BK: That argument could be fought from the other side, you should talk to SAS Institute where they have hundreds of Analytic PhD’s on staffs that are building very robust predictive models. The question is, “How many commercial companies are sophisticated enough to take advantage of that technology.”
In traditional modeling, companies continue to struggle with defining appropriate and action-able conversion funnels. Marketing is typically concerned with getting more visitors to the site and at the top of the funnel. And Marketing tends to be satisfied if somewhere between 2% and 4% of this top-of-funnel visitors make it all the way through since that meets with “industry standards.”
But who in the organization is focused on increasing that conversion percentage? It seems to me it would be more cost effective and more brand desirable to get a larger percentage rather than focusing on drawing more visitors in. Particularly in an environment of great noise, over lapping options, and fickle consumer behavior!
MM: Yes! The Miller and Heiman folks that came out with that canon of sales management strategic selling that came out in the ’80s—Miller recently wrote an article in Brand Week in which he describes the sales funnel. You call it the conversion funnel, which I guess is a little further down.
He said that most companies—especially younger companies—have these wicked peaks and valleys in their monthly revenue, as a function of spending too much time in the bottom third of the funnel—which he characterized as “closing.” In his model, he simply trisected it into prospecting, nurturing and then closing.
He said it’s very common for a company to spend most of its time-resource-money on the closing function – which leads to these wicked swings in revenue on a month-to-month basis. He said that ideally, you want to have an equal distribution of time, money and resources.
He was advocating—to contradict you a bit—to put more people into the funnel so that some number of them will bust the rate and zip right down to the transaction, because they’re so desperate to do something.
I think to your point Bob, most companies do a mediocre-at-best job of nurturing deals already in their pipeline.
BK: I would fully agree with you.
MM: I concur that for incremental investments, it would seem to me that if you could reduce your attrition rate by just 10%, you could in effect double a conversion rate.
MM: In terms of gain-for-pain, it seems to me that getting the easily implemented solutions done first would probably result in a very noticeable and tangible return on investment.