The sales funnel – historically, has been the dominant metaphor used to represent a selling process. Sales funnels come in different shapes and sizes, and are composed of multiple stages. Some are short and fat with big openings on top, and others are long and skinny with very few opportunities getting into the flow.
Typically, the sales funnel is depicted as an inverted pyramid (i.e., funnel) used to illustrate the steps in a sales process, from lead generation to completed sales. At the top of a sales funnel is a mixture of qualified and unqualified prospective customers. Less-qualified purchasers drop away at each stage of the evaluation and purchasing process.
However, in reality, customers don’t go through a sales process when they buy – they go through a buying process. So, it only makes sense to map the customer’s buying process to your funnel, and to the way you sell: That’s what the buy funnel does. The traditional sales funnel is a flawed design; it’s an artificial creation by sales managements that is outdated and ineffective. It’s flawed because it uses the seller’s activities and not the buyer’s activities to define each funnel stage.
The traditional sales funnel design that is used by many companies and promoted by training organizations, does more harm than good for selling. The buy funnel corrects major flaw of traditional sales funnel, and uses the customer’s buying process to define the funnel stages. With the customer’s buy cycle, salespeople learns to seek and encourage customer commitment at each stage for each sale, which is key for effective selling.
In the article Flip the Funnel by Joseph Jaffe writes: The traditional sales funnel is now seriously out of whack – it doesn’t work effectively any more. The funnel model was an oversimplification which has passed its use-by date. It’s time to get back to basics and take a clean sheet approach for the best way to acquire and retain new customers. Instead of spending the bulk of resources on new customer acquisition, invest in customer retention; in other words– flip the funnel. Flipping the funnel is about using customer relationships to grow your business.
Once you accept the fact, its smart business to treat your customers better, the question becomes how do you make more of the right stuff happen? Grow the customer base from the inside-out; the flipped funnel is inside-out approach for growing the business. This is a 180-degree shift from the normal outside-in approach which focuses on bringing progressively more new customers into your business, all the time.
This is all about growing your business while shrinking your budget; about getting more from less at a time when business needs and even demands it. It’s about eliminating waste and focus dollars on the people who really matter: your customers. It’s about harnessing the hidden potential of two incredibly under-utilized constituencies: customer evangelists and employees.
Begin with the end in mind… During trying times, opportunities do not come from cutting costs, mitigating risk, or trading off quality (experience) for quantity (transactions). It instead comes from ramping up investment and commitment… Flip the funnel isn’t a fleeting experiment or a fad. It’s not the next shiny bright object or must-have of the new marketing season.
Rather, it’s a seismic and irreversible shift in terms of how companies conduct business, relate to customers, and balance the mission-critical objectives of keeping the cash registers ringing and customers singing (the praises). As simple and profound as this may sound, the truth is that the entire marketplace is built around an acquisition-centric methodology…
In the article The Buying Funnel by Bill Fellows writes: The sales funnel typically starts with initial contact with the prospect, proceeds through qualification, validation of need, possible solutions, proposal and closing the sale. There are many versions of the funnel, but these are the fundamental stages. What I find backwards about most sales funnels is that they do not usually synch with the buying funnel, especially in the early phases of the funnel.
With big-ticket items, buyers typically look at many options in terms of the type of products or services that will meet their needs. Once they determine the best type of product or service, they consider a variety of companies that could provide that product or service. So, in the early phases of the buying funnel, the buyer has a large number of companies under consideration.
This does not synch with the sales funnel approach because the sales person is qualifying the buyer before the buyer even knows what he/she wants, let alone which vendors to consider. Add to this the complexity of team buying, which has become more prevalent in recent years, and you can see how the sales funnel approach can be misaligned. Studies show that the higher the price of the solution and the more critical the impact on the company’s long-term profitability and survival, the more likely the buying decision will be made by a team.
The team buying approach also means more planning and coordinating… With all the emphasis on ‘customer centric’, these days, you would think that more companies would focus on the buying funnel approach. By understanding the customer’s buying funnel, you can determine when and how it’s most appropriate to interact with the customer.
