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Author: Don Obrien

Use the ‘cash flow funnel’ to fight finance with finance


Sales funnel Ok, we can already hear you groaning through the computer screen

“Please, not another article about the funnel!”

But wait, give us a chance! There’s a reason everyone has a hot take on the marketing funnel. It’s because the funnel is almost certainly the most important mental model in B2B marketing.

The funnel informs how we think about everything from buyer behaviour and marketing objectives to budget allocation. If your funnel is wrong, it’s almost impossible to get your marketing right.

That’s why countless marketers have tried – and failed – to perfect the funnel. We’ll probably fail too – but Marketing Gods be damned, we’re going to try anyway!

Today, we unveil…drumroll please…The cash flow funnel.

Step #1: Flip your funnel

For our first trick, we will be flipping the funnel and adding a missing axis: time.

Time is the most under-rated metric in the marketing industry.

Why?

Because every B2B business has two customer segments: in-market buyers and out-of-market buyers. In-market customers need to buy today. Out-of-market customers don’t need to buy today, but will need to buy sometime in the future, whether that’s in five months or five years.

And as our last article explained, there’s a “95:5 rule,” which states that ~5% of buyers are in-market and ~95% are out-of-market at any one time. The biggest growth opportunity in B2B is to influence the 95% of “out-of-market” buyers who are not even in the funnel yet.

Marketers are in the memory business. Our job is to make sure that when those 95% of buyers do come in-market, our brand “is easy to mind and easy to find,” because the brand that gets remembered is the brand that gets bought. Marketers can’t “move” a buyer in-market, only a customer need can “move” a buyer in-market. And we can’t control the speed at which buyers move through the funnel because that’s determined by the customer, not the marketer.

As Erwin Ephron wisely wrote in 2005: “The advertising itself did not get Mary to buy cereal. The empty cereal box did.”

You should build your funnel around this fundamental truth:

Cash flow funnel So, why is our cash flow funnel better than the traditional funnel?

Well, first and foremost, our funnel is grounded in the customer’s needs, not the marketer’s needs. “Today I moved down a purchase funnel from awareness to consideration,” said no customer, ever.

However, “I’m in the market for a cloud solution” is something customers do say on Planet Earth.

Obsessing over short-term results and forgetting the customer are probably the two biggest mistakes that B2B marketers make. We think our cash flow funnel solves both problems.

You can’t possibly forget the customer if your funnel is built around their needs. And it’s much easier to think long-term when your funnel accounts for the fact that only 5% of buyers need your product in the short-term. Our funnel forces B2B marketers to focus on future customer needs.

Step #2: Financialise your funnel

B2B marketers can’t forget their external customers. But we can’t forget our internal customers either.

Most B2B marketers think sales is their internal customer. We are constantly being scolded for not “aligning with sales.” But aligning too closely with sales is a huge mistake, in our opinion.

Why?

Because the head of sales doesn’t give a shit about future sales from future customers, which is mostly how marketing creates value. Sales gets paid to deliver immediate results. Future customers don’t count against their quarterly quotas. Our incentives just don’t align.

But you know who does give a shit about future sales? Your CFO. You know, the person who secretly runs the marketing department.

So how are marketing incentives aligned with finance incentives?

Well, if you work at a public company, your CFO mostly cares about the value of your stock. And if you work at a private company, your CFO mostly cares about…the value of your stock, if you were to go public, or sell the business. And what determines the value of your stock?

We’ve got two words for you: cash flows.

Obsessing over short-term results and forgetting the customer are probably the two biggest mistakes that B2B marketers make.

As Jeff Bezos once explained: “If you look at academic studies, you can see stock prices are most closely correlated with cash flow.” And Bezos is primarily talking about future cash flows because, by most estimates, 80% of the value of a company’s stock is based on expected cash flows generated 10 plus years in the future. And where do these future cash flows come from, you ask?

Future customers. Or, to re-use our earlier terminology, out-of-market buyers.

So when you take your funnel to finance, you should frame it in their language, like this:

Cash flow funnel B2B marketers love to complain about the finance department. But truth be told, finance is much more likely to appreciate the value of long-term investments than sales, and much more likely to make investments in the strategies that generate future cash flows (AKA: marketing).

This is the beauty of the cash flow funnel. It doesn’t just align marketers with their customers, who are mostly out-of-market. It also aligns marketers with finance, who control their budgets.

Step #3: Fill your funnel

Now that marketing and finance speak the same language, we can work together to figure out how much growth we can expect from different investment strategies.

The finance team can fill in your funnel with real numbers, like your market share, the lifetime value of your customers and the average purchase frequency in your category. Your cash flow funnel will start to look like this:

Cash flow funnel Now both the CFO and the CMO can see how small the in-market opportunity is and how big the out-of-market opportunity is. And you’ll have a much easier time explaining to the CEO why the business needs to make big investments in the marketing strategies that generate future cash flows.

Strategies like…brand building.

If 80% of the stock price is based on sales 10 years in the future, and 95% of buyers are out-of-market, then it makes absolutely zero sense to spend 100% of your budget on short-term “lead generation.”

Yet that is exactly what most B2B businesses do today. We like to blame sales and finance for our predicament, but maybe it’s our own fault. Today, most B2B marketers position brand building like it’s an arts and crafts project. We walk into meetings ranting about brand love and brand iconography, and then act surprised when all the budgets get allocated to “performance marketing,” which brought in a spreadsheet filled with numbers and dollar signs.

B2B brand marketers need to learn to play the game and fight finance with finance.

That’s what the cash flow funnel is designed to do.

We hope it brings you fame and fortune. If it doesn’t, well, you can always try one of the other 10,000 funnels…

Peter Weinberg and Jon Lombardo are the heads of research and development at the B2B Institute, a think tank at LinkedIn that studies the laws of growth in B2B. You can follow Peter and Jon on LinkedIn.





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