- 2013 Alignment Survey
- Sales and Marketing tips
- Sales and Marketing webinars
- Sales and marketing papers
- Sales and Marketing Plan
- Sales Funnel Calculator
- The Leaky Funnel
- Other books we love
- North America – East Coast
- North America – West Coast
- North America – Central
- North America – Canada
- Australia – NSW
- Australia - QLD
- Australia – VIC
- Europe - UK
- Europe – West
How to make money from failure
Sales and marketing teams are geared towards success, but it's how they handle failure that will make them rich.
Let's look at what happens when a salesperson returns from making a sale - or when a colleague from marketing hauls in loads of qualified leads. There are high-fives all around - and even the customer gets a look-in: They get a letter from the head of the company or division congratulating them on their fine decision.
But what do we do with the prospective customers who don't proceed? Those who leak from our funnel? The answer is usually "not much". They are usually dropped like a hot potato.
And the usual approach of putting a re-contact note in Outlook, or whatever software program you use for your customer relationship management (CRM) might be good housekeeping, but simply making the entry has zero effect on your buyers.
When you go to contact them again in six months, your "leaked" buyers have forgotten most of what you discussed with them last time, and your previous efforts are mostly wasted. And how do you know how many will leak?
Here's a typical progression from initial interest to sale, recognising that it takes time for buyers to progress, and that some will leak at each stage:
This can be expressed as a series of progressions:
40 per cent
50 per cent
75 per cent
67 per cent and
33 per cent
Putting it another way, buyers "leaked" in the following percentages of our potential customer funnel:
60 per cent
50 per cent
25 per cent
33 per cent and
67 per cent of our buyers
Leakage is defined as how many buyers fail to make a progression. In this progression, 300 buyers leaked on our first attempted progression, 100 on our second, 25 on our third and fourth, and 33 on our fifth progression.
And buyers took one quarter to make each progression. We can say that the average lag is one quarter for each stage. "Lag" is a measure of how long it takes buyers to progress through each stage.
But if we were to take the 300 potential customers who leaked from the funnel on the first progression and recycle them after six months, then the progression table might look something like the one below.
This clearly shows that on the second run through the funnel, 180 buyers leaked from the first progression, 60 from the second and third, and 15 from the fourth and 20 from the final.
If we recycled not just those first 300, but each of the leaked buyers, including those who leaked from subsequent runs through the funnel, the progression table would look a little more complicated.
Eventually, the entire market will have progressed - but the law of diminishing returns suggests that at some point the numbers will be small.
Of the 500 buyers we began with, 483 of them will be recycled at least once (because only 17 became customers from the first run through the funnel.)
There are two big conclusions from this:
Given that 483 out of 500 buyers will be recycled, doesn't it make sense to do recycling properly? That is, have a clear recycling program?
Shouldn't we have some idea of the effect of recycling before we plan a demand generation campaign?