2+2+1+.5 = 50!
Marketing Funnel Math!
How small improvements in your marketing performance can add up to a huge improvement in your bottom line.
If you’re like a lot of business owners, you are probably very aware of the importance of a strong sales funnel, and are keenly interested in moving prospects through your funnel as efficiently and effectively as possible.
Today we are going to take a closer look at your Marketing Funnel to review;
- How your Audience evolves into Prospects, Leads and Customers
- The digital tools and touch-points that will move them along that journey
- How small improvements along that journey can translate to big gains to your bottom line.
First, let’s take a look at what we mean by a Marketing Funnel. This is the journey that customers take as they evolve from:
- Anonymous Audience members who broadly fit your target market, to;
- Prospects, who have displayed an interest in your products or services, then to;
- Qualified Leads, who demonstrate purchase intent, and finally to;
- Paying Customers or Clients, who provide Sales Revenue to your business.
Your Audience is the very large group of people who might come in contact with your brand, your company or your messaging.
They become your Prospects once they Engage with your Brand or Messaging, and visit your website, interact with an ad, or send you a contact.
A Prospect graduates to a Lead by actively reaching out for a quote, submitting a contact form, or otherwise indicating an intent to purchase your product or service. And the proportion of prospects that turn into leads is known your Conversion Rate.
Leads become Customers based upon the rate at which you Close your estimates or proposals,
And your average Deal Size is calculated by dividing your annual Revenue by the total number of Customers or Projects you undertake.
These four touch-points;
- Engagement Rate,
- Conversion Rate,
- Close Rate, and
- Deal Size
… have an enormous impact on the performance of your Marketing Funnel.
Small improvements to these touch-points can ladder up to make huge impacts to your bottom line.
Let’s take a look to see how. Let’s review a Typical Scenario, using Acme Contracting as our test case.
Acme has revenue of $ 3 million dollars a year, generated from 60 projects, which means their average Deal Size is $ 50 thousand.
That’s generated from 300 proposals, estimates, and serious inquiries, which means Acme has a close rate of 20%. Not great, but not bad, given the number of tire-kickers in their business.
Between website visits, social followers, email contacts, and other people who directly interact with their brand, Acme has about 6,000 total prospects in their universe, so they are converting them to leads at a rate of 5%.
And Acme has tried out a few online ads in the past, and they had achieved an engagement rate of 2%, which is actually pretty good. So we are estimating their baseline total audience that they are currently reaching at 300 thousand people.
But let’s take a look at look at what happens when we make small improvements to the performance on our rates of Engagement, Conversion, Closing, and to our Deal Size.
They make a big impact on your business performance.
… These are not wildly ambitious, difficult changes. They are small, incremental, manageable improvements to your 4 key performance touch-points. But leverage them together, and they ladder up to a Huge impact on our Bottom Line.
These small improvements can translate to big results.
Even if we focus on just one performance metric, Conversion Rate, and we increase it from 5 to 6%
That translates to a 20% increase in your revenue.
Combine that with a small 2% improvement in your Close rate, and that compounds to a one-third increase in revenue.
And all these improvements have been based on the assumption that we are working with your existing audience.
It takes some effort to fine tune all these moving parts, and get your marketing funnel working properly. But once it is operating smoothly and efficiently, then you can start to prime the pump by expanding your audience with ads and promotions.
Then you can really start to ramp up your funnel and fuel your business growth.
So, how do we improve these touch-point performance metrics?
How do we increase our Engagement, Conversion, Close Rates and Deal Size?
Check out our follow up blog posts to find out.
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