From Funnels to Flywheels
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Traditional sales organizations used the concept of a sales “funnel” to describe the process through which potential customers move, ending up with sales at the end. Winners today have abandoned that way of thinking in favor of building flywheels — business models in which every element reinforces every other.
Ah, the marketing funnel, we knew it well
A staple of the required business school marketing course, students are taught that prospective customers move through a predictable set of experiences. It is usually depicted as something like this:
Understanding the funnel makes sense when one is trying to evaluate the leading indicators of future sales success. Gail Goodwin, the onetime CEO of small business direct mail service Constant Contact observed that looking after the pipeline — the flow through the funnel — was essential to the company escaping the “long, slow SaaS, ramp of death.”
The funnel concept has a lot to like. For starters, you could begin to anticipate how well your business would do by measuring how many potential customers got in at the beginning (awareness) and then apply metrics to what proportion of them would take the next step. If you knew 1,000 people were aware of your offering and that 10% of them would do something that expressed interest, you would know that you were likely to have 100 of them at that stage. If 50% of these folks started to make buyer-like noises, you could tell how many would be doing that, and so on. It made for a nice way to model leading indicators of buying behavior.
For B2C businesses, creating awareness was often a huge barrier to entry — television, magazine and radio advertising are expensive. For B2B businesses, armies of sales reps were used traditionally to create awareness, also expensive and a barrier to entry.
Cracks in the funnel model
But the funnel has its limitations, and the inflection point that is digital has exposed them. As Hubspot co-founder Brian Halligan points out in a recent Harvard Business…
