A simple framework to improve your existing funnel (📈 MTN #07)

Move The Needle Mar 28 13 minutes read

Table of contents

    In this edition

    • 📊 Paid Search vs Paid Social for SMB Advertising
    • 📈 Driving more growth our of your funnel
    • 🙌 Conversion, the forgotten marketing lever

    📊 Trends & Insights (from Benchmark Groups)

    Paid search vs paid social: which one is the right channel for your SMB?

    Most small and medium-sized businesses (SMBs) don’t have a huge budget for ads, so they’ve got to be selective about where they’ll use their ad spend and make big bets.

    And in general, there are two areas they’ll run these ads online:

    Search ads: getting in front of prospective buyers at the exact moment they’re searching for a solution.

    Social ads: reaching the right person and prompting awareness and consideration of your product or service. 

    If you subscribe to the whole “demand creation” vs “demand capture” distinction, here’s how you might view them through that lens:

    Search ads = demand capture (capturing existing intent for a product/service from someone who is in-market).

    Social ads = demand creation (creating demand for your business among an audience that is not in-market, or category aware).

    If you view it that way, it’s fairly easy to choose which of those two would best serve your needs.

    If you’re trying to build brand awareness, create demand and fill your pipeline 6-12 months from now, you might use social ads. And if you’re trying to convert existing prospective customers who are actively looking for a solution, you’d use search ads.

    But we wanted to go one step deeper, and find:

    • How SMBs think about the pros and cons of each
    • How much the average business spends on ads each month
    • And what specific channels they’re spending it on.

    The highlights

    Our Google Ads benchmarks for SMBs  (which sampled data from 2027 companies during Feb 2023) showed a median ad cost of $1,841.01, and median cost-per-click (CPC) of $1.16.

    According to the data from our Facebook Ads benchmark group for SMBs (sampling from 1334 sources), the median cost was $1,598.23, and the median CPC was $0.32. 

    From there, we surveyed 70 SMBs and found that:

    • Google Ads is by far the most utilized ads channel for SMBs
    • 98% of SMBs utilize some type of ad spend
    • 44% have < $5k/mo in spend, 30% spend over $9k/mo

    Read the full article and view all the data here.

    📈 Drive Predictable Performance (from Metrics & Chill)

    Drive growth by improving your existing marketing & sales funnel

    Chances are you have to hit some kind of growth goal in the next year. And broadly speaking, there are two ways to do that. 

    You can identify new opportunities for growth ( = put more people into your funnel), or you can improve the performance of your current marketing and sales funnel (improve conversion at various stages of your funnel).

    Finding new opportunities for growth is crucial, but it requires a significant investment of time, money, or both. New growth programs like SEO or paid ads can require months to spin up and measure. Organic content channels can take even longer.

    But almost everybody can improve their existing funnel in some way. And just to be clear, by “funnel”, I mean the entire journey your target customer takes from the moment they come into contact with your company, to the time they hand you money. 

    Optimizing your existing funnel offers a few benefits:

    It helps you get quick(er) wins. If you’re at an early-stage company, they probably have fairly aggressive growth goals (especially if they’re VC-backed). Improving an existing area of your funnel can be a great way to chalk up some quick wins in a short timeframe. 

    It helps you understand how your company grows. If you don’t have a good visualization of your funnel, it’s almost impossible for you to know how your company grows, or how what happens down-funnel impacts numbers up-funnel, and visa versa. If you increase traffic to the blog, what happens to conversion rates further down the funnel? If you niche down on your ICP (ideal customer profile), what effect does that have on your close rate? These are things a good marketing and sales funnel will help you understand.

    It helps you drive more predictable growth. If you don’t know how much performance you can expect at each stage of the funnel, or what channels are driving the best performance, it’s really hard to forecast growth. But if you have your funnel clearly mapped out, you can predict what kind of growth you might see if you increase a single percent at each stage.

