A Sales Funnel is crucial for every business to improve conversion and increase revenue. It helps marketing and sales professionals in understanding the buyer’s journey from the initial awareness stage to the final decision stage.
A well-designed sales funnel can simplify the sales process and help you in identifying risks in real-time. It is the smart way of taking the major moves towards fulfilling your sales goals. You can determine prospects’ requirement and know what you need to do for converting them into paying customers. The width of each section of the sales funnel reflects the number of opportunities, with the top being the widest and the bottom being the narrowest.
Benefits of using sales funnel:
- Makes your sales more consistent
- It helps you in nurturing leads
- It delivers better sales estimate
- It aids in sorting and prioritizing high potential prospects
To measure the effectiveness of the sales funnel and achieving success at each stage of the sales process, Dave McClure venture capitalist and founder of startup accelerator, 500 startups introduced the AARRR framework which is also popularly known as Pirate Metrics. Originally designed for startups, this framework has also proven to be beneficial for established enterprises.
This Sales Funnel Series is created with an aim to scrutinize each stage of the AARRR framework making it more understandable and adaptable for businesses of all sizes. This series divided the sales funnel into five Stages- Acquisition, Activation, Retention, Referral, and Revenue to analyze them separately and see how it can be applied to improve business score:
AARRR stands for-
- Acquisition- Where the customers come from?
- Activation- How good is the customer’s first experience?
- Retention- How many customers are you retaining?
- Referral- Are they referring you to their networks?
- Revenue- Can you monetize any of the behavior to increase revenue?
Let us commence by throwing light on the first stage of the sales funnel framework:
Phase 1- Acquisition
Being the first contact point for customers, Acquisition is one of the most important stage of the Pirate Metrics. As Pierre Lechelle points out correctly in his article:
To ensure that customers go through the funnel stages (to Revenue), you have to make sure that there are enough customers at the top of the funnel. Without those customers, there will be no customers at the end.
Volume matters but the quality of the leads is equally valuable. For achieving the desired sales results, it is necessary to attract the right target audience.
There is a simple explanation for Acquisition: Users hear about you and land to your site from different channels. It doesn’t stand merely for that though; it also refers to the users’ first impression of your product.
So, along with measuring how many people you acquire in a given time frame from a certain channel, you will also have to measure how many of them subscribed for a free trial and how many got converted into paying customers.
There are several acquisition channels; you need to track and find out which one is best in terms of volume, price, and quality. This will help you in understanding where you need to place a greater focus on for optimizing the exposure and engagement.
Example: You are running a handbag brand, and your target audience spends their maximum time on Instagram and Facebook. So, instead of wasting time tweeting on Twitter or creating long videos on YouTube, you should try to capture their attention through visually enriched Instagram and Facebook images or engaging campaigns. For instance, Lululemon, a yoga, and sports apparel company from Canada used Instagram to bring more users on board by posting impressive yoga poses and preaching inspirational wisdom. According to Simply Measured, Lululemon doesn’t post every day, still its Instagram results are phenomenal. Their account has a 9.4% engagement rate, 27,547 likes and 258 comments per photo.
So instead of casting your net wide, spend your budget and efforts on only a few channels that are effective.
The acquisition logic you must follow
The few things that you need to keep in mind-
- Market your product efficiently by identifying the right channel and persona
- Measure each step of your sales funnel
- Test various channels and eliminate the ones that don’t work
- Emphasize on channel segmentation and the type of customers you acquire
Let’s assume you have designed a product which is making a certain process or task easier for people that they will like and pay for it. However, the challenge is to identify the acquisition channel for bringing in those buyers. For this, you need to create an impactful strategy from scratch. Research and explore various tactics then start experimenting with each to see which one works the best.
Acquisition techniques you should start testing
Over the years, companies have tried a wide spectrum of techniques to attract the ideal prospect. The acquisition techniques differ per industry. Like SaaS and e-commerce companies might use the same technique, but their approaches will be different. One focuses on acquiring business while the other on the customer.
Before moving to the techniques, it would be wiser to look at some statistics that provide major lead generation insights:
- 64% of B2B marketers generate leads via LinkedIn, 49% via Facebook, and 36% via Twitter.
