Why is a B2B Sales Funnel Important?
A sales pipeline allows businesses to understand how their leads are being generated, captured and converted, and the various modes of interaction that happened during their business journey. Developed as a concept in 1898, this is the B2B sales funnel or purchase funnel.
The importance of the B2B funnel lies in its ability to increase business recognition and awareness in the market.
A B2B sales funnel is focused on acquiring customers through three stages –
Top stage – For Sales prospecting
Middle stage – To Generate leads (MQL & SQL, explained further in this article)
Bottom stage – For Deal closing & customer retention through repeats and referrals
The five stages of a customer’s journey in a B2B sales funnel that work in tandem with the above involve the following –
Companies use various strategies once the awareness stage starts to increase consumer interaction and pique curiosity to nudge consumers towards the purchase stage of the sales funnel.
From the awareness stage (where the leads are poured into the funnel) right to the purchase stage, companies undertake various strategies to enable interaction and piquing businesses and consumers’ interest enough to take them right through the purchase end of the funnel.
3 Reasons Sales Funnels Have Become More Complex
The B2B sales funnel has evolved into an overall digital space, making it increasingly challenging and complex to undertake a thorough sales journey.
Three primary reasons the sales funnel has become complex are –
- Digital strategies need to be deployed to generate leads constantly: Digital strategies to generate leads completely depend on growth metrics, i.e., website traffic, and email marketing, etc., are strategies that need to be deployed constantly to push out leads.
- Businesses need to involve more innovative ways to grab customer attention: Using social media, email campaigns, etc., are just some innovative ways to hold a customer’s attention.
- Keeping customers engaged to ensure repeat business through digital strategies: Customer engagement is a constant exercise; the minute an online business.
One digital strategy deployed to take care of all these above challenges is using an interactive and engaging video platform, video content, and video advertisements. Companies like Hippo Video help businesses generate leads, and connect with prospects to increase sales conversions by engaging customised videos.
But, before we get into that, let’s look at some specific sales funnel requirements:
Sales numbers metrics
Numbers help businesses grow strategically.
It’s a fact that if you know precisely what your lead-to-win rate ratio is, your business will automatically be able to identify the areas where it needs to improve, as well as the areas that are fetching its optimised results.
The lead-to-win rate ratio is nothing but the quantified percentage of the number of leads that entered the sales funnel and were ‘won’ or closed.
By analysing the closing rate versus the win rate, you can easily understand your marketing efforts’ results.
For example, if you generate 1,000 leads, of which 100 are converted to the win stage, your lead-to-win ratio is 100/1000, or 1:10.
The closing rate helps determine how many customers were converted from a lead or prospecting stage and entered your business’ sales funnel. For example, if a business is generating leads through its social media channels, the closing rate would be how many of those customers clicked on the products displayed on the social media or were directed to the business’ website to browse products with a purchase decision in mind.
A fit rate helps to understand whether your product is the right fit, thereby driving the customers towards a sales execution stage. When inching closer towards a sales qualification stage, customers analyse the product vis-a-vis their needs. For example, a business looking to purchase marketing tools to boost its marketing will explore whether those tools are the right fit for it and help it achieve the best results.
To get past the fit stage towards being sales qualified, a business needs to showcase why customers need it and what it can offer its clients. It needs to showcase the value addition it can bring to its clients in terms of revenue generation.
The win rate, or ‘sealing the deal’, is the sales funnel’s purchase stage where a client is satisfied with its product understanding and goes ahead to execute a sale.
Lead generation metrics
Lead generation metrics help provide insight to generate leads. Businesses use a set of B2B sales key performance indicators to measure the results generated by their marketing.
Some lead generation metrics include –
- Measuring return on investment and tracking revenue in terms of the leads generated.
- Investing in SEO optimisation to increase organic traffic to your business’ website.
- User engagement on your website or value based on your content strategy and deciding to convert.
Lead Channel Origination Rate
In marketing, businesses have access to various channels that help them to get access to leads.
The lead channel origination rate is the rate at which a business tracks channels that help it generate the most leads, and on that basis, invests more in those channels to create higher prospects.
For example, a digital marketing company’s highest lead channel could be through SEO optimisation – this means its SEO strategy is working for it.
It should invest more effort and resources into increasing optimisation. On the other hand, the same company may be generating negligible leads from its social media, so investing in that channel may not be as fruitful in terms of the returns.
To track which lead channels are the most effective for a business, businesses need to look at their numbers and analyse them from time to time.