In fact, if the customer has not already thought about their process, you may be able to exercise some influence… If the customer already has a process, you will earn points for being sensitive to their needs. Either way, you will be perceived less as a sales person trying to push your alternative and more as a partner able to support the prospect. It demonstrates the type of partnership you will have after the ink on the contract dries.
Thinking about the buying funnel does not mean you have to abandon the sales funnel. By understanding the buying funnel for the individual prospect, you can overlay a traditional sales funnel and determine the best time to implement a specific sales action. Rather than rushing the process according to your time line (trying to close the deal as quickly as possible), you are customizing the sales process to the prospect.
In the article Why The Sales Funnel Is Bad For Business by Steven Reeves writes: At the heart of the sales funnel concept is the numbers game– the more people a sales guy talks to the more deals she wins. Every 100 cold calls results in 10 first meetings which in turn results in 1 proposal. 1 in every 3 proposals results in a sale. In this example there’s one successful sale to come out of every 300 cold calls.
The word funnel describes how the number of prospects reduces as; the cold call, first meeting, proposal, sale process is executed. The numbers quoted are simply examples and don’t mean anything. It’s the concept which counts and it operates differently in every business. So how come the sales funnel is so popular if it’s bad for business? Good question.
There are ways it’s good for sales operations, for example; it recognizes that there is a process and the probability a prospect will buy increases as that process is completed. It provides everybody on the team with a common language covering revenue generating activities. But, most important – it gives management simple measures they can use to monitor operations and forecast sales outcomes.
The sales funnel is part of the folk-lore. That’s a lot of upside, so where’s the downside? The facts are that the sales funnel wastes an awful lot of time and resource. In our example, for every successful sale there’s been cost of sale spent on 299 prospects that were never going to buy. There are two ways of looking at this; neither of them is pretty. If average cost of sale per prospect is $500 the cost for the 300 in the funnel totals $150,000. If business could reduce that cost by half, the result might be much lower prices to better compete in the market, or another $75,000 in pure profit, per deal.
On other hand, there is an opportunity cost; e.g., what could the sales team be doing if they weren’t wasting effort on 299 prospects that aren’t going to buy– this is equally frightening. Simply by reducing the number of cold calls needed to produce a sale by half, the company could increase profit by having fewer sales guys, or increase sales by redeploying them.
The big overhead cost in any sales operation is the prospects who don’t buy, and simplest way to improve sales performance is by spending less time on them, and more on the ones who do. That means; figuring out who will buy, how, and for how much… and, focus marketing, prospecting, and selling on executing more efficiently…
The sales funnel presents a ‘snapshot’ of sales activity at a given point in time. It’s a visual that describes a sales process from initial contact to final sale. The stages of a sales process refer to a potential customer’s degree of readiness to commit to a deal (from the seller’s perspective). Or put in a different way, readiness may be seen as the probability of the sale taking place.
As a sales opportunity moves down the funnel, time to closing decreases and the probability of the sale occurring increases. The sales funnel metaphor enables you to analyze, manage a portfolio of sales opportunities. But, sales funnel is not accurate representation of the customer engagement reality, it’s only a reflection of salesperson’s activity.
Whereas, a customer’s buying or buy funnel describe the steps that the customer takes when they buy or purchase a product or service, and these are the only activities that really matter…. Other names that might be used to describe this process are; buying or buy cycle, buyer decision cycle, decision-making process… The buy funnel is an important concept because it helps business understand the way customers think…
All of this is fine and good, but times are changing… businesses and customers are moving away and outside the funnel concept, and changing the way they research and buy products. Organizations must change with the times and respond accordingly. Sales has always sought special moments, or touch points, when customers are open to influence.
Sales traditionally, has understood and used touch points through the metaphor of the sales funnel. Today, the funnel concept fails to capture all the special moments, touch points, and key buying factors resulting from the explosion of product choices, digital media…
These new dynamics coupled with emergence of increasingly discerning, well-informed customers… requires a more sophisticated and relevant approach to help sales navigate these hostile environments, which are less linear and more complicated than the funnel concept suggests…