Alex Steer

Advertising effectiveness, analytics and strategy / about / archive

Fun with funnels

400 words

The more I think about the tendency to overstate the importance of ROI in digital and social media channels, the more I wonder whether marketing technology companies are implicitly trying to reshape their clients in their own image.

If you run a software start-up, you really care about sales funnels. That's because most of your marketing activity is sales activity. You develop a great product, you get feedback on that product and improve it, you generate qualified leads and you sell to them. With technology in particular, a lot of this activity happens online and can be tracked; new leads can be stored in CRM databases; and there is a defined customer acquisition funnel down which you can see those leads moving.

Do you know what doesn't work like that? Selling margarine.

Yet if you believed the way in which a lot of marketing tech firms talk about selling a £1.50 tub of margarine, though - or beer or jam or deodorant - you'd swear that it was exactly the same kind of problem as selling a £15 million software license. People who sell retail analytics software obviously want you to believe (and tend to believe themselves) that there's definitely a sales funnel in your category - you just need the technology to help you see it.

The truth is, there probably is no funnel if you sell margarine. You don't move from 'aware' to 'in-market' to 'loyalist' to 'repeat purchaser' in any meaningful way. In fact, there's excellent data demonstrating that in these categories loyalty (the classic bottom-of-the-funnel effect) is largely a function of market share.

So even if people did buy all their margarine online (and they don't), being able to track every stage in the customer journey wouldn't necessarily give you much advantage.

When you sell low-price products to the mass market, you grow share by making many small, weak, positive brand impressions in people's minds - not by 'closing' customers and moving them up a linear sales funnel. That logic works for high-price, high-consideration, infrequent purchases like cars, computers or mobile phones. For cheap, fast-moving goods it matters far more that you know which brand and advertising metrics correspond to sales growth, and that you have a way of measuring which advertising content and media is performing best against those metrics.

# Alex Steer (18/06/2014)