Innovate the Funnel

A startup’s job is to learn, not execute. As you learn your market, new best practices reveal themselves, and they may or may not jibe with what the experts say.

One way to think this through at the beginning of your startup endeavor is to forget marketing completely. Think only of learning how to sell.

Recall the Concierge method of viability testing. Practitioners deliver their value proposition by hand, before building any product, in order to see if anyone cares. They then automate the parts of delivering that value that can be automated, continuously testing that the product delivers necessary value.

Use the Concierge method to learn how to sell, too.

Again, forget about the Internet for the moment. Sell your product in person. When Eric Ries and the IMVU team brought users in to test an early version of their product, they learned much more than that their product was all wrong. When a teenage girl refused to share IMVU with friends, because in her words “What if this isn’t cool?” they learned a powerful marketing message. Growth through referrals was going to be impossible if the product wasn’t cool. Cool, as ambiguous as that may seem, was critical to closing the deal.²

Selling in person instructs you about what is needed to close a deal, what objections must be overcome. What you do and say evokes a response that provides you indications about whether you’re on the right track and what emotional state you need to evoke next.

The parts of the selling process you can automate become marketing.

As we discussed previously, customers go through a series of stages when acquiring any product. They must become:

• Aware—Almost always, people are aware of the product they are purchasing. (It’s often said that in the case of free products, the purchaser is actually the product and is blissfully unaware of the fact. For this discussion, however, Facebook [a free Internet application] is the product and not the user whose activity is sold to advertisers.)

• Intrigued—The person who becomes a customer must become intrigued with the product before moving down the funnel. Again, we’re sure you can find exceptions, but the vast majority of products must appeal to the customer in some way. Customers are intrigued when they think—beyond being superficially aware—the product might be the right thing for them.

• Trusting—Fulfilling a need is often insufficient, however, unless the customer feels they can trust the product and the company delivering the product.

• Convinced—The final step that convinces the customer to buy; the promised value exceeds the price + risk, where risk might be risk of change, risk of being wrong, risk of being uncool, and so on.

After the customer prospect is convinced the product is right vis-à-vis the price and the company is trustworthy, the customer buys, right? Well, not exactly. There’s a secret substep we can zoom in on where the “Magic Happens.”

Magic Happens is the moment when rationality exits the equation and emotion takes over. Or vice versa. It’s this ineffable something that gets the customer to pull the credit card from the wallet or put the signature on the purchase order.

We contemplated calling that step “Euphoria,” which is a condition in which a person experiences intense feelings of well-being, elation, happiness, ecstasy, excitement, and joy, but that isn’t exactly right.

We were thinking more accurately, perhaps, the moment should be called “Delusional,” but that isn’t exactly right either. Customers might feel a range of emotions from excitement to resignation, the latter arising from a leap of faith that they made the right purchase or the realization that they are exposing their private lives to the Internet.

(Creating an account on an Internet site is as much a leap of faith as a purchase order is to others.)

This isn’t a trivial matter, because the next thing the customer will do is try out the product. How they feel about the product before using it will affect their feeling about the product after using it. This post-purchase stage might be called PPTS, post-purchase trauma syndrome, but we’ll handle this outside the conversion funnel. (See the section titled “Hopeful,” later in this chapter.)

The titles and descriptions of these phases are not set in stone. Come up with your own, if you’d like, but they serve well as a stab at describing what motivates people to become customers. There are many instances, for example, where one might use a product regularly and feel loyalty, but are not necessarily passionate. Passion is just a label. What’s important perhaps is “loyalty.” Exceptions like these abound, and, frankly, you might have a leg up on your competition if you can figure out the exception to the rule and act on it.

The point of the exercise is that as a business, you must do stuff to help people become customers. The stuff you do varies by product, market segment, and business model. What you do is limited only by your creativity and, of course, your values.

Perhaps an activity you perform induces the customer to skip a state, as with impulse buys near the cash register. Activities sometimes manipulate people through the various stages in ways that are ethically dubious. The line is thinly drawn. A business that thrives on one transaction per customer might resort to any means necessary to convince a person to buy, uncaring whether they ever buy again. That negative experiences move at the speed of the Internet makes such tactics more dangerous, but appealing to fears and emotions is a proven sales method. They are age-old tactics.

Our purpose here is to not stand in judgment, but for the sake of our discussion and with the hope that providing value is not a cyclical trend but, rather, a movement forward, we write with the belief that the purpose of marketing and sales is in delivering a known value to a known customer. All activities, then, are for the purpose of making customers aware of, demonstrating the existence of, and building operations in support of this value. There is a laundry list of activities that might work at each emotional stage. For new businesses with no customers, your job is to learn which activities work best for your product and target market segment. For businesses with existing customers, your job is to align the best activities with specific market segments. For big businesses seeking to disruptively innovate, your job is to create a group to act like a new business with no customers.

Just as developing a product requires a cross-functional team to ensure you are building features people need, experimenting and executing on your marketing funnel might benefit from a cross-functional team to eliminate conversion bottlenecks. As more sales and marketing functions happen online, a team that includes design, product marketing, engineering, sales, and perhaps other resources in order to create experiments, interact with customers, and measure the results is a fast, efficient way of discovering what works.

How can you learn what the best activities are? Dive into your proposed funnel, create hypotheses, and test them.

Staring into the wide mouth that is the top of your funnel is like staring into the abyss. There are an infinite number of activities to make people aware of your product, for instance. But you can’t test infinity. Having numerous activities to contemplate makes it difficult to learn the best and most profitable activities.

By flipping the funnel, you are forced to think through one buying cycle completely for one market segment. Related activities for each step become rather self-evident and act to flesh out your marketing and sales plan and provide additional aspects to test. As we did with the value-stream mapping exercise in Chapter 4, we imagine the path that one persona—one market segment—uses to traverse through the stages.

E-Commerce Example

On an e-commerce shopping site, you can easily measure what state the customer is in using off-the-shelf analytical tools. At each customer state, the customer needs something, in order to move to the next state. You, the site owner, have a myriad of things you can do to provide the need. It’s pretty easy to imagine, for instance, the different tactics one might use to invoke trust or to up-sell. As a matter of fact, for most e-commerce sites, where both the customer and the product are known, e-commerce best practices can probably be used to optimize sales. (Best practices, of course, includes usability testing and split-testing.)

If you’re doing anything radically different, the amount and depth of experimentation required increases. It’s important to not allow best practices to interfere with creativity.

Consider the state of social shopping. Although still in its nascent stage, the extent to which social media can be used to enhance online shopping and increase conversions is a giant lab right now. You can’t predict exactly how new things might result in big conversion improvements.

Consider also social entrepreneurship. How you acquire and measure trust is a different beast compared to selling standard products. The customer must believe not only that a green product will bring value to their lives, but also that the product is truly green.

B2B Software-as-a-Service (SaaS) Example

Enterprise Software (or Hardware) Example