Remember, a business keeps evolving, and so does the kind of customers it attracts – so it doesn’t necessarily mean that the same lead origination channels will work through time.
Let’s look at some KPIs that help in understanding these marketing efforts:
The best way to determine whether a generated lead works for your business is to see if it converts. A conversion rate varies over time and industries, so there’s no specific ratio your business should be following. However, the idea is to measure how profitable your leads’ ratio to your actual conversions are to your business.
For example, if you find that there are almost 1,000 visitors on your website; however, only a handful are converting (less than 2%-5%), then you need to analyse your lead quality.
Qualified lead rate
Qualified leads are prospects that are qualified to be closed. To achieve qualified leads, marketers need to use tools to boost their content strategy, provide valuable information about the product or service to customers, optimise their website and social media channels, and optimise other marketing strategies like creating newsletters or email campaigns.
Simply put, a qualified lead rate is a rate at which a lead qualifies from a prospect stage towards a conversion stage, and is ready to be closed.
QL to SQL rate
The rate at which marketing qualified leads is converted into sales qualified leads is known as the QL to SQL rate. In simple words- converting a customer from a marketing lead or scouting stage into a closing or sales stage. The higher the SQL rate, the better the marketing efforts of the company in terms of return on marketing investment.
For example, using video content can help boost a customer from a QL to SQL stage. Hippo Video is a platform that allows customers to create valuable content videos to showcase to their customers and convert them into SQL. A tech company that helps users create engaging emails can make use of Hippo Video’s tools to create informative videos on how their interactive email product can help the business grow and reach out to more customers. When customers look at videos, they are more engaged and have a higher takeaway in terms of the value the product or service can add to them.
B2B sales marketing metrics
B2B sales marketing metrics help businesses to plan their marketing strategies in advance. These metrics are nothing but KPIs that allow a business to set goals and measure results against such goals, and are quantifiable.
Some B2B metrics that a business should typically track are –
- Conversion of marketing qualified leads to sales qualified leads
- Sales growth by product, geography, or target customer
- Opportunities received through lead sources
- Customer acquisition and associated costs
Let’s explore some of these metrics in detail:
Customer Acquisition Costs
When a business acquires a new customer, it doesn’t just happen magically. There is a process and a cost associated with it. Depending on the strategy deployed by the business, customer acquisition costs are the total costs associated with driving a customer through a B2B sales funnel – from a prospecting stage to a winning stage. What are the steps taken by a business through that funnel to achieve a closing rate? That’s your cost per acquired customer.
Typically, most businesses consider a 3:1 ratio to be a good customer acquisition cost – where the value of expenditure per customer is 3x. Anything lesser means the business is spending a lot more per customer and may be deriving lesser revenue.
From engaging in ad campaigns and mass email marketing campaigns to the overall company costs involved in targeting a customer- all factors contribute towards the cost per acquisition. So, how do businesses determine whether an acquired customer is good for them in terms of revenue generation and growth?
One of the indicators that business metrics use is the customer lifetime value indicator. This helps a business to ascertain the expected amount a customer or a business entity will spend or invest in your business during their/its lifetime. To calculate this, businesses use a simple formula – they measure an average of the total purchase value made by a customer and multiply this by the frequency of purchases made by the same customer.
The importance behind understanding this metric is that it helps a business understand the value it brings to a customer, and how its marketing efforts have translated into building customer relationships.
B2B sales key performance indicators
B2B sales KPIs have one primary goal – to generate more business.
Some of the top sales KPIs are understanding the first response time, business win rates, customer churn values, revenue sales, etc.
New Leads by Source
One of the most undervalued and difficult aspects of sales is generating new leads. Salespersons may be confident about closing deals, but not so sure about generating new leads. So, where do businesses find new leads?
Some of the best sources of new leads are through referrals. Whenever something comes along as a recommendation, users are more likely to take a second look and purchase it, as opposed to a product or service that doesn’t have a referral associated with it.
To generate referrals, social channels like Linkedin are excellent to find networks and suggestions.
Let’s take a look at some more components of new leads:
Estimated revenue by lead source
By now, you would have realised that not every lead generated is a quality lead, and not all leads convert into sales opportunities. For those that do, businesses need to evaluate how much-estimated revenue has been generated – and overall, how much revenue has been generated by a lead source.
For example, if a business is able to develop a high percentage of revenue via leads developed through LinkedIn, then the business must be doing something right! On the other hand, if the revenue generated through leads from other social media channels are not up to mark, then the business should evaluate whether investing in those channels is worth it.
