Over the past few weeks I’ve had conversations with a variety of people about the marketing/sales funnel, which I wrote about recently1. Even though many would a consider clear understanding of where you’re customers are coming from—and how to scale those channels—an essential part of business (which it is), many companies simply haven’t defined their marketing/sales funnel.
For those who have an intimate understanding of their funnel, the temptation is to be critical of businesses who don’t. When you step back, though, the context for most companies without a funnel is understandable and, in some cases, even justifiable.
Here’s a quick list of the top reasons I’ve seen in my conversations over the last few weeks.
1. The business needs to scale
The most common motivator for understanding the marketing/sales funnel is scale. Many businesses find themselves in a place where they are happy with what they have accomplished, but want to build on that success and increase growth in a significant way. Others might have a short runway of cash to get them to break-even. The path that leads to this “scale inflection point” is different for everyone. Here are a few examples I’ve run into recently.
Sometimes, the business was founded on a good idea that solved a problem and things “just worked.” When you’re making good money, the marketing/sales funnel isn’t on the top of your priority list. Almost always, though, word-of-mouth is one of the most significant contributors to success, whether that’s based happy customers or employees’ networks (personal and professional). Word-of-mouth is extremely powerful, but incredibly hard to track and scale. Referral programs are one of the most common tools used to harness world-of-mouth, but as one expert has noted, finding a company that can consistently sustain more than 15% of their revenue based on referrals—over the long-term—is extremely rare2. Direct-to-customer, in-person sales can have a similar dynamic in early growth, but is often easier to scale sustainably. No matter the cause, when the honeymoon period of hands-off growth ends, but you still want to scale, marketing and sales are the first stop.
Other times, a company may have a pretty good handle on their funnel as it relates to past growth, but not when it comes to engineering marketing and sales for significant future scale. The catalyst for scale could be taking on investment, strategically pursuing a market opportunity, capturing marketing share, or simply the desire of leadership to push the business to the level of success they believe it’s capable of. In any case, people often find that what they did before doesn’t translate easily into predictable marketing/sales channels at a significantly larger scale, leading them back again to the funnel.
2. Acquiring customers is harder than it used to be
At some point, almost every business will run into the reality of a constantly shifting marketplace and the changing demands of customers. More often than not, that volatility translates into previously-unexperienced difficulty in finding new customers. Examples of this are myriad, so I’ll cover a few that come to mind (both current and from the past):
- A referring (or partner) company shuts down or is acquired
- People stop using the Yellow Pages (which was a very real challenge for many businesses)
- A competitor’s mobile app solves the problem your website used to solve
- Advances in technology change what was a healthy marketing channel (like the Safari browser’s new ad-blocking and auto-play-stopping features)
- Reviews become the primary ‘storefront’ for your business (which can render a website “unnecessary”)
- Real estate development changes physical traffic to your business
- Good software helps businesses take your service in-house
No matter the cause, when what were once reliable channels dry up (slowly or suddenly), companies revisit the faithful marketing/sales funnel and figure out how to fill it up again.
3. Small/early-stage and don’t know yet (or don’t need one)
If a business is extremely young (often startups), they are working to define their marketing/sales funnel. Perhaps they’ve had enough interest to get a sense of product-market fit, but if they’re counting customers on two hands (or one for enterprise deals), the funnel, like the company, is still in infancy. If sales take off, many companies ride the wave and neglect the funnel, then often find themselves facing one the challenges I mentioned above. Hopefully, early-stage companies take the time to pay careful attention to their funnel so that they can find predictable, scale-able channels to sustain their growth over the long haul.
Last, but certainly not least, some businesses don’t need to focus on their marketing/sales funnel. More often than not, this is due to business goals where growth isn’t a priority (or even, in some cases, isn’t desired at all). My wife’s floral design studio is a great example. It’s not a huge business, but she’s had to turn work away over the last year because her website and word-of-mouth are driving more business than she wants to take. That being said, not needing to worry about the marketing/sales funnel is a rare, generally temporary luxury.