Is ‘funnel thinking’ leading to missed opportunities and revenue loss?
I have issues with the visual concept of the ‘sales funnel’ …
… and in this email I’ll explain why, and present what I think is a more accurate and useful model.
The goal was to develop a framework that made more sense for the purpose of helping create more profit-optimized sales and marketing campaigns.
This is the first I’ve published on this.
The Traditional Sales Funnel
In July of 2020 Google published new research about ‘why people buy’ and the ‘new-normal’ customer journey, or purchase pathway.
They tracked 30,000 shopping experiences and a typical pattern of behaviour emerged, which they called ‘The Messy Middle’.
Despite mapping out this new model of buyer behavior, they wrote:
The funnel is immortal.
Decoding Decision, Making Sense of the Messy Middle. Think with Google, 2020.
The funnel is still very much alive. In fact, at 120 years old and counting, the funnel is quite possibly, immortal.
You can download their full report here →
You can read the 2023 update here →
The typical funnel is visualised with the wide-open end at the top and a stem that gradually narrows down into the small, narrow spout at the bottom.
It’s been a useful model, but seriously, this visual model is flawed.
Call me pedantic, but when you pour stuff into the top of a funnel, it all exits out the bottom, and this is simply not what happens in sales.
I mean, it would be great if 100% of the people who enter the top of your funnel, exit the bottom as a sale.
But that's not going to happen.
So, for this visual model to be more accurate, you’d need to add a bunch of holes or gaps for the majority of people to leak out of the funnel without making a sale.
The other reason it’s inaccurate is for this funnel to work as shown, it needs gravity to explain why all the people who enter at the top are ‘falling down’ the funnel.
Again, this is not what happens, which is why the funnel is a poor analogy.
When I first had to delve into marketing to grow my business, no-one seemed to care about the quality of this analogy, so I just carried on.
Until one day I came across someone else who did care about these flaws and reimagined the funnel as an ‘inverted funnel’.
The Inverted Funnel
Flint Mcglaughlin is the founder of MECLABS and runs the highly popular blog, Marketing Sherpa.
Flint solves two problems by inverting the sales funnel, so that the wide entrance is at the bottom, and the narrow exit is at the top.
Read about the inverted funnel here →
First, this model provides for the fact that people don’t just haplessly fall down a funnel; we have to move them up the funnel using a force of some kind, and that force is the ‘offer’ and a series of micro-commitments, or what Flint calls ‘micro-yeses’.
This inverted funnel also covers the fact that people will naturally fall out of the funnel due to ‘gravity’, in the same way a liquid of powder would fall out of the funnel if it were upside down.
This inverted funnel doesn’t need extra holes or gaps to explain why not everyone completes the funnel as a sale. There is a whopping great hole at the bottom they fall out from.
For me, this is a smarter visual and I really like it, but it still doesn’t quite do it for me.
This funnel maintains that for people to move up through the funnel, there needs to be a series of micro-yeses that all lead to the one big ‘yes’ at the top, which is the purchase.
It implies that everyone moving up the funnel is doing so against an invisible force that’s pushing them back out, e.g. the gravity.
It’s not that this is incorrect but consider those offers that have so much demand and novelty, that people line up for hours, and when the doors open, they rush in and may even hurt other people in their race to make a purchase or claim a bargain.
This doesn’t fit the visual of people being ‘forced’ up a funnel against a natural and consistent force that’s pushing them back out.
And for this nit-picking reason, I want something more than the inverted funnel concept, because it’s not complete.
I prefer another model entirely and it’s the model of a chemical equation applied to sales.
The Sales Equation
This doesn’t require a university level Chem 101 course to understand. It’s basic high school chemistry (the same class that you probably used a real funnel for experiments).
When two substances get together, they can create a new substance.
Hydrogen + Oxygen = Water
If you want more water, you have to add more hydrogen or oxygen in the right amounts.
You’ll also remember that just because you put two substances (elements) together, does not mean they will naturally fuse together to create a new substance.
This rate at which the two raw substances combine to produce the new substance is measured by what’s called the reaction rate.
The reaction rate, or the speed that water gets made, depends on all sorts of variables, like the concentrations of hydrogen and oxygen, the temperature, the pressure, and the presence of reactants, such as catalysts and accelerants.
You might have a chemical reaction that is ticking along nicely, and then you add an accelerant and BOOM … that reaction starts converting like crazy.
If we analogize this to sales, we get a basic sales equation that looks like this:
People + Offer = Sales (Revenue)
I know it’s basic, but humour me.
Want more sales, then add more people or more offers.
If you add more offers, but there’s not enough people, then you won’t get more sales.
If you add more people but there aren’t enough offers (e.g. inventory is low), you won’t get more sales.
And if you’ve got enough people and enough offers, and you want to increase the reaction rate to create more sales, then you can add a reactant, such as a catalyst or an accelerant.
Catalysts and accelerants speed up the reaction rate; and can be described and changing the slope or gradient of the reaction rate, making it ‘steeper’.
Andy is trying to sell a 6-week muscle building program on Instagram. He has 100 places available and has sold 2.
He has the people, and the offer, but the reaction rate (sales) is very low and almost non-existent.
He needs a reactant.
In this fictitious example, Andy also happens to be Arnold Schwarzenegger’s neighbour and Arnold decides to help Andy out by joining the program and being part of the group.
Andy posts this on Instagram, and the program sells out in 93 seconds.
Arnold was a reactant, and in this case, a catalyst.
Catalysts and Accelerants
A catalyst is something that speeds up a reaction but does not get used up in the process.
An accelerant is something that speeds up a reaction and does get used up in the process.
