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Wednesday, September 23, 2009

The End of the Sales Funnel?

Thanks to Kent Hammer, CEO of HammerConsulting.net, who published the three paragraph version of this post in The Hammer Letter.

The sales funnel has been a foundation of sales practice since before WWII. Whole sales organizations based their activities on this model…because the funnel accurately explained the buying process.

What if the sales funnel no longer mattered?

How could you tell?

What would be a more productive model?

How would you change your selling activities?

Would you manage differently?

What if the sales funnel no longer mattered?
Disintermediation – def: Removing the middleman or intermediary. The internet is changing whole industries. Why not the sales profession?

Through the internet, all prospects are now instantly available. Instead of painstakingly identifying and contacting enough prospects, we can easily contact more prospects than we can ever service. We need to get their focus.

Originally the sales funnel was used to control information flow to the prospect, making sure they got the correct information in the right order. Prospects put up with salesmen because they were the gateway to key resources to learn about the product.

Later, the funnel was crimped to reveal how many touches were needed to interest how many people to generate how many sales, to smooth out vagaries in the demand curve, to cover for organizational mistakes, to predict post sales service revenue, and it goes on and on. The more uses the funnel was assigned, the less accurate it became, but it was easier than creating a more accurate model.

I had one sales manager tell me that the funnel couldn’t forecast individual transactions, but it did give him an estimate of monthly volume.

Today every prospect has a host of internet-enabled ways to learn about your offering. Do you really think your prospects, customers, and investors are not talking to each other on the internet?

How could you tell?
One clear indicator would be an increase of “bluebird” or out-of-funnel sales.

Selling enterprise software and IT services over the last 15 years, I realized that the top tier salesmen are frequently short circuiting the funnel, and that doesn’t count the one hit wonders who intercept a phone call and think they have created a sale.

The salesman has no incentive to admit a sale came from outside the funnel. He is paid to complete transactions.

What would be a more productive model?
Seth Godin pointed out that “prospect” is a term created by a sales organization to mark who they want to sell. Since the “prospects” often don’t know or care about their special status, Seth suggests using the term “citizen.”

How do citizens educate themselves about what you sell? Do you know? Do you participate in, add to, or help guide the conversation?

Tom Peters wrote that “Networking is helping someone.” Are you using “helping” to create beneficial relationships?

“Territories” are a way to keep customers organized…and barriers to purchasing. Before I gave a speech last week, I notified 20,000 people in two hours, using internet and face-to-face communication where I thought the audience might be found. They all didn’t attend, but it was the biggest event my sponsor ever had. I wasn’t selecting “prospects,” I was using demonstrated interest in my subject, industry, geography, and any other affiliation I could imagine.

Some “tips groups” won’t have two members from competing organizations. What about competing to see who has the best offer or the best features for the buyer? I started a $60 million dollar sale by speaking to a tips group. I didn’t even charge them for the speech!

Today all prospects are instantly available. What matters is getting the interest of enough people to support a business. You need fewer customers if you can have more volume from those customers. Of course, if you don’t satisfy your customers, because of the internet the whole world will know.

I read recently that some doctors and lawyers are trying to enforce contracts that you can’t discuss their service with others. Why would they try to choke their most valuable marketing channel?

If the funnel is over, how would you change your selling activities?
Rather than following a “Qualify, Present, and Close” for a limited number of prospects, I am dealing in multiples, telling a different part of the story at each time.

I am depending on my customers and stakeholders to share telling the story, and I am working with them and rewarding them to improve their story.

I am working hard to know where my customers congregate, where prospects congregate, and how I can put them together.

I am working hard to make sure that anyone who is dissatisfied or has an idea for improvement is publicly recognized.

What would you manage differently?
The last to suspect seem to be the sales managers. And the managers of managers. They have all mastered talking about the funnel. They insist that funnel must still be out there, otherwise they will have to learn new skills. So they continue using a tool that has less and less to do with their actual performance.

For the first time in history, there are many companies that are growing to a billion dollars in less than ten years, and as near as I can tell, they have all abandoned the funnel.

They are selling products and services and experiences, and replacing the funnel with a more accurate model of the customer acquisition process has been their key to success in story after story.

What is the state of the sales funnel in your practice?