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Inbound Marketing Blog

    A Crash Course in the Smarketing Funnel

    Posted by Bill Faeth

    Smarketing for Beginners

    It never ceases to amaze me how many modern marketers don't have a defined funnel where they can identify points of leverage and focus for their teams!

    The Marketing Funnel


    The Top Of the Funnel (or "TOFU") is normally considered a function of the traffic to the website - which is mostly true. The net number of website visitors that come to your site and have a chance to convert into a lead form the very top of the funnel. However, non-sales qualified leads (such as ebook downloads, webinar registrants, etc.) can also be considered part of the TOFU goals. For example, you may have a leads goal of 50,000 leads per month at the top of the funnel, but a different goal for sales qualified leads in the middle of the funnel. Organic visits (through SEO and blogging), social media, PPC, and offline advertising can drive more traffic while effective calls-to-action, landing pages, and non-transactional research phase downloadable offers (like ebooks) can help generate TOFU leads from that traffic. 


    MOFU (or the "Middle Of the FUnnel") refers to the ability to take TOFU leads and nurture them to be sales-accepted. Turning an ebook download into a marketing-qualified lead (MQL) - such as a free consultation conversion - which is significantly more likely to result in a sale for the sales rep can be accomplished through effective e-mail and social media nurturing. Although email and social media belong to all the other phases of the marketing funnel, the place in which they're most under-utilized is in MOFU. You can use email and social media automation to create a scalable method of nurturing leads, but remember that consumers don't self-segment into "TOFU Leads" and "MQLs". For them, the movement down the consumer buying cycle is a integrated and interrelated experience with various elements including your website, social engagement, e-mail communications, and other elements.


    An all-too-often ignored part of the funnel is the bottom. Marketing teams often assume that once a lead has been converted into a sales opportunity - or even a full-fledged customer - that their job is finished. However, since marketing teams typically have the time and data to control the MOFU tools such as e-mail automation and social media engagement, as well as the data analytics to know what types of content and conversions have a significant correlation to a lead moving into a different stage of the funnel, it makes sense for marketing to be involved in nurturing sales opportunities that are lost as well as being responsible in part for the customer LTV output.

    The Consumer Buying Cycle

    Although there are many different variations in the description and defined phases of the consumer buying cycle, all cycles look fairly similar. By exploring the buying cycle along with the marketing funnel, we can see how they interact.


    The awareness phase of the buying cycle is where the consumer acknowledges that they have a problem that needs solving. For example, I've moved to Nashville and I need a car now because Nashville doesn't have a great mass transit system to ferry me around. However, ground transportation is a very broad category with lots of possibilities!


    The research phase is where I aggregate and organize the possible solutions relating to my newfound ground transportation needs. If, for example, you sell floor mats for cars on your eCommerce website, you can still create content that targets me here since my journey will eventually bring me to a point where I'd be prospective customer for your floor mats. However, by the time I reach a phase of the buying cycle where I'm searching for terms like "floor mats for cars" you're going to find it difficult and expensive to compete for my attention against long-tail commodotized firms like Amazon. Capturing me here is analogous to generating a TOFU lead in the marketing funnel. I may or may not be the most qualified lead and it may be that only 1 out of every 20 me's actually buys, but it's much easier to compete for my attention.


    Once I've researched the potential issues and identified some possible solutions, I'll begin refining and comparing my options to each other. For example, I could take a taxi to work every morning - but that's super expensive. Jet packs always fuss up my hair, so those are out. A car would probably be the best solution, but there are many kinds! I care about gas mileage, so maybe a hybrid would be a good idea, but I'm not sure if I can stomach my friends mockery for driving a Nissan Leaf (this is the South, after all).

    As I continue to analyze and weigh what's important to me and gather all the facts, I refine my options to eliminate Jet Packs, taxis, and Bentley's and wind up at deciding on a Prius (yes, I actually did buy a Prius - the mockery is outweighed by the ridiculous gas savings).


    I want to buy a Prius. I know I want to buy a Prius. However, cars are notorious for having the MSRP much higher than what the dealer will settle for. Now that I know what I intend to buy, it's a question of deciding from whom I should buy it. There are many factors that enter here, such as my trust in the seller or timeline for delivery, but this phase is where I'm the most price sensitive.

    If you're focusing your marketing efforts on capturing consumers already in the intent phase of the buying cycle, you're going to end up competing against large firms with much lower acceptable profit margins. Also, even if you do win a customer from this phase, because you neglected building a value-added relationship based on research and guidance you'll wind up with a price sensitive customer who's less likely to remain loyal that one that you captured in a earlier phase and nurtured through.


    Once I actuall complete the purchase, you have a unique opportunity to leverage me for feedback into my buying cycle. Some of this may be survey-reported feedback, such as the Net Promoter Score for the brand or the sales associate, and some of it may be attribution-oriented feedback such as how I originally found your website (what PPC campaign, what time of day I clicked through on Twitter, what eBook I first downloaded, etc.). Also, this phase is where marketers have the opportunity to capitalize on the excitement and anticipation to upsell and cross sell materials.


