The Six Funnels of the Buyer's Journey

Enterprises are besotted with digital, while also being intimidated by it.

They are engaging in intense board level discussions on how to renew their current businesses using digital technologies while experimenting with disruptive new business models in parallel.

But what does all this really mean from the perspective of providing a better experience to the prospective buyer and the customer?

In working with both B2C and B2B clients, I have often used the construct of the “six funnels” to help them visualize their buyers’ journeys.

To clarify the definitions in use:

1. Outsiders: People who are not users or customers of your brand, or even aware of it, but represent a target audience.
2. Window Shoppers: People who have developed a positive affinity or interest towards your brand or product. They may not be ready to buy yet and will likely need more persuasion.
3. Shoppers: People who are actively considering your products. They are in-market and close to opening their wallets. [1]
4. Customers: They have bought your product or service and are ready to use it.
5. Happy Customers: These people have used your product or service, have realized or continue to realize value, and are happy with the experience.

The six funnels in the buyer’s journey apply to both B2C and B2B situations, although some of the funnels may get compressed or elongated depending on the type of product or service.

The first two funnels (outbound and inbound) are related to marketing and typically take place on television, social media, the internet, SMS and email.

The third and fourth funnels are related to nurturing and conversion, and unfold on properties that you own and control — Stores, Web Sites, Mobile Apps, Facebook Pages, etc.

The fifth and sixth funnels are related to customer experience and customer expansion. They involve the successful usage of your product or service, and subsequent efforts to expand the customer’s engagement with your brand.

Every enterprise needs to master these six funnels, so that they can navigate customers through them in the most effective way, and in the fastest period of time, with minimal friction and maximum throughput.

It is important to recognize that these funnels do not represent a linear path.

The buyer typically traverses multiple stages and loops in each funnel, and may move forward or backward within and across funnels, based on certain triggers. For example, a shopper on the cusp of purchase can abandon his cart and move back to being a window shopper, who may need to be persuaded again with new impressions to come down the funnel.

Now, none of this is new insight.

Enterprises have indeed instrumented operations in sales, marketing and customer engagement using a variety of technologies.

But, very few have instrumented the end-to-end buyer journey from impression to conversion to customer experience to customer life-time value.

Not because of lack of technology, but because no one owns the total experience of the brand across the company. The data related to the experience of any one buyer and customer is fragmented across a vast number of internal and external silos.

While each funnel deserves its own post that details the stages, loops, triggers and metrics within, let me first try to define them in broad brush strokes.

1. Outbound Funnel

Outbound = Seller Initiated.

The brand or seller reaches out to a broad audience to build awareness, or elicit a direct response.

Outbound = Paid impressions on TV, Radio and Print. Display and Native Advertising on Social Media, Mobile and the Desktop Web. And proactive direct marketing outreach on email, SMS or direct mail.

Outbound = most of the ~ $ 1 T annual budget spent on marketing and advertising worldwide.

GroupM: 2015 Worldwide spending on Media and Marketing.

Outbound is interruptive and it can be hard to track ROI. As John Wannamaker, a department store owner famously said in the early 20th century, “50% of advertising is wasted. Not sure which 50%”.

The Outbound Funnel Equation

Funnel Input = Outsiders who are not your customers or users and who may not know your brand.

Funnel Actions = Expose outsiders to brand impressions across multiple media.

Desired Output = Shoppers with a positive interest in your brand. In many categories like B2B and high-value B2C products, they typically turn out to be window shoppers with awareness of your brand, who need more research and data to be persuaded.

2. Inbound Funnel

Inbound = Customer Initiated.

Inbound is about engaging with the customer when she is interested and potentially in-market.

The customer finds you through search, hears about your product or service from a friend, or finds your content organically on social media from trusted sources — facebook posts, youtube videos, recommendations on Nextdoor, etc.

Or all the above at different points in time.

An inbound impression can be paid or organic, but it always has rich customer context in terms of intent or relevance. Consequently, it contains a stronger signal than outbound, is more likely to convert, and in a shorter period of time.

Inbound is additive, not interruptive.

The Inbound Funnel Equation

Funnel Input = Outsiders.

Funnel Actions = Expose outsiders to impressions that are either targeted responses to explicit intent or contextually relevant with high signal value.

Desired Output = Shoppers with a positive view of your brand.

Inbound and Outbound Funnels manifest outside your properties. On television, social media, Email or SMS.

The prospective buyer is typically exposed to multiple outbound and inbound impressions. It is often the cumulative effect that piques the user’s interest and propels him to take an action to visit one of the properties you own or control —Web Site, Landing Page, Facebook Page, Offline Store, Dealership, etc.

3. Nurturing Funnel

Once the user lands on a property you own, you need to make the best possible first impact. But he is unlikely to be persuaded yet. After all, he is just beginning to understand who you are and might be in no hurry to pull the trigger. 

Taking the user from vague interest to active consideration can take minutes, days or months — depending on the product category and the customer segment.

Nurturing is now a large software and services market with billions of dollars in spending.(Marketo, Eloqua, Retargeting exchanges, etc.)

Nurturing Funnel Equation:

Funnel Input = Window shoppers with positive but not definite interest.

Funnel Actions = Nurture window shoppers through retargeting, delivering personalized content, free diagnostic services, advisory recommendations, etc.

