How to build a high converting sales funnel for your subscription business
All businesses have sales funnels. A lot of them.
If you want to succeed with your business, you need to understand how sales funnels work.
In this blog post, I’ll teach you the fundamentals about funnels, so you know how to build and optimise your sales funnel. I’ll focus on sales funnels for subscription businesses, but I’ll also cover a lot of fundamentals about sales funnels in general, which you can apply to ANY business.
Let’s dive right into it.
What is a sales funnel?
First question: What is a funnel?
There are many definitions of a sales funnel, but here you have my take:
So..
“A sequence of events, your ideal customer profile must go through to achieve their goals.”
It’s all the steps that a person must take in order to become your customer.
You can also call it the customer journey. The journey from being an unknown brand to having a customer.
All sales funnels are unique, but usually you can divide your funnel into a couple of steps:
- Top of the funnel (TOFU): Creating awareness and driving traffic to your business
- Middle of the funnel (MOFU): Converting that traffic into leads
- Bottom of the funnel (BOFU): Converting those leads into paying customers
With subscription businesses you usually pay a lot of money up front to acquire the customer (CAC: customer acquisition cost), and revenue comes down the road as a recurring revenue. It will take some time (payback period) to break even on a customer level. This is what we call the lifetime value to customer acquisition cost ratio (LTV/CAC ratio). Therefore, it’s extremely important to focus on retaining your customers and even expanding the revenue from existing customers. That is also why I have included a fourth step to the funnel:
4. Post funnel: Retaining customers and expanding the revenue from existing customers
All these four steps are important to build a high converting sales funnel for your subscription business.
Why should you work with your funnel?
You should really see your sales funnel as a sequence of steps where everything can go wrong. Steps where people can drop off.
A funnel is a framework to break down your business and understand 1) why you are not making any money or 2) how to generate more money.
It’s your job as an entrepreneur and sales or marketing professional to build and optimise your sales funnel. If people just went ahead and bought your product when they landed on your website, then there we no need to work with your sales funnel.
This is not how things work.
You need to work with your sales funnel in order to generate customers and revenue.
Let’s have a closer look at each of the different steps in your sales funnel.
Top funnel
This first step in the customer journey is where your prospects become aware of their problem and your product as a potential solution.
For you as a marketeer, this is where you should focus on driving relevant traffic to your website.
How do you do that?
There are so many ways to drive traffic.
To help us uncover some of the ways, let’s have a look at the 19 different traction channels you can use to drive traffic to your business. The 19 traction channels are popularised by Gabriel Weinberg and Justin Mares, authors of the book Traction. Really worth a read.
The 19 mutually exclusive marketing channels are great to map out what channels you should leverage to drive traffic into your top funnel.
Make sure to pick channels that have a great product/channel fit with your product and business.
Middle Funnel
Traffic that doesn’t convert is useless.
That’s why you need to focus on converting your traffic into leads. That’s the focus of your middle funnel.
Put in other words: You need to collect name and contact information on those visiting your website. As a bare minimum.
You do that with lead magnets. A lead magnet could be an e-book, a webinar, a report or similar. Something your visitors get in exchange for their name and contact information.
You want to create lead magnets that help educate your leads on the problem they are facing and guiding them towards why your solution is the best.
When you have collected name and contact details, why not get more information on your leads, you can use to better sell your product?
As your lead navigates through your website and what to access more of your lead magnets, why not try to get to know your leads even better? That’s what we call progressive profiling.
When you have collected name and contact details, then you can start selling to your leads. We’ll come to that in The bottom funnel.
As a B2B subscription business it is probably nice for you to know what industry your leads are in? Maybe also understand what size of company you are dealing with? Define what’s important for you to know in order to qualify your leads and sell as efficiently as possible.
Bottom Funnel
When you have gotten your leads, then it’s time to sell in your solution.
Selling is hard work.
To make it easier for you, let’s look at it from a rather simple perspective:
Selling is all about closing the gap between your leads current state and the desired state, where they choose your solution.
Also called Gap Selling, coined by Keenan.
Find out WHY your leads aren’t already buying your solution. Isn’t your product solving their problem? Is your product too expensive to their budget? Is it difficult for your lead to make a purchase decision? When you contact your lead, try to understand his or her reservations.
