2014-23-May-Marketing-Funnel.jpgContrary to what you might have heard, rumors about the marketing funnel’s demise are greatly exaggerated.

The funnel is alive and well. And it should be leveraged extensively by marketers. It provides a consistent and universally understood (and somewhat accepted) framework. The funnel does come in a variety of shapes and sizes and colors -- with different twists and turns. Despite this variety, few marketers really leverage this powerful model.

What the Funnel Provides

The funnel enables marketers to have an almost universally understood visual representation of various customer touch points, and makes it easier to track and score a person’s behavior. The funnel we use at Marketo provides a good (although, not the only) framework and consists of six key stages:

  • Awareness: This is the universe of people who know anything about Marketo, no matter what social network they participate on, what articles they read, etc.
  • Inquiry: This is when we finally know something about the person -- we know at least their name and email address.
  • Prospect: This is when the individual has taken some sort of action.
  • Lead: This person is treated as a lead and can be shared with a sales organization.
  • Opportunity: The sales team has accepted these leads and added them to their pipeline.
  • Customer: The person becomes a customer and they are passed on to a new revenue cycle for upsell and retention.

marketing funnel.jpg

Of course, each of these stages include multiple marketing tactics and scoring approaches.

It’s important to understand the difference between a contact (or a prospect) and a true lead (someone who has explicitly engaged with the company). Obviously, the relationship does not end after an individual becomes a customer. At that point, you can upsell or cross sell them.

You can determine the value of a customer based on the different products they purchase, if they adopted your product sooner than others or if they are part of a referral program, etc. As Seth Godin points out - “Customers are traditionally undervalued, and prospects are all treated the same.”

Godin continues:

Once you see the funnel, it's easy to understand how valuable your existing customers are, and easy to think about how you want to spend time and money in promoting and building your site. Most Marketers are running a flat campaign. Embracing the funnel changes the way you treat people. And treating different people differently is what consumers demand.”

Having a model like the funnel and a good marketing automation tool enables you to measure and understand the cost of each interaction. Sharing this information with the rest of your organization helps build a marketer’s credibility in a company, especially with the CFO.

The funnel also provides a learning framework for marketers to test out different messaging and creative at each stage of the funnel. This gives marketers the option to fine-tune their current program.

Addressing 7 Funnel Concerns

Since I started my first big marketing job in American Express in 1992, I have heard lots of critiques of the funnel. Marketers love catchphrases, especially "The Funnel is Dead." I disagree.

Its advantages have evolved since 1898 when E. St. Elmo Lewis developed a model which mapped a theoretical customer journey from the moment a brand or product attracted consumer attention to the point of action or purchase. (St. Elmo Lewis’s idea is often referred to as the AIDA-model -- an acronym which stands for Awareness, Interest, Desire and Action). Let's address some of the funnel naysayers’ concerns, most of which apply to any marketing or sales model:

1. It fails to take into account the ‘feedback loop between existing customers and prospects’

Whether it is the funnel or another framework (such as a Life Preserver Ring of unique Awareness, Interest, Desire and Action areas), there always exists the challenge of tracking all the interactions among people (customers and prospects). It’s always difficult to uncover each discussion about your brand online.

2. The funnel is too linear

According to these critics, the primary problem with the funnel is that the buying process is no longer linear. I was always taught that the shortest distance between two points is a straight line. Most of the companies I work with, however, do have the majority of their customers follow more or less a linear process. They can be broken down into the different stages described in the model above.

3. If fails to track retention or repeat business

I must confess this might be the weakest part of most funnel models. But that doesn’t mean you should ignore the simplicity of the funnel’s approach. Most frameworks do not go into any great detail about "Retention" or "Lifetime Value" anyway. The bottom line is that good marketers constantly score their customers over time. American Express might be the masters at this. It leverage all its great Cardmember spending data to model, score and customize online and offline programs.

4. It fails to paint a pretty picture, nor does the word funnel sound great

I never did judge a book by its cover or people by their names. If this is what marketers are worried about, they are focused on the wrong things. There are many powerful Six Sigma names and diagrams, for example, that don’t convey a powerful image such as SIPOC (Single Point of Contact), DPO (Defects Per Opportunity), PD (Proportion defective).

5. It fails to take into consideration the powerful feedback loops between existing customers and newly arriving prospects that search and social media have wired up

I beg to differ. If you have some of your word of mouth programs coded properly you should be able to track shares, referrals and other types of influencer programs.

6. It fails to consider some products, such as iPhones, where marketing is integrated into the product

I think it comes down to how you set up your programs. You should be able to track cross-sell and upsell, and even referrals from within a product. With Flurry, for example, you can track your customers behavior when they use a mobile app. It tracks the big three: taps, tasks and transitions.

7. The Funnel fails to capture all touch points

Over time, good marketers should be able to define these. They also should ensure they are in learning mode so they constantly update their list of sources. This means tracking referral links, surveying their customers and analyzing where their competitors get their leads from.

And then there’s the McKinsey Consumer Journey (see below) which attempts to demonstrate that the buying process is not linear and that several steps repeat themselves. For the real digital practitioner it’s too simple to say someone goes from Bond to Buy:

bond to buy.jpg

While brands may put the decision maker, the Customer, at the center of the McKinsey Customer Journey, the above excludes the importance of the experience the marketer and the company are having with the customers. Life is not all about the transaction. For example, at Marketo, our energy goes into building relationships with marketers as well as connecting marketers together. In addition, you don’t have to be a customer to recommend a product. I am probably the biggest promoter of Tesla, but I can’t afford one. I have only tried it via a Freemium ride provided by a neighbor and have read great reviews about it on Edmunds.com. Does that mean I can’t recommend the vehicle to others? Obviously not.

In sum, CMOs and their teams need to know that the funnel is alive and kicking. Rumors of its demise are greatly exaggerated. The funnel is an easy to use, easy to remember approach to tracking individuals who interact with your brand -- either directly or indirectly. Its simplicity is what makes it special. It provides the most universally understood way of thinking about an individual's interaction with your brand. It works not only in a B2C environment, but in a B2B environment. Marketers should always feel free, however to add their own creative twist on things and rename all or parts of it.

Long Live the Funnel.

Note: This will be the second of a series of posts that look at CMO’s evolving role in companies, especially as the "run and gun" campaign approach moves to building longer-term customer relationships. My next article will focus on How to Build a High Performing Band of Marketers.

Title image by Stuart Monk (Shutterstock)