    A customer who makes a single purchase from you isn't the one that brings the greatest value. If I buy a $25k car and Jasmine buys a $28k car, but I come back for maintenance and buy tons of accessories, retaining me actually brings you more value that the slightly higher initial sales price of Jasmine's car. Marketers should focus on using social media, e-mail, and other customer communication technologies to communicate educational and value-added content to the customer. By making the marketing communications value-oriented for the consumers, the marketer is given a plausible pretense for engaging the consumer in post-sale transactional nurturing when it's time for maintenance, or they have a new model, or there are cool related accessories, etc.

    Amplification & Advocacy

    A metric that is much more difficult to track is the impact of amplification and advocacy by consumers. I never cease to be amazed by the number of business owners who claim that there primary method of driving more business is "word of mouth", yet they don't track any metrics that are related to word of mouth (such as Net Promoter Score). If specific products have a low NPS, or specific marketing collateral, or specific sales tactics, then you may actually be hurting your brand.

    During the post-purchase phase, marketers should take advantage of the buyer's high and anticipation to ask them to share their experience in social media. However, marketers should remember that different buyer persona's have unique motivations for social sharing, and should align the value proposition and user interface accordingly. One buyer persona may respond to a blog article about awesome accessories, one may just need to be asked, and one might better respond if they get a discount or rebate for sharing, etc.

    Marketing Unit Economics

    The phases of the funnel are also the expressed component parts of the unit economics of a business equation. Analyzing the acceptable thresholds of your costs for visits, leads, and customers let's you know if focusing on one aspect of the funnel will drive greater overall enterprise value for your business. Keep in mind that each individual traffic source has it's own unit economics that you can calculate, as well as segmenting the economics by buyer persona.

    You can make these numbers much more complicated, but that's what writing books is for. For the purposes of this article, I'm only defining the basics of how to calculate this to illustrate the thought process.

    Cost Of Visit Acquisition (COVA)

    Fairly simple and straight forward, the COVA is the amount of money invested into a given channel divided by the number of visits. If you have a social media marketing manager who makes $30k/year, and your site gets 30k visits from social media per year, then your COVA from social media is $1/visit.

    Cost Of Lead Acquisition (COLA)

    The COLA is the cost per visit from each source divided by the conversion rate for that source. For example, if your visit-to-lead conversion rate from social media is 5%, and the cost per visit is $1, then your COLA from social media is $20.

    Cost Of Customer Acquisition (COCA)

    The COCA is, then, the COLA divided by the conversion rate for that source. If your lead-to-customer conversion rate is 10% (i.e. your sales reps close one out of every ten leads you send them from social media), then your overall COCA is $200. Not bad if you're selling airplanes, really bad if you're selling iPad covers.

    This illustrates how each part of the funnel's unit economics are influenced by the conversion rates.

    Allocating Resources

    When the above exercise is complete and your business has a beautiful, defined, measurable funnel for marketing dollar to customer value, the next step is to decide where to invest your resources. Even large, sophisticated marketing teams typically have to focus primarily on a single part of the funnel at a time. Most marketing teams are heavily focused on TOFU because it's one of the most easily trackable metrics - as well as the easiest for the marketing team to influence.

    However, if the top of the funnel is growing normally and performing effectively and you're managing your cost-of-visit-acquisition but your lead-to-customer rate is performing poorly, it might make sense to focus on improving the quality of leads by identifying common characteristics of leads that do close and leads that don't - rather than simply blaming the sales team.

    Of course, this is why CMO's exist - to make the hard choices of steering the direction of the marketing team's focus - so there's no set formula for deciding where the most leverage is in your marketing funnel. What matters most is the rational calculus of deciding where investing resources will have the greatest impact down your funnel. If, for example, your wonderful marketing team is generating 50,000 leads per month, it might not make sense to push everyone super aggressively to try and hit 55,000 leads per month when the lead-to-customer close rate is hovering at 1%. It may make more sense to segment and focus on how the marketing team can empower the sales team with collateral or better nurture leads to become sales ready to improve the efficiency of sales rep time.

    Remember, at the end of the day the purpose of the marketing organization is to drive measureable value for the sales team. We work for the sales team. Now, this doesn't mean that the VP of Sales is always right - just as the business axiom of the customer always being right isn't necessarily true. But the wonderful thing about inbound marketing is that we can precisely attribute lead conversions to specific marketing actions and types of content attracting specific personas. It's much easier to change our methodology and the leads that we're attracting than it is to change the entire sales organization if the sales organization seems to be unable to close specific types of leads and better at closing others.

    If all this sounds super confusing and overwhelming, you can request a free assessment and we'll walk you through how to define your funnel so you know what needs to be done:

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    Image credit: freedigitalphotos.net/scottchan

    Topics: Inbound Marketing