Demystifying the Sales Funnel in a Subscription Economy
The traditional sales funnel, a linear model that guides customers through a series of stages from awareness to conversion, has been a cornerstone of sales and marketing strategies for decades. However, with the rise of the subscription economy, this traditional model is no longer sufficient. In this article, we’ll explore the limitations of the traditional sales funnel and introduce a new framework for understanding the customer journey in a subscription-based economy.
The Traditional Sales Funnel: A Linear Approach
The traditional sales funnel is a straightforward, linear model that assumes customers progress through a series of stages, from initial awareness to conversion, in a sequential and predictable manner. The stages of the traditional sales funnel typically include:
- Awareness: The customer becomes aware of the product or service.
- Interest: The customer expresses interest in the product or service.
- Desire: The customer develops a desire for the product or service.
- Action: The customer takes action and makes a purchase.
While this model has served businesses well in the past, it is no longer effective in a subscription-based economy where customers are not just making a one-time purchase, but rather committing to a recurring relationship with the business.
The Challenges of the Subscription Economy
In a subscription economy, customers are not just buying a product or service; they are buying into a ongoing relationship with the business. This relationship is characterized by recurring payments, ongoing support, and continuous value delivery. The traditional sales funnel is not equipped to handle the complexities of this type of relationship, where the customer journey is no longer linear, but rather circular.
In a subscription economy, customers may:
- Cancel and re-subscribe multiple times
- Upgrade or downgrade their subscription plans
- Engage with the business through multiple channels and touchpoints
- Require ongoing support and customer success management
A New Framework: The Customer Journey Loop
To better understand the customer journey in a subscription economy, we propose a new framework: the Customer Journey Loop. This framework recognizes that the customer journey is not a linear progression, but rather a circular loop, where customers may enter and exit the loop at various points, and may repeat certain stages multiple times.
The Customer Journey Loop consists of the following stages:
- Onboarding: The customer signs up for the subscription service and is introduced to the business.
- Engagement: The customer engages with the business and begins to use the service.
- Retention: The customer continues to use the service and becomes a loyal customer.
- Upsell/Cross-sell: The customer is offered additional services or upgrades.
- Churn: The customer cancels their subscription.
- Win-back: The business attempts to win back the customer.
Key Strategies for Success in a Subscription Economy
To succeed in a subscription economy, businesses must adopt new strategies that prioritize customer success, retention, and ongoing value delivery. Some key strategies include:
- Customer Success Management: Assigning dedicated customer success managers to ensure customers are getting value from the service.
- Personalization: Using data and analytics to personalize the customer experience and offer relevant recommendations.
- Ongoing Communication: Regularly communicating with customers to ensure they are satisfied and engaged.
- Continuous Improvement: Continuously gathering feedback and improving the service to meet evolving customer needs.
Conclusion
The traditional sales funnel is no longer sufficient in a subscription economy, where customers are committing to ongoing relationships with businesses. The Customer Journey Loop framework offers a new way of understanding the customer journey, recognizing that it is a circular loop where customers may enter and exit at various points. By adopting new strategies that prioritize customer success, retention, and ongoing value delivery, businesses can succeed in a subscription economy and build loyal, long-term relationships with their customers.