In 2012, a strapping young startup with an ambitious dream and 1000 subscribers invested $4500 to make a YouTube video. This simple quirky video took YouTube by storm, so much so that the company’s server crashed in the first hour of the launch. In 3 days, they had garnered 12,000 subscribers for their humble product – the razor.
The success of Dollar Shave Club can be attributed to many things- masterful storytelling, poignant positioning, and weaving simplicity into their entire user journey from the pitch to their final checkout. While they did a marvelous job of increasing awareness with their viral video, they didn’t stop there. They reinvented the customer purchase journey simplifying the recurring chore of buying razors with a subscription model. They offered accessible bundles to choose from and the option of opting out of their service for a couple of months (without canceling your subscription) if you wanted to.
The goal of any enterprise is to create revenue, and the sales funnel is a critical part of the revenue engine of any business. The funnel stages might look different depending on the industry and vertical you operate in; some journeys could be more complex with new channels for customer acquisition and tools for attribution. However, optimizing the buyer journey continues to be a high ROI activity for any business focused on revenue growth and profitability.
In this blog, we’re diving into the basics of a sales funnel and critical tactics you can use to optimize your buying journey to drive more subscriber growth and maximize profitability.
What is a sales funnel?
A sales funnel maps the stages of a prospect’s buying journey to become a customer. Different organizations name and organize their sales funnels according to their specific business use cases, but broadly the funnel can be categorized into four parts.
Stage 1: Awareness
The user learns that your company exists, about the core problem you’re trying to solve, and the cost of not doing so. In this phase, the prospect consumes educative assets that provide value.
Tools: SEO articles for pain awareness and targeted keywords, social media posts
Stage 2: Interest
Prospects in this phase are interested in what you’re saying and want to double down and learn more about your solution. This phase is characterized by informative content that dives deep into the nuances of your value proposition and exhibits your company’s expertise.
Tools: Gated content, white papers, webinars
Stage 3: Decision-making
At this point, your prospect is convinced they need the solution you’re offering, and they’re evaluating their options – you and your competitors. In this phase, companies optimize the prospect’s journey of value discovery and ensure they have their Aha moment. A free trial or a guided product demo can help the prospect understand how your solution can solve their specific business use case while showcasing the usability of your product.
Tools: Free trial, product demos, objection handling assets
Stage 4: Action
This is the stage where the prospect converts into a customer and commits to a purchase.
Tools: A frictionless checkout process
The real buying journey
While the funnel looks deceptively simple, the buying journey is rarely linear. There is a rich smorgasbord of content available on the internet. With people consuming content across multiple channels and platforms, it’s hard to construct strict points of entry into your sales funnel.
Someone might consume content from your awareness stage and then churn because this wasn’t a priority problem to solve. The same person might directly book a demo when they revisit the situation a few months later. Another prospect might move from Awareness to Decision-making, only to churn because of their organization’s budget constraints or a re-prioritization of company goals.
As buying journeys became more complex, there was also a surge in marketing and sales tech tools that could help companies track their user journeys better. With everyone scrambling to create a coherent picture of user journeys across multiple online and offline platforms, optimizing their sales funnels is becoming a priority for businesses everywhere.
At Chargebee, we use the MEDDPICC sales methodology to help our sales teams close their deals faster and drive more revenue.
According to the B2B Sales Benchmark Report 2023 conducted by EBSTA and Pavilion, a growing trend in 2022 was the adoption of sales methodologies, increasing from 11% to 21%. MEDDPICC, or a variation of it, was the most popular at 61%. A structured sales methodology helps your team qualify a deal earlier in the pipeline, saving precious time and effort. Recent research lends credibility to this claim; 43% of high performers followed a structured sales methodology.
How can you optimize your sales funnel?
Build out ICPs
“If you try to be everything to everyone, you won’t be anything to anybody.”
If any words of wisdom deserve to be etched in blood in the metaphorical marketing hall of fame, it would be these. Many ambitious startups have made the mistake of not defining their target audience and sacrificing the efficacy of their messaging and campaigns.
Defining your Ideal Customer Profile (ICP) helps to narrow your focus and sharpen your positioning resulting in on-point messaging that your ICPs can immediately relate to. Fender, the world’s leading guitar manufacturer, found that first-time players made up a considerable chunk of their market, but due to the complex learning curve, 90% of them don’t pick up a guitar after the first six months. Fender offered subscription-based guitar lessons to tap into this cohort on their app Fender Play. With this, they provided value while increasing subscriber growth and retention rates.
Understanding your market and building out your ICPs is an effort-intensive process with disproportionate payoffs for your revenue growth. We all like to be seen and acknowledged; the sharper your ICPs, the more specific you can get with your messaging.
An earlier version of Basecamp’s homepage exhibits its value proposition succinctly and light-heartedly.
