2019-02-27 11:54:14Marketing a Business: Marketing a BusinessEnglishSales Funnels are an important concept of marketing. This article talks about everything from what is a sales funnel and how can you create...https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2019/02/What-is-a-Sales-Funnel.jpghttps://quickbooks.intuit.com/in/resources/marketing-a-business-marketing-a-business/sales-funnel/What Is A Sales Funnel?

What Is A Sales Funnel?

18 min read

Sales funnel is one of the vital concepts of marketing. If you map it correctly, it can pilot your business from a flat to power house venture.

So, you have a product that can serve as an outstanding solution to thousands of people. But, how will they know who you are and what you do, until you reach out to them.

That’s where sales funnels come in. They help you seek customers and allow customers to seek you.

Customer is king. No customer means no business. As a business owner, you might question “Why do my sales suffer, despite a great product?”. The best selling author Jen Blount answers this the best way. Jen says “The number one reason for failure in sales is an empty pipe. And the root cause of an empty pipeline is the failure to prospect”.

Therefore, it’s essential to design your sales funnel the right way. It should allow you to:

  • drive prospects,
  • generate and nurture leads,
  • guide them towards purchase,
  • convert leads into customers and
  • eventually turn customers into brand evangelists.

But, before jumping to how its done, let’s understand

  • what is sales funnel and
  • how it can help you skyrocket your sales

What is a Sales Funnel?

Sales funnel is a multi-step process that converts your prospective buyers into customers. It depicts the path your prospective buyers take from the time they first come in contact with your brand to the time they make a purchase.

Your prospects go through a lot before they make a purchase decision. And you need to understand how your prospects are reaching you.

Let’s understand how sales funnels function in real world. Capital Financial Advisory is a foreign exchange consulting firm. It wants its customers to visit its website. Not only that, it wants these website visitors to take some action. It could be buying products or services, downloading a report, signing up for newsletter etc. Next, it wants these visitors to go through a series of steps, before buying from it. Here’s one of the possible ways a prospect would find Capital Financial Advisory.

Stages of Sales Funnel For Capital Financial Advisory

Abeer is new to textile exports. Majority of his exports are from India to US. Therefore, he receives payments in US dollars. Now, each time he receives payments, he’s exposed to foreign exchange risk. He has to convert US dollars into rupees. He’s confused what is the best way to do that. So he thinks of doing some research.

Stage I – Traffic Generation

  • Abber looks for query“ managing foreign exchange risk” on search engine
  • Search engine presents him with an eBook on the same by Capital Financial Advisory. Capital Advisory is using content marketing to drive prospects to its website.
  • Abeer downloads the eBook by providing the email id

Stage II – Lead Nurturing

Capital advisory sends a series of emails, as a part of its email marketing strategy,  encouraging Abeer to read detailed educational material from their archives like:

  • Expert Guide On Best Strategies To Cover Currency Risk
  • How Capital Advisory saved a ship recycling company from a Rs. 70 crore currency hit
  • Get a free health check of your foreign exchange risk exposure by our Forex expert

Stage III – Undertake Sales

  • Abeer takes the free health check
  • Towards the end of the health check, Abeer avails a customized consultancy service from Capital Advisory

Why the Term Funnel?

Look at the above stages broadly. Much like Abeer, there are number of prospects who are visiting Capital Advisory’s website every day. However, only a few of these website visitors register for a free trial. And still handful of those who take the free trial end up making a purchase. If you put these people at various stages, from customer attraction to conversion, on paper, you’ll see them taking a shape of a funnel.

Think of it much like pouring a liquid through the real funnel. A funnel is wide at the top and narrow at the bottom. This allows for pouring too much liquid at the top, with only a trickle coming out.

But if you see the sales funnels today, and also the above sales funnel carefully, you’ll understand that this attract, nurture and convert structure is now old school. So before going any further, let’s understand how sales funnels are changing with time.

