Why the sales funnel model doesn’t work for service businesses?
A sales funnel is the marketing term for the journey your potential customers go through on their way to a purchase. There is a guided path the customer or client travels through before becoming a loyal customer. A salesperson should walk the client through the path gently and smoothly addressing the objections to close a deal successfully.
The sales funnel is considered to be the universal cycle of how sales work. But in our observation, this cycle doesn’t work for the service business well. So, let me explain why does that happen?
The services (mostly consulting and professional services) are bought differently than products. They are bought on reputation, referral and relationship not on tangible features or attributes. - Tom McMakin and Doug Fletcher, How Clients Buy
1. Services are sold on faith.
When you go to buy a product, you can test the features and virtues of the product before you buy it. But in the case of services, you can not test the virtues until the service is performed. So, the services and bought on faith alone and faith takes time to build.
2. The funnel assumes an infinite supply of leads.
If you run a generic service business which provides every attribute of your related industry, then you have millions of businesses you can address to. But if you are in a specific niche (As example video production in creative agency business or data science in tech business), you may only address to specific customers. It is advisable to serve a specific niche even if there is a limited client base because you will get compensated handsomely for your expertise in the specific niche.
3. The funnel assumes leads are of short duration.
During selling a product you should listen to the customer carefully like a hunter observes its prey. Listen carefully and understand if they have the intent to buy. If you realize you don’t, you just move on. But service business doesn’t work like that. The service business is sold best with long term personal connections. It’s like a farmer cultivating their field for result in future.
4. The funnel assumes only the numbers should be measured.
In the service business instead of focusing on numbers, how deeply one connects with the executives should be measured.
5. The funnel fails to appreciate the referral effect.
Having a long term relationship, inviting them to events or on dinner, helping them even when you are not under any contract creates reciprocation building a deep connection which helps to gather revenue from the connections of the client as well. The positive word of mouth creates authority and referrals.
6. The funnel assumes the client’s buying cycle is linear.
It assumes you need to create awareness and interest first. But service business doesn't work like that. The client may already have an interest and looking for the right consultant to execute it.
Relationships for service business almost never unfolds serially. It can be arbitrary and an expert service business salesperson understands it.