bottoms-up MQL plan here
  5. Closed loop reporting visibility to measure effectiveness of each vs. goal – in this Aberdeen CMO Essentials article I discussed how to do this with six essentials to setting up a closed loop marketing system.

Now here’s the rub - the marketing organization that has these five components in place should be set up to meet and exceed their target numbers, so the performance based conversation should be seen as a massive positive (not a negative) provided that like Sales there is no cap around the upside marketing can attain based on their performance. So it shouldn’t be seen (by either Marketing or the Business) as attaining a % of your bonus based on meeting MQL objectives, it should be seen as earning a % of the revenue growth driven through marketing’s efforts to meet and exceed the revenue growth plan.

And for those organizations that don’t have the five aforementioned points, any attempts at performance based compensation will surely lead to conflict and negative ramifications like those detailed by Mike Volpe.

So for marketing management, whether or not compensation is tied to specific MQL metrics, having an approach like it is, will help ensure the process and systems are in place to best ensure success.  

And the best case scenario for boards of directors, executive teams and marketing teams alike – and the whole business for that matter –is that marketing drives the pipeline at the pace required for the target business growth (and beyond) and is rewarded for doing so in line with the performance.


Building a bottoms-up MQL Plan

Moneyball Marketers want to take the guesswork out of demand generation. The best way to do this is building a bottoms-up MQL plan to reach and exceed MQL targets. Ideally the plan targets 10-20% lift vs. the MQL target number established in the revenue team’s planning process.

These are metrics you’ll want to benchmark and then establish targets for and monitor.

Website – Recommend approaching traffic measurement as an integrated approach incorporating Digital Marketing, PR & Social resources.

  • Organic Search Traffic
  • Organic Search Conversion Rate
  • Referral Traffic
  • Referral Traffic Conversion Rate
  • Direct Traffic
  • Direct Traffic Conversion Rate

Paid Search – Ensure you are looking at paid search segmented by these four areas as they all behave differently and investment and optimization decisions should be varied for each.

  • Branded Search
  • Non Branded Search
  • Retargeting Ads
  • Display Ads


  • Net New Program MQIs
  • Same-Month Conversion Rate (e.g. from a ‘Burst Nurture’) – this will tell us when we do outreach what % of prospects are ‘ready for sales’, I typically see this as a range between 2-10%


  • Active Nurture Database
  • Monthly Conversion Rate – This is where lead nurturing and teleprospecting to the database pays-off, as it helps bring yield from past marketing programs that helped grow the activity database but leads were not yet ready to engage.  
  • ** Note I would include recycling of closed/lost opportunities in this active database although it also can be split out separately

Outbound Calling

  • Contacts per month
  • Conversion Rate

The bottoms up plan help in multiple ways:

  1. Educate outside the marketing team to various components of the plan and move away from all “all or nothing” measurement – Exec Teams tend to ask questions like “are we hitting the MQL numbers?”… this allows for education to show which areas are growing faster than expected or slower than expected.
  2. Which leads to the second benefit, as it will help guide investment decisions going forward, which is top of mind to both the marketing and exec team. Are there areas growing well whose growth can be accelerated with investment? Are there areas underperforming who require investment to improve and mitigate risk?
  3. Help hold various contributors to the marketing programs accountable – often outside agencies are involved and this allows them to see how they fit in the plan.

And last but not least  -- having a plan greatly increases the chances that you’ll  hit the plan!

Answering the question, “How many MQLs do we need?”

A data driven marketing plan needs to start by answering the question, “How many MQLs do we need?”

Although it can be calculated with straightforward arithmetic, ambiguity around some of the details has thwarted many a marketing team, so let’s walk through it.

Here’s the assumptions that you’ll need – for each product line x country or geographic region.

  • Revenue Target – If it’s a high growth business, you could calculate each month with the appropriate # of leading months based on the average sales cycle. Alternatively if you are planning this annually you could take the monthly average over a 12-month plan.
  • Makeup of Business By – Here’s where this can either get complex or stay simple. Marketing and Sales will want to agree where the source of business is expected to come from these sources, or all that apply to your go-to-market strategy:
  • Net New Customers (Inbound / Marketing Programs)
  • Net New Customers (Outbound) …. Worth splitting out for two reasons – conversion rates and deal size will likely vary, and the responsibility for generating the business will likely vary vs. Inbound/Marketing Programs.
  • Existing Customers
  • Cross Sell (e.g. from other product lines)
  • Partner Driven Deals

For each of the above you will want to then have these assumptions:

  • Average order value (based on how the above number split this will then allow you to calculate # of wins you need over the time frame)
  • Win Rate (this will then allow you to calculate # of opportunities you need)
  • MQL-to-Opportunity conversion rate (this will then allow  you to calculate the number of MQLs)

The next step is then taking your MQL target and building a bottoms-up MQL plan.