Optimize lead generation strategy
With a buying journey that isn’t strictly linear, businesses need to create an ecosystem of customer value delivery that can generate leads at all touchpoints of the user journey. Besides lead generation cornerstones like gated content that explores an in-depth analysis of the problem you’re solving or industry-specific white papers or webinars, channels like social media, review sites, or referral programs could also become viable lead sources if harnessed well.
Generating leads and sustaining a healthy lead inflow can be challenging for most businesses. What works for you largely depends on the space you operate in, your consumer behaviors, and your organizational strategy.
A decade ago, when PayPal had accidentally frozen some customer accounts, a daring young competitor, WePay, swooped in to make the most of it. Rich Aberman, the co-founder of WePay, was chased by security out of a PayPal developer conference for wheeling around a giant block of ice with dollar bills locked underneath. A simple message ‘Paypal freezes your account, unfreeze your money by switching to WePay’ conveyed visually, made headlines on TechCrunch, increased website traffic by 300% and signups by 225%!
While memorable, marketing stunts aren’t sustainable or scalable by nature. By investing in social listening tools and consistent market research, you can build a scalable lead-generation strategy based on competitive analysis.
There are broadly two main channels of lead generation. It’s fundamental to identify your organization’s priorities, what works for the type of product or service you’re selling, and set expectations on the quality of leads each activity will generate.
Inbound lead generation: Under this category, you have a stratum of educational and informative content (SEO blogs, gated content like white papers, webinars, newsletters, and social media) and product-specific content (landing pages, email marketing, and customer reviews). Market research and personalization go a long way in increasing the precision of your inbound initiatives. For example, optimizing your homepage to cater to users in different parts of the buying journey can help increase engagement. Do you have a ‘learn more’ CTA or educational articles for a first-time user and a CTA for a free trial or a product demo for users farther down the funnel?
Outbound lead generation: Some activities under this category are cold calling and emailing, events, and Account-based marketing (ABM) campaigns. With a plethora of tools simplifying omnichannel communication, list management, and revenue intelligence, the onus is now on the business to accurately understand the buyer persona they’re targeting and the landscape they’re operating in and leverage the relevant tools judiciously.
The sales cycle for inbound leads is typically shorter than that for outbound leads since the desire for the product must be created and nurtured in the latter.
Shorten your sales cycle
With people’s attention spans shrinking and patience wearing thin, reducing friction and time to value can help increase your conversions dramatically. How long does it take a first-time visitor to your homepage to understand the impact of your product on their life?
“Executive alignment at the start and the end of the cycle is a critical part of the sales cycle. Typically we try to get people to uncover three significant challenges in the business. Then at the end of the cycle, we tell them you asked us for A, B, and C, and here’s how we solve for them,” says Ash Lomberg, Global VP of Strategic Growth at Chargebee.
Shorten time to value: Monday.com, a project management software, offers an interactive demo on its homepage so website visitors can experience the ease of creating and managing tasks firsthand. If your product is more complex, offering a free trial or a guided demo could be a more compelling CTA than asking users to merely sign up.
Simplify your onboarding process: Make it as simple as possible for a prospect to sign up and use your product or service. You could reduce friction by accepting Google’s Single Sign-On instead of asking your user to create new credentials. Slack, the ubiquitous messaging platform, does a great job of onboarding users using a chatbot that employs fun and informative messaging to deliver aha moments to the user within a few minutes of signing up for the product.
Leverage multi-threading: If building good relationships bolsters your chance of closing a deal significantly, more relationships should mean a higher likelihood of success, right? In 2022, the number of internal and external stakeholders involved in a sales process increased to four (+33% YoY) and 10 (+25% YoY), respectively.
“If you have one stakeholder in the deal, it typically takes longer and doesn’t have a high chance of success, but if you have eight stakeholders in a sales cycle, it typically speeds up the process. It sounds counterintuitive, but it’s true,” asserts Ash. Having multiple champions for your product inside the buyer organization allows them to explore more use cases across different functions and better cement your product’s value in their operation.
So is there an optimal size for a buying committee? Recent research gives us some answers.
For enterprise deals, win rates peak at 10-12 relationships, averaging 42%. Similarly, sales cycles were the shortest, with 7-9 relationships. For medium-sized deals, win rates averaged 48% when engaging 7-9 relationships, a 39% improvement on engaging with 4-6 relationships. With 7-9 relationships, medium-sized deals closed 10% quicker than when 4-6 relationships were involved.
It’s imperative here to note that the correlation between stakeholders and success rates does drop off at a point (the average win rate decreased by 87% once you were at 16+ relationships) and that modern engagement with stakeholders demands a consistent delivery of value; boilerplate emails and cold emails aren’t going to cut it anymore.
Qualify your leads ruthlessly: Qualifying a deal early in the sales cycle can help triage your workload, improving resource and effort allocation. The efficiency gains are significantly higher if your product typically has longer sales cycles.
