Does your sales funnel look like a champagne flute or a jam funnel?

Is your sales funnel long and skinny, like a champagne flute, or short and fat, like a jam funnel?

Both are fine, in the right circumstances. But if your market is changing subtly or significantly your sales funnel probably needs to be updated.

If you have the wrong shape sales funnel there will be serious financial consequences for your business. The answer may be a combined sales funnel approach that provides the benefits of each and reduces risks.

A regular Sales Funnel Review will identify early warning signs, and corrective actions.

Long skinny sales funnel

Champagne Flute long narrow sales funnelA sales funnel like a champagne flute is typical of a business that focuses on sales of major projects. Examples are selling big IT systems implementation, property development, framework agreements and contracts, or a solo consultant focused on change management projects.

If your business model is to win a major project say every quarter, then there will be a small number of bids underway, a few more very close relationships being developed and nurtured in the middle of the funnel, and some targeted door-opening going on at the top of the funnel, maybe through exhibitions, cold calling and social media.

Because of the cost of sale, the qualification will be massively important, to ensure the right organisations enter the funnel, and sales effort is committed to opportunities that will lead to a purchase and selection of your solution. The buying and selling cycle may take many months or even years, where other activities need to be aligned at the client organisation.

However, if say you need to win one deal a quarter and you win either zero or two deals this can have a big impact on revenue and resource utilisation. If large projects are lost to competition, or spending is deferred it creates big issues.

Short fat sales funnel

Jam Funnel short fat sales funnelA sales funnel like a jam funnel is typical of a business selling relatively low cost deals in large numbers. Examples are training course providers, accounting and HR services, smaller IT projects and software as a service (SaaS) solutions on a monthly contract.

If your business model is to win 10, 100 or 1000 small deals a month the time you can put into selling each deal is minimal. Moving towards a self-service system, where people can buy or book online, where a telephone call is the exception rather than the rule, (never mind meeting face to face), keeps the cost of sale down, and provides more of a 24/7 availability to buyers.

The buying cycle may be very short, and close to an impulse purchase, which you’d like. If the buyer needs more time an automated follow-up system will help you stay front of mind.

Since there are economies of scale based on higher volumes it is worthwhile offering products and services that meet the needs of a large number of people. The Internet Marketing and ‘Make money from home’ segments are extreme examples.

Replication is another way to achieve extra revenue for not much extra cost. This is particularly so if systems and content can be re-purposed for a second and subsequent market segment.

Additional strategies for profit include focusing on repeat purchases, cross-selling, retention, joint ventures and other techniques to gain additional revenue for not much more sales cost.

Danger zones for your sales funnel

If there are subtle or significant changes in buyer behaviour and purchase patterns, or in competitor activity there can be big implications. Two extremes are:

Buyers and competitors move toward the short flat funnel

A major warning sign is when the average order or customer value has dropped considerably. In IT, the move from software license to monthly Software as a Service, the arrival of the app-stores from Apple and others, online insurance quotes and share dealing, template websites and printing from 1&1hosting and Vistaprint, free apps from Google, are just some examples of major changes affecting other suppliers business models and sales funnels.

If this is happening in your market there are at least three dangers.

  • you may still be incurring a high cost of sale, with a lot of relationship building and bespoke solution bidding
  • you may not be geared up to market and pre-sell in the way that buyers want to research and short-list suppliers
  • you may find there may only be limited opportunity to go for big contracts, but at cut-throat pricing, to make up the short-fall, as happened in the building sector a few years ago.

Buyers and competitors create a niche that suits the long thin funnel

A major warning sign is if one or more of your major clients start to put the premium work with another ‘specialist’ supplier. An extreme example is the off-shore IT development and support, and customer service call-centres that came into the finance and banking sectors through the 1990s. Another example are the boutique firms in law, accountancy, finance and other professional services who were able to become established in very high value specialist areas, while the low value, high volume work moved towards intensive, factory’ style operations.
If this is happening but you don’t spot it and respond there are at least three dangers:

  • you may lose the trophy projects, business and clients, with a hit on revenue, profits and market reputation
  • you may lose your more talented staff who want to specialise in areas, and with teams, that you can’t offer
  • customer service to your mainstream clients may suffer as your attention and time goes into key bids.

Review your sales funnel regularly

There is value in standing back and evaluating your sales funnel regularly, and probably once a year is a good time for most businesses. Independent advice can also be extremely valuable to probe assumptions and provide fresh insight.

Consider these three steps as a baseline for a review:

  • goals, monitoring and tracking – what changes are taking place in your performance and operational figures?
  • market and customers needs – are there any subtle or significant shifts in who is buying what you offer, of what they want that you’re not offering?
  • your value proposition – what differentiates you from others, in ways that your target buyer will value, are you getting that message across, and do they understand it?

Once those are understood, and maybe updated, then they can be communicated through sales and nurture, engagement and promotion activities. These are the major sections covered by the Wurlwind Sales Funnel Roadmap.

The blended sales funnel approach

Identifying value propositions at different price-points, and marketing and selling them by the appropriate method, can be very effective at overcoming the issues of either extreme.

For example, offering a book you’ve written at say £25 each, training courses at say £395 per person per day and one company courses and consultancy from £995 to £9995, is a way to earn revenue from buyers with different needs and budgets.

The way each is sold will vary accordingly, for example one through e-commerce, one via online booking and telephone and the third through face to face meetings and proposals. This also provides opportunities for cross-selling.

If this article triggers questions please get in touch and let’s have a chat.

One Response to Does your sales funnel look like a champagne flute or a jam funnel?

  1. Caroline Flack January 7, 2013 at 6:42 pm #

    I respect your work , appreciate it for all the good articles .