What's Killing the Traditional Sales Funnel?

by: IDC's Kathleen Schaub, VP CMO Advisory Service

B2B Buyer behavior is undergoing an extraordinary sea change triggered by Internet technology.  Tech marketing and sales teams haven't caught up.  They still rely on a 112-year-old sales funnel model. To remain a winner, you need to adapt your customer creation process to the way customers really buy.

The Internet tsunami had radically changed B2B Buyer behavior. 

Before the Internet, the B2B buyer making a complex decision had few sources of information. Vendors leveraged that knowledge gap. The sales person was the primary gateway to information the buyer needed to decide – a tremendously powerful position. Fast forward to today. The Internet and social media have triggered a turbulent change – the rich dialog has shifted on-line - and away from the sales person. 

As a result, the B2B Buyer in a complex sale is now an expert with very different behavior and expectations than in the past. 

• Buyers are constantly on-line. IDC research shows that IT buyers find online search and the vendor websites more valuable sources of buying information than face-to-face conversations.
• Many times, buyers know more than sales people. 55% of buyers think sales people are only somewhat prepared or not prepared for initial meetings.
• B2B buyers, who are life-long consumers, bring buying expertise to work and expect concierge service.

The Internet tsunami has massively changed IT Buyer behavior. Yet, we’ve seen surprisingly little change in the traditional marketing and sales funnel.

The Empowered Buyer is Killing the Traditional Sales Funnel 

The traditional sales funnel is 112 years-old and bears the unmistakable marks of the industrial-era. Buyers are treated like widgets that sellers manufacture into a product called a customer.

But today's empowered Buyer is far from a widget. The industrial-era funnel is out-of-touch with reality – and the results show up in poor funnel health. Conversion rates are unsustainable. It takes over 1000 targets to get one sale.  Time to convert is lengthening. The average time to create a large B2B tech customer has lengthened by 15% in the last year.  

Symptoms of a sick funnel show up inside tech vendor companies, too. Sales and marketing teams bicker over leads. Companies lack data to judge performance and predict the pipeline. Sales people don’t have the tools needed to sell, in spite of the fact that they have access to a tonnage of content. Prospects fall out of the pipeline and no one knows why.

A New Customer Creation Framework

To ensure that prospective buyers want to become customers, tech companies need a new framework that better aligns with the way buyers buy today.  This framework should maintain what is valuable about the industrial-era funnel. For example, the graduated stages of the traditional funnel are a practical tool for measuring progress. To meet the needs of the 21st century tech buyer, this new framework, which IDC calls the Customer Creation Framework (Figure 2), must advance from tradition in three important ways:

• Buyer-centric: Act like a Concierge Replace the manufacturing mind-set with a service orientation. Act like a concierge who delights guests with information and support services that guide them through their "Buyer's Journey". 

• Integrate Marketing and Sales Instead of the hand-off between marketing and sales silos, the IDC Customer Creation Framework calls for an orchestrated collaboration between the two functions. Since the new Buyer never, ever, goes off-line, marketing, as the owner of the company’s digital dialog, can never disengage, can never hand-off. The sales team cannot simply wait for the “good leads”. Sales people must be adaptable, prepared to serve the Buyer at whatever stage he happens to be at. Marketing must be more active enabling the sales conversation.

• Smart: Data-driven The entire customer creation process contains data that can be harvested to use as a feedback system. By analyzing this data, barriers and opportunities will be revealed. Companies can then use marketing and sales tactics like knobs and levers to tweak the behavior and outcomes of the pipeline. 

This is an exciting time for marketers and sellers. Changes in Buyer behavior enabled by the Internet may be killing the traditional sales funnel. However, these same changes are opening up opportunities. Companies that transform their Customer Creation process into a buyer-centric, data-driven, well-orchestrated pipeline will see success. Our job at IDC is to help you with that transformation.

More Good Advice From BtoB Technology Buyers to Increase Sales Productivity

Throughout each year, our Sales and CMO Advisory Practice teams collect valuable insight from BtoB technology buyers through focused studies, surveys, in-depth interviews and panel sessions. Why?  Because that is the source of some of the greatest ideas for improving our sales and marketing success. . . from small improvements to big, groundbreaking ideas. This past summer I reviewed the results of our 2011 Buyer Experience Study where we learned that buyers want to reduce their buying cycle by 40% and how to do that. 

I'd like to share some more recent insights from a buyer panel that we just held in October to refresh our connection with the buyer and their feedback about their interaction with our own sales teams and marketing outreach efforts.  The quotes represent what our CIO panelists had to say:

• Buyers still like to buy from trusted people: "Just as vendors will follow good buyers from account to account, we (buyers) will follow good sales reps from vendor to vendor."
• Just in case you've missed this piece of advice before. . . "Trusted advisors don't sell products, they solve problems."
• Marketers and inside sales teams, watch out for the quality of your lists!. . ""Apparently I got on a mailing list as someone that's investigating a cloud solution. I got at least 20 calls yesterday from cloud consultants I never heard of!"
• Sales team, watch your pricing strategies! . . .. "After going through an entire RFP selection process, we called the losing vendor with the bad news. They said they would match the winning bid, which meant they were willing to substantially cut fees in the face of competition instead of giving a real bid up-front. This did not please me!"
• What's your strategy for shifting accounts into different sales models across your organization? "A vendor switched our account rep midstream and moved us to an enterprise-class account. The result was a doubling of their price. One week later, after several phone calls to set the record straight, the price was back to the original model. Needless to say, we did not do business with them again."
• CIOs and IT are striving to become trusted advisors for their internal LOB customers; and as technology vendors we need to help them achieve this status: "There is growing awareness and ability for LOB to go directly to the cloud and implement low-cost solutions and then request integration, security services, and so on from us, the CIOs; and we need to better connect with our internal customers earlier on in the process in an intelligent way."
• And if you think that means you need to go around the CIO as part of your sales process, watch out!. . . . "As CIO I want to trust vendors not to go around us and sell directly to LOB and exacerbate the rogue IT problem."
• And finally. . Here's another reason why IDC research indicates that over 1/2 of sales reps show up to their first prospect visit unprepared: "We will take the time to educate account managers on our business but don't want to do the same for every product line rep that wants to sell." (refer to Bldg. the Intelligent Sales & Mktg. Org.)

Any of this sound familiar?  Have your own stories to share?  Please feel free to comment below, or contact our team directly to learn about strategic, operational and tactical solutions for these challenges. (mgerard@idc.com or izvagelsky@idc.com or gmurray@idc.com) Clients of IDC's Sales Advisory Service should contact us directly for additional details about the above meeting.