How to Build a Sales & Marketing Funnel

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Once you’ve defined an overall plan for your business and sounded out a marketing plan at a high level, building a marketing funnel should really be your next step. A marketing funnel isn’t a term used to describe the process of some kind of method for filtering your bad results, but is a method used to help you understand your sales and marketing flow.

The process of creating a marketing funnel will allow you to build a tool that you can overlay to your commercial objectives and calculate some of the stages you’ll need to go through to achieve it. These stages will typically include things like opportunities or “pipeline”, numbers of confirmed leads and numbers of “eyeballs” you’ll need to get in front of. By creating this model you can effectively calculate the returns you will need from a marketing activity individually as well as overall and keep track of it along the way. In its most simplistic form, a marketing funnel shows how you the stages that you go through to turn a prospect into a customer.

Creating a Marketing Funnel.JPG

As with the example above, a marketing funnel will take you through these stages and help you to determine the conversion ratios between the stages of a potential customer’s lifecycle. The terms used in the above are as follows:

  • PL. Prospect Lead. This determines a single individual or contact you are able to effectively market your message to. For example if you have 10,000 people in your email database then you’d be able to market to 10,000 PL’s via email.
  • ML. Marketing Lead. A marketing lead refers to a record that you have had some semblance of engagement with to one extent or another, but they have not yet done enough or behaved in specific ways for you to class them as being a “hot lead” to engage with.
  • MQL. Marketing Qualified Lead. A marketing qualified lead is at the point that a specific record has been determined as being worth engaging with from a potential sales perspective. This term is usually used if you have a marketing team in your organisation and a separate sales team. If you don’t have a marketing team specifically owning this part of things you’ll often skip straight to the next stage. You will determine what constitutes an MQL specifically to your organisation and marketing campaign. You may determine that if someone downloads a trial they are an MQL or if they request a contact. Perhaps if they downloaded 1 piece of content they are not, but when they have downloaded 2 pieces of your content they are moved to MQL. It’s determined by knowing your audience and the journey you are trying to get them to take.
  • SQL. Sales Qualified Lead. An SQL represents the stage in the process in which the contact has been engaged with an confirmed as showing the behaviours of being highly relevant to potentially sell your product or service to. A sales qualified lead can often be confirmed by processes such as BANT – the process of determining that person has the Budget Authority Need and Timeframe – to confirm they are more than just marketing qualified/ MQL.
  • Opportunity/ Pipeline. A contact who has made it to this stage has clearly gone through a number of stages to the point you have defined them as being highly likely to purchase. Perhaps at a one in three chance or similar, an opportunity would be someone you’d define as part of the process of creating a sales pipeline to help you determine how much you’ll expect to sell in a given period.
  • Won/ Loss. This is the ratio of opportunities you have that you either sell something to or you don’t.

So how on earth do you begin to approach the process of taking this information and this model and applying it to your organisation? The easiest and usually most effective method is starting at the bottom and working backwards (to the top). Start with the number of sales/ transactions you want to achieve and then map that backwards against the stages (that are applicable to your organisation) to work out the numbers you’ll need to put into the top.

For example, let’s keep it straight forward and say you want to sell £1000 of products/ services. Your ATV (average selling price) is £250 and therefore you typically need to sell 4 times to hit that target. So in this example, your funnel would work along this premise:

  • Closed Sales (Won) = £1000 or 4 sales.
  • Number of Opportunities Needed= The number of pipeline deals you tend to win and lose overall. Often the expectation is a 3:1 ratio so therefore you would have £300 in pipeline or 12 potential sales opportunities.
  • SQL’s = How many of your sales qualified leads would turn into an opportunity typically? Let’s work on the basis that 1 in 5 of them are converted to an opportunity and therefore you’ll need 60 SQL’s.
  • MQL’s = From the leads you calculate go from MQL through to having been BANT qualified (or whatever means you use to qualify your sales leads). Let’s work on a further 5 to 1 so in this instance you’d need 300 MQL’s.
  • ML’s = How many of the contacts you’ve engaged with to some degree exhibit enough behaviour to be confirmed as a marketing qualified lead? This is often a higher ratio and where you’ll start to see more “lost” from the funnel initial. In this instance let’s work on a ratio of 10:1 so therefore you’ll need 3000 ML’s as part of this flow.

Use this above example you’ll create a funnel that looks something like this:

Calculation of Marketing Funnel.JPG

It pays to try and understand your sales conversions and marketing conversions as much as possible and the more information you can gather around them the better as your funnel will be more accurate. You’ll also find that different “sources” have different conversion rates and things flow down the funnel faster and this is where the real secret lies. By locating methods, types of marketing and hooks for potential customers that lead to more effective conversion rates between stages and therefore less “in the top” of the funnel, the better your ROI will be. For example if a customer takes a trial of your service do the convert down faster and with less of them lost? If so, how can you maximise that? If you find webinars deliver you a better “quality” of lead that creates better MQL to SQL rates then perhaps that’s a tactic to exploit more.

Overall the more intelligence and analysis you can do the better and the end result is you’ll get a bigger bang for your buck AKA your marketing budget.


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