- 67% of B2B marketers say their primary goal in measuring efforts is better quality leads. — Formstack
- 37% of B2B marketers are using marketing automation to generate leads
- Verifying business leads before passing it to the sales team is conducted by only 56% of B2B companies
The lead generation process starts by finding out where your target market ‘lives’ on the web- Wayne Davis
Below are few widely used acquisition techniques that can help you:
Don’t find customers for your products, find products for your customers.- Seth Godin
1. Understand your target audience/ persona
Most marketers fail because they target the wrong audience. Unfortunately, marketing budgets are limited; so, you don’t have the privilege to approach everyone. For increasing conversions, you will have to discover who exactly is your target audience, what matters to them and what are the sources to reach them. Only when you get a thorough understanding of your buyer persona, you will be able to determine the acquisition channels.
The aim of marketing is to know and understand the customers so well the product or service fits him and sell itself – Peter Ducker
Failure in creating a buyer’s persona leads to the following consequences:
- You will bank upon wrong acquisition channels.
- You will waste time on prospects that won’t convert into paying customers.
- If you create an email list for sending newsletters, it will reach subscribers who are not interested in your offerings.
Things that you need to know to create a buyer persona:
- Professional details
- Goals and challenges
- Personal values, fears, and interest
- Buying process
Once you gather this vital information, you need to do the following to ensure you are not lost in the wilderness:
- Focus on your website analytics and create reports based on customer behavior. Like you can use Google Analytics to check the page view, bounce rate and average time a user spends on your website.
- Monitor your existing customer databases to understand their purchase behavior. You can use a CRM software to track their buying process and other vital statistics like LTV, average time taken to close a deal, future sales forecasting. etc.
- Research your competitors and find out their customers.
- Send a questionnaire to your existing customers if you want to know anything specific about them.
2. Best call to actions and other elements
Your call to action is extremely important if you want customers to invest in your product/service. Just having an optimized landing page is not enough, there needs to be a defined action that you require your user to take for directing them to purchase your products or services.
Continuously test and update your CTAs as per the changing demands
- Like after a recession, customers hesitate in investing, so you can attract their attention by highlighting a low price.
- At the end of the year, customers will look for special offers so you can use discount codes and coupons to influence a buying decision.
- You can give the customers the illusion of saving by presenting your offers in an interesting manner.
Keep improving your call to action to generate more leads.
3. Customer acquisition cost
The cost of acquisition is the biggest hurdle for a product owner. It is the amount of money you spend on acquiring new customers. Estimate your acquisition cost well in advance to ensure you don’t make losses. For example. If your customer acquisition cost is $10 and you sell a product worth $60 means you have a profit of $50 but if you sell it for $4 that means you will have to face a loss of $6 per customer.
Do note, that customer acquisition cost doesn’t only include the amount spent on paid advertisements but also the expenditure of different marketing activities and tools. There is no one-size-fits-all customer acquisition cost benchmark; it differs on various factors.
Here are a few ways you can try for reducing your CAC:
- Improve your website conversions through A/B testing.
- Be cautious while spending on marketing activities and tools.
- Try to reduce your churn rate by retaining more customers.
- Optimize your buyer persona to create targeted campaigns.
- Invest in SEO for better organic results.
Which acquisition strategy did Wistia use? Let’s take the example of the acclaimed video platform- Wistia that has over 300000 customers from various industries. Wistia’s impactful acquisition strategy is one main reason for its success. Like many SaaS companies, Wistia too had optimized the process of converting free account into paid. Instead of concentrating on increasing sign-ups they were inclined towards increasing the right kind of sign-ups. For this Wistia focused on their data and marketing strategy:
Find below the strategy they followed to improve results:
- Conducted A/B testing on their website
- Asked the existing customers to provide feedback on their email marketing flow
- Created weekly sales reports to analyze the trend and predict future revenue
- Customized their email approach to get more sign ups
(Source: This example is based on the blog” How Wistia used data to transform its customer acquisition strategy” written by Mixpanel)
Wrapping it up
There is a direct connection between customer acquisition and sales, so you need to use the right strategies and channels to attract quality leads. It is not a one-time thing; your acquisition techniques need to be optimized consistently. Keep exploring and experimenting with new techniques to boost your customer acquisition. Once you acquire the prospects, your next step would be to activate the users by providing an excellent first-time experience.
Stay tuned for the next phase- Activation of this sales funnel series to get smart tips and tactics on how to activate your user successfully.
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The post The Complete Sales Funnel Series: Phase 1- Acquisition appeared first on Salesmate.