The “sales funnel” is one of the most commonly used metaphors in business, and it should be one of the first places you go when trying to understand why your company may be struggling with hitting your number and growing.
The concept of the sales funnel has been around for over 100 years, initially popularized by an early advocate of advertising E. St. Elmo Lewis, when he described four key stages of the funnel, Awareness – Interest – Desire – Action, also known as the AIDA-model. It starts wide with Awareness and narrows as you move through each stage.
Any business can start measuring the flow rate through the funnel, and based on this, know where to focus their efforts and address potential issues. For example, if 70% of leads move from Awareness to Interest, but only 10% of leads move from Interest to Desire you must figure out why only 10% are moving from Interest to Desire. Issues at any of these transitions can be a leading indicator to strategic problems, or purely just execution related.
To help you apply this to your business, let us translate each stage and evaluate them as they occur within the sales and marketing process. Through this will discuss potential issues that may be causing growth challenges at each stage.
The Awareness Stage, is where your marketing and lead generation activities occur. The goal of these activities is to generate qualified leads, and/or interest. If you are struggling with conversion rates in your sales and marketing activities (X% of leads moving from Awareness to Interest) this is often a market strategy issue, rather than an execution issue. The three most common causes that make this situation occur are poor market segmentation, poor understanding of the buyer and bad branding/positioning. If you truly “know and understand your customer” as per Peter Drucker famous quote, you will be able to segment a market and focus your go-to-market efforts on a well-defined market segment. When this occurs you are addressing market problems and “jobs-to-be-done” (those tasks the buyer is looking to resolve) that are specific to the buyer’s needs in your segment.
Once you have defined the market segment’s and understand the buyer’s needs, your branding/positioning can be more targeted. If your company is struggling with your conversion rate, instead of focusing on tactical issues, consider a Market Strategy review to make sure you truly do “know and understand your customer” and you can align your efforts around that knowledge. In a Market Strategy Review you engage with existing customers to begin understanding the buyers, the needs they share and characteristics they have in common. This dramatically helps improve the focus of your campaigns using better market segmentation, buyers’ needs and tailoring your message to reflect both.
Upon executing a go to market campaign, a certain number of people will self-identify as having Interest wanting to learn more…something resonated with them. Your next goal is to move them from the Interest Stage (a qualified lead) to the Desire Stage. For the purposes of this example, the Desire Stage is getting the prospect to request a demo or try the product to see what your message claims. What often occurs here is sales explains to a qualified lead conceptually how your organization and solution is going to address their needs. Within this Stage of the funnel your sales have identified a lead with a market problem or job-to-be-done that they are interested in resolving. They present to the prospect your solution that will address said need thus creating desire. Based on the solution concept you present, the prospect then chooses if they want to move to the Desire phase to see your solution in action.
However, if you are struggling with moving people from the Interest Stage to the Desire Stage you may want to consider a Product Strategy review. A Product Strategy Review is about making sure your product fits your customer. It requires engaging with customers to get more context about the type of product or solution that will fit their needs and then reviewing options to define a right-fit solution based on their feedback. This might mean re-thinking your solution in total, or adjusting your description to reflect the language and knowledge the buyer will understand.
If you apply a successful product strategy and succeed, you have now moved the prospects into the Desire Stage. Here they are interested and want to try the product for themselves. From your initial branding/positioning they became interested and when you talked with them about your solution they gained desire, so now it is time for them to gain belief. Here they will demo or trial your product to convince them it meets their needs. If it matches their expectations and needs it will move these prospects into the Action phase.
The steps to get them into the Action phase could be a full-on trial where they use the product or a demonstration where you show them the product or service and walk them through how they would experience it. If you are struggling moving prospects from the Desire stage to the Action stage, you have a Product Execution issue. When you initially told them about your solution, they remained interested, but when they got to use it or see it, they lost interest. This could be a user-experience issue which needs design help, a requirements issue where the needs of the buyer and market segment are not properly defined therefore the product is not a fit, or other reasons to be uncovered. The best way to find out what is preventing them from taking action is through Win/Loss Analysis. Through Win/Loss Analysis you learn more about your buyers, why you are winning deals, why you are losing deals, and the decision-making process the prospect is going through, helping your understand product execution and other issues.
Once you overcome these issues, you can successfully move your prospects all the way through the funnel to the Action stage. They have seen your product, witnessed it work and are ready to talk about a purchase. Here you discuss purchasing terms and pricing which hopefully leads to a purchase. However, If you are struggling to close deals, at this point, the aforementioned pricing and terms could be the reason for a non-sale.
Once again, Win/Loss Analysis is the best way to identify which of these factors are impacting your close rate. Like using Win/Loss to resolve a Product Expansion issue, the same technique is perfect for uncovering pricing, terms or other potential barriers preventing a final purchase. Identifying insights such as “Did the pricing not match the value proposition?,” “Is a competitor underpricing you?,” or “Does a customer need a higher Service Level Agreement?” can be uncovered through this analysis and what you will need to do in order to overcome any of them.
The sales funnel is your in house diagnostic tool. While you may be using it to manage your sales teams or track your analytics it is also the best way to identify what is causing your sales to slump.
So look at your sales funnel as an assessment tool to identify issues:
Lastly do not try to solve a sales funnel issue by throwing more marketing dollars or sales associates at it until you are certain each part of the funnel is working properly and you do not have any of the issues outlined in my blog. Otherwise, you’ll be hurting your profitability and ultimately your company’s growth.
If you are interested in learning more about how you can use funnel analysis to identify where you should be focusing your efforts, feel free to e-mail me at email@example.com. I always enjoy a good conversation focused on helping people improve their performance.
Also, check out our MO2 program where we can pair funnel analysis with win/loss interviews to provide you with a complete understanding of where your challenges are, and what the opportunities are to improve your results - http://www.inventisstrategies.com/mo2.html.
Insights into building great products and choosing the right markets to grow.