How do people purchase from you? What does the buyer’s journey look like for your company?
Some customers might quickly transition through the buyer’s journey and even skip steps along the way, while others might follow certain steps to a T. Regardless, you need to understand how people discover your brand and how they make purchasing decisions relating to your product or service. This understanding will help you make better business decisions over time.
By combining the data gleaned from your marketing funnel with anecdotal information from your customers, you can improve the customer experience you offer and increase ROI.
The goal of diagnosing your funnel is to figure out how to hit your revenue goal and optimize that process over time. You’re not looking for 100% conversion rates, so you need to identify ranges that you’re comfortable with for the transitions between each stage.
What Does Your Funnel Need to Include?
The marketing funnel has six stages that customers move through:
1. Visitors: Anyone who visits your website
2. Leads: Anyone who has given you a piece of their information that can be used to actively market to them.
3. Marketing Qualified Leads (MQL): The leads most likely to be ready to talk to sales. This could be based on high fit, high interest or a combination of both.
4. Sales Qualified Leads (SQL): The SQL stage is like a first date; sales agrees with marketing that there could be a future with this lead and wants to go through a discovery phase to explore more.
5. Opportunity: An opportunity is when a lead agrees that your company might be able to solve and address their pain points and challenges. For New Breed, this is an assessment. For software companies, this is frequently a demo.
The transition between opportunity and a deal is when the sales pipeline comes into play.
6. Closed-Won Deal: When an opportunity decides to purchase from you and move forward with your company.
The definitions of those six stages can vary from company to company, but you should have a clear understanding of what each stage means for you.
How to Use Your Funnel to Inform Your Strategy
Once you understand what each of those stages represents for you, you should examine each transition to understand where people are dropping off in the process. Ideally, you already have goals for each stage to use as benchmarks — from the number of site visitors you want to attract to what the opportunity-to-closed-won conversion rate should be.
For example, you want to create 50 opportunities in a month. If you’re not hitting that goal, you can’t just focus on creating more opportunities. Instead, you need to look at all the transitions leading up to the opportunity stage. That shortage of opportunities could be due to a low conversion rate from MQLs to SQLs, which means that marketing and sales are not agreeing on what defines a good-fit lead.
To solve for that, buyer personas might need to be re-examined so marketing and sales agree on who constitutes as an ideal customer. Then, the marketing team would update its content strategy to reflect that.
Analyzing your funnel can help you identify where you need to improve your marketing and sales processes. Each transition point then needs to be addressed in a different way.
As mentioned earlier, the problem behind a low MQL-to-SQL conversion rate might be misalignment on buyer personas, but that isn’t necessarily what’d be causing a low opportunity-to-closed-won conversion rate.
If you have a high SQL-to-opportunity rate, but a low opportunity-to-closed-won rate, then your sales team might be opening opportunities too early.
If your entire marketing and sales team is operating the same way, outliers can be used to optimize your funnel and improve the process for everyone else. For the example above, if you have a low opportunity-to-closed-won rate, but one of your sales reps has a significantly higher close rate, you can find out what they’re doing differently — maybe it’s waiting longer to open opportunities — and make that a part of your overall process.
How to Create Goals
To create goals for each stage of your funnel, start with the revenue target you want to hit. This is typically done at the end of each year when you set your growth goals for the upcoming year.
If you want to hit $10 million for the next year, figure out what your average deal size is so you know how many closed-won deals you need to create to reach your revenue goal. Then work up the funnel to find out the necessary conversion rates for each stage in the funnel in order to close that many deals.
However, your funnel doesn’t have to stay identical from year to year. Part of your goal setting can be to increase conversion rates at specific stages, which would change the required conversion rates of the other stages.
When setting goals, keep in mind that you’re not going to see 100% conversion rates, and you probably don’t want to. Not every visitor to your site is going to be a good fit, and that’s okay. Related to that, if you increase a conversion rate higher in the funnel, it’ll likely decrease conversion rates at the stages below it.
For example, if you increase your lead-to-MQL conversion rate, you’ll have a larger pool of MQLs to work with. This will lead to an expected decrease in your MQL-to-SQL conversion rate. Even if the same amount of SQLs is created, the conversion rate will be lower because the potential number of MQLs who could have converted is higher.
If you start to change a process within the funnel, you need to plan for how it will impact the rest of your funnel.
Even though the flywheel methodology has somewhat replaced the marketing funnel, you can’t just throw out the insight the funnel has to offer.
The flywheel is the methodology you should follow to keep your business customer-centric, but the funnel provides empirical data on the buyer’s journey that you should be utilizing to inform your marketing and sales strategy.