Understanding the sales funnel is crucial for improving customer conversion rates and optimising marketing return on investment (ROI). The process begins with understanding your customer's journey when engaging with your brand. Once you've identified the customer touchpoints, you can pinpoint where interventions are needed, ultimately aiding in moving prospects closer to conversion.
The more we understand our customers' purchasing behaviours, the more effectively we can personalise actions and influence the buyer's decision-making process in product evaluation. For example, when we identify where the prospect stands within the sales funnel, we can customise messaging, content, and offers to address the audience's specific needs. This ultimately enhances the likelihood of engagement and improves our conversion rate.
Furthermore, understanding the sales funnel also helps businesses allocate resources more efficiently. By investing in areas that will yield the highest return on investment, businesses can improve their operational efficiency and drive higher ROI.
However, not all sales funnels are created equal. Your industry, customer base and distribution channels can affect how your customers interact with your products and services.
The Difference Between B2B and B2C
Before delving into the nuances of sales funnels, it's essential to distinguish between Business-to-Business (B2B) and Business-to-Consumer (B2C) models, as each sales funnel has unique characteristics.
B2B sales involve transactions between businesses, such as a manufacturer selling to a wholesaler or a wholesaler to a retailer. These transactions are characterised by longer sales cycles, more touchpoints, higher transaction values, and a decision-making process that involves multiple stakeholders.
On the other hand, B2C sales refer to transactions between businesses and individual consumers. These sales often involve lower individual transaction values but higher volume, shorter sales cycles, and a decision-making process that typically involves one or a few individuals (i.e. household).
Typical Sales Process for B2B
Through my experience working with clients across diverse industries, a B2B organisation is generally sales-led and marketing-supported. This means the Sales function typically designs and manages 80% of the customer experience. While every organisation will have a set of different sales stages to suit their industry conversation requirements, the B2B sales process typically involves the following stages:
✅ Lead Generation: Identifying potential customers through various inbound and outbound efforts (including marketing).
✅ Lead Qualification: Assessing the leads to determine their potential to become customers (including automated lead scoring or cold prospecting).
✅ Needs Assessment: Engaging with warm lead prospects to understand their needs and challenges to formulate a solution accurately.
✅ Proposal: Presenting a tailored solution to meet the prospect's needs.
✅ Negotiation and Closure: Discussing terms and finalising the deal.
Typical Sales Process for B2C
A B2C-led organisation is generally marketing-led and customer service-supported. The sales process is straightforward, as the customer controls their interactions and can easily complete the transaction independently (i.e. purchase a product without a proposal or quote). The steps often involve:
✅ Awareness: Making potential customers aware of a product or service through marketing campaigns.
✅ Interest: Encouraging customers to learn more about the product or service.
✅ Decision: Convincing customers of the value proposition and nudging them towards purchasing.
✅ Action: The customer makes a purchase.
Optimising Each Stage of the Sales Process
Once you understand your sales process, optimising customer touchpoints and experiences to improve conversion rates involves identifying key touchpoints within each sales funnel and implementing strategies to enhance interactions. Here's a step-by-step blueprint to guide the process of optimisation of your sales funnel:
📍 Map the Customer Journey
Break down the customer journey into distinct stages relevant to your organisation. Using the above sales process as an example, different funnel stages you might have include:
B2B New customer
Lead Generation | Qualification | Assessment | Proposal | Negotiation | Clost Won/Lost
B2B Existing customer
Upcoming Renewal | Evaluation | Proposal | Negotiation | Clost Won/Lost
B2C customer
Awareness | Interest | Consideration | Desire | Purchase | Evaluation | Loyalty
For each stage, you will need to identify the goals customers are trying to achieve and their questions.
📌 Identify Key Touchpoints
The next step is determining customer attitudes, desires and intent within the particular sales stage. List all the potential touchpoints customers have with your brand across various channels (website, social media, customer service, in-store, email, etc.) and the type of information they need when they are in that particular stage of the buying process.
🎯 Analyse Customer Data and Feedback
It is important to use data to identify insights such as patterns, preferences, and pain points in the customer experience.
Gather your data through analytics, surveys, customer feedback, sales transactions, and industry insights to understand how customers interact with your brand and products within your industry. Look for leading indicators or trends associated with the buying behaviours of your most satisfied customers. Identifying what leads to a happy customer helps you to build pathways for prospective customers.
