Marketing is Math and The Leaky Funnel

October 24, 2007 at 5:57 pm Leave a comment

There’s an interesting misconception out there about marketing folks. I think it’s partly fueled by professional marketers calling themselves marketeers. Evokes kind of a swashbuckling, seat of the pants partier type, doesn’t it? Certain marketing types like to propagate this image. But to me it demonstrates a fundamental misunderstanding of the marketing function.

Sure, we all know how to make cool looking ads and buy truckloads of squishy globe balls with our logo on them. Some of us can even write a decent press release. This is all many engineers and salespeople see us do. So how can we blame them for thinking that’s all we do – it’s an image problem. In reality though, the core job of Marketing is to make sure we generate enough leads.  That’s where the math comes in.

It’s not hard math, really. You just start with the revenue goal and divide by the average selling price. This is the number of deals you need. Then you work backwards, from the narrow tip of the funnel (revenue), back to prospects, to leads all the way to suspects (aka likely targets). There can be more stages (e.g. qualified leads), but this is the classic sales funnel. The dropoff rate from suspects to leads to prospects to deals varies by market and is often the source of great debate between Sales and Marketing (“Your leads suck.” vs. “You guys can’t close.”), but you ultimately figure this out and come up with a total number at each stage of the funnel. This basic math should drive all of your activities.

I don’t think I’ve covered any new ground there. But I happened to pull a recent favorite of mine off the shelf the other day to show a friend. It’s called The Leaky Funnel. The basic concept is so obvious, it’s amazing the book needed to be written. But it did. You see, it’s obvious that we lose prospects and leads at each stage of the funnel. It “leaks.” But what most marketers do next is where they fail.   They start all over again.  They create new programs to get new suspects into the funnel and completely ignore the people that leaked out.

You see, getting new suspects into the funnel is the most expensive thing you can do. And they may not even be good leads. But people who made it into the funnel before and progressed a bit are generally less expensive and more qualified. So why would you ignore them?  Do the math!

The idea is to figure out why they leaked out and how to market to them. Some people call this lead recycling. For example, if someone fell out because they lost their budget, then they should be actively marketed to for the next budget cycle. Leaving it up to the sales rep to do this is not enough. Or maybe they went away because you were missing some key feature. These people need to be informed when your next product release with that new feature comes out. Maybe there were just researching and not ready to buy; make sure to have a nurturing program for them to keep them abreast. I could go on, but you get the idea.

Think about your funnel. Are you effectively “re-marketing” to people who leaked out? If you are not, then you are wasting money need to sharpen up your marketing programs. Let the numbers be your guide.


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