Desired Output = Shoppers with active consideration for your brand.

4. Conversion Funnel

Conversion = Actual Transaction, Download, Sign Up or any such action that serves as the goal of the marketing and sales process.

Conversion = Process starting from the last click or interaction that led the user to your property and eventually to a successful action.

The Conversion Funnel Equation

Funnel Input = Shoppers with active consideration for your brand.

Funnel Actions = Provide a path for the buyer to express needs, find the right products, and complete the transaction.

Desired Output = Customer who has consummated the purchase or equivalent action.

5. Customer Experience Funnel

Customer Experience = Process of activation, usage and interaction to derive value from the product or service.

Customer Experience = Sum of positive and negative emotions from every touch-point with the company, product or service. This spans across physical products, digital services like web sites and apps, and engaging with real personnel in stores, call centers and offices, either in-person or through virtual engagement.

The Customer Experience Funnel Equation

Funnel Input = Customers who have purchased, but yet to use the product.

Funnel Actions = Helping customers activate, use product/service and realize value; leverage data from closed feedback loops to improve the user experience on a continuous basis.

Desired Output = Happy customers, translating to continued annual recurring revenue (if subscription based), who are less likely to churn.

6. Customer Expansion Funnel

The customer expansion funnel is a proxy for the process required to expand the customer relationship. These include renewals, upgrades, cross-sells, increasing usage, increasing engagement time, and expanding to additional users.

This funnel has characteristics similar to the nurturing and conversion funnels but used for selling to existing customers vs. net new.

The Customer Expansion Funnel Equation

Funnel Input = Happy Customers (This is not a pre-requisite, but the ability to expand the engagement is a lot higher if they are happy with the products they already have).

Funnel Actions = Nurturing and conversion activities related to broadening (more products), deepening (higher priced plans), lengthening (renewals or longer terms or upfront cash), or widening (more users) the customer relationship.

Output = Continued expansion of the relationship and customer lifetime value.

There are varied manifestations of these funnels, based on what is sold to whom (CPG, B2B products and services, B2C subscriptions, B2B2C automotive, Online Education, B2C mobile apps, B2C Insurance, etc.). But the broad framework of the six funnels generally holds true in any situation involving a seller and multiple buyers.

Ten Key Questions for the Chief Digital Officer, Chief Marketing Officer or a CEO.

1. Do you know how these six funnels manifest in your company for different types of products and customer segments?
2. Do you know the stages, loops, triggers and metrics for each of the funnels and the transitions between? [2]
3. Do you know the volume of traffic through these funnels and the rates at which prospective buyers absorb outbound and inbound impressions, progress, convert, activate, use your product or service, and generate value for your business?
4. Does your instrumentation of these funnels help you understand attribution of marketing spend in different media and channels: not just to traffic, click-throughs, and conversion, but to customer lifetime value?
5. Are you allocating your marketing and sales spending based on these insights? Or better yet, do you have closed loops in place that dynamically adjust digital advertising and marketing spending to what works vs. not?
6. If you are a startup or a new business unit, are you investing in optimizing the customer experience and getting to product-market fit, before investing in marketing or growth hacking the front-end funnels? Too many companies commit the unpardonable crime of investing in growth before the product is ready for prime-time.
7. If you are post product-market fit, do you understand if / where you may be wasting capital towards generating traffic that does not convert, or worse still, converts but churns at unsustainable rates?
8. Do you truly understand the experience of your customers across all touch-points? Do you understand all the systems and data sources — both internal and external — that hold the data related to the experience of the buyer and the customer?
9. Do you understand how existing customers are marketed and sold to and do you have data related to pursuits of customer renewal and expansion? Do you understand what represents customer delight and value, and their correlation to the effectiveness of up-sell and cross-sell?
10. If you are not the CEO, do you have the explicit mandate to own and shape the experience of the brand across these six funnels? What are your specific goals in the context of the buyer’s journey and how will they be accomplished through collaboration across CDO, CMO and CIO organizations?

Holistic optimization of the six funnels of the buyer’s journey across awareness, acquisition and engagement — using intelligence fueled by data collected across internal and external systems — represents a huge opportunity for enterprises. It holds the potential to radically boost effectiveness of marketing dollars, reduce wasteful spend and increase customer life-time value.

But.

Succeeding at this is a formidable organizational and management challenge. It requires a clear understanding of the status quo, an executive owner of the brand experience who is empowered to drive change, and deep collaboration among multiple stakeholders including CDO, CMO, CIO and more.

Companies that learn to do this well will enjoy a significant and lasting competitive advantage. [3]

Footnotes:

[1] Terms like window shoppers and shoppers are used only to facilitate easy understanding for a casual reader. It is not intended to convey a retail-only context.

[2] A funnel is divided into multiple stages. The transition from one stage to another occurs on a trigger. A trigger is based on a metric specific to a funnel or shared across funnels. Loops are used to model repeating or circular behavior. The funnel also has exits, each of which may need different treatment depending on the type and context. (Think cancellations. Responses will differ depending on reason, tenure, CLTV, etc.)

[3] Assuming that the company delivers a product/service that solves a real problem with a truly differentiated solution. No instrumentation or intelligence on the buyer journey will be useful if this essential prerequisite is not met.