Friday, September 25, 2020

Lesson #331: Master Your Marketing Funnel and Media Mix

Posted By: George Deeb - 9/25/2020

  One of the biggest struggles that companies have is knowing how to build an effective and profitable marketing funnel and media mix, and u...

 


One of the biggest struggles that companies have is knowing how to build an effective and profitable marketing funnel and media mix, and using the right metrics to manage such efforts.  And, for most startups, they really don't have the budgets to build an effective full funnel strategy, and typically focus on more immediate cash returning lower funnel tactics.  This post will help you learn the various stages of the marketing funnel, the right tactics and metrics to explore at each stage of the funnel and how to translate that into an effective media mix.

What is the Marketing Funnel

A marketing funnel is the process of making prospective customers aware of your brand in the first place, and then nurturing them over time into buying customers.  The upper funnel is making sure you have brand awareness to prospective buyers.  The middle funnel is making sure your brand is actively being considered when a customer is actively researching their options.  And, the lower funnel is doing everything you can to convert known active in-market buyers to purchase your product. The next stages, typically forgotten by most companies, are getting your customers to become loyal repeat buyers, and more importantly, to become impassioned brand advocates spreading positive word-of-mouth referrals to prospective new customers.

To help visualize this, take a look at this graphic from Marketing Edge Magazine showing the typical marketing funnel:



The Stages of the Marketing Funnel

Let's provide a little more definition to each of the above funnel stages for clarity:

Awareness:  A person is aware of your brand, whether they are buying right now or not.  If someone asks, what is the biggest brand names in soda makers, the names Pepsi and Coke come immediately to mind.  Unaided brand awareness is best, as top of mind with customers without any help.  Followed by aided brand awareness when presenting a list of companies in the space, and them recognizing your brand on the list.

Interest:  A person begins to learn more about your brand and offering, perhaps reading about it in an article or seeing it promoted in an advertisement. 

Consideration:  A person is in-market for products you sell, and is willing to learn more about your specific product.  Often comparing your brand to others at this stage, perhaps on reviews sites.

Evaluation:  A person has narrowed down the list to a couple finalists, and is digging into all the details and differences between various brands, product features and pricing.

Decision:  A person has decided that this one brand or product is the specific one they want to move forward with, when they are ready to buy.

Purchase:  The person officially becomes a customer, swiping their credit card on their first transaction with your company.

Repeat:  That same person has purchased multiple times from your business.  That can either be the same product in higher frequency, or new products altogether.

Loyalty:  That same person is dedicated to purchasing from your brand, anytime they have the need.  They would not consider other brands given their past satisfaction with your brand.

Advocacy:  That person is so passionate about your product, they start to spread the "gospel" and positive word-of-mouth referrals to their friends and family.  And, even better, they are promoting your brand on social media to all their followers (which in turn, helps to profitably build your upper funnel with new prospects).

Using the Appropriate Media Tactics at Each Funnel Stage

This diagram from Visual Paradigm does a good job of showing how you need to tailor your marketing efforts to each of the specific funnel stages:


At the top of the funnel, you are trying to get as much reach as possible, to make sure the market is aware of your brand.  Large brands may do this in television advertising, and startups may do this in more affordable social media advertising.  Once a user makes an action that signals that they are in-market for your products, you want to make sure they are aware of you on review sites and the search engines during their middle funnel consideration stage.  And, once they engage with your site, your lower funnel tactics will take over with things like digital retargeting ads and email follow ups.

But, getting them to buy is only half of the exercise, now you want to get them to buy again (through your email newsletter promotions and joining your customer loyalty program).  And, you want to ask them for positive reviews of your products and to share their love of your product or brand with their social media followers, turning them into brand ambassadors.  As you know, acquiring customers through positive word-of-mouth for free is a lot cheaper than trying to acquire customers with expensive advertising upper funnel.

Using the Appropriate Measurement Metrics at Each Stage

One of the biggest mistakes a company makes is using the same marketing metric across each of the funnel stages.  For example, they compare their cost of acquiring a customer (CAC) to everyone one of their marketing tactics.  If they did that, they would immediate bias lower funnel tactics, as the CAC from in-market lower funnel buyers will be a fraction of out-of-market upper funnel prospects.  That bias may help them drive an immediate ROI on their marketing spend, focusing on the most profitable tactics, but it would hurt them in terms of investing upper funnel and building long term brand awareness with which to better scale the company long term.

To me, your upper funnel would be measured on a cost per impression (CPM) or cost per visitor (CPV) metric, your middle funnel would be measured on a cost per lead (CPL) metric, and your lower funnel would be measured on a cost per acquisition (CPA) metric.  If you set the appropriate metrics for each stage, you will have a much higher odds of scaling your business long term.  It may be a little less profitable in the first few months of "funnel building", but long term you will have a much bigger and more profitable business, than if you simply focused on the lower funnel alone.

Doing the Appropriate Media Mix Modeling 

I prefer to grow my business profitably, not on a grab market share at any cost basis to "own" the market in the short run and drive profits in the long run (after years of huge losses).  So, with that as my guide, I typically split my media mix: 20% upper funnel brand building, 30% middle funnel development, and 50% driving lower funnel conversions.  That will give profits a "fighting chance" for success in the near term, within a few months of starting a campaign.

But, the mix here can be highly variable based on your customer sales cycle.  Let's say you are selling expensive automobiles and customers only buy a car every 5-10 years.  That will take a really long time for your upper funnel brand building to pay back.  So, maybe you should focus more on middle and lower funnel tactics only, to drive a more immediate return on your investment.  And, on the flip side, let's say you are selling an affordable consumable with a high repeat purchase cycle (e.g., Starbucks Coffee).  In that case, you may want to invest more upper funnel, to quickly build up the brand awareness and lock out competitors, as any losses you may incur in the short run from your media spend, will be recouped from the repeat purchases in the following months.

Concluding Thoughts

Doing your marketing funnel planning and media mix modeling is not easy, especially for first timers.  So, make sure you surround yourself by smart mentors, consultants or ad agencies that have deep expertise in this area, to ensure you don't flush your limited marketing dollars down the toilet.  But, hopefully, you now have a better understanding of how it works to help point you in the right direction to building a truly great brand, marketing success, revenue growth and bottom line profit.  If you have any questions on this stuff, don't hesitate to reach out to one of our fractional CMOs to help you with your marketing strategies and planning efforts.


For future posts, please follow me on Twitter at: @georgedeeb.






Thursday, September 10, 2020

North Carolina Venture Capital Trends

Posted By: George Deeb - 9/10/2020

In case you haven't seen it, the Center for Entrepreneurial Development recently published its 2019 Innovators Report .  It contains...



In case you haven't seen it, the Center for Entrepreneurial Development recently published its 2019 Innovators Report.  It contains  venture capital data going back to 2015, covering funding, funders, deals, and exits. The report explores a number of useful categories, including year-over-year comparisons, sectors, locations, funding and investor types and much more. 

Its great to see the entrepreneurial activity in the Triangle area (and the rest of the state) is doing well.  Kudos to the team at the CED for pulling this together.


For future posts, please follow us on Twitter at: @RedRocketVC.



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