As human beings, we’re naturally inclined to regard change with a sense of skepticism.
But, sales and marketing organizations must resist this instinct in order to constantly adapt to changing markets, new technologies, emerging trends and so on.
But, there’s one business concept that’s stood the test of time like no other. It’s a model so deeply ingrained in modern strategies that most businesses don’t even think to question it. We’re speaking, of course, of the sales funnel.
The sales funnel represents the theoretical customer’s journey to making a purchase. Marketers structure their entire strategy around moving prospects through the funnel, towards the ultimate goal of winning a new customer. Here’s the problem: like many classic business concepts, the funnel has become outdated.
If this news comes as a shock, don’t panic. In today’s blog post we not only explain why the funnel is outdated, but we also examine a more modern alternative: the flywheel. Let’s get into it!
The Sales Funnel
- Top of the funnel: Prospects enter the sales funnel but are still in the “pre-awareness” and “awareness” stages of their buying journey. They might be aware they have a problem, but don’t know how to solve it yet and aren’t quite ready to make a purchase.
- Middle of the funnel: Prospects in the middle of the sales funnel are still not ready to purchase, but they’ve defined their problem and are in the “consideration” stage of the buying journey. They’re continuing to learn about their problem, and beginning to research potential solutions.
- Bottom of the funnel: At the bottom of the funnel, sales prospects are in the “decision” stage of their buying journey. They want to make a purchase and have begun to research potential solutions.
The objective of the standard sales funnel is simple: guide prospects from the top of the funnel to the bottom, as efficiently as possible.
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Why is the Sales Funnel Outdated?
The sales funnel follows a linear trajectory. Prospects enter the funnel at the top, and exit at the bottom as paying customers. It’s a model predicated entirely on closing deals. While there’s no doubt the sales funnel produces customers, there are several reasons why it’s an outdated model for the modern buyer’s journey:
1. The sales funnel is not customer-centric.
Since the digital revolution, modern customers have more control over their buying experience. Due to the wealth of resources and information available to them, they not only want to buy high-quality products; they also demand positive experiences from the companies they buy from.
The problem with the sales funnel model is that it positions the customer as a means to an end, rather than a focal point. It enables marketing and sales teams to prioritize closed deals and revenue over customer experience. Regardless of how healthy your sales funnel seems at a glance, poor customer experience will result in a number of consequences — high churn rates, negative word-of-mouth, lack of trust in your brand, etc.
2. The funnel emphasizes quantity over quality.
The funnel model encourages businesses to fill their own sales funnel with as many customers as possible. Sounds good, right? Unfortunately, this objective often results in a quantity-over-quality mindset.
Under the pressure to hit their goals, marketing and sales teams push as many prospects as they can through the sales funnel, even if they’re not a perfect fit. Marketers pass along bad leads so they can hit their numbers and sales reps push products on unqualified prospects to reach their quota. The result? Misaligned departments, customer dissatisfaction, lower customer retention rates — the list goes on.
3. The funnel doesn’t account for momentum.
Why do sales and marketing teams seem particularly stressed and overworked at the end of a quarter? The answer: because the sales funnel model turns each quarter, and each year, into an isolated window during which results are measured. How many leads did we generate in Q1? How many new customers in Q3? What was our total revenue in 2018? This mindset fails to capture the role momentum plays in the growth of a business.
In reality, a successful business generates momentum over time. Word-of-mouth, evergreen content, customer advocacy, social media buzz— these assets don’t disappear or reset every quarter. They continue to feed your business’s growth at an exponential rate. Unfortunately, the linear nature of the sales funnel model ignores the role of momentum entirely.
The Sales Flywheel
A flywheel follows a circular trajectory, rather than a linear one. It’s a device that is designed to efficiently store and release the energy with which it fuels itself. Coined and popularized by Hubspot in recent years, the flywheel is the perfect replacement for the sales funnel.
As shown in the model below, the customer is the center of the sales flywheel. This presents a stark contrast to the funnel, which places the customer at the bottom. The three stages of the flywheel can be defined as follows:
- Attract: Capture the attention of qualified leads with high-value marketing content.