The reason Arnold is a catalyst, is because Arnold still exists after the sales are made. He doesn’t get used up in the process of speeding up the sales reaction.
If Andy discounted his offer by 50%, then this would be an accelerant, because it would speed up the reaction, but that 50% also gets burned up with every sale.
Influencing Elements, Micro-yeses, and Google’s “Messy Middle”
Instead of thinking about funnels, and whether they’re the right way up, or down … we can think about a sales equation and the speed of the reaction.
The things that speed up the reaction are all the influencing elements and persuasive techniques you’ve learned in every sales and marketing course, ever.
Discounts, scarcity, positioning, logic and reason, visual cues, heuristics, reducing friction, authority, novelty … they’re all in there.
Let’s start with Google’s research on the Messy Middle, and what they found that creates more sales.
The 6 Biases
- 1Heuristics: mental short cuts.
- 2Authority: expert endorsement.
- 3Social proof: when people like us are buying.
- 4The Power of Now: Instant downloads, same day delivery.
- 5Scarcity: Time limited, quantity limited, access limited.
- 6The Power of Free: Free shipping, buy one get one free.
None of these is the least bit surprising as ‘sales reactants’ and all can be derived from social influence research, behavioural economics, and consumer neuroscience studies … not to mention, common sense.
What is surprising is how many other sales reactants there are, in addition to these 6, and yet weren’t included in the report.
MECLABS and Micro-yeses
Flint McGlaughlin from MECLABS specifies 8 micro-yeses that people must agree with in order for the sale to occur. Each micro-yes moves them one step up through the inverted funnel, against gravity, and closer to the sale.
- 1Yes, I will pay attention.
- 2Yes, I will engage deeper.
- 3Yes, I understand.
- 4Yes, I believe.
- 5Yes, I want this now.
- 6Yes, I want this from you.
- 7Yes, I will trade.
- 8Yes, I will finish.
Instead of thinking about these in the inverted funnel visual, we can simply see these as stages of the sales equation; with all 8 providing the most ideal conditions for the sales reaction to take place.
There’s a lot of overlap in these micro-yeses with the 6 biases from Google’s messy middle.
→ ‘Yes, I will pay attention’ could be caused by heuristics and authority.
→ ‘Yes, I believe’ could be caused by social proof.
→ ‘Yes, I want this now’ and ‘Yes, I want this from you’ could both be caused by social proof, scarcity, the power of now and the power of free.
You get the gist of it.
I refer to each and all of the above, and many others, as ‘influencing elements” that you can include in your sales and marketing to influence the prospect to make a buying decision.
Influencing elements are the reactants (catalysts and accelerants) in our chemical equation analogy, or what we can call, the sales equation.
There are no features in a funnel model that include these reactants as part of the process, whereas they are naturally present in the analogy of the sales equation.
And this is why I much prefer this chemical equation analogy, compared to a funnel. It’s more accurate and it gets me to think ‘better’ about the making of sales.
Let me prove this to you further, with another natural feature of chemical equations, that analogise well to a sales situation.
Clean and Dirty Reactions
We all know that certain chemical reactions can provide toxic waste, e.g. the smoke coming out the back of a car, and the emissions that literally (and figuratively) ‘drove’ Elon Musk to develop Tesla.
The choice or type of reactants you use to speed up your chemical reaction, will impact how clean, or dirty (toxic) the by-products are.
Let’s go straight to the sales equation analogy.
If you use high-pressure sales tactics, you might speed up the sales reaction and make more revenue, but the unwanted toxic side effects are chargebacks, and reputation loss as people bad mouth your brand in their social media.
You might put a countdown timer on your page to signal the end of a limited time offer, but then people can still buy after the timer hits zero.
Fake scarcity can speed up the sales reaction but also damage the trustworthiness of the brand.
You might want to use social media ‘influencers’ as authorities to speed up the sales equation, but depending on the influencer, the whole reaction can explode in your face, e.g. the Dylan Mulvaney drama and Bud Light beer boycott.
The ‘Mulvaney’ reactant cost the parent company a nearly 30% loss in core profit during the second quarter of 2003 and a $400 million drop in revenue.
Putting the Model to Use
I find the reaction / equation model useful when thinking about the funnels I build or advise on.
(I just called them funnels … old habits die hard.)
For starters, the equation model doesn’t annoy me like the traditional ‘funnel’ model does 😜
Secondly, and more importantly, by being a more accurate analogy, it gets me to think more deeply about how I am setting up my sales reaction to take place.
When I consider the reactants that I can use to speed up my sales equation, I can think about:
A brief survey of the market will show you that many people and businesses are successfully selling inferior products or services that simply don’t work as promised.
This can be perplexing, and frustrating.
A funnel model doesn’t explain this.
A sales equation does.
As long as you have people and an offer, you can use reactants to drive that sales equation, and a poor or bad offer must rely heavily on those reactants.
In this case, the reaction only occurs in the presence of the reactants.
On the flip side, if you have people and a great offer, then that sales reaction will have a steep gradient and happen all on its own, without the need for reactants.
In this case, the reactants are like fuel to the already existing fire.
By using the sales equation, instead of the funnel, we can view our business, products, offers, and marketing more accurately.
Not everyone has a unique and differentiated offer. Not everyone can be innovative with product design. This doesn’t preclude them from making offers to people, but it does mean that they have to become expert in the use of reactants.
For those that have a unique product, or are prime movers in a new market, they don’t need to rely on expertise in reactants, and can simply make the offer to the people and watch the sales flow in.
It’s important to know this about your business and the market you’re in, so that you can evaluate the strength of your offer, and the use, type and number of reactants you need to create sales and meet your sales target.
Nic Lucas, PhD