How to Create a Demand Funnel (for 44X Revenue)

You know that feeling in the pit of your stomach when you get a calendar invite for an all-hands meeting—with no warning or context? I got one of those in 2018, mere months after I started at data.world as their first growth marketing and demand generation hire.

My initial role was to grow the user base for our free, open-data catalog. But I soon found out our real challenge was monetization. We had built the world’s largest open-data community but—like so many startups—didn’t have a clear product-market fit.

In that unannounced meeting, Brett Hurt, our CEO and co-founder, laid it out for us. To have the future we wanted, we needed to shift away from monetizing our open-data community and toward enterprise sales.

It wasn’t quite a flip from B2C to B2B, but it was close. Instead of getting people to sign up for a free account, I now needed to help six to 10 decision makers at big companies learn why they needed us and evaluate our data catalog.

To do that, we built a demand funnel that took us from nothing to 44X revenue growth in a single year. Here are the three lessons we learned along the way.

Lesson 1: Choose the right demand generation funnel.

A confession: I hadn’t actually done demand generation before getting my job at data.world. While they knew that—and that might seem weird—I did start my career as a sales development representative (SDR) selling demand generation SaaS products.

Having worked with demand gen marketers for years, I knew that building data.world’s first demand funnel was my chance to emulate the best of those folks. They always measured their performance against a demand funnel, so I would, too.

You might think a Google Images search would return a good representation of a demand funnel for you to steal borrow. But every diagram is biased towards the creator’s perspective.

With so many options, which one should you pick? Here’s the process of elimination I went through.

The SiriusDecisions Demand Waterfall (2006)

demand waterfall.
(Image source)

The first one I looked at was the SiriusDecisions Demand Waterfall. I remember my demand-gen friends raving about the insights they learned from SiriusDecisions (now Forrester), so I thought I would start with their demand funnel.

Upon closer inspection, this older version seemed one-dimensional. It aligned perfectly to an inbound marketing model in which a marketing team sourced inquiries from prospects, qualified them, and passed them to sales to close or disqualify.

But such a simple funnel works only if you have a lot of inbound interest and a sales team focused on fielding inquiries. If you’re doing outbound, this version of the funnel doesn’t account for that.

Since we had a sales development team of our own, we needed to factor in their efforts, too.

SiriusDecisions Rearchitected Demand Waterfall (2012)

rearchitected demand gen waterfall.
(Image source)

This is the model my customers referenced when I was selling them demand-gen software in 2014. At first glance, it might seem complex, but the complexity has a purpose.

Notice how the top of the funnel is split between inbound and outbound efforts. That difference cascades down the funnel, allowing you to track the ROI of your lead sources between inbound and outbound campaigns—all the way through to revenue.

Ultimately, this is the one we chose to implement because it was just the right amount of complexity for our stage of maturity. Before we agreed on that decision, we looked at a couple of other options.

Honorable mention: The DemandGen Framework

demandgen framework.(Image source)

I also liked the DemandGen Framework because it considered customer expansion revenue in addition to the acquisition side, which is covered by the SiriusDecisions models.

If you’re in SaaS, expansion revenue is critical to success and, according to Profitwell, can separate you from your competition. But since we were still a young startup, we deferred customer expansion tracking.

Honorable mention: SiriusDecisions Demand Unit Waterfall (2017)

siriusdecisions demand unit waterfall.
(Image source)

We seriously considered using the most up-to-date SiriusDecisions waterfall, the Demand Unit Waterfall. I loved that it took the Rearchitected Waterfall to the next level while simplifying it—demand capture is the focus, not lead sources.

This model lends itself well to account-based marketing efforts that coordinate marketing and sales to identify and convert demand within large companies. Since we were just starting out—only beginning to test ABM—we wanted something simpler.

Takeaways on demand funnel selection

Choose the model that aligns best with your business:

How complex is your marketing and sales operation?
Do you have dedicated inbound and/or outbound efforts?
Do you do account-based marketing?
How long is your sales process?

Each model has pros and cons.

For more information on the SiriusDecisions frameworks, I recommend you read about them straight from the source. Also, Intelligent Demand has a great post that explains the nuanced differences between each of the SiriusDecisions waterfalls in a quickly digestible way.

Lesson 2: Make your funnel airtight.

Most B2B enterprise demand funnels, like the ones reviewed earlier, have metrics like Marketing Qualified Leads (MQLs), Sales Qualified Leads (SQLs), and deals or opportunities created from those.

Most importantly, the stages they map out are sequential, with specific criteria for passing from one to the next. In a perfect (and simplified) world, a lead starts at the top (MQL, in our case) and works their way to the bottom (closed-won opportunity).