- Engage: Build relationships with prospects and enable them to interact with your products and services.
- Delight: Deliver an exceptional customer experience in order to retain more customers and create brand advocates.
The flywheel’s momentum depends on three factors: speed, friction and size.
- Speed: A flywheel spins faster when force is applied to the most impactful areas. If your business applies all its force to closing deals, customer satisfaction will suffer. In the flywheel model, you must apply force to customer experience and customer success if you want to generate momentum.
- Friction: A flywheel is most efficient when it carries the least amount of friction possible. As a business concept, think of friction as any steps or processes that make the buying journey more challenging.
- Size: The more delighted customers in your flywheel, the “bigger” it will be, and thus the faster it will spin. In other words, your business will grow at an exponential rate as your customer base grows, so long as you delight your customers and give them a reason to continue buying from you.
Why is the Flywheel a Better Alternative?
Customer experience is more critical to a company’s success than ever before. In fact, 86% of buyers are willing to pay more for a great customer experience. And, recent studies predict that by 2020, customer experience will overtake products and price as the key brand differentiator (source).
In other words, customer experience will soon become the dominant force behind a business’s growth. The flywheel model reflects this trend by emphasizing customer delight as one of its core components. By doing so, it also accounts for the rising importance of word-of-mouth marketing and customer advocacy in our hyper-connected digital world.
While the sales funnel has a more singular focus on maximizing revenue, the flywheel’s customer-centric structure is more conducive to long-term revenue growth. In fact, customer-centric companies are 60% more profitable than companies who don’t prioritize the customer (source).
How to Adopt a Flywheel Model
Despite the benefits of the flywheel, you might still be wary to say goodbye to the funnel and embrace a new and unfamiliar model. We get it — but we’re here to tell you that adopting the flywheel model isn’t the massive structural overhaul it may seem like. Let’s look at a few important steps your company can take to introduce the flywheel as a model for business growth.
1. Redefine your business goals and metrics.
Sales funnels and flywheels aren’t literal. They’re hypothetical frameworks that shape the way we think about the buyer’s journey and our customers. Therefore it requires a shift in mindset to execute correctly— meaning the first step to adopting a flywheel model is to restructure your goals and the metrics and marketing KPIs you track as a business.
While this may sound like a major undertaking, bear with us. You won’t be throwing out all of your funnel-oriented metrics and replacing them with new ones. Rather, you’ll be reorganizing your goals and metrics to fit the three stages of the flywheel: attract, engage, delight.
- Attract: The first objective in the flywheel is to attract the right prospects with relevant, informational marketing content. If you’re already offering and promoting free high-quality content, your goals for this stage won’t differ greatly from your traditional top-of-the-funnel goals. Track metrics such as website traffic, content downloads, click-through rate, and other marketing metrics related to audience behavior.
- Engage: Stage two of the flywheel model is to help prospects engage with your products and solutions. Continue to track metrics related to lead generation, but emphasize your free trial downloads, product demos, and any other freemium offerings that get prospects to actively engage with your products.
- Delight: Your ultimate goals are to increase customer retention (bolstering the “size” of your flywheel) and boost the positive word-of-mouth around your company. Use Net Promoter Score surveys, monitor review sites, and track other metrics related to customer satisfaction.
Keep in mind, the flywheel does not require you to change your business goals. Rather, it provides a structure to hold your business accountable for the quality of relationships you maintain with prospects and customers.
2. Invest in customer marketing.
Your flywheel starts spinning as you attract and engage prospects — processes you’re already familiar with if you’re using the sales funnel model.
But to generate momentum, you must devote more resources to maximizing customer delight. Delighted customers translate to higher retention rates and increased customer advocacy. That positive word-of-mouth creates new customers for your business to delight and retain, and so on — that’s momentum.
