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Originally published on June 15th of 2012, this blog is one of the most popular blogs ever posted on our site. I believe that the reason this blog is so popular is because of its simplicity. At its essence, this blog is what inbound is all about. How you use your website to drive more leads and more sales. The best way to do this is to segment your visitors and provide them content appropriate for their buying stage. I hope you enjoy this "best of the blog" reprise.
Attracting attention to your company can be very unpredictable at times. Finding out how many of the people who converted from a prospect all the way to a lead can be even more unpredictable. However there are ways to estimate and set boundaries in order to achieve your sales goals. Through inbound marketing you can project how many deals you will close based on a set of statistics. The statistics come from the ratios of your contacts in the stages of the sales acquisition funnel.
First of all, what is the sales acquisition funnel? Picture a funnel with the wide end at the top and the narrow end at the bottom. This funnel depicts the stages of your contacts in the sale process. The better relationship you have with a contact the closer to the narrow end they will be.
Five Stages of the Sales Acquisition Funnel
- Suspects- Any company/person in your entire target market
- Prospects- An identifiable decision maker within a company in your target market
- Qualified Prospect- A decision maker whom you determine has the time need authority and money for your product or service.
- Developed Prospect- Is a decision maker with the time, need, authority and money for your product or service to whom you send a proposal, quote, or sample.
- Closed Prospect- A decision maker who has agreed to make a purchase and whose check has cleared the bank
The number of items in each category is relative to its placement in the funnel. For example, the suspects would be near the top so there should be the most of them. The Closed Prospects would most likely be the segment that has the least names since it is hardest to close deals.
Inbound marketing uses the funnel in one way or another to efficiently track and monitor where the contact is in the sale process. By segmenting the audience to which you are marketing you can create more efficient marketing plans that caters to each stage rather than spending all your efforts on one large audience. That would be costly and confusing to the contacts who are not prepared for moving to the next stage. After you have segmented the contacts, tracked their progress and received some business you can now project how many suspects you need in order to obtain a lead, or how many leads you need to close one deal. It’s all elementary statistics. Here are the steps to figure out how many prospects you need at each stage:
Taken from Andy Birol’s "The 5 Catalysts of 7- Figure Growth:
1. Lets say your average sale from a first time buyer is $1,000
2. Divide this number into your new customer sales goal to see how many first time buyers you must land. If your goal is $10,000 then you must close 10 new buyers.
3. Now we must move up the funnel to decide how many prospects you need at each step. If you are usually closing one buy for every 5 qualified prospects, this means you need at least 50 qualified prospects. Similarly if you need 50 suspects to produce one qualified prospect then you will need to identify 2,500 suspects.
By monitoring the ratio of conversions you can then focus on the factors that made them convert by asking questions such as:
- How did each one display interest?
- What were the earliest clues?
- How many times did you or your rep meet with him or her before closing the deal?
- What objections were raised, and how did you overcome them?
- What finally won over the customer?
Pay as much attention to detail as you can so that you can either focus and hone in on what you are good at when converting or you can find out what you are lacking in and try to improve it.
The Funnel can also be used to figure out how much each prospect is worth to you, what the prospect costs, and eventually what it costs to keep customers and how many champions you need and what you need to get them.
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