Sales funnels symbolize a widely-known reality among marketers: s*** happens.
Funnels instantly remind us that interactions between buyers and sellers are fraught with risks – not that we need any reminding. Funnels also represent our fear that we can assiduously attempt to convert a prospect to a customer, but lo, there’s a chance we won’t prevail.
I like funnels because they are easy to understand. Funnels mansplain uncertainty and risk. When you need to justify a pipeline multiplier, or reveal the rationale behind a multi-channel lead generation campaign, simply fire a 2-D trapezoid shape onto the projection screen or whiteboard. Divide the image into equally-spaced horizontal stripes. Use bright colors. Then, dive into funnel taxonomy. “Raw prospects enter the gauntlet at the top. From there, they undergo a metamorphosis, becoming Leads, then MQL (Marketing Qualified Leads), then SQL (Sales Qualified Leads). Those that emerge will be anointed as Opportunities before moving south, eventually crossing into a hallowed zone marketers call Paying Customers.” My presentation includes a bloated money bag positioned near the funnel’s bottom to drive home the idea. The funnel glows even brighter. Warmth envelops the room. This is everyone’s favorite topic.
You already have recognized that my scenario is called The Happy Path. Happy paths, as we know, make people happy. Everything on the slide is linear. Everything is ordinal, with a prominent, single-headed arrow to emphasize the direction of actions, activity, and interest. The partitions between funnel stages are always crisp and distinct. “Questions? . . . No? Great! Let’s move on . . .”
I advance to the next slide to continue my speil when inevitably, someone – often a new hire – lobs a question with the antecedent, “What about . . .” I’m prepared. I press the “back” button, and ask, “Was there a question about the funnel?” Indeed. Many questions, actually. A partial list of ways to complete the interrogative:
. . . Lead qualification and disqualification, changed priorities, low buyer motivation, misaligned or insufficient sales incentives, faulty CRM data, lack of project funding, buyer fear, seller fear, redirected budgets, raised customer expectations, increased ROI hurdles, misunderstood needs, bad assumptions, new assumptions, strategic re-prioritizations, project starts-and-stops, buyer confusion, atrocious sales processes, predatory buying, industrial espionage, new decision hierarchies, flawed business intelligence, process breakdowns, competing internal agendas, technological innovation, tariffs, product recalls, spikes in monetary exchange rates, increases in the cost of capital, mergers and acquisitions, personnel changes, passive aggression, essential conversations that never materialized, relationships gone awry, cruddy demos, software bugs, regulations, external competitive maneuvering, internal competitive maneuvering, and stupid tweets from anyone with access to the company’s “official” Twitter account . . .”
I don’t consider any of this the Unhappy Path. I call it Life. Here’s the problem: beyond their purpose for symbolizing risk, funnels don’t represent the myriad conditions companies encounter when executing revenue strategy and tactics. These examples obliterate the template funnel’s shape, and shatter that straight North-South arrow into countless, itty-bitty pieces.
For me, the funnel’s most meaningful features are its taper and length. The angle degree at the top should invite concern, interest, and discussion. “Our funnel is wide as a tank container at the top and narrow as a pipette at the bottom, and it takes one year to travel from top to bottom. Perhaps we’ve found the root cause for our cash flow problems.” In practice, few seem interested in dissecting the risks that cause the delta, and how to manage them. A funnel is a funnel. Counter-intuitively, the funnel’s ubiquity as a risk symbol has made us less risk aware.
Time for a fresh look.
Twitter abandoned its egg silhouette in 2017. Assuming their objective was to render a human-ish image, the replacement – two detached shapes that faintly suggest a human head and shoulders – offers scant improvement. Imagine what we’d be purchasing if design engineers adopted such anonymized forms to use for prototyping. I suppose we’d have a visceral understanding of what daily life was like in the 1700’s. Similarly, how can companies create revenue strategy when using generic funnels as design templates?
Overlooked differences. At best, funnels suggest risk in marketing and sales. But they don’t mirror reality. I love Roadrunner cartoons, but for my safety and that of others, I resist letting them inform my understanding of physics.
Three real-world deviations from the funnel symbol:
Prospects enter sales funnels at many different points, not just at the top. Sales funnels are highly porous, and exit points vary, too.
Not every lead remains permanently outside the funnel. Prospects that have exited the sales or buying process can re-enter.
Opportunities in sales funnels generally don’t drop from top to bottom on their own. As leads descend through the funnel, effort and costs increase for both sellers and buyers. In fact, if funnels reflected aggregate cost of sales, the model would be exactly flipped – small at the top, and large (or very large) at the bottom.
. . . And two overlooked similarities:
As cash engines, revenue funnels are connected in several ways to the organizations they serve. They are not free-floating in space, as they are often depicted in presentations. Marketers implicitly understand that revenue funnels often receive inbound leads from a messy universe of opportunities, and that revenue flows from the bottom. But marketing funnels are but one component of a large system. They require additional input such as cash, information, talent, and other resources to operate.
With physical funnels, smooth material flow from top to bottom signal that the funnel is operating well. But marketers often defer to a flawed proxy for funnel health: fullness. The problem is, full funnels can also be clogged. Rather than using funnel fullness as portents for cash-flow vitality, marketers should emphasize velocity and throughput as meaningful metrics.
General recommendations for funnel management:
- Make sure the funnel opening is as wide as it needs to be, but no wider.
- Match the size of the opening at the bottom with the company’s revenue needs. That includes ensuring orders won’t swamp the company’s ability to fill them.
- Don’t take the taper for granted! Make sure it aligns with the company’s risk capacity.
- For planning purposes, net the funnel’s cash output against the resources required to operate it.
- Remember that throughput velocity is as important to consider as overall funnel value.
I’m not declaring funnels dead. Not by a long shot. The marketing and sales profession has long suffered from lack of probabilistic thinking, and funnels offer a symbolically-accurate representation of revenue generation risk.
Put another way, a picture that tells us s*** happens is worth a thousand words.