Revenue Funnel Science is a methodology to measure, forecast and optimize your marketing and sales funnel. Last year, I wrote a book about the approach based on my experience and the examples I have seen from other companies I have worked with. Since then, I have hosted several webinars and workshops on Revenue Funnel Science, and I have also worked with others to produce a lot of great content to help companies understand and utilize the methodology.
In conversations about how to use Revenue Funnel Science, there are two common misconceptions that can occur. First, there sometimes is confusion about the word “funnel.” At its core, a “funnel” is really just a business process for how leads are generated, nurtured and transitioned from marketing through sales on the journey to becoming a paying customer. It is not always sequential and it may not look like a true funnel, but it is a process. Revenue Funnel Science, ultimately, is a framework to better measure, forecast and optimize that process.
Second, Revenue Funnel Science is incremental and progressive. In other words, it builds on itself, step-by-step. Sometimes, I see companies who want to skip to the fifth stage but they have not completed the three previous stages. That tends to not work well very well. To better explain the incremental nature of the approach, I created the Revenue Funnel Science Maturity Model to outline the major steps. Which stage is your company at?
Stage 0: Desire & Need
To benefit from Revenue Funnel Science, you first must have the desire and need to improve the measurement and performance of your marketing and sales processes.
If you’re in sales, you need to have an interest in not just the “art” side of sales, but also the “science” side – using data to understand and improve your results. If you only have one or two people doing all the selling in your company, this may not be a big need for you. In my experience, it typically becomes a much stronger need when you have somewhere between five to 10 or more people selling for your company.
If you’re in marketing, you must have a desire and need for marketing to contribute directly to revenue results. Typically this includes marketing being responsible for demand generation that is actively handing leads off to sales. Sometimes this also includes marketing having a specific goal for the amount of revenue that has to come from marketing-generated leads or programs. But if your marketing organization has not yet made this philosophical shift and is still focused solely on traditional brand marketing and public relations, then you’re not yet ready to use Revenue Funnel Science for your marketing.
Stage 1a: Implement Technology
Revenue Funnel Science relies on two basic technology building blocks. For sales, you need to have a Customer Relationship Management (CRM) system in place, such as Salesforce.com. For marketing, you should have a marketing automation platform in place as well, such as Marketo, HubSpot, Pardot, Eloqua or one of the many others that are available today. An effective marketing automation platform allows you to better manage your marketing programs and engage in true lead nurturing in a way that a CRM usually does not.
It is important to note that I am choosing my words carefully in this section. You should have CRM and a marketing automation platform “in place” to start to work with Revenue Funnel Science. “In place” means you have purchased and implemented them. It does not mean that your usage is perfect (it never is), that your data is perfect (it never is either) or that you’re 100% satisfied and will never make a change in the future (this usually is not the case either).
Stage 1b: Establish a Blueprint
The next step is to implement a marketing and sales funnel blueprint. A funnel blueprint is a process map of the steps in your marketing and sales process as leads are generated, nurtured, transitioned to sales and ultimately converted to paying customers. An effective blueprint includes both business definitions and technical criteria for each step in the entire process. It also considers the entry and exit points – where leads might jump into the process, and where they might fall out of it.
The best time to develop a marketing and sales funnel blueprint is when you’re implementing your CRM and/or marketing automation technology. However, even if you don’t map out a clear process then, it can be developed later. It is also normal for blueprints to evolve over time, and many companies have different blueprints for different products or business units.
Stage 2: Capture & Slice Key Metrics
Once you have a blueprint in place, you should begin to capture key metrics around each step or stage in your funnel. The key metrics for Revenue Funnel Science include movement (the records entering and exiting each stage in a time period), conversion rates and velocity (the amount of time spent in each stage).
You should also capture the data that allows you to slice and analyze your funnel by different dimensions. For example, you may want to look at funnel performance by different lead sources, marketing campaigns or programs, products, business units, geographic regions and sales reps or sales managers. If you are capturing this information then ultimately you can slice your funnel into multiple “sub funnels.”
Stage 3: Goal Planning & Analysis
Goal planning and analysis is the process of determining how many leads you need higher up in your funnel and when exactly you need them in order to hit your future revenue goals. Using your funnel blueprint and the key metrics that you began capturing in a previous step, you can “reverse engineer” your goals to determine what you need and when you need it. The goal planning and analysis is typically more effective and precise if you break out across each of your sub funnels since the metrics for different sub funnels will typically perform differently. The goal planning process should be repeated for each major time increment that is important to your business – commonly each month, quarter and year.
Stage 4: Early Warning System
When you have completed analysis around your goals, you can also implement an early warning system that tells you if your funnels are on track, and if they are not, where the problem is. This forward-looking view of your funnel is critical for executive leaders and ideally occurs early enough to make adjustments or fix problems when issues are found. Many companies never get to this level and instead are surprised when a major goal is missed. I struggled with this myself in my previous business and it taught me a painful lesson that your data always tells a story about where you are headed in the future.
Stage 5: Forecasting & Projections
Forecasting and projections is the next forward-looking step that builds on top of the early warning system. An effective forecast ultimately uses the data you have captured in previous steps to calculate funnel momentum and project where you are headed in the future. It is different than the typical sales forecast that involves an imprecise probability placed on each open opportunity. Instead, forecasting with Revenue Funnel Science allows you to calculate a true probability of records in your funnel moving forward within a given time period based on how your data has performed in the past.
Stage 6: Benchmarking & Optimization
The final step in Revenue Funnel Science maturity is to use the information from previous steps for benchmarking and optimization of your marketing and sales processes. To grow your business successfully, you ultimately need to know what are your biggest areas of improvement.
Revenue Funnel Science Stages Build on Each Other
As I mentioned earlier, I sometimes see companies who want to skip to the fifth or sixth stage but they have not completed the previous stages. It’s important to understand that the stages build on each other. For example, you cannot implement an early warning system or accurate projections unless you first have done the work for goal planning and analysis to fully understand how contributions higher up in your funnel are driving revenue results at the bottom. You cannot accurately analyze goals unless you are first capturing the key metrics described in Stage 2. And you cannot capture those metrics without first having the technology in place (Stage 1a) and a funnel blueprint defined (Stage 1b).
Special Thanks to Josh Hill’s MarTech Maturity Model™
I have to give special thanks to a framework that Josh Hill developed called the MarTech Maturity Model. If you don’t know Josh, he is a Marketo expert, and his website Marketing Rockstar Guides provides many great resources for Marketo and other marketing technology. He developed his Marketing Technology Maturity Model as a way to explain the stages that companies move through in evolving their marketing technology usage.
I found Josh’s work to be inspiring when I was thinking about the Revenue Funnel Science Maturity Model. In addition, I believe the Revenue Funnel Science Maturity Model overlays and complements Josh’s model in some ways. Maximizing the benefits of Revenue Funnel Science definitely goes hand-in-hand with where a company is at with its overall technology utilization. In my next blog post, I will dig into this further.
Assess Your Funnel
Take the Revenue Funnel Science Assessment to look at what areas of the framework you may already have in place and how you compare to other companies.