Did you know that it costs McDonalds $1.91 in advertising to get you to buy a burger from them? And when they sell you that burger for $2.09, they ONLY make $0.18. It’s even worse for them if you order off of the value menu! No wonder they ask, “Would you like fries with that?”
But, when they sell you fries and a coke for $1.77 more, they make (and more importantly KEEP $1.32 profit). That’s eight times the profit when they get you to add a fries and drink to your order!
That’s how a sales funnel works. The initial profit is small, but once the sale is made there’s the opportunity to upsell (or downsell).
A Better Way
But, is there a better way? Brian Halligan thinks so. He’s the co-founder and CEO of Hubspot, and he wrote about his conversion to the sales flywheel in the Harvard Business Review. Last year, I wrote about a business flywheel. Brian applies the same idea to the sales funnel after using a sales funnel for 28 years.
He gives two reasons for retiring the sales funnel. 1. The erosion of trust in society has done irreparable harm to traditional lead generation methods. 2. Sales funnels fail to capture momentum. Let’s look at these issues.
Two Compelling Reasons for Retiring the Sales Funnel
- The erosion of trust. Before the internet, sales forces worked to generate and cultivation leads with salesmen and women. Whether it was cold calling, leads received from marketing, or referrals, the sales cycle often meant a long period of lead cultivation before sales. Today, with the internet, much of this work is automated. It all may happen faster, but it’s also more impersonal. Plus, in the world of spam, incessant junk mail, and incessant robo calls, trust is at an all-time low. Whether it’s email address capture, immediate automated email response, or chat bots, today’s sales process is highly automated and generally with less human one to one contact.
- It could be a slow, tedious process, but there was one part of sales reporting that was considered essential. It was the quarterly report. Sales were measured weekly, monthly, quarterly, semi-annually, and annually, but the push was always for great quarters. Today, inbound marketing, that is, the marketing that you do to draw in visitors and potential customers includes content marketing (many times via a blog), backlinks to your website, social media marketing, and, like the old days, a customer base who can send referrals. The internet has made the sales process 24/7/365. As Halligan says,
“For many of us, our marketing departments could take a vacation for a month, and new visitors and leads would continue to come in, and existing customers would continue to refer new business. That’s momentum. ” Brian Halligan
Introducing the Sales Flywheel
Over 200 years ago, James Watt invented the flywheel. It was took the power generated by the pistons of the steam engine he created and converted it into continuous motion. His steam engine is credited with driving the industrial revolution.
The sales flywheel has several benefits that aren’t available in the traditional sales funnel. Here’s a traditional sales funnel:
But take a look at this visual representation of a sales flywheel:
The first thing to notice is how the sales funnel is linear and the sales flywheel is circular. In the sales funnel, traffic is converted into leads that are converted into sales. In the sales flywheel, customers aren’t the end product of a marketing campaign.
In the sales flywheel, customers are at the center of a continuous marketing cycle that begins with leads (attract), continues with marketing (engage), and continues with customers who become raving fans and generate referrals for your business (delight). As Hannigan says,
“…delighted customers are the biggest new driver of growth. “
This is Ken Blanchard’s “raving fans” idea applied to the internet. Hannigan talks about force and friction. He’s applied force to reworking how Hubspot does marketing and sales. For Hannigan and Hubspot, it means shifting the focus from closing sales to “delighting our existing customers.” The reason? “…that’s the best way to find new customers.”
He’s also worked to remove friction – making it easier to do business with Hubspot. His premise is that human to human interaction can and often does create friction. His answer is to automate as much of customer interactions as possible. The goal is to make the customer experience as efficient as possible.
Whether it’s force or friction, customer experience is central. This idea isn’t all that new. Jim Collins talked about the flywheel effect in his seminal book, Good to Great. Collins said,
“Once you fully grasp how to create flywheel momentum in your particular circumstance, and apply that understanding with creative intensity and relentless discipline, you get the power of strategic compounding. Never underestimate the power of momentum, especially when it compounds over a very long time. Once you get your flywheel right, you want to stay with it for years to decades—decision upon decision, action upon action, turn by turn—each loop adding to the cumulative effect. But to best accomplish this, you need to understand how your specific flywheel turns.”
Whether you divide the customer experience into attract, engage, delight, as Hannigan does or marketing, sales, service, as others do, the idea’s the same – the intention to encircle customers with a great experience.
What drives the flywheel are repeat purchases from delighted customers who tell others about your phenomenal business. In this customer-centered model, exceptional customer service adds weight to your marketing efforts and drives your business forward.
The central premise of the flywheel is that once you’ve gotten it spinning, it takes less effort to keep it going. Once there’s momentum, everyone’s happy to be along for the ride! The more force that you can apply to your sales flywheel, the more momentum you will create, and less effort will be required to achieve faster and faster movement.
That’s the sales flywheel theory. How can you apply it to your business?
I invite your comments and questions, and your likes and shares!