If you’ve been in marketing for a while, you know funnels inside and out. Funnels are the mechanisms that convert leads into customers.
Over the past few years, the relevancy of the funnel has slowly died out, leaving room for a new, digitally-informed strategy to take its place.
Enter the flywheel.
If you have never heard of the marketing flywheel before, keep reading. Here we discuss:
- The Marketing Funnel (and why it may no longer be relevant)
- The Marketing Flywheel (and what it promises for the future)
- The Differences Between Funnel and Flywheel
- Flywheels in Action
- How to Shift to the Flywheel
The Marketing Funnel: Reliable, Trusted…Outdated?
The funnel model is as classic as a tool can get in marketing. This represents the stages a prospective customer goes through on their buyer journey. The stages are usually broken down into:
Some add loyalty and advocacy at the bottom of this funnel. Others add a note like “rinse and repeat.”
The top of the funnel is wide. Many people can become aware of your product, but not all will become interested. The funnel gets narrower as the leads pass through the different stages. Only a small percentage of the initial prospects will actually take the desired action, usually a purchase.
With this in mind, businesses have put a great deal of effort into filling the funnel with more leads. This process of “widening the funnel” finds more potential customers, eventually leading to more sales. This allows marketers leeway to spin their awareness campaigns as a way of generating actual sales.
The funnel is helpful in visualizing the customer journey in specific steps. Within each stage, the company can assign specific actions. The awareness stage may contain actions like leads visiting the website or filling out a form. Watching tutorial videos or reading the blog also fall into this category. In the next stage, they might take a stab at a free trial. After their trial, they might become paying customers.
Because the specific actions are listed, marketers can see where people stop on their journey. They can calculate the number of leads that enter the top of their funnel, the percentage of leads that make it to the next stage, and so on to purchase. Then marketers can decide how many more new leads need to be added to the top of the funnel in order to meet their goals at the bottom of the funnel. This is typically done based on expected conversion rates. If the dropoff at stages in the middle seems high, they can also decide to make improvements to middle-of-the-funnel content.
For example, this could be testing new sales enablement materials, or hosting a how-to webinar. In summary, the funnel model predicts that fewer people will work their way through each step. A certain number will be generally interested in your brand, a smaller number will be interested in your product specifically. Even fewer will actually purchase the product.
With funnel-vision, the way to get a few more people to buy your product is to get many more people into your funnel at the awareness stage. This is done with the knowledge that they won’t all be a fit in the end.
Recently, there has been a debate about whether the funnel is an adequate display of the customer journey in a changing marketplace. Does it really represent how buyers make decisions, or even how they consume marketing content? Is the funnel helping marketers think strategically and realistically about how to grow their businesses? The idea of the flywheel is an alternative to the funnel designed to address these doubts.
What is a Marketing Flywheel?
At the B2B Marketing Lab’s Grow with Inbound 2019 event, CEO Bob Dearsley chatted with HubSpot’s CEO and co-founder, Brian Halligan. The conversation was about replacing the old Marketing Funnel with the flywheel model. Halligan discusses how startups he refers to as “experience disruptors” have infiltrated the marketplace by creating a “new experience” for their customers. The Marketing Flywheel is a tool to help businesses do just that.
As a marketer, you might have escaped physics class in college so you might not know what a flywheel is.
A mechanical flywheel is a heavy type of wheel that efficiently stores energy and can be used to increase a machine’s momentum. Flywheels are used in trains, buses, and cars. Flywheels create continuous power in engines. Power, momentum, force, friction, stored energy; these are the words associated with a flywheel.
Much like an engine needs a flywheel to store energy, marketers need a marketing flywheel to garner the power of loyal customers. The flywheel is similar to the funnel in that it represents the customer journey in three main stages. Hubspot coins the flywheel stages as:
At the center of the wheel is the customer base. The rotation of the wheel is the growth of your business. Happy customers are the energy that fuels the growth. In this model, sales are less an afterthought or result of promotion, but part of a cohesive system. This marketing flywheel is inspired by Amazon’s flywheel business model, also known as Bezos’ Virtuous Cycle.
