Tuesday, October 03, 2006

Funnel Math

As marketers, we all know that, in order to get sales, you need to find prospects, and in order to find prospects, you need to generate leads.

Simple enough proposition.

It just tends to break down when you get to the math.

At Genuity, I sat in one meeting with the EVP of Sales and the VP of Marketing in which we calculated how many leads we’d have to throw into the funnel in order meet the sales quotas for web hosting. Starting from the bottom and working our way up the funnel, we determined that we’d need 1.5 million leads a year. Our offering was aimed at the Fortune 1000 and well-funded dot.coms. You do the math. It just didn't add up. Even if every Fortune 1000 had 1500 potential buyers, even if we could find all those well-funded dot.coms before they imploded, even if we had an infinite budget, we were never going to scare up 1.5 million leads a year.

Fortunately, we never had to. (Unfortunately, we went out of business.)

But it does raise the question of just how wide you want the mouth of that funnel to be.

There may be products and industries where you have extremely predictable behavior where the big funnel math works. I’m sure that consumer products know (plus or minus a point or two) exactly how many coupons they have to stuff in the Sunday paper to induce a sale. And how many people need to see a TV or Web ad (and how often) before they’re impelled to act.

But for enterprise technology sales, marketing’s job is not to widen the mouth of the funnel, it’s to narrow it.

We do this by identifying and targeting the companies and purchasers most likely to purchase from us because our product’s best suited to them (and they’re best suited for your product). Years ago, at one small software company, we beat our heads against the wall trying to sell our product – which was absolutely horizontal in nature – across all verticals. No reason not to buy from us, but no reason to buy from us either. We were just the other guy, the little guy. Chasing a lot of leads with little success.

We got a lot better at selling once we figured out that, because of an odd-ball technical aspect of our product (a story in itself), our best prospects were in financial services. We began focusing our marketing, sales, and partnering efforts on this vertical. Guess what? It actually did get easier to sell our product.

In marketing, we went from the defeatism that came when we stared down into that wide funnel and realized that we could never throw enough into its maw to satisfy sales, to a situation where we could produce fewer leads with far higher confidence that they would turn into sales. We saved time and money – which were both in short supply – and decreased the sales cycle.

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