Traditional Vs Modern Sales Funnel

Conventional sales funnel stages comprised of awareness, interest, evaluation, commitment and sale. Both B2B and B2C marketers used to push too many prospects into the top of the funnel. Next, they made these people vulnerable to advertisements, cold calls etc until they became leads. And finally, they pitched them their products or services so as to convert them into customers. These traditional sales funnels, no doubt are good at laying out a basic idea. But these don’t reveal the complexities of present day buyer’s journey. Let’s understand why?

1. Traditional Funnels Made Prospect To Conversion Process Linear

Conventional sales funnel idea maps a defined path for customers from attraction to conversion stage. But if you see the way customers seek solution providers today, you won’t find this linear pattern. Firstly, not all of your leads enter the sales funnel from the top. Your prospects today are way too smart and well informed. 81% of these interested buyers research online before making a buying decision. They gather information from all possible sources. Not only that, they are placed at different levels of awareness . In his book ‘Breakthrough Advertising’, Eugene Schwartz, the famous advertising figure, explained why it’s important to know the level of awareness of your prospects. In fact, these levels of awareness can act as various stages of your sales funnel. He defines levels of awareness as:

Levels Of Customer Awareness

  • Most Aware: These are the most loyal prospects, who follow you and engage with your content. But they are still not your customers.
  • Product Aware: They are aware of your business offering as well as that of competitors in the industry. But they are still not sure if you could provide them the best solution.
  • Solution Aware: These are part of your prospect base who are aware of solution like yours in the Industry. But, they specifically don’t know about your business offering.
  • Problem Aware: These are the kind of prospects who know they have a problem. But they may not completely understand the same. This can be because they have faced the problem for the very first time.
  • Unaware: These are the people who don’t have an idea that they are facing a problem. Since they don’t realize they have a problem, they are not necessarily searching for you or your business offering.

Therefore, with different levels of awareness and sources of information, prospects enter at any stage of sales funnel. Hence, you need to generate and serve content for various levels of customer awareness. Furthermore, they are switching between multiple platforms such as desktops, mobiles etc to complete a single transaction with you. Hence, you can see that there is absolutely no linearity or sequential pattern to your customer’s journey today. So understanding your sales funnel as a simple five step process can make you lose some potential business.

2. Sales Funnels Came With a Defined End

If you still go by the original sales funnel idea, your end goals are either :

  • Obtaining email address via a sign up
  • Affecting sales

After all, the ultimate purpose of all your marketing effort is increasing sales. True, but what after these prospects become your customers? What are you possibly going to do to engage with your customers? How are you going to create lifetime value for your existing customers? Selling of course is a goal, but it cannot be the end of your sales funnel. This is because your customers are much more worthy than the amount they spend on your business offerings today. Your sales funnel must guide you towards building an audience who eventually turn into brand evangelists. Let’s understand why?

  • If you didn’t know, it is 5 – 25 times more expensive to hire a new customer than to retain the existing one.
  • The chances that an existing customer would buy again lie between 60% – 70%. Whereas, probability that a new customer would buy from you is just 5% – 20%.
  • Increasing customer retention by 5% can increase your profitability by 25% to 95%.
  • Existing customers are 50% more likely to try new products and spend 31% more as against new customers.

Therefore, modern sales funnel does not stop at sales as the end goal. It extends beyond sale towards customer on boarding, retention, cross and up selling and finally turning customers into brand evangelists. Brian Clark, founder at Copy Blogger defines modern sales funnel the best way. He says that there is no end to customer sales funnel. But before looking at various stages of modern day sales funnel, it’s important to understand how buyers today are seeking you. How are they moving from the research stage towards the buying decision.

Buyer’s Journey and the Stages

Buyer’s stages consist of a series of steps the customers go through ultimately to buy the final product. It is the process of how the customer interacts with your brand before taking the decision of investing money in your products. But nowadays tracking the buyer’s journey is challenging. It is hard to understand how the client is actually reaching you. Is it by advertisements? By references from people they know? Is it through a search engine? Or through customer reviews?