In a flywheel, growth and customers are the center of every other process. Everything literally revolves around customer experience. Loyal customers are the energy that fuels all growth. Customers never fall out of the loop. They are not lost energy.
The flywheel spinning relies on harmony between the three forces. This does keep some components of traditional sales matra. The idea of repeat sales (e.g. renewals, cross-sells, and up-sells) is not new. Marketers and sales leaders know that existing customers are often more predictable sources of revenue growth than net new customers
What makes a flywheel slow down? Friction. Friction points are processes that cause the customer inconvenience and put a damper on their experience.
As a result of that keynote presentation, marketers are now debating whether the funnel is truly antiquated. Some think the flywheel is just a marketing ploy. Other marketers think that there is room for both the funnel and the flywheel.
We will continue discussing why Hubspot has decided to “retire” their funnel and what the fundamental differences are between the funnel and the flywheel. After reading, you can decide if the funnel is outdated or if you want to stay the course of traditional marketing.
Why is the Funnel Being Retired?
Why do we no longer use CD’s, VHS or probably DVD’s, or perhaps even digital cameras anymore? Because times have changed. Technology has progressed and it has affected every aspect of our lives. One of the most critical changes of our time is how we, as customers, become aware of brands. We are more conscious of how we gather information about products and our ability to share our opinion about products to the world.
In the last decade, the availability of online reviews has grown tremendously. Alongside online reviews, there is a growing distrust of marketers and salespeople. This combination creates an environment not suitable for a funnel approach.
The old efforts that would be poured into “widening the funnel” do not work anymore. People become aware of products through word of mouth and online recommendations. The consideration stage is vastly different too. Customers are more likely to do independent research before talking to a salesperson. Marketers don’t have control over, or even visibility into, every touchpoint that influences a buyer’s awareness, consideration, or decision to purchase.
Where does your strongest marketing come from today? Your customers.
In a traditional funnel, the customers are an output. Once they leave the funnel, they are theoretically forgotten about. There might be an arrow indicating that the process should repeat with customer retention programs, but in reality, physical funnels simply don’t have a tube bringing water back to the top of the funnel.
The funnel is an ineffective analogy for customer-centric businesses. With a funnel, there is no room for repeat customers or customer advocacy.
Advertisers had been saying the funnel is dead for several years before Halligan’s announcement. They just did not have an attractive replacement analogy. With Halligan’s idea of the flywheel approach, marketers are comparing the two to see how they can transform their marketing framework.
Flywheel vs Funnel, What’s the Difference?
A flywheel and a funnel are very different designs. We will discuss some of the major inherent differences between the two mindsets:
Customers as an Output vs Input
With a funnel, customers are an output. They are lost energy. Many come in, many filter out, and only a few come out of the funnel. The few customers who took action are not part of the process of gaining new customers. Customer Success and Support teams handle interactions with customers after they buy. They’re not the concern of the Marketing team.
With a flywheel, customers are the most important input. They are stored energy that drives growth. They’re absolutely the concern of the Marketing team – you could even say they’re the marketing team’s secret weapon. Customer energy is what drives more people to become aware of favorite brands. With this, they then continue on the cycle through engagement and delight.
This relates well to the ideas of inbound and outbound marketing. Flywheel sales use a more attraction-based, energy-efficient approach. The buying journey is led by the customer. An inbound marketing approach stresses that customer relationships and brand identity are key. These are core tenets that help make the flywheel spin. If you are interested in this distinction, check out one of our blog posts on inbound versus outbound marketing.
End-Point vs Ongoing
With a funnel process, at the end of each quarter, a marketing team feels no momentum and has to start from scratch the following quarter. In other words, the success of driving new business last quarter doesn’t help reach this quarter’s lead goals.
