Funnel Failure – Try Lifecycle Marketing

Posted by | November 09, 2012 | | No Comments

Published by Sales & Service Excellence – August 2012

Byline by Troy Burk

Saying that the world has changed a lot in the last 20 years is an understatement, in the least. Just about every industry has experienced tremendous advances, from telecom to computing to medicine to automobiles.

Despite the variation between the growing number of advancing industries, they all have one thing in common – survival and advancement through financial success. The interesting thing is, the piece of the equation responsible for driving more revenue – sales – is the business component that seems to be stuck in a time warp. The practices and strategies of sales and marketing managers haven’t truly evolved; despite the increasing accessibility to powerful software applications and major shifts in the way customers buy products and services. It can be said that there is an entirely new breed of ‘sales cycle’ now – one that is heavily influenced by the educated buyer.

At the crux of this problem, however, is the concept of the traditional marketing funnel. The funnel was meant to illustrate the path prospects take from awareness to evaluation, then finally to purchase.

For the marketing funnel model to work, all of the nurtured, ideal fit, brand advocates at the bottom have to first be fed into the top of the funnel through marketing efforts.  However, today, most sales that close are not sourced from marketing. To illustrate this point, nearly half of all B2B marketers say that they either 1) close fewer than four percent of all marketing-generated leads, or 2) they don’t even know this metric (Source: Forrester Research). In fact, reports show that the revenue most companies attribute to marketing is probably not greater than 25 percent of all revenue.

Where is the other 75 percent of revenue coming from? The answer is: many sources, including upsells and referrals, which has nothing to do with the marketing funnel. Yet, companies continue to allocate the majority of their marketing spend on filling “the funnel” with new leads.

This creates a problem for marketers, who are evaluated based on sales resulting from marketing generated leads. Consider this scenario: a sales rep is introduced to a new prospect through a mutual friend, and the prospect eventually becomes a customer. That hot lead doesn’t ever go through the marketing funnel, yet it reached the end goal. Marketing doesn’t get any credit for helping, even though marketing certainly touched this lead through automated nurturing efforts; thus, having a significant amount of influence on the eventual sale.

Engagement is paramount

Today, marketers instinctively understand the need to build prospect and customer engagement. But, the fact of the matter is, it cannot effectively be done with the old funnel model still in place. The two strategies do not align. Instead, implementing marketing plans to nurture the individual or the organization over the course of their customer lifecycle illustrates a paradigm shift in marketing strategy. It places an emphasis on marketing that goes beyond generating leads and passing them to the sales team. It recognizes that the nurturing of the relationships does not stop at the handoff – it continues past the qualification, and even past the sale.

Instead of the funnel, companies should consider Customer Lifecycle Marketing, which recognizes that prospects and customers move through phases in their relationship with a brand, from initial contact to a fully-engaged relationship.

Marketers play a crucial role in this scenario, communicating with prospects and customers across all channels to drive engagement. Every communication and touch point strives to advance people through the lifecycle.

While every business has its own way of segmenting prospects and customers into phases of the relationship lifecycle, most include two main categories: lead engagement and customer engagement. Under these two categories, a company might further define stages.

The lead engagement phase could consist of two stages: Develop and Convert. A lead progresses through the Develop stage until it is determined to be qualified. The marketing and sales teams nurture each lead during the Develop stage using a series of communications, which may consist of case studies, white papers, webinars, regional events and online demos. Each time a prospect engages in one of these communications, a point value is assigned and the total points equal his engagement score. The “gate criteria,” which determine when an individual moves forward into the next stage, typically includes a lead scoring measurement. Once an individual reaches the gate criteria, the lead is given to a sales rep and it moves to the Convert stage, where the sales rep manages customer communication until the lead closes, the sale is lost or the lead recycles to the Develop stage.

The engagement phase may have several stages that signify movement from customer to brand advocate. Customer communication is individualized based on the current stage, with the goal being to move the customer to the next more engaged stage.

Two-dimensional charting

The best way to visual these phases and stages is through a two-dimensional chart, showing engagement and target audience. The engagement dimension ranges from initiate to advocate, and the audience dimension includes ranges of profiles based on criteria such as target customer revenue, employee count and product interest.

Customer Lifecycle Marketing can be used for any type of business, B2B or B2C, and the stages and gate criteria should be customized to fit the company. However, the general framework remains the same:

Lead engagement phase:

  • Initiate–An individual is identified or initially engages with the company through any channel. Communications center on encouraging them to engage further.
  • Develop–Based on behavior, data, action, timing or lead score, communications continue to engage the individual. Communications further encourage individuals in this stage to either purchase or move forward into a more active buying cycle.
  • Convert–The individual moves into an active buying cycle and communications support the evaluation, selection and negotiation of the purchase.

Customer engagement phase:

  • Adopt–The new customer uses the product or service. Communications should encourage the new customer to use the product, enroll in training or better understand how to get the greatest value out of the product or service.
  • Value–The is receiving value from the product or service. Communications help the customer maximize this value and make additional purchases or upgrades.
  • Advocate–The customer actively promotes the company and its products to friends and colleagues. Communications center on monitoring customer satisfaction and loyalty, and encourage the customer to promote the brand.

Putting the new framework into practice

Marketers who are willing to move away from the funnel model and embrace a Customer Lifecycle Marketing framework can do so in four steps:

  1. Define the Customer Lifecycle Marketing programs. How will you market to individuals in each stage of the customer lifecycle. For example, an Adopt Stage might include a customer on-boarding program that ensure the customer is using your product or service.
  2. Define the Customer Lifecycle Marketing campaigns and tactics for each marketing program. Each lifecycle marketing program consists of one or more campaigns that are sequenced, triggered and scheduled according to the campaign design. These campaigns could be a mix of single step and drip campaigns.
  3. Define the target audiences. These are audience segments based on attributes, such as behavior, demographics, action, time or lead score.
  4. Define the treatments and offers for each step in each campaign. Treatment refers to the communication method (electronic, physical, etc.). The offer compels the individual to action. These may be different depending on the segment. The objective is to move individuals forward in the lifecycle.

Finally, select a marketing automation solution that gives you insight into your growing customer engagement and provides the flexibility to nurture all sources of revenue, including leads from marketing and sales, repeat customers, referrals and up-selling.

Troy Burk is the CEO and founder of Right On Interactive, a customer lifecycle marketing automation software company that helps organizations win, keep and grow business by building customer engagement. He can be reached at tburk@rightoninteractive.com.

 

Article can be found in the August issue of Sales & Service Excellence.

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