I’m currently reading a great marketing book called UnMarketing, which is a great general read for any web marketers out there, but one thing in particular I found interesting was this graphic:
It’s what they call the Hierarchy of Buying.
Basically it shows people customers are more likely to buy from starting from the top down. So at the top customers are most likely to buy a new product from a business they already use and love and least likely to buy from someone cold-calling them out of the blue.
It also indicates the competition at each level, so at the top are you existing customers and there’s really little competition if they’re already satisfied. As you go down the pyramid the competition gets more fierce and thus your conversion rates drop as customers are shopping around.
It really got me thinking about where most of us online marketers (me in particular) spend their energy. I spend most of my energy hunting out brand new prospects through display, PPC, SEO etc. But obviously the conversion rate for the leads can be low as they have no existing relationship with the business. Is 1 lead through a referral actually equal to 10 leads through search? I haven’t really spent any time tracking that in the past but it’s an interesting question and my gut feeling is yes, the referral lead is actually probably 10 times more likely to convert to a sale.
Where are you spending your energy marketing currently and are you taking on unnecessary competition rather than focusing on prospects with a higher chance of converting?
Very interesting. I see this as where Freemium and Free Trials can play an important part in the marketing mix. It is a way of accelerating the prospect from the bottom to the top of the barrel by removing any barrier to signing up.
We have had a lot of success with this at Shoeboxed. Those prospects that actually participate in our free trial (as opposed to just signing up) become satisfied customers relatively quickly and conversion to paid plans is near 100%. Those who sign up but don’t participate get a phone call from our sales team, but it isn’t a cold call – because they already know who we are.
It always amazes me how many businesses don’t follow up quickly with enquiries. A few years back I was looking into a CRM system for a business I was working with, and completed enquiry forms on 4-5 vendor websites. Only 1 company actually followed up with me … guess who got the business?
MailChimp have a great blog of their experience with the Freemium model, and how it has propelled their business – http://blog.mailchimp.com/going-freemium-one-year-later/
– Simon
Totally agree on accelerating people up the pyramid, great read there from mailchimp. I’m wondering if there should/could also be separate funnels for ie search leads and referral leads. Can you spend more time and resourcing on leads that are more likely to convert. Should sales calls be prioritised based on this?
There should absolutely be separate funnels, or at least the ability to measure within the funnel by lead source. A good CRM helps in being able to measure this against calls made and conversion rates, and then integrating with your app and analytics tool. Also check out http://www.kissmetrics.com which makes this analytics part of the process ridiculously easy.
Would love to find out more about shoeboxed sometime Simon.
Have a new found love of kissmetrics, actually my last post was about it 🙂
http://www.pollenizer.com/track-people-not-just-funnels/
Plenty of experiments to be had around this topic in the coming months.