This process falls under the umbrella of “customer marketing”. In fairness, it would take us much longer to outline every facet of a comprehensive customer marketing program. For the sake of this post, we’ll focus on the following elements:
Delighting customers starts with providing them with every tool they need to succeed. Invest more in your training and onboarding to ensure the customer’s experience starts off on the right foot. Create and distribute content that helps your customers get the most out of your product. We recommend creating a centralized digital knowledge center, so customers can visit one location and find all the resources they need.
Businesses often engage prospects with personalized marketing campaigns, but then revert back to a one-size-fits-all approach to their existing customers. Be sure to tailor your onboarding process to each customer’s needs and preferences, and continue to engage in regular, personalized conversations with each existing customer.
Establish a loyalty program that incentivizes customers who continue to buy from your business. Your loyalty program can include exclusive discounts, invitations to customer-only events, and other exciting perks. Reward customers who leave reviews or advocate for your company within their own personal networks.
Remember, your customers can likely find other businesses who offer similar products and solutions. So, you must create a uniquely rewarding customer experience that they can’t find elsewhere. Make them feel less like anonymous customers and more like part of a community, and you’ll build the momentum your flywheel needs to keep spinning.
3. Identify and eliminate points of friction.
Any inefficiencies that slow down or complicate the buying journey constitute friction. For example, let’s say a prospect wants a free trial of your product, but has to wait days to be contacted by a sales rep after they fill out a form. Or, a prospect is searching for content about a specific issue, but the sales rep they’re in touch with can’t provide any.
It’s crucial to identify points of friction if you want your flywheel to run efficiently. Every business has its own unique friction points — but there are a few steps any business can take to reduce friction:
Without question, poorly aligned departments is the most common and significant cause of friction. Marketing, sales and customer service teams must operate with shared goals and processes throughout all three flywheel stages. Misalignment results in siloed data, mismanaged handoffs, and inconsistent messaging — all of which can bring your flywheel’s momentum to a halt.
Listen to customer feedback:
More often than not, your customers are aware of your business’s points of friction before you are. Use surveys and other customer feedback channels to identify and document common complaints about your sales process and customer experience. Some issues might be isolated incidents, while others will expose more systematic friction points your organization can assess and eliminate.
Leverage efficient technology:
Many friction points can be eliminated with modern technology. For example, let’s say you receive several complaints about the wait time between when a customer asks a service question and when they receive a response. After recognizing this as a friction point, you decide to invest in a customer service chatbot that customers can interact with 24/7.
Automation and technology won’t be able to solve every friction point, of course. But if you leverage your technology stack strategically, you’ll free up time for your employees to focus on more on the tasks that benefit your customers.
Example: Funnel vs. Flywheel
If you’re new to the flywheel, we’ve thrown a lot of information at you throughout this post. So, let’s tie it all together with an example of the sales funnel and sales flywheel in practice:
Company A, a growing SaaS business, far exceeded their sales funnel goals last year. They generated 200% more leads than the previous year and more than doubled their overall revenue. But as they grow their sales funnel, their customer churn rate rises. And, negative word-of-mouth about the company’s post-sale customer service begins to spread on social media. But, the company continues to grow their funnel and close more deals, so they believe they’re on the right track towards long-term business growth.
Meanwhile a competitor, Company B, adopts the sales flywheel model and begins to invest in their customer experience. Their short-term revenue numbers aren’t as impressive, but they achieve unprecedented customer retention rates and begin to earn a fantastic reputation online. As Company B continues to build momentum, they grow at a much faster rate than Company A and soon become the more profitable business.
Final Thoughts on the Funnel and the Flywheel
There’s no way around it: the sales funnel isn’t going to disappear anytime soon. It’s the tried-and-true business model that countless organizations have used to achieve success. And yes, a business can use the sales funnel model and still offer a great customer experience.
But, it’s important for businesses to be aware of how much the market has changed since the sales funnel was first adopted. A signed contract and a closed deal is no longer the finish line, it’s now a starting point. Modern businesses must put the customer first if they want to sustain and build positive momentum, and the sales flywheel is the perfect model for the customer-centric world we live in.
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