Thursday, March 02, 2006

Marketing & Sales Funnel

The sales funnel is a popular tool to graphically depict the sales process and the timeline for a future sale. Sales funnel is universally used in B2B sales - where sales cycles are long (typically several months) and closure of the sale takes some level of executive relationships or executive level selling. Role of marketing in a B2B sales can also be linked to sales funnel. In this article, I will write how various marketing functions are associated with the sales funnel.

A typical sales funnel is depicted in figure-1. As the name implies, there is a large list of potential customers in the beginning of the sales process - and as the process continues, the number of potential customers decrease. At the end of the sales process i.e., closed deal - a few become actual customers.

Marketing functions in a sales intensive company must therefore be aligned with the sales funnel. The underlying theme of most successful marketing operations is about segmentation, focus and targeting. In most firms there will be more opportunity than what the company can successfully pursue. This makes in imperative for the marketing department to create a strategy or define the rules which will initiate a winnowing process - i.e., narrow down the list of prospective customers which the firm can successfully pursue and close.

One model of the marketing activities in the B2B world starts with branding, and then builds awareness and interest, targeted prospecting, lead management, sales funnel support and, finally, customer life cycle marketing i.e., repeat sales.


The top level of the marketing function is focused on branding and the building of awareness and favorable associations. Having written several articles on branding, I won't say much in this article. It is sufficient to say that brand is a promise you make to the customer - once the customer experiences the product/service and feels that the product/service has lived upto the promise made by the brand, a brand value is created. In short, "walking the talk" in terms of your brand promise is essential to retain the customer.

The branding stage could be defined as the art and science of creating an association or nexus in the mind of a potential buyer, highlighting your offer and/or company and a desired characteristic such as quality, dependability, good value, etc. Activities in this stage may include general advertising through traditional media - mass media(trade magazines, journals, newspapers, TV, WEB etc.,) publicity and buzz campaigns, etc. and seminars for large segments for key decision makers (such as CIO, VP of sales, and so on).

The main message here is that you need a lot of impressions to create an imprint on the market's psychic awareness as well as to begin to fill the sales funnel. Depending on how fragmented and competitive the market is, you may only get 1-5% in terms of qualified leads out of such activities.

Building brand equity, however, takes time; the results may not manifest themselves for months or years. Many companies in the B2B space usually don't notice the adverse impacts of less marketing until 6-9 months after the initial budget cuts, when it's often too late to fully recover.

Targeted Prospecting

This funnel stage is where you've winnowed down the focus to your target markets and accounts. It is a process of identifying, analyzing and educating the key decision makers in the targeted markets/accounts.

It's surprising how often salespeople pursue opportunities outside their chosen targets (and sales managers let them), and win few of them. Brand-building and awareness campaigns at the top of the funnel will help the prospect education process in this stage. As Harry Beckwith writes in What Clients Love, "Advertising warms every marketing and sales effort that follows it."

Activities in this stage may include targeted seminars(or Webinars), account management, mapping any un-penetrated opportunity and specific vertical campaigns. The main focus here is to allocate resources to the specific targets where your company can add value, offer up a solution and can extract a profit.

Lead Management

A lead is generally defined as someone who shows an interest, through various means, in a company's offerings, although it's often defined differently depending on the organization. The key is to have a fairly granular definition that everyone agrees with. A lead could be generated from seminars, advertising, account mapping or Web sites, among other myriad marketing or sales vehicles.

Generating, vetting and distributing leads involves numerous processes and coordination efforts. Various studies show that most leads, especially in the B2B space, are not followed up on by salespeople or fully audited by management.

In general, if weak or unqualified leads are continually distributed to the sales organization, salespeople are less likely to give them much attention going forward. For example, in a 2003 META Group report titled "Lead Management: The Hinge Between Marketing and Sales," the authors write that "many Global 3000 organizations report that 70 to 90-plus percent of marketing-generated leads are not acted on, because sales finds them unqualified (an often-provided excuse for not making sales projections)."

