revenue funnel science step 1: build the...
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Revenue Funnel Science Step 1: Build the Foundation
Take the First Critical Step Understanding the marketing and sales funnel can be challenging, unless a holistic view is created to view the entire revenue funnel from top to bottom. The Revenue Funnel Science methodology helps provide a framework that allows leaders to take three critical steps: build the foundation, connect the dots and operationalize the funnel. They empower business leaders to answer key questions about their funnels and accurately interpret the future to see where business is headed.
The Revenue Funnel Science discipline creates a competitive advantage by allowing companies to outperform peers, grow the company faster and optimize their return on investment. This cheatsheet covers how to align sales and marketing by taking the first critical step: Build the foundation.
About the Methodology
Revenue Funnel Science uses a holistic approach to help businesses better measure, forecast and optimize their revenue funnels. It combines the application of science and data to effectively manage the revenue funnel, while documenting and teaching best practices. Although the term Revenue Funnel Science is relatively new, its principles have been practiced for many years by top-performing organizations. It’s their core discipline for revenue growth and is embedded as a key part of their planning and operations as they continue to grow.
CHEATSHEET
Accurate ProjectionsThe blueprint clearly defines the stages in a company’s marketing and sales funnel. It allows organizations to obtain consistent measurements and create projections of future outcomes. Some people have it documented, while others have it built out in their CRM. A blueprint needs to be concise and effective, and for this to happen, it needs to be written, shared, understood and agreed upon by everyone in the company. This includes sharing it with not just marketing and sales, but all of the departments within the company who work with the revenue funnel.
Defining Entry & Exit CriteriaDefining each funnel stage’s entry and exit criteria ensures there are no misunderstandings with people and processes. The blueprint should address two definitions or aspects: the business side, which ensures people are on the same page, and the technical side, to verify CRM and marketing automation platforms are set up correctly. To the right are examples and definitions of entry and exit criteria for a Marketing Qualified Lead stage.
Criteria ExamplesStage: Marketing Qualified Lead (MQL)
Entry Criteria: How does a lead move into the stage?
Business Definition: Marketing confirmed the lead’s title is a VP level or higher, the company belongs to the manufacturing industry and their behavioral score is at least 100. Or, the lead expresses interest by filling out a high-value Contact Us or Request a Demo form.
Technical Definition: Using rules in CRM or marketing automation platforms, enable the following: If a lead meets the title, industry requirements and behavioral score requirements, then update the lead’s funnel stage to MQL. Alternately, if the lead fills out the high-value form, update the lead’s funnel stage to MQL.
Exit Criteria: How does the lead move out of the stage?
Business Definition: If the lead is deemed qualified by the sales team and they accept it, move it to the Sales Accepted Lead (SAL) stage. If a lead in the MQL stage does not respond for 45 days, or if a sales rep has called the lead three times without successfully connecting, move it to the Recycled stage so the lead can be re-nurtured by marketing.
Technical Definition: Using rules in CRM or marketing automation platforms, enable the following: If the sales team accepts the lead, manually update the stage to SAL. If there is no activity for 45 days, automatically move the lead to the Recycled stage.
Agreeing Upon a Common BlueprintOnly until a common blueprint has been built and agreed upon, can organizations accurately measure how their revenue funnels are performing. This process needs to be done before marketing, sales and others responsible for revenue within the company can create or talk about how to accurately build forward-looking projections.
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Key Foundational MeasurementsOnce the blueprint is documented and agreed upon, companies have a foundation to align marketing and sales effort and can begin to measure and share core funnel metrics. They can start looking at their revenue funnel holistically and embed it as a key part of their planning and operations to effectively grow business. Here are the key funnel metrics used to accurately measure revenue funnel performance:
Net New Movement: Understanding funnel movement, or net new movement, is a critical component of Revenue Funnel Science. This metric provides important information regarding what’s entering and exiting each stage, where they came from and where they went. Many CRM platforms can make this challenging to track because the reports don’t show the movement, but instead the volume of records at that moment in time. Using the Revenue Funnel Science framework, businesses learn how to measure where leads and opportunities are moving within the funnel, not just what’s sitting there today.
Conversion Rates: Revenue Funnel Science defines conversion rates in terms of successful forward motion in the revenue funnel. This motion includes records that move subsequently to the next stage or further down the funnel. This data can be used to calculate conversion rates from stage to stage. Monitoring this metric over time provides insight into how the revenue funnel is functioning and establishes a benchmark to identify patterns, progression and changes. Ideally, conversion rates are consistent or improving, unless a decrease is expected due to seasonal sales cycles and trends.