The buyer’s journey is not straight forward anymore. But it plays an role in summing up the various steps of the sales funnel. Therefore, let’s understand how the buyer’s journey looks like.

I. Awareness

Spotting the need

Prospective Buyer: Hey vendor, do I need you? Are you appropriate for me?

This is the first stage of your buyer’s journey. Here, your buyers are most likely unaware of the fact that they have a need. Also, they are also not aware of your company and its business offerings.

Research

Prospective Buyer: Yes, I have a pain point?

Once your buyers realize that they have a need, it prompts them to research for more information. They can use multiple sources of information to find answers to their questions. This could include –

  • searching for queries on search engines,
  • reading online reviews,
  • consulting friends and acquaintances,
  • visiting stores for product demonstrations

Choosing criteria

Prospective Buyer:  What all functionalities will solve my need? What things do I have to consider while making the purchase decision?

Here, your buyers go one step further in research. They try to select parameters would be important for them for making a purchase decision. This helps them to settle upon vendors who can serve them with best solutions. And leave out those who cannot provide the solutions they are seeking.

II. Consideration

Research on companies

Prospective Buyer: Who all are there to cater to my need?

At this stage, your buyers undertake in depth research on the vendors they have selected. They study in detail business offerings of each of them to understand how can they solve their pain points.

Compare

Prospective Buyer: How are you better than the other vendors? At what price do I get the functionality I want as compared to other vendors?

Once the buyers know about the business offerings of various vendors, they get down to drawing detailed comparisons. Your buyers may reach out to sales reps of different vendors for product demonstrations. Or may register for free trials to understand which vendors offer the functionality that solves their purpose the best way.

Decision

Choosing

Prospective Buyer: How does buying your product/ service change my current process?

At this stage, your buyers are ready to choose between the vendors for making the purchase decision. They will think of the various things such as implementation, starting costs etc that will help them make the final decision.

Buying

Prospective Buyer: How do I buy from you?

Finally after days of in depth research, your buyers will make the purchase decision. Purchase doesn’t really end the thing. Buyers would now learn about using the product or service, tips for doing it the best way etc.

Advocating

Prospective Buyer: How can I help the vendor spread the word about his business offerings?
Now this is a stage you would want your customers to enter after they make a purchase. If buyers are happy and satisfied with the product or service they have bought from you, they would favor your brand. And this is something that you should work on the most.

And now that you have a clear understanding of how the buyers make the purchase decision, let’s understand how this can be used to design your sales funnel. Also, what type of content you must create as a marketer for your prospects at every stage of sales funnel.

Breaking Down The Sales Funnel

Customers today are walking themselves through 67% of the sales funnel, before encountering a sales rep. Therefore, it is important that you seek the right buyer persona, at the right stage and with the right content.

Let’s understand the modern day sales funnel taking the above foreign exchange consulting firm again. In addition to this, let’s have a look at the type of content that you must prepare for different buyer personas at various stages of sales funnel.

I. Lead Generation

1. Engagement: Brand Awareness

Your intent here is to create value for your audience who are neither aware of the problem, nor about your brand. Therefore, your aim should be:

  • to make customers seek you,
  • have a good impression about your brand and
  • show willingness to engage with your brand in future

2. Education: Problem Identification

At this stage, your intent as a marketer is to make prospects have the realization that there exists a problem. And they need to come up with a solution for the same.

Awareness stage of sales funnel

II. Lead Nurturing

1) Research: Investigating Solutions

Your prospects are looking for solutions. Again the focus must be on solving the pain points and not pitching your business offering. So you must bring to light the advantages, competency, unique functionality, but not by directly talking about your product or service.

2) Evaluation: Assessing satisfaction of needs and requirements

As an outcome of research, buyers are now evaluating what vendor to go for. Therefore, you need to establish yourself as an authority in your domain. Come up with comprehensive, in – depth content that helps build that trust. It makes your prospects understand how you as a vendor have the potential to solve the problem.