If it's worth the effort to try to generate leads, it's worth the time to follow up in a timely manner. Also, if you don't track the lead source, it's next to impossible to determine what's working. Marketing ROI is often dependent on the value created from lead management activities. It is in this stage sales reps can add great value by following up on the existing leads - thus freeing up the company resources for other activities.

In terms of lead metrics, for example, cost per lead is meaningless if most of the leads are unworthy of pursuit and never end up as closed deals (the quantity vs. quality problem). Cost per opportunity or closed deal may be a better measure. Also, it's important to differentiate the leads that need to be nurtured and developed from those that should be acted upon immediately. (You could develop a lead funnel to differentiate the stages that a typical lead passes through.)

Marketing activities in this stage may include white papers, various events, newsletters and creating customer touch point opportunities. The idea is to generate and qualify interest and to separate those who are intellectually curious from those who are economically serious, which should be further vetted by the sales force.

Sales Funnel Support

Accelerating, expanding and winning deals in the sales funnel is the essence of good sales execution. At this stage, the sales funnel has been winnowed down to the opportunity level. The customer has issues an RFQ or an LOI indicating an indication to buy. Main function of marketing in this stage is to help sales to deliver the right message, to the right people, at the right time in the sales process is the essence of customer message management and providing good opportunity support. As Hartman and Staudt aptly state, "if you want qualified leads—people that can progress from being prospects to becoming customers and on to advocates—take the time to fine-tune your data and make sure that your messaging is personal and relevant."

Marketing can ensure that all sales collateral and messaging is built on the premise of aligning the company's solutions with customer problems, and crafting and proving the value story in a way that is targeted, germane and believable.

Marketing activities in this stage may include executive sponsor support (e.g., inserting and extracting an executive sponsor at the right time in the process), reference calls, collateral and conversation support and message management.

Customer Life cycle Marketing

Once you've acquired a customer, it makes sense to ensure that the customer remains loyal by consistently listening for changing lifecycle needs and value drivers. Banking is one industry that is quite attuned to the lifecycle of its customers (consumer and commercial)—from opening a first checking (or business) account, to obtaining a mortgage (or business loan), to funding one's retirement (or selling a business).

We know that numerous studies have shown that it's generally easier to sell more to a satisfied (even better—delighted) customer than a dissatisfied one, as well as to get solid referrals and leads.

A closed-loop marketing funnel should help to feed itself as satisfied customers tell their friends and colleagues, and help to corroborate your brand promise. (Recent empirical research has demonstrated a powerful customer loyalty barometer—the net positive response to the following question: "Would you recommend this product [offering] to a friend or colleague?")
Activities in this stage may include the development of customer groups (blogs, user groups, online communities, etc.), external account reviews, value reviews and performance reviews. The key tasks in this stage are for you to get credit for the value that you've delivered and for you to anticipate shifting customer needs.

Closing Thoughts

The sales funnel is an effective tool to manage and execute a complex sales process. The sales process can be made more effective and successful by aligning marketing activities with the sales process - branding, advertising, targeted seminars, whitepapers, technical pre-sales, account management, closing deals and looking for ways to add incremental value to existing customers.

Like most framework tools, sales funnel can enable you to identify, isolate and improve marketing black holes and/or upstream dependencies.

In my experience, educating customers is more difficult if they have no awareness of the offering category and your company's place in it. Qualifying opportunities often takes longer if you have not refined your targeting. In other words, the marketing functions has to be aligned with sales funnel and this will make the sales process smoother & more importantly - efficient.

Finally, understanding the flow, the hand-offs and the overlap between the marketing and sales funnels would go a long way toward improving integration between the respective functions as well as to better pinpoint accountabilities and lessen finger-pointing. In many competitive selling environments, where exploitable differentiation is paramount, marketing and sales alignment is the Holy Grail for effective selling.


Abhishek said...

Superb...Mast hai boss...

Harshil Shah said...

Can you let me know, who has developed this image of Sales Funnel? Who is the creator of this image?