“During first discovery, you should be able to qualify whether it will go through the sales cycle. Once it gets past technical discovery, there’s a high chance you’ll win the deal or lose out to a competitor. They don’t drop off unless there’s unforeseen circumstances like economic environment, change in business strategy, or a change in executives.” notes Ash.
Here again, stakeholder engagement can act as an accelerant. Studies indicate that lost opportunities with great relationships were closed 211% quicker. Failing faster can ensure the capacity to focus on deals with higher potential.
Analyze sales data and identify bottlenecks
Analyzing sales data is an indispensable part of sales optimization. Closely monitoring your pipeline doesn’t merely mean looking at your CRM data and monthly numbers. In a complex subscription business, you have data from different sources, and together they stitch a picture of your company’s health.
If your customers take longer than usual to convert, building customer relationships could be a problem. If you have a self-service option, you should revisit it to identify possible places of friction. If emails and payment reminders from your team are slipping through the cracks, it could be a tool problem. By tracking key metrics like conversion rates, average deal size, and sales cycle length, businesses can identify areas of the funnel that are underperforming and take steps to address them. Regularly analyzing your sales data can help you identify patterns early and course correct before it snowballs in severity.
At Chargebee, we observed that our deals spent the most time in the technical discovery phase.
“A deal would spend 60% of its time in technical discovery. When establishing technical fit, you need multiple stakeholders from multiple functions, executive alignment, and a high engagement level during the phase. The other stages are a lot quicker.” notes Ash.
We began introducing a joint action plan to streamline and structure our sales cycles. An action plan, typically drawn up by the account executive or the solution consultant, guides the evaluation process and maps the key steps and milestones we aim to achieve. And when the client agrees to those, we observe that getting through them and bringing the deal to fruition becomes much more seamless.
Building your sales funnel and constantly optimizing it can be time and resource-consuming for any business. Automation continues to be a driver of productivity and growth in all functions of an organization. With a whole gamut of tools available on the market, one can leverage automation to eliminate manual tasks, streamline processes and conduct hassle-free experiments.
Eliminate manual tasks: Automate nurture sequences for your core lead generation sources like white papers and webinars. In addition to eliminating manual tasks, it can help ensure a unified tone across your organization. CRM tools also include automated reminders and emails, taking a load off your sales team.
Relevant read:We just put the ‘easy’ in your Q2C process with the Chargebee + HubSpot integration!
Test, test, test: Iterate and optimize your CTAs, homepage copy, and email messaging to find out what works. Solid infrastructure support can help you segment your audience and create personalized journeys to increase engagement and conversion. A/B testing is a powerful tool that can help you identify what works.
While a new category of AI tools begins to flood the market, OpenAI’s ChatGPT remains everyone’s gateway tool into the AIverse. Sales teams can leverage ChatGPT for low-hanging fruits: list building, writing emails, social, extensive client research, keeping a finger on industry trends, and writing executive summaries while prospecting. There are massive efficiency gains to be realized from the automation of the sales funnel, and to begin with, these will take the ‘busy’ out of your team’s busy work and help shorten sales cycles.
Don’t forget about customer retention
While it’s easy to focus on bringing more leads into the funnel, it’s prudent to look down sometimes to see how many of your customers are churning regularly. Many acquisition-driven companies double down on bringing new customers without building out a retention engine, only to end up with the very expensive ‘leaky bucket’ syndrome.
Given the current macroeconomic climate, investing in a retention engine makes fiscal sense since acquiring a new customer is several times more expensive than retaining an existing one. Focusing on why your customers churn can also give you critical insights into product gaps or market expectations, which can inform your roadmap. Recent studies also show that a mere 5% increase in your retention rate can boost your profitability by 25%, in addition to building a loyal base of customers in the long run.
An intelligent deflection funnel can help build personalized cancel experiences for your customer cohorts, enabling you to understand why your customers churn. You can iterate and experiment with compelling offers to understand what it takes to retain them at the point of cancellation.
Healthier retention rates and happier customers generate organic word-of-mouth marketing and referrals that could become an additional lead source.
ABC: Always Be Continually Optimizing
The key to predictable and efficient revenue growth starts with a repeatable and scalable process.
Almost midway into 2023, businesses continue to double down on operational efficiency to tackle cost pressures and unpredictable consumer demands. Deal slippage continues to be a challenge for teams everywhere. On the face of it, it might seem like a delayed opportunity, a deal that will close in the next financial period, but studies have consistently shown that once past a certain point, they do not. Time kills deals.
In 2022, the number of companies adopting a sales methodology doubled. Businesses obsessing over streamlining sales funnels and shortening sales cycles have shown immediate and tangible revenue impact. At Chargebee, we help you accelerate your quote-to-cash process, close deals faster, and cinch the race’s final leg. Contact us to find out how we can make your sales team’s lives easier.