sales-funnel

What Is A Sales Funnel And Is It Still Relevant?

The sales funnel is a model used in marketing to represent an ideal, potential journey that potential customers go through before becoming actual customers. As a representation, it is also often an approximation, that helps marketing and sales teams structure their processes at scale, thus building repeatable sales and marketing tactics to convert customers.

Have sales funnels ever existed in the real world?

The sales funnel is just a representation of reality, as such, it has its own drawbacks, such as:

  • Assuming most customers reach you through the same path can drive bad marketing campaigns.
  • Assuming the sales cycle is linear, when it’s not, it can create the illusion of understanding fo the customer.
  • Simplifying too much the sales funnel means losing significant opportunities as the service won’t correctly be tailored for more complex shots.

And yet the sales funnel has been a useful tool for marketing and salespeople, as a way to communicate and talk about the way customers get to know a brand. In short, sales funnels introduced a consumer-centered approach to sales, that required marketing people to get aligned with potential customers, thus identifying potential actions to take to unlock the potential of a product.

Therefore, the funnel answers an important function, that of setting a team’s priorities. So even with its evident limitations it can still be a great tool for teams.

A team’s prioritization tool

A classic example of sales funnel is the AARRR funnel, which is a longer version as it relates to subscription-based or SaaS companies for which the journey of the potential customer starts with the awareness of the brand, and it ends with the product referral.

pirate-metrics
Venture capitalist, Dave McClure, coined the acronym AARRR which is a simplified model that enables to understand what metrics and channels to look at, at each stage for the users’ path toward becoming customers and referrers of a brand.

This means that the sales funnel helps the whole team understand the kind of actions to undertake for each step of the journey.

For instance, if the marketing team has identified the problem in the acquisition stage, where only a few contacts get to know the brand, then they will know to leverage on certain channels rather than others (for instance, SEO, email marketing, PR or else, rather than working on-page conversions).

If instead, the marketing team has identified the problem in the activation stage, then other things will need to be prioritized, such as landing page conversions, or perhaps product features.

Shortening the sales cycle

sales-cycle-stages

One of the elements that most of all can damage the bottom line is a mistake in understanding the sales cycle for larger customers.

As sales deals move from small and B2C, to larger and more complex deals, the sales cycle becomes increasingly volatile.

Thus, deals that you thought might close in a few weeks, take months, and this, in turn, affects the health of the overall organization.

Therefore, having a sales funnel to prioritize, at each step of the cycle, can be a critical element to sustain the company.

In short, if you know that important deals will take closer than expected to close, you will need to fill the so-called sales pipeline, quickly, to prevent completely miss the targets.

From attention to desire

aida-model
AIDA stands for attention, interest, desire, and action. That is a model that is used in marketing to describe the potential journey a customer might go through before purchasing a product or service. The AIDA model helps organizations focus their efforts when optimizing their marketing activities based on the customers’ journeys.

Sales funnels or mental models like the AIDA model can help salespeople use a common language to understand the journey potential customers are taking.

And it becomes a tool to question whether the lead is ready for conversion. In short, mistaking a lead at the interest stage, to the desired stage, can lead to misleading action that can wreck the whole relationship with the prospect.

Freeterprise

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

When marketing works well, it can become an incredible tool in the hands of salespeople, to close deals in much less time, and to shorten the sales cycle.

Marketing automatons like in freeterprise models can help salespeople identify the right opportunities that can become enterprise account for the organization.

The social seller

social-selling
Social selling is a process of developing trust, rapport, and a relationship with a prospect to enhance the sales cycle. It usually happens through tech platforms (like LinkedIn, Twitter, Facebook, and more), which enable salespeople to engage with potential prospects before closing the sale, thus becoming more effective.

In the era of digital platforms, sales teams can leverage tools to make the process more effective. Platforms like LinkedIn are powerful tools for business developers and social sellers.

And they have become indispensable tools for sales teams.

The sales funnel has started to morph into something else, as digital business models took over.

Digital platforms

digital-business-models

As digital platforms have become among the dominant players of this era, they also learned to take advantage of intrinsic features of digital spaces, that before would not be available.

Indeed, platforms can leverage network effects whereas the more users join the more the platform becomes valuable for the users coming next. With this sort of logic of consolidation of the business infrastructure, also marketing teams followed suit.

This means that marketing or sales aren’t necessarily made on a one-to-one basis (complex sales and business deals still are) but that the marketing team becomes more like a policy-making lab, where it needs to experiment with all the sorts of ways to build ecosystems rather than just getting the next customers in.

When companies start to prioritize this sort of strategy, that is when they align their marketing efforts around a platform business model logic.

Customers vs. ecosystems and communities

Many companies that we value today have focused their efforts on building ecosystems made of a few key players coming together. When the ecosystem becomes liquid (players interact freely, with a minimum effort from the central platform) that is when the platform has reached its maximum potential.

Therefore, as this happens marketing becomes the set of activities to help this ecosystem to build up in the first place, and to maintain or grow. In that, the marketer becomes more like a policy-maker or a community-builder.

When a company creates an ecosystem, it becomes possible to convert its business model, relatively quickly. See how Airbnb is during pandemic times, trying to convert from physical, and local experience, to digital experiences.

airbnb-business-model
Airbnb is stretching its business model and experimenting with new formats like online experiences to transition toward fully digital experiences.

Flywheels and momentum

amazon-flywheel
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages on customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.

