Why a traditional marketing funnel is not enough for a successful SaaS?

When you read the trade press, you get the impression that the marketing and sales world has long been crazy about funnels. And that craze is still at its height. It’s a simple and neatly visualized idea. A well-designed funnel usually works quite effectively. At least for a while.

So what’s the problem?

The problem is that funnels no longer reflect consumer behavior, especially in the context of digital products. In traditional and most commonly used models, such as AIDA (Attention, Interest, Desire, Action), marketing and sales activities are designed based on the assumption that the consumer’s path is linear. Linear funnels expect that attracting the customer’s attention and building awareness of a product or service results in an interest that needs to be “heated” to turn it into a desire that leads directly to purchase (action).

However, recent studies and observations [e.g., Customer journey analyses in digital media: exploring the impact of cross-media exposure on customers’ purchase decisions by Jan F. Klein, Yuchi Zhang, Tomas Falk, Jaakko Aspara, Xueming Luo] indicate that the reality is much more complicated than traditional funnels suggest. It is also confirmed by experts from leading companies such as Google, Intuit, Sephora, SAP, Twitter, and Visa quoted by Harvard Business Review.

It shouldn’t be much of a problem as every theoretical model simplifies reality. However, in this case, excessive simplicity at the theoretical level leads to inefficiency at the operational level.

Referring back to the Golden Circle model — without understanding the “why”, we guess the extent of the “how”, which leads us to a completely wrong “what”.

Is a linear marketing funnel always a bad model?

Absolutely not. There are many products and services (usually relatively simple products where describing a specific persona is not particularly challenging, e.g., FMCG, clothing, footwear) where marketing and sales funnels do their job.

The situation is slightly different in the case of subscription-based products, which are complex in terms of logic and business, niche products, innovative products characterized by a lengthy implementation process, and a complicated purchase path that usually involves more than one decision-maker. This is where marketing funnels — instead of helping — get in the way.

And so we come to the most important postulate of this article:

A marketing funnel cannot replace a business strategy!

A funnel should at most be a derivative and consequence of a well-developed business strategy. Funnels themselves are not bad — they help to put a part of a complex process into a simple frame. However, an effective strategy should not be limited to funnels alone, as this is the shortest way to lose sight of the big picture and paint yourself into a corner.

If you decide to use a funnel, you need to be aware of its limitations and find a way to overcome them. If you want to learn about the four considerable drawbacks of traditional funnels and discover a modern alternative used by the leading global consulting firm, McKinsey — keep reading!

Disadvantage 1: In most cases, a single funnel is far too few

Even for the simplest of products, the buying experience can be broken down into at least three areas:

• marketing,
• sales,
• customer service.

In addition, depending on the complexity of a product, one can specify the areas related to:

• configuration and implementation of a product/service,
• onboarding of target users — it applies mainly to the enterprise-class products where a person who decides about the purchase is not a final user,
• creation of internal corporate documentation.

Each of these areas has tremendous potential. The extent to which this potential is used represents an opportunity or a threat to the purchasing process. The areas mentioned above are a set of touchpoints with a brand that can play a decisive role in contract renewal, upsizing or upselling, and so on. That’s not something you want to leave to chance.

Disadvantage 2: Traditional funnels end earlier than they should

It’s common to see an unhealthy focus on acquiring new customers. This strategy typically makes no business sense. The cost of acquiring a new paying customer is usually a fair share of marketing costs and an enigma in the long run because it is largely dependent on external channels, advertising systems, etc. You have to pay a lot to get someone to pay you. In addition, you never know how much you will have to pay for the same thing in the future. It casts great uncertainty over the entire business model.

So it seems logical that the next step after acquiring a customer should be extending their lifecycle and increasing average order value and brand loyalty (the advocacy component). However, this does not happen. And if it does — these efforts occur in isolation from the main process as if adding the payment card to service was a point where the whole situation mysteriously rotates by 180 degrees.

It is often the fault of funnels, in which the Action stage (understood as the first payment for a product/service) is the last step managed by marketing.

Disadvantage 3: Traditional marketing funnels miss important mechanisms

Have you heard of multichanneling? How about ROPO? Or micro-moments in the decision-making process?