Selling can be done both in person, over the phone, over online meetings or email. Figure out what fits best with your ideal customer profile, product and business.
Post Funnel
It’s always nice with happy customers.
With subscriptions businesses it’s even more important.
It’s more important as revenue doesn’t come right away. To get most out of your marketing cost, you need to retain customers to get the full value of a customer. With subscription there is usually a big cost associated to getting a customer while revenue comes over time.
In comparison, with ecommerce, when you sell a product, you know how much you have spent acquiring that customer and how much you have made in terms of revenue. You instantly know if you have a positive return on ad spend (ROAS).
With a subscription business, you have spent all the money getting the customer, but you haven’t made any money yet. This is where the hard work starts. Now you need to deliver on your promises.
You have two things to focus on in the post funnel:
- Retain your customers / minimise churn: The golden key to beating churn is retention, retention, retention. You want to be building a solid retention process to keep your customers locked in with your product.
- Expand your revenue: Make more revenue from your existing customers. This can be from cross-selling other products or upselling to more advanced tiers (or by increasing usage).
Before sending traffic into your top funnel, make sure you have a low churn. If you spend a lot of money on driving traffic, but customers are leaving you after using your product for a while, then you have a leaky bucket. This is also what you call product/market fit.
Also, before you work on any kind of account expansion activities, make sure you get your retention right! You don’t what to ask existing customers to buy more, in case they don’t even like your product.
How to work with your funnel
There are a few important principles you should know when working with your sales funnel:
- Always work bottom up with your funnel: Before driving traffic to your business, make sure you have a low churn. If your customers are leaving you after using your product for a while, then you have a leaky bucket. This can become very expensive and in many cases, therefore people have to close their business.
- Remove friction and increase motivation: As a mindset, you should always focus on removing friction from your funnel. Remove unnecessary steps and requirements that prevent people from becoming your customer. Likewise, always do what you can to increase their motivation to become a customer.
- Focus on low hanging fruits: Many funnels are long and complex. There are so many places where you can start optimising. Therefore, focus on the low hanging fruits. Time is probably what you lack the most. Spend the time you have as efficiently as possible.
- Shorten the length of your funnel: If your funnel is long and complex, then try to make it shorter. Are there steps you can remove? Information you don’t really need? Or maybe you can ask for that information after people have become a customer with you?
Whether you are building or optimising your funnel, always make sure to measure your performance. As Lord Kelvin puts it:
If you can’t measure it, you can’t improve it.
It’s as simple as that.
It’s critical to any funnel that you know how each step is performing. And when you know what’s working and what’s not, then you need to be able to dig one step deeper, to understand why it’s not working and how to fix it.
Data is your friend.
Do you want to become an expert on funnels?
Do you want to become an expert on sales funnels and succeed with your business?
All the above is from my Udemy course on “How to build a high converting sales funnel for your subscription business”. More than +2000 students have already enrolled and rated it with 5-stars.
In less than three hours I’ll teach everything you need to know to build and optimise your sales funnel through 10 sections. Step by step.
After taking this course you will learn:
- What funnels are and how to work with them
- How to find your ideal customer profile and why it’s critical to get this step right before sending traffic into your funnel
Next, I’ll cover the four stages of a funnel:
- Top of the funnel (TOFU) — this is about driving traffic to your funnel
- Middle of the funnel (MOFU) — converting that traffic into leads
- Bottom of the funnel (BOFU) — and finally closing the deal and get paying customers
- Post funnel — this covers everything that happens after a sale has been made
- Then I’ll teach you how to continuously work with your funnel
- I’ll even help you put together the right tech stack which supports the needs of your funnel
- Lastly, I’ll provide you with a few cases that will inspire you to build your own funnel
It will cover so much more than what you have read in this post and of course I have saved all the best tips and tricks for those attending the course.
The course is for you who consider starting or already owns a subscription business, like a software-as-a-service (SAAS). However, the course covers a lot of fundamentals about sales funnels, which you can apply to non-subscription businesses.
If you want to succeed with your business, you need to understand funnels and this course will provide you with the right structure to build and work with your funnel.
Remember that you are covered by a 100% money back guarantee. So what are you waiting for? Click here and enroll today.