With the flywheel, marketers recognize they already have assets with inbound marketing, SEO, social media engagement, and loyal customers. These assets are stored energy that keeps growth moving.
Awareness vs Delight
With a funnel, marketers need to focus on widening the funnel. This means that large amounts of investment is put into driving more people to become aware of their product and to acquire customers.
With a funnel, emphasis is placed on the delight stage. Halligan says this is where the biggest return on your investment is today. Delight consists of great customer support, quality policy, enjoyable ads, and all things that bring joy to the customers. Delight brings customers back for repeat purchases and gets them talking about your brand.
Flywheels in Action
Flywheels are a recent idea but companies are latching on. We are going to take a look at some actions that marketers can take at each of the three stages.
This is where customers are drawn to your brand. This happens through creating engaging and useful content for the right people. Some practical example actions include:
- Traditional means (word of mouth, events, paid ads)
- Review Sites
- Customer testimonials
- Inbound marketing, with a focus on creating content that will interest your ideal customer profile (ICP), rather than broad clickbaity content
Engagement happens through creating meaningful relationships with clients. Businesses need to understand clients, their motivations, needs, and pain points. When companies truly empathize with clients, they can provide customers with solutions that satisfy. Some examples include:
- Blog with helpful how-to resources
- Social Media polls and sharing articles your customers could really benefit from reading
- Interactive content
- Chat Boxes, text message follow-up, call center, etc.
Delight is bringing joy to your customers along their journey. It involves giving them an impactful experience that they will want to promote your brand. They will be the customer advocates who bring more into the flywheel. Examples include
- Return policies
- Free shipping and other shipping options
- Reward programs
- Regular check-ins
- High-quality customer support
- Recognizing and featuring their successes – showcasing them to the rest of the world
Negative Force to the Flywheel: Friction
Through all these stages, it is important to identify friction. Friction is what makes the customer momentum slow down. This can be misalignment between departments, hiccups in the pipeline, or whatever is killing your customers’ joy.
Make sure all silos are on the same page with how customers will be supported, reduce handoffs, and take action to reduce customer churn. Above all else, make sure you’re actively listening for customer feedback, so that you can identify friction wherever it may be.
How to Shift to the Flywheel
Shifting to a flywheel model can seem overwhelming. The good news is that most companies already have what they need to create a flywheel. Preexisting funnels can lay the groundwork for future flywheels.
Funnels typically already have the metrics your company tracks. Companies can shift those to the flywheel stages. While shifting metrics, set aside time to consider how more force can be applied to the delight stage of your company.
Are there resources you can reallocate from the top of the traditional funnel to the delight stage instead? For example, instead of creating two broad industry trends listicles per month, could you create two articles that would help (or even just amuse) existing customers instead? Rather than seeking outside validation, make them feel like insiders.
After metrics are applied to your flywheel, identify areas of friction. This can be areas where customers and your staff experience miscommunication. Internal friction, like silos and disorganization, can affect the customer experience as well. Create a plan to reduce friction as much as possible.
Hubspot offers homework templates and tutorials on shifting your marketing model to the flywheel. These helpful resources can get your team on the right track. Below you will find a video from Hubspot on how to transition between the two.
Is This the Final Farewell to the Funnel?
Change can be difficult when overhauling a tool so integral to a marketing team. Funnels have served their purposes for a long time. Perhaps, they still do. Although the flywheel model has shaken up the online marketing industry, we have not seen further evolutions of it since the flywheel’s introduction in 2018. It appears that the majority of the industry is still in the process of transitioning to this new way of thinking.
Whether you prefer a more traditional framework or the new way of doing things, what matters is that you are tracking where your customers are coming from, what they are experiencing, and reducing all force that comes against your growth.
Want to share your experiences using customers to drive growth at your business? Get in touch with us at firstname.lastname@example.org – we’d love to hear your story.