🥅 Define Optimisation Goals
Once you understand touchpoints and influencing factors, you must set your customer experience goals and optimisation objectives for each touchpoint you are seeking to optimise. Remember, objectives must be measurable objectives. Examples include:
- Increasing engagement by X%,
- Improving satisfaction scores from X to Y, or
- Increasing conversion rate between A and B to X%, driving Y incremental sales.
✂️ Develop and Implement Strategies
With your goals set, it’s now time for test and learn. You will need to work with your team to generate a list of ideas and a strategic roadmap that will help you implement solutions that work towards achieving your goals. Some ideas of what strategies might look like include:
- Enhanced Digital Presence: Optimising your website and social media channels for usability, content quality, and engagement.
- Personalisation: Use customer data to personalise interactions and communications at key touch points.
- Content Strategy: Develop a content strategy that addresses customer questions and needs at each stage of the journey.
- Customer Service Excellence: Equip and train your customer service team with the tools required to provide exceptional service that addresses customer needs promptly and effectively.
- Introduction of additional feedback loops: Implement a system for collecting and analysing customer feedback regularly to continuously improve the customer experience.
What Should Be My Optimisation Goals?
At the end of the day, for-profit organisations must drive shareholder value—plain and simple: make money. However, the sales and marketing optimisation strategy must balance short-term needs (conversion) and long-term gains (awareness).
In marketing, while generating awareness can lead to conversions, the attribution of ROI is not always straightforward. For marketers, it's important to strike a balance between immediate gains and long-term value.
Consider a scenario where the cost to acquire a customer is $50, and the average transaction value is $52. This scenario yields a modest profit of $2. However, when we factor in product and operational expenses we are paying customers to take our product. A non-sustainable business model.
Evaluating the ROI in this linear view would conclude that the advertising investment is non-justifiable because of the high cost of acquisition. However, if the marketing efforts also obtain the customer's consent for future marketing communications, the company can engage in resale activities without incurring additional advertising expenses for the same customer.
Evaluating the acquisition cost AND the Customer Lifetime Value (CLV) becomes crucial for accurately assessing the return on marketing investment (ROMI). This involves identifying the long-term scale opportunity at the expense of immediate profits. CLV ultimately improves commercial outcomes across the span of the new customer relationship, offsetting the initial cost of acquisition. Retaining a customer is easier than acquiring a new one.
Return on marketing investment (ROMI) in practice
The above strategy is often used in B2C environments, where customer acquisition and building brand awareness are often high business expenses on the balance sheet. In contrast, B2B organisations often invest in a larger sales force to manage high-touch customer interactions. Unlike B2C, B2B organisations often yield higher ROMI even though their cost per acquisition can be upwards of $250, with the cost per new customer sometimes exceeding $1,000.
Given the higher transaction value of a B2B customer, using the marketing acquisition cost and CLV can often inflate marketing ROI. This is one of the reasons the focus within B2B organisations centres around the optimisation of conversion rates at critical junctures, instead of dollars from advertising spend. For example transitioning contacts from Cold Leads to Marketing Qualified Leads (MQLs), MQLs to Sales Qualified Leads (SQLs), and SQLs to actual customers. This focus aims to improve conversion while lowering operational costs.
By distinguishing between the behaviours of cold, warm, and hot leads, businesses can ensure that only the most promising prospects are passed onto the sales team, thereby increasing the efficiency of the sales process.
Final Note
A deep understanding of the sales funnel enables businesses to create a more seamless and satisfying customer experience. By addressing the needs and concerns of prospects at each stage of the funnel, businesses can reduce friction points, build trust, and foster stronger relationships with their audience. A well-optimised sales funnel leads to increased conversions, sales, and revenue.
Leveraging analytics and metrics associated with each stage of the sales funnel can help provide valuable insights into customer behaviour and preferences. This data-driven approach allows businesses to make informed decisions about product value proposition management, marketing strategies, and sales tactics, leading to more effective outcomes.
Remember, optimising your sales funnel from awareness to conversion requires a deep understanding of your audience, a strategic approach to marketing and sales, and continuous analysis and refinement of your processes. Businesses can maximise their ROI and achieve sustained growth by distinguishing between each phase of their B2B and B2C touch points, tailoring strategies that effectively manage prospects and customers.
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