Companies looking to scale their businesses by ramping up production have it easy. They only need to look at the points on their assembly lines and make each one bigger. The more migrant laborers Foxconn hires to push batteries, chips and screens into iPads, for example, the more tablets it can make for Apple to sell (and for Hong Kong dealers to resell). Move those workers into other areas, and production can keep up with demand. The sales funnel is supposed to bring that easy scalability to lead conversion. To make more sales, all a company has to do is widen each of the elements that make up the funnel, putting more resources proportionately into lead acquisition, data collection and negotiation. It’s just possible though that the model no longer works, that the journey a lead makes from first contact to first purchase is no longer straight — and that sales can no longer be scaled up simply by making the stages of the sales process bigger. According to some experts, the sales funnel is dead.
And if the death of the sales funnel is true, it wouldn’t just be scalability that would suffer. Building a linear process to point of conversion doesn’t just allow companies to ramp up their marketing. By seeing where they’re losing leads, companies can identify bottlenecks in the sales process. And by measuring the efficiency of each stage, marketers can predict the effect an improvement in one step should have on the end result.
A sales manager who noted that his company was picking up plenty of leads but failing to move many past the response to the first enquiry, for example, would be able to look at the answers to those enquiries to improve conversions.
A clearly drawn sales funnel enables a marketing team to automatically turn leads into sales, and to spot problems along the way. It’s such a basic approach to marketing that Google built it into its Analytics program so that online sellers can track users from landing page to leaving page.
Customers Aren’t Rational
But it’s a system that relies on one step following another. A lead comes into contact through an ad; he completes a form; he receives a quotation; he supplies more information; the quotation is updated and upsold; finally, the payment is made. In practice, says Meghan Keaney of Performable.com, a marketing analytics firm, conversions just don’t happen that way.
“The funnel model assumes that customer behavior is linear, rational and orderly,” she says. “But real customer behavior is much more complex. It happens over multiple channels, from social media to search, to mobile, to helpdesks and beyond.”
Customers rarely convert immediately, she adds, but tend to move towards a willingness to buy as a relationship develops over time. And a sales funnel focuses on the first point of conversion even though the relationship continues after that sale.
“We argue, and we’re not the only ones on this, that it’s time to put the funnel away in favor of an approach that better reflects the complete customer lifecycle.”
For Performable, that means marketers should replace the traditional sales funnel with “lifecycle marketing.” Instead of tracking stages on the sales process, marketers should look at the entire customer experience from first click to latest interaction, including time as active customers and ideally, company evangelists.
Performable, which was formed in 2009, tracks almost a billion “events” a month for companies that include WPP, GFI, Rolling Stone, US Weekly, and in fields that include eCommerce, media, fundraising and Software as a Service. Using a variety of cookies, as well as individual visitor profiles, the company follows customer behavior across channels that include email, the Web, social media, mobile and third-party apps to produce no less than five kinds of reports.
These include “First Touch Reports” that link revenue numbers all the way back to initial contact, enabling sellers to see which channels, content and keywords are bringing in converting leads; “Last Touch Reports” which show the real start and end points of a buyer’s journey; “Assists Reports” that identify the key touch points that influence customer behavior, such as a newsletter or a tweet; “Keyword ROI Reports” that show the long-term value of search engine campaigns for periods over months or even years; and “Customer-Level Data” that allow clients to segment their customers according to behavior.
From Sales Funnels to Lifecycles
It’s a huge amount of information and it doesn’t come entirely cheap. Performable’s rates are based on the number of “events” — trackable items such as page views, form submissions, file downloads, email clicks and social media mentions — the company’s software records, and charges around $1,000 per month for 500,000 events. With an average ten events for each unique visitor, a site with 50,000 unique visitors would be looking at a significant monthly bill for information. Google Analytics, which Performable also uses in-house in addition to its own platform, is free.
And while the traditional sales funnel may not be completely accurate for all businesses, it does have the other advantage of being simple and clear. It might not record all of the possible touch points that help to turn a lead into a conversion, and it may stop just when things get interesting — as the lead becomes a buyer — but it’s easy to create and it can still help to track what could be the main sales route , particularly for small businesses.
To say then that the sales funnel is completely dead would be an overstatement. Rather, there are two overlapping systems: a basic model that allows marketers of small businesses to follow what’s happening on the most important route from lead to customer; and a more complex array of reports that show all of the possible ways in which buyers and leads relate to a company large enough to have outgrown its funnel.
“As a company’s customer base grows, it becomes more and more important to have the sort of analytics that will enable them to segment customers and make messages more personal and relevant,” says Meghan Keaney. “That’s really the message behind lifecycle marketing.”
A growing company doesn’t just churn up more data; it also creates a need to find new ways collect, analyze and act on that data.