When Jeff Bezos scratched on a piece of paper what would become the Amazon Flywheel (at Amazon they called it virtuous cycle), this was a way to align the marketing effort with the fact that Amazon was transitioning at all effect to consolidate its e-commerce platform (so enable third-party stores to sell on Amazon, which as a side-effect brought to the birth of another platform: Amazon AWS).

etsy-flywheel

Other examples, like the Etsy business model also follow the same logic. As the flywheel model gains momentum, you don’t start from scratch, but when the accumulated momentum reaches a critical mass as a side effect an entrepreneurial ecosystem forms, which becomes the most important asset for the platform business model.

Therefore, marketing at this level becomes a completely different game.

liquidity-network-effects

Other examples, like the Uber business model, also combine platform (both business and technical) and marketing efforts to build momentum. The argument from a company like Uber is that when the ecosystem becomes liquid, this creates s market which is much larger than the previous one:

uber-market-expansion

At each expansion stage, the next market created is much bigger than the previous, and as a result, the platform scales with it. By scaling with the market, the whole context changes, and the whole company changes with it, thus requiring a whole new business model.

Key takeaways

  • Sales funnels are useful tools that enable sales and marketing teams to prioritize their work.
  • While sales funnels are useful for digital and platform business models, the flywheel can be more effective.
  • Indeed a flywheel marketing model can help build an ecosystem that becomes the main asset of the platform.

Connected Business Concepts 

Brand Building

brand-building
Brand building is the set of activities that help companies to build an identity that can be recognized by its audience. Thus, it works as a mechanism of identification through core values that signal trust and that help build long-term relationships between the brand and its key stakeholders.

Brand Equity

what-is-brand-equity
The brand equity is the premium that a customer is willing to pay for a product that has all the objective characteristics of existing alternatives, thus, making it different in terms of perception. The premium on seemingly equal products and quality is attributable to its brand equity.

Brand Positioning

brand-positioning
Brand positioning is about creating a mental real estate in the mind of the target market. If successful, brand positioning allows a business to gain a competitive advantage. And it also works as a switching cost in favor of the brand. Consumers recognizing a brand might be less prone to switch to another brand.

Business Storytelling

business-storytelling
Business storytelling is a critical part of developing a business model. Indeed, the way you frame the story of your organization will influence its brand in the long-term. That’s because your brand story is tied to your brand identity, and it enables people to identify with a company.

Content Marketing

content-marketing
Content marketing is one of the most powerful commercial activities which focuses on leveraging content production (text, audio, video, or other formats) to attract a targeted audience. Content marketing focuses on building a strong brand, but also to convert part of that targeted audience into potential customers.

Digital Marketing

digital-marketing-channels
A digital channel is a marketing channel, part of a distribution strategy, helping an organization to reach its potential customers via electronic means. There are several digital marketing channels, usually divided into organic and paid channels. Some organic channels are SEO, SMO, email marketing. And some paid channels comprise SEM, SMM, and display advertising.

Growth Marketing

growth-marketing
Growth marketing is a process of rapid experimentation, which in a way has to be “scientific” by keeping in mind that it is used by startups to grow, quickly. Thus, the “scientific” here is not meant in the academic sense. Growth marketing is expected to unlock growth, quickly and with an often limited budget.

Guerrilla Marketing

guerrilla-marketing
Guerrilla marketing is an advertising strategy that seeks to utilize low-cost and sometimes unconventional tactics that are high impact. First coined by Jay Conrad Levinson in his 1984 book of the same title, guerrilla marketing works best on existing customers who are familiar with a brand or product and its particular characteristics.

Inbound Marketing

inbound-marketing
Inbound marketing is a marketing strategy designed to attract customers to a brand with content and experiences that they derive value from. Inbound marketing utilizes blogs, events, SEO, and social media to create brand awareness and attract targeted consumers. By attracting or “drawing in” a targeted audience, inbound marketing differs from outbound marketing which actively pushes a brand onto consumers who may have no interest in what is being offered.

Integrated Marketing

integrated-marketing
Integrated marketing describes the process of delivering consistent and relevant content to a target audience across all marketing channels. It is a cohesive, unified, and immersive marketing strategy that is cost-effective and relies on brand identity and storytelling to amplify the brand to a wider and wider audience.

Marketing Mix

marketing-mix
The marketing mix is a term to describe the multi-faceted approach to a complete and effective marketing plan. Traditionally, this plan included the four Ps of marketing: price, product, promotion, and place. But the exact makeup of a marketing mix has undergone various changes in response to new technologies and ways of thinking. Additions to the four Ps include physical evidence, people, process, and even politics.

Marketing Personas

marketing-personas
Marketing personas give businesses a general overview of key segments of their target audience and how these segments interact with their brand. Marketing personas are based on the data of an ideal, fictional customer whose characteristics, needs, and motivations are representative of a broader market segment.

Multi-Channel Marketing

multichannel-marketing
Multichannel marketing executes a marketing strategy across multiple platforms to reach as many consumers as possible. Here, a platform may refer to product packaging, word-of-mouth advertising, mobile apps, email, websites, or promotional events, and all the other channels that can help amplify the brand to reach as many consumers as possible.

Niche Marketing

microniche
A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.

Relationship Marketing

relationship-marketing
Relationship marketing involves businesses and their brands forming long-term relationships with customers. The focus of relationship marketing is to increase customer loyalty and engagement through high-quality products and services. It differs from short-term processes focused solely on customer acquisition and individual sales.

Sustainable Marketing

sustainable-marketing-green-marketing
Sustainable marketing describes how a business will invest in social and environmental initiatives as part of its marketing strategy. Also known as green marketing, it is often used to counteract public criticism around wastage, misleading advertising, and poor quality or unsafe products.

Read next:

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"