Average lead response time
Estimating how much time it takes for your business to connect with a lead or a prospect is the business’ lead response time. When calculated on average, businesses can quickly estimate how much time they take to respond to leads, and whether the time taken is quick enough to retain the lead. If the time taken is too high, businesses are likely to lose leads.
Pipeline creation by month
As explored through the course of this article, a sales pipeline involves various stages. From prospecting to lead qualification, proposal and negotiation stage, it travels into the closing or win stage. Once a business has developed its funnel or pipeline journey, is it okay to sit back and relax?
No! The hard part starts now. To grow, businesses typically need to evaluate their pipeline creation on a monthly basis. Basic tools used to track metrics give businesses a monthly overview of how their sales pipeline has been performing at all the individual and collective stages. This helps businesses specifically evaluate which aspect needs more improvement – and thus evolve the business accordingly.
Marketing qualified leads to sales qualified leads conversion rate
Another important aspect of lead generation is converting the MQL to SQL. When leads are at a marketing-qualified stage, this means the customer’s interest is piqued and they are keen on understanding the product or service offered by a business.
The strength and collaboration between a business’ marketing and sales partnership help a business convert its marketing qualified leads into sales qualified leads.
The rate at which a marketing lead is likely to convert into a sales lead is the conversion rate.
Typically, a 13-24% conversion rate is considered a good average rate by most businesses.
Opportunities by lead source
Even though they sound similar, leads and opportunities have a slight point of difference in terms of specificity. Unqualified leads could be opportunities – from interacting with a prospect to meeting or networking, these are all opportunities that eventually could have the potential to be converted into a lead.
Businesses should assess whether their lead source is helping them garner opportunities and whether this is fruitful for the business. If not, then perhaps it is time to change the lead source.
Closed won opportunities by month
To understand how many opportunities converted into leads on a monthly basis, it is important to keep track of the metrics on a sales dashboard. These metrics help businesses understand the level of win rates based on their opportunity conversions, and thus assess the quality of lead conversion from opportunities.
In simple words, it refers to the time taken, or the speed at which a lead moves through a sales pipeline and comes out at the other end at the closing stage is the pipeline velocity.
This is used to understand whether there are any roadblocks within the sales pipeline. If the pipeline velocity is higher, then it helps in a smoother response rate.
Longer time taken to close a lead often means the business needs to look into its pipeline.
Pipeline velocity is thus a great sales metric indicator of lead movement.
Customer acquisition cost
Estimating a good cost of acquiring a customer is important for businesses to evaluate their overall marketing costs and efforts.
By dividing the customers by the total sales and overhead costs, a business can evaluate and measure whether it is generating adequate revenue from customers or not.
As explained above, a good customer acquisition cost is typically at a 3:1 ratio.
For example, if a business spends INR 3,00,000 on sales and marketing efforts and gains 50 new clients, then the customer acquisition cost is INR 6,000.
This helps a business specifically evaluate whether it needs to increase or decrease its cost per customer.
B2b Sales Metrics KPIs FAQs
FAQ #1 – How can a business target new customers?
There are various ways businesses can target customers – from using targeted advertisements to social media and building a network or community through social media channels, businesses can easily build their lead base.
FAQ #2 – How do sales funnels function?
A sales funnel process is a stepwise process that goes right from a buyer’s interest in a product or service along the entire buying journey, right to the purchase stage.
Businesses use various strategies like video content, email marketing, campaigns, etc., to ensure that a buyer’s journey remains smooth through the funnel, and the business can close the buyer.
FAQ #3 –Why do businesses need sales funnels?
Every business needs to analyse the journey its customers take – from the awareness stage to the buying stage, a customer’s actions help businesses determine whether their strategies are working or not, and where the business needs to improve. For example, a business may be generating relevant written content; however, it is unable to convert leads through the sales funnel. In this case, the business probably needs to change the manner in which it displays content – perhaps using video content instead of written content will help the business get its message across to customers better.
Core marketing functions include the management of a business’s sales funnel.
To ensure that the journey undertaken by a prospect is smooth and optimised, businesses need to keep checking in on their KPIs and sales metrics. Numbers are a business’s best friend – they help in quantifying whether strategies are working for the businesses or not.
To understand how your business can better convert its leads, hop onto the video bandwagon – with Hippo Video, your business can attract 3x more clients and increase its sales by simply showcasing content and information through a more engaging platform.
Keen to know more? Find out more about how Hippo Video can go a long way in smoothening your B2B sales funnel.