Consideration stage of sales funnel

III. Decision

1) Justification: Justify and Quantify Value; Internal Buy – In

After comparing multiple vendors and their offerings, buyers are now getting down to finalizing the vendors. B2B buyers explain their management as to why you as a vendor are their choice for the problem at hand.

2) Purchase: Transactional and transitional factors

And after all the education and research, prospects finally end up making the purchase decision. Therefore, you need to provide the with content that helps them make the purchase decision. This could include pricing details, coupon codes, free trials, product demonstrations etc

Decision Stage of sales funnel

IV. After Sales

On boarding, Retention, Expansion, Brand Evangelism

Traditional sales funnel ends with purchase. And this is where modern day sales funnel takes the lead. Post sales stages begin with customer on boarding. One of the main reasons why customers leave you is that they do not understand your product/service. Therefore, as soon as your prospects turn into customers, you need to make them familiar with your business offering. And an outstanding customer on boarding strategy helps you achieve just that. It not only reduces the customer churn rate. It also adds to Customer Lifetime Value, helps in customer retention, helps in cross and up selling and turns your customers into raving fans.

Post Sales stage of sales funnel

Also, apart from creating content specific to every stage of sales funnel, you must create customized Lead Magnets. So what are Lead Magnets and how do they help? Lead Magnets are in – depth valuable resources on a specific topic that create urgency on the part of your readers to share their contact information. These can be in the form of an eBook, Case Study, Template, Free Webinar, Free Trial etc. Say your reader shares his e-mail id to download an eBook that talks about  detailed strategies to cover your currency risk. Now he might not end up buying your services. But if your eBook creates value for him and gives him information that changes his world, he is able to place that trust in you. This further helps to establish you as an authority in that field.

Contrasting Views Of The Funnel – Biggest Source Of Friction Between Marketing And Sales

Marketing and sales are two different functions of an organization. Where marketing focuses on increasing brand awareness and generating leads, sales directs these leads to closure. That is how each one creates value for the other, company and its customers. Yet, the two for the majority of time are not in sync with each other. One is always undermining the others’ contribution. Sales reps blame the marketing team for not handing off quality leads when they fail to meet their sales quota. Marketing blames the sales team for a poor follow up. This rift acts as a drag on company’s performance. So, what causes this friction at first place? Let’s have a look.

a) Varying marketing and sales goals:

It is very hard to bring the desired results if both the departments are not aligned. Problems arise when both start blaming each other instead of setting goals and working together.

b) No common picture of customer journey:

This is one of the main reasons of rift between marketing and sales. Both marketing and sales teams need to have a clarity on buyer’s journey each customer persona goes through. And for that to take place, a business needs to map the buyer’s journey clearly.

c) Sales Given Preference over Marketing By Higher Authorities:

Since sales impacts the bottomline, management tends to give more preference to sales. It is true acquiring customers is the goal. But, but it’s how you market that guides customers from awareness to sales.

d) Lack of communication:

Little communication between sales and marketing breeds poor coordination. This further leads to poor results. Marketing team would never know how their efforts are helping sales and what are the areas they need to improve on. Sales, on the other hand would never be able to derive full benefit of marketing, which would further impact their sales targets.

How to Align Sales and Marketing? Enforce Service Level Agreement Between Marketing and Sales

According to Hubspot’s State of Inbound 2018 report, 65% of marketers from companies with SLA (between marketing and sales) say they have higher ROI from inbound marketing. So how does tightly aligned sales and marketing or an SLA between sales and marketing help achieve higher ROI .

Service Level Agreement (SLA) is nothing but an agreement between marketing and sales that outlines the goals and requirements of each of the teams. Clarity of goals and consequences of failure to meet them on the part of each of them improves coordination which further impact your bottom line.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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