What changes about your sales and marketing funnel when the market is in turmoil?

Here are some tips on how to size your market, funnel, and resources accurately – so no matter the change in market conditions, you’ll be able to plan a sales and marketing strategy that will enable you to maintain the required number of leads (and conversions) to deliver on your revenue goals.

First, confirm your market size

Market sizing is often done with a degree of rigour. But far less rigour is applied to the task of sizing your sales funnel. The proposition that “there is plenty of sales there” might be true, but sizing is not just about working out if the market can support you.

Consider if your markets have grown or contracted since you last dimensioned the total addressable market. Then ask yourself, “How much market do I need?”

To be a small player in a big market is as frustrating as it is unprofitable – but being No. 1 generates its own awareness.

What you really need is to choose a market small enough to win.

Here’s how:

  1. Identify how many customers you can properly serve
  2. Determine what share you need to be dominant
  3. Divide your target customer base by your target market share to determine the number of businesses in your ideal market size

Here’s an example. If your TAM (total addressable market) has 5000 companies in it and right now you count 50 of them as customers, you are sitting at 1% market penetration. Invisible! How much share would you need to have before the market (or a segment of it) considered you to be the gorilla? Markets vary – in some you’d need 30% or even more before you were the big guy, and in others, 10% would have you as a stand-out leader.

Sticking with the example above, maybe you can do a good job of serving 100 companies. And let’s assume your market is moderately fragmented and you’d need 20% to be the gorilla. Dividing 100 by 20% suggests that we’d need the market to be only 500 – not 2500 – for our 100 customers (50 old and 50 new) to represent 20% of the market.

So, you’d need to drop significant parts of that 2500 TAM to get down to 500 then get busy earning the next 50 customers from only those segments.

Once you’ve done this, your sales and marketing planning must centre on sustainable effectiveness for a market of only this number of businesses and nothing more.

If targeting this tightly sits uncomfortably with you, then perhaps you need to reconcile yourself to being the happy chimp rather than the wealthy gorilla!

Then, determine how many leads you need.

Once you calculate your market size, it’s time to determine how many leads you need for any campaign to meet your sales and growth goals.

Trying to calculate the number of leads is a valid pursuit, but it can also be a trap. Your campaigns need to be built with two factors in mind:

  1. Buyers need time to progress and that time normally increases – lots – in uncertain times
  2. Your tactics need to be repeated several times to have an effect – “one-hit-wonders” rarely do the job

In the table above, you can see that buyers took one quarter to make each progression and that 300 buyers failed on the first attempted progression, 100 on our second, and so on.

Here’s what Marketing needs to do to contribute strongly to sales revenue to properly determine its contribution in the number of leads:

  1. Build a simple model (see progression above) that shows how buyers progress through each stage in their journey.
  2. Add all the “leaked” buyers back into the funnel and re-run your model.
  3. Decide how much of the total revenue (and therefore how many sales) Marketing will contribute.
  4. Adjust your top-of-funnel number until the “customer” numbers suggest you will deliver Marketing’s required contribution to your revenue goals.
  5. Decide which point in this journey you consider to be a “marketing-qualified lead” for the purposes of campaign design.

This model will provide you with two key pieces of data for your campaign design:

How many leads you need

How many buyers for whom do you need to know the contact details

Finally, sense-check against your resource load

So, why not just get as many leads in the funnel as possible? Surely, the more you get through, the more that will ultimately convert? Well, only if you have the person-power to manage them all.

A face-to-face sales call is the preferred and most successful method of making a sale. But because it is also the most expensive tactic, you should use it where it will have maximum effect.

You will need to consider carefully where to use face-to-face meetings and where to use some other tactics. You will also need to build a funnel that has the right number of buyers progressing – too many and you will not be able to act on all enquiries, too few will create a hungry sales force competing for the same prospects.

How do you calculate your sweet spot? Here’s how we do it:

  • Consider how many leads you intend to pass to Sales (remember that Sales won’t accept all of your leads)
  • Divide this by the number of salespeople
  • Multiply this “leads per salesperson” number by the number of meetings required per opportunity to take it through to closure (won or lost)
  • Compare this “required meetings per sales person” number with the actual number of meetings they have to offer this campaign (given they have existing customers and other duties).

If your required inventory (of meetings) and available inventory don’t align, go back to the drawing board.

Get help from the experts

We’ve been helping businesses across the globe size their markets and funnels and build great go-to-market plans for 25 years. In fact, we’ve helped build over 4,000 of them. Need some help with your sales and marketing maths? Or maybe just some planning guidance? Get in touch with us to have a chat.