    I recently got to talk with Adam Goyette, to learn the framework he uses to identify opportunities for improvement in your funnel, and further optimize it to drive more performance. Adam is the founder of Curdis, where he helps early-stage SaaS companies grow faster. He’s also led marketing at companies Help Scout and G2.

    I love his framework because it’s clear, simple, and practical. Almost any company can apply it, and use it to identify more opportunities for growth. 

    For the skimmers, here’s the 30,000-foot overview:

    • Measure your existing performance, and monitor it monthly
    • Identify the best-performing and worst-performing stages
    • Double down on the best-performing, and improve the worst-performing
    • Then experiment with simultaneously growing your funnel stages, as well as new marketing opportunities 

    For the rest of you, I’ll unpack each step below.

    Measure and monitor your performance.

    You might assume that every company has a good understanding of their funnel, but you’d be wrong. Adam says you’d be surprised by the number of SaaS companies he sees who aren’t visualizing the customer journey.

    Instead, most companies are monitoring different stages of their funnel with native reporting inside various tools. In other words, they’ll monitor website traffic in Google Analytics, sales pipeline in HubSpot, and revenue or churn in ProfitWell. But they don’t have a centralized place where they can view the performance of each stage of the funnel.

    So the first step is to build out a centralized funnel that highlights the performance of your company at each stage. If you’re doing it for the first time, most tools will provide you at least a few months of historic data which can serve as your starting point.

    Once you’ve built your centralized funnel, Adam says you should monitor it every month. Your monthly check-in might look something like this…

    Have team members who are responsible for owning the numbers at a particular stage update them (or ensure they’re accurate if they’re automatically pulled). Then host a meeting where you review each stage, and review which numbers improved, which dropped, and why those changes took place. 

    For example, you might see that traffic from paid ads dropped significantly, and discover that it’s due to your paid team dropping a cluster of ineffective keywords.

    Or you might find that your churn rate increased, and find that one of your new marketing channels is driving more “bad-fit” customers to sign up, who churn at a higher rate.

    By the end of this first phase, you’ll have a much better grasp of how your company is performing at each stage. You’ll also have a clearer understanding of how each step of the funnel impacts others.

    Macro or micro funnels? Both.

    When you’re building your funnel, how detailed should you get? Adam advises two views: macro, and micro. 

    The macro view should display the primary stages a customer advances through, and the performance of each stage. This view is best for sharing the most important information with shareholders, and investors, or at an all-hands meeting. 

    The micro view should include every single step you can measure that a prospect takes on their journey to becoming a customer. The purpose here is to provide your team with a complete view how your company is performing at every stage.

    This includes:

    • How much traffic you’re getting, and where it’s coming from
    • What those visitors do when they’re on the site
    • Where those visitors frequently leave the site
    • The conversion rates of the pages where you’re driving them to take a specific action
    • What they do after signing up, or booking a demo
    • How many actually show up to the demo, turn into opportunities, and close
    • Etc.

    Identify the best and worst-performing stages.

    Once the funnel is built, Adam says your eyes should go to the best and worst-performing areas. By honing in here, you’re able to identify the best opportunities for quick wins. 

    But how do you know what’s “good” or “bad”? In other words, if your homepage conversion is 2.3%, your close rates are 13%, or your website traffic is 3,440 sessions/month, how do you know what’s lower or higher than average?

    Adam says you can use a combination of factors: industry benchmarks (like these), feedback from peers, and past experience. Using these three, most experienced marketing leaders can easily pick out stages that are especially high or low performing.

    “You kinda have to understand your funnel a little bit, but if you’re seeing, ‘only 5% of our leads that we’re passing over are actually converting into an opportunity.’ That’s like a big red flag, right? What’s happening then? Is it a lead quality issue? Is it something in the qualification process with the BDR team? Is it in the BDR to AE handoff?”

    Double down on the best, and improve the worst.

    Once you’ve identified the best and worst-performing stages of the funnel, you’ll want to improve them further.

