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The sales funnel has been the primary visual representation of a sales and marketing organization’s flow of prospects to closed customers; however, as the customer journey evolves, the sales flywheel is becoming a more accurate business model to follow.
The idea of the sales funnel is to fill the top of the funnel with a business’s identified target market, engage with the targeted customers to move them to the bottom of the funnel and push them out to the other side as a customer. Businesses then repeat the process, focus on new leads and relegate the newly acquired customer to an afterthought.
The flywheel approach, on the other hand, puts the customer at the center of a company’s marketing activities. Customer retention, recurring revenue and word-of-mouth referrals are all tactics that business leaders use. It is more expensive to acquire new customers than it is to retain existing customers, so it’s important for businesses to nurture relationships with the audience that already uses its products and services.
While businesses may be heading toward the flywheel approach, that does not mean the traditional funnel model is dead. Early-stage companies need to fill the top of that funnel so they have leads to nurture toward a closed won customer. By evolving toward a flywheel approach and focusing on the customer experience throughout, companies have a bigger advantage to re-engage, grow and receive more positive feedback or referrals from these customers.
The sales funnel and flywheel differ in their approaches, as well as in their focus areas.
Approach. The sales funnel is wide at the top, which represents the awareness of a brand and its offerings. The funnel gets smaller as a prospect moves along in their journey, and only a small percentage of those that were at the top come out as customers. This a very common approach in the sales process, as the mentality of business development teams is often very sales focused: Get the lead and close the sale.
The flywheel approach puts a customer at the center of the process. The rest of the flywheel is broken into three additional but equal segments representing the different stages of — or teams responsible for — the customer journey. The flywheel stages include:
Focus on prospects vs. customer experience. The traditional sales funnel focuses solely on prospects and how to quickly move them through the process of becoming a customer, without consideration of how customers can feed back into the funnel for repeat purchases.
However, the sales flywheel dictates that each stage feeds into the next and cycles around the customer and their overall experience with a brand. At every touchpoint, marketers need to consider how each stage provides a unique customer experience that makes consumers buy products and keeps them using the products and services that a company offers. Customer loyalty programs can increase customer satisfaction and customer referrals. These word-of-mouth referrals from positive experiences can yield more business, as those leads are more likely to become a customer than a cold prospect.
The sales funnel is a staple for pushing leads in and churning out customers, but like many other practices, it needs to evolve. Buyer behaviors are changing, and with more access to information and reviews online, there is a growing distrust from consumers toward marketers and sales representatives. These modern prospects can do research on their own — fact finding, comparing a company’s offerings with the competition and even purchasing and self-onboarding in many SaaS models — all without talking to a single person at the company.
The traditional funnel model leaves little opportunity for repeat business. However, today’s business models — whether it’s in a B2B or a B2C industry — encourage repeat business, as business leaders look closely at recurring revenue from a sale or overall customer lifetime value.
One additional flaw to the stages of the traditional funnel is the misalignment between departments in an organization. Marketing, sales and service all work independently of one another, with marketing feeding the top of the funnel, sales creating the customer output and service being the only group taking over relationships with those customers after the sale, leaving customer engagement with the brand solely to those solving customer problems. That’s a poor customer experience that the flywheel model can solve by making a customer’s experience the focal point of every department through alignment and communication, as well as good customer relationship management.
The flywheel elicits a specific image — a wheel that spins with various forces and frictions. With the flywheel model, businesses can apply more force to certain areas, making the “wheel” spin faster. Friction, on the other hand, prevents the wheel from turning.
Force. If businesses used the flywheel a few decades ago, the location to apply the most pressure would have been in sales. This is where potential buyers could access company information about the products and services they were interested in, because customers didn’t have the knowledge they may have access to now. Today, customers can access company information using the internet and advanced search engines that enable them to find the information they seek without speaking to sales.
More recently, marketing is the area to apply more pressure, as consumers have the power to engage with marketing content through specific campaigns, web searches, website visits, social media and more. Consumers can also learn more about the products, services and differentiators among brands, as well as make decisions without a sales representative. It’s important for businesses to apply pressure to the service side of the flywheel to ensure customer satisfaction and drive revenue growth.
Friction. To keep the wheel turning, companies should reduce friction among sales, marketing and service departments. Companies that are good at reducing friction make it easier for consumers to make their purchases. When sales, marketing and service work together and place the customer at the center of their business efforts, a customer never knows which group influences their decision. They feel as though they have the knowledge and power to make a decision without a pushy sale, and are reassured that they have the backing of the company if a problem arises.
Businesses use technology, alignment and customer data to ensure an experience that flows from one department into the next. The marketing team should inform the customer, the sales team should deliver the goods and services and the service team should provide support coherently.
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