In recent years, much has been written about the funnel. It was discussed how to generate new leads and how to turn as many of them as possible into customers with a high conversion rate. Sometimes the way to achieve this was via re-nurturing. But mostly the posts ended with the successful closing of the opportunity. For some months now, people have been discussing whether the concept of the funnel is outdated. Customer Centricity and the customer lifecycle are supposed to transform the customer language. Has the funnel had its day?
The funnel maps a buying process – not the entire customer relationship
From the perspective of customer acquisition, the funnel helps to understand that you first have to reach interested parties who come to the trade show or your own website as visitors. The next step is to try to generate leads from them. Leads are further nurtured and finally passed on to the sales department. There, if possible, leads are qualified as opportunities and, ideally, a sale is concluded. This is the end of the classic funnel. But what happens next?
The prospect has become an existing customer. Depending on the product or solution, there are opportunities for cross-selling and upselling. If the customer has bought a machine, there may be additional tools or wear parts, such as new saw blades or filters. Or the customer may need another machine for another location. This follow-up business should not be left to chance.
B2B customers in particular know the importance of their existing customers
Many companies in the B2B business know about their limited target market. They cannot sell their products and solutions to millions of potential, ever-new customers, but often only to a few thousand companies. You can know these companies by name, you can maintain them in the CRM system and address them with marketing or sales measures. A large number of these companies are already customers or former customers. They have already successfully passed through the funnel once.
Especially when it comes to larger investments, such as a new machine, new sales opportunities arise afterwards that have to be identified again, developed, further qualified and led to closure. In most markets, business with existing customers is not a self-perpetuating process, but continues to require intensive sales work. If the generation of new leads were restricted to completely new companies, it would often no longer be possible to generate any leads at all. Instead, new leads can also be identified from existing customers if the customer shows interest or potential for follow-up business. These leads are then again at the beginning of the funnel.
The same company can be a lead, existing customer, and former customer in the funnel
Customer relationships are very complex. In the course of a customer life cycle, different purchase processes are often run through. In the process, a new product replaces or complements the previous one, or other similar or completely different products or solutions are sold. Different buyers can occur within a company, e.g., different departments.
The same company can be in different phases of the funnel at the same time:
- Different business units or product groups procure the same or similar products in parallel
- Different locations are in the purchasing process for the same/similar products
- The same business unit buys different products in parallel
Or procurement processes run consecutively whether. For example, one department has decided to purchase a new solution, while the other department opts for a competitor’s product or postpones procurement completely.
Anyone who tries to apply the funnel to the company here quickly reaches its limits. As soon as the funnel maps the individual purchase process, it is considered parallel to the customer relationship. If an ex-customer reappears as a lead, he will require more attention and a different approach than an active existing customer who has also initiated a new purchasing process.
Keeping track of leads, funnel and customer status in the marketing or CRM system.
Pushing the individual company through different stages of the funnel only works for a single procurement process. Initially, more differentiation can be made at the contact level. But if an existing customer reopens a sales opportunity here, this cannot be meaningfully mapped via contact status alone either.
Differentiated processing and meaningful tracking require a separate entity for the lead. The object lead can be linked in the system with contact person and company and can later be converted into an opportunity. A lost or cold lead is closed. However, the associated contact person remains addressable for marketing communication – provided the person has given their consent (opt-in or permission).
New customers are downgraded to the status of “subscriber” or “contact,” while existing customers continue to be addressed as part of existing customer communications.
This approach opens up a range of useful tracking options in the context of marketing success control. The start and end date of a lead and thus the lead duration as well as the time until conversion can be calculated and compared. Within campaigns, the newly generated leads as well as the leads reached with them (“touched pipeline”) can be assigned. The respective conversion rates can be calculated from the number of leads generated and won per campaign, product area, period or region.
It can be analyzed at which funnel level lead processes break off.
Over the entire customer lifecycle, it is possible to look at the ratio of leads generated to leads gained and at which customer segments there is potential for optimization. Different procurement processes can be viewed and processed separately within a company – for example, because different product areas and sales teams are involved.
A funnel describes a buying process in the course of the customer life cycle.
The image of the funnel is therefore still helpful and useful for mapping the course of a possible sales opportunity from the initial contact through various touchpoints to the hopefully successful conclusion of a deal. However, it should always be applied to the current sales opportunity, i.e. the lead or opportunity, not to the contact person or the entire customer company.
If you try to map the course of a customer relationship using the funnel, you will inevitably stumble as soon as a follow-up transaction is pending and the (existing) customer would then have to be at the beginning of the funnel again – even though he has long been a customer. For the customer lifecycle perspective, there are other models that are more suitable than the funnel, such as the customer relationship lifecycle model.