    Your goal is to get the worst-performing stage up to an average level of performance. And then you want to double down on the stage that is performing best, to drive more growth out of it until you hit a plateau. For example, if you’ve invested heavily in SEO and your best performance is monthly organic sessions to the site, you should double down on that until you see that growth level out.

    Continue optimizing your funnel, while testing new channels for growth.

    At this point, you’ve established your funnel and are monitoring it with your team every month. You found the best-performing stage and doubled down on it to find a quick win, and you focused on improving a stage that was performing below average for your industry. 

    At this point, Adam recommends testing new opportunities for growth (new marketing channels, growth experiments, etc.) for growth, while simultaneously working to continue improving other areas of your funnel.

    In other words, once the best-performing stage is maxed out, and the worst-performing stage is brought up to average, you can go through the rest of the funnel looking for other stages you can squeeze more growth out of.

    To help you identify which areas have the best opportunity, he offered a few tips:

    Be curious.

    Fundamentally, marketing leaders should be curious. You should be asking, “why are these numbers what they are? What’s impacting them further up the funnel? What’s contributing to this performance? And what steps could we take to improve it?”

    When you ask questions and probe, you’re bound to unearth some opportunities. For example, Adam asked a client where their paid ads were running, and found they were running ads all over the world since they served customers internationally. So Adam looked closer at the numbers and noticed that while the conversion rates were about the same in each country, the annual contract value (ACV) was almost double for US customers. So they ran an experiment where they doubled ad-spend and only displayed the ads in the US. As a result, they saw a significant increase in pipeline.

    Project the potential reward.

    When you’re evaluating a specific stage of the funnel, ask “what would be the best case scenario if we improved this?” to help you determine if the juice is worth the squeeze. 

    If you could take your homepage conversion from 2% to 3%, what would the outcome be in terms of deals, signups, or revenue? If it’s significant, consider doing it. If it wouldn’t be that impactful, move along to a different stage.

    Look for obvious areas of improvement, where basic best practices are missing.

    Adam says that a seasoned marketer, you can usually quickly look at something and see if there’s more opportunity to improve it. 

    For example, you might notice that your paid ad campaigns have really poor creative. Or your homepage is missing some obvious language or content visitors would expect to see. Or a form might have 7 fields when it only needs 3.

    Organize the opportunities by reward and difficulty.

    To help you run optimization experiments more quantitatively and effectively, Adam recommends organizing and prioritizing them by potential reward and difficulty. 

    You can list each opportunity, and assign it two numbers: a “growth potential” score, and an “effort required” score. Then you can prioritize the opportunities that have the biggest growth potential and require the least amount of work.

    Driving more predictable growth, over time.

    After you spend enough time on this, you’ll start to get a much better idea of how all the stages impact one another. You’ll learn what channels are most effective, and you’ll drive holistic growth at each stage of the funnel. As a result, you’ll be able to more accurately forecast growth or understand what kind of revenue increases you can expect from a specific investment.

    🙌 Community Feature (on LinkedIn)

    The forgotten marketing lever: conversion.

    In my conversation with Adam, he unpacked the value of finding existing growth opportunities in your marketing and sales funnel. And often, that means improving the conversion rate at various stages.

    Emily Kramer (Co-Founder of MKT1) had a great post on this:

    “There’s 1 marketing lever that’s often forgotten.

    🍊That lever is conversion—and fixing conversion is often the lowest hanging fruit. Improve conversion and you can increase revenue by 2x to 3x.

    To increase revenue, you have 3 main levers:

    1. Traffic: Drive more traffic to your website 🚘
    2. Price: Increase your contract value, or reduce discounts 💰
    3. Conversion: Get more visitors to signup or book a sales meeting 🏁

    Too often teams just focus on the 1st lever: driving more traffic. But fixing conversion is typically a lot cheaper than driving more people and companies into the top of the funnel.

    Here are a couple of scenarios to illustrate why you need to get going on fixing conversion, especially given the current state of slashed marketing budgets…”

    Read the full post here.

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