Velocity: This metric is the key to revenue prediction. Velocity is the speed at which records move through the revenue funnel – their passage of time. It can be measured within the overall funnel as well as specific stages within the funnel and is used to help companies determine if revenue goals will be achieved sooner or later than expected. By providing this valuable insight, velocity allows companies to grow revenue faster.
Aging: Aging is the duration of time a record has sat in a particular stage. Measuring aging by stage assists in determining where records are getting stuck to identify bottlenecks or where a breakdown in process is occurring. It is critical for predicting growth because records have a shelf life that diminishes with time, and aging helps determine how much revenue is at risk. This allows companies to take the appropriate action to move records.
Activities: Activities are the sales and marketing efforts that drive records through the revenue funnel. Each activity completed (email sent, website visit, sales call made or meeting held) plays a role in moving records forward in the funnel. This allows companies to trace revenue growth back to the successful activities. Measuring this metric provides insight to marketing and sales regarding the effort needed to acquire a customer and determines what future activities will provide the best return.
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Slicing and Dicing DataBy comparing the key metrics across sub funnels (or business-specific data segments), companies can identify where they need to make improvements or changes. A company’s overall funnel only tells a small piece of the story, which is why the act of slicing and dicing data into sub funnels is how businesses can drill into specific data points such as sales reps, region, lead source or product line. This is where they can learn what is effectively driving revenue growth.
What Drives Revenue?An important part of the overall funnel and sub funnels is understanding key revenue drivers, or which activities are filling the top of the funnel and converting records forward. In some businesses, their sales team is the key revenue producer through activities performed. In other businesses, their marketing team may be the key revenue driver through lead production. All organizations are different and may have multiple drivers, which is possible if the funnel is evenly divided between sales and marketing deals. In this case, they need to assess the situation and decide which drivers have the most impact because it’s the key to future planning and projections. These activities allow marketing, sales and everyone else responsible for revenue to have a holistic view of what the revenue drivers are for the entire revenue funnel, from top to bottom.
Pro Tip:
Records Jump, Skip and Move Backward
Funnels can appear messy at first glance, but that is common. If the funnel blueprint has clearly defined entry and exit criteria, companies can still track movement. The idea of leads or opportunities entering and exiting the funnel implies that records moved in the top and out the bottom of the revenue funnel.
The reality is, records tend to jump around, skip stages and move backward, and this can happen multiple times. Some records enter mid-funnel because they match the criteria or someone did not follow the correct process. This is why a revenue funnel blueprint ensures people and processes move records appropriately for quality pipeline health and accurate revenue prediction.
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The Shape of Your FunnelIn reality, most revenue funnels don’t actually look like funnels. Marketing and sales professionals usually picture a normal shaped funnel that progressively gets smaller as records move down. Unfortunately, real-life funnels don’t always follow this because they have “bulging funnel syndrome” or a disproportionate shape. This can happen due to many things:
• Processes are not being followed and need reinforcement.• It may not be designed properly and the blueprint needs revisited.• A large number of leads are skipping stages or entering midway.• Or, it could be a combination of all of these problems.
Looking at the shape of a revenue funnel is a critical component of understanding what is working and what is not. It allows businesses to determine what immediate adjustments are needed. Below are examples of various funnel shapes:
Bulging Funnel Syndrome
Random Shaped Funnel
Top Heavy Funnel
Bottom Heavy Funnel
The lower stages may have more records than the stages above. A misshapen funnel can be caused due to the issues listed above.
Due to the varying funnel shapes throughout, this is a sign of a process issue, or an issue with the way the company blueprint was set up originally.
The top stages are generating a large amount of leads and the stages below are not being used properly or are being skipped.
This funnel is almost completely upside-down, which indicates the existing blueprint needs revised or better communicated to everyone in the company.
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Predict Future OutcomesWith a common funnel blueprint and foundational measurements established, the second critical action is to connect the dots and monitor funnel performance to gather insights and drive revenue. This holistic approach ensures marketing and sales have a unified view of the entire revenue funnel.
Download our digital book to learn more about Revenue Funnel Science and the steps businesses can take to develop better visibility into their revenue funnels. Or, take the next step and download the Step 2: Connect the Dots Cheatsheet.
DOWNLOAD CHEATSHEET
Assess Your Current StateBefore you begin building your blueprint, take a moment to complete this online assessment to see what areas of the framework you may already have in place and how you compare to other companies. Do you measure, forecast and optimize your marketing and sales funnel to its fullest potential?
TAKE ASSESSMENT
CHECKLIST
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Create blueprint:
Define criteria for each stage Communicate and document company-wide Ensure CRM and marketing automation platforms reflect blueprint
Share funnel metrics with team:
Net new movement Conversion rates Velocity Aging Activities
Determine key sub funnel views to define revenue drivers:
Sales rep or team Product line Lead source Business segments