In traditional marketing funnels, all these concepts are terra incognita. It is extremely difficult to capture the essence of everyday life in such simple models. Many try by rebuilding and expanding funnels with subsequent stages. Such an approach sometimes works, but in my opinion, adding more layers obscures the picture instead of making it clearer.

Disadvantage 4: Traditional funnels don’t focus on customers and their needs but on the actions we want them to perform

Marketing has come a long way in recent years. Marketers begin to understand that the best and the most profitable strategy is to respond to real consumer needs, communicate openly, honestly, and transparently, and base the actions on the values shared with the audience.

They are finally beginning to see that customer-centered marketing is not just an ideological, trendy-sounding postulate, but also an effective strategy. They focus more on the right people, communicate with them in their language, empathize, and try to understand the essence of their problems.

But the logic behind the mechanics of marketing funnels doesn’t align with these assumptions. Funnels focus on triggering peoples’ actions: “Read more.” “Sign up.” “Like this page.” There is no thinking about the problems to solve, no analysis of what consumer challenge a particular stage of the funnel should address, or what value it could bring to the consumer’s life.

If not funnels — then what?

Before I present an alternative, let me emphasize you should not give up on funnels entirely. Use them to arrange and measure your activities, systematize your efforts and track progress.

However, for strategic work and planning, reach for something more. Use models that put your audience in the center. By doing so:

• you will create not only tactics but the foundation for a solid, self-iterating, easy-to-modify strategy that you can successfully use to customize a low-level action plan;
• you will determine a starting point to integrate the processes within the organization: adapt a holistic approach instead of making an artificial division into sales, marketing, and customer success.

Based on the goals and needs of your customers:

• you will identify opportunities and threats relevant for the entire decision-making, sales, and implementation processes and — more importantly — start to see it as a coherent whole.

Customer Decision Journey

A model popularized by McKinsey. It is wonderfully simple, and the revolutionary change from the funnel approach is that it loops the process. Instead of falling into the “top” of a funnel and gradually moving to the very bottom, a customer moves in a circle around the purchase point: before, after, and during.

As you can see, we don’t treat a purchase as a single “action” that is supposed to be the overarching purpose of communicating with the market. The purchase is one of many actions we take concerning not only a product we offer but the problem we solve, as well as consumer decisions.

This model can be successfully applied to understand the emotions occurring at each stage and the challenges you want to accompany our consumers through. Appropriate supplementation of this approach will help you create the right content, plan the delivery of content in the right moment and context, and get a consumer to take the necessary actions to achieve their goals.

What might those goals be?

To find the answer to this question, I recommend using the Jobs To Be Done methodology (“JOBS TO BE DONE: Theory to Practice” by Anthony W. Ulwick, available for free on Ulwick’s website).

If correctly implemented and backed by sound knowledge (e.g., gathered during interviews with customers), it will allow you to specify many functional, useful, emotional, and social tasks that you can manage through a proper marketing plan.

Your work never ends

This (and similar models like the Buying Lifecycle) assume no cut-off point after which you can stop caring about a customer. By increasing your customer’s awareness of the problem and the product, you have a responsibility to continually moderate their presence in the process, increase their satisfaction with a product, and engage them in using it.

How to construct such a model?

When designing a strategy, I often tell clients that it is not about a plan but planning.

The strategy may and even should be subject to modifications. In such a dynamic and competitive environment, it is impossible to create a ten-year plan that would bring the expected results. It is not the role of a strategy at all. When starting a game of chess, you do not plan all your moves with no regard for your opponent’s actions.

A well-constructed strategy should help you gather knowledge, prepare a proper framework for action, determine the scope of possible changes, and develop the most probable scenarios. But above all, it should help you understand the mechanisms determining your business model.

Therefore, customers are involved in the strategic process and making crucial decisions.

And this is the role of the models described above. They are tools for mental work, whose job is to structure our knowledge and ideas. The model, although simple, offers significant changes in high-level thinking, which affect the efficiency and effectiveness of the execution of actions.

***

Kamil Cupiał, Lean Strategist at Project: People

Kamil gained experience in NGOs, start-ups, and creative agencies, where he coordinated the work of creative and technology teams. He can easily understand seemingly contradictory perspectives and transform them into an effective, holistic strategy.