With that in mind, it’s critical to understand the recommended funnel stage definitions and handoff criteria between stages before you set up your marketing automation platform (e.g., Hubspot, Marketo, Pardot, etc.).

marketing automation tools.You have no shortage of choices—the marketing automation landscape is crowded. (Image source)

The combination of the model you choose and the tool you use entails different levels of effort to implement. It helps to have a strong marketing operations or sales ops person help you figure this out if you’re not well-versed.

Getting help from an agency that specializes in this work is also a great move.

Align with your sales team’s view of deal creation

Once you have a firm grasp of your chosen demand funnel’s definitions for each stage and progression criteria, make sure those definitions align with your business’s view of how deals are created.

If the sales team already works marketing leads, ask them which leads are better than others (i.e. take more meetings) and when they consider a deal created. It’ll be easy to tell how close the definitions are when they tell you how they’re really engaging your leads.

If they happen to be the same—great! Your definitions and measurements don’t have to change, and you can begin implementation. If not, you have some work to do. If you don’t align your funnel’s definitions with those of your sales team, your work will be in vain.

I’ll go over some actionable tips that helped me align my team and our sales team’s understanding of the demand funnel. But first, a quick example of what you’re aiming for.

data.world’s demand funnel definitions and progression criteria

Here are our stage definitions:

Lead. A new email is created in HubSpot.
MQL. A lead performs enough activity to reach a lead score of at least 19 (e.g., by downloading guides, using the open parts of our product, requesting a demo).
SQL. An MQL is deemed worthy of a response from our sales team, and an SDR begins pursuing the SQL.
Opportunity. An SDR books an initial meeting with the prospect and creates a new deal in HubSpot to begin tracking the sales process.
Customer. The deal is handed off from the SDR to an account executive, who eventually closes the deal.

Feel free to borrow steal these. But I can’t stress enough that your stage definitions and hand-off criteria must reflect your actual sales process as it is today—not an aspirational state—so you can measure conversion rates between the stages and know where to focus when your funnel, inevitably, springs a leak.

For example, if you have a 50% conversion rate from MQL to SQL, that’s not bad (depending on your volume). But if you have only a 5% conversion rate from MQL to SQL, something might be up. The only way to know is if those definitions and hand-off criteria are airtight, so that you can measure a baseline and begin optimizing it.

Now, on to creating the coveted sales-marketing alignment!

Lesson 3: Get your sales team’s buy in.

Again, this shouldn’t be news. But if you and your sales team can’t agree on a shared view of your demand funnel’s staging and progression criteria, you’re at an impasse. You must find a way around.

Otherwise, sales and marketing folks will begin pointing fingers at each other when goals are missed. You won’t have a clear way to tie marketing efforts to real pipeline and revenue creation, and sales won’t be interested in helping you because you’re not helping them close more business.

conflict sales marketing.The hand-off between marketing and sales is notoriously tricky; often, the peak conflict within an account occurs before sales is brought in. (Image source)

The good news is that doing this work pays off big time:

56% of aligned organizations met their revenue goals, and 19% beat their goals. Among misaligned organizations, by comparison, just 37% met their revenue goals, and just 7% beat them. (Source)
Among survey respondents with a formally agreed-upon sales/marketing definition of what constitutes a qualified lead, 29.8% claim a lead conversion rate (to opportunities) of over 75%. Only 18.2% of firms lacking an agreed-upon definition boasted conversion rates at that level. (Source)
Aligned organizations achieve up to 19% faster revenue growth—and 15% higher profitability than other companies. (Source)

What you’re working toward is a written document of your definitions and staging criteria, and an agreement between marketing and sales teams on their responsibilities within the demand funnel.

Go into as much detail as possible. Some might call this a Service Level Agreement (SLA) between your teams. That’s not a bad idea. The most important thing is that your teams agree to what’s written on the piece of paper. That makes it real to you and the rest of the company.

Here’s what we did to get our sales team’s buy-in.

Put yourself in their shoes. Think, “What’s in it for them?”

Some people think salespeople are greedy. While some might be, most are pragmatic. They understand their job is to make money for the company. And the more deals they close, the more money they make for the company (and the bigger their commission checks).

There’s certainly more nuance to it, but you can’t go wrong by approaching your sales team with a way for them to get more leads or help deals close faster.

One thing that was helpful: framing my arguments in ways that helped them minimize losses and maximize gains. For example:

For heads of sales (e.g., VPs, Chief Revenue Officers): “Here’s how I think we can help your team spend more time on deals that are more likely to close and quickly disqualify ones that don’t. The SDR team wants to qualify deals and pass along ones that meet their qualification criteria. If we create deals only after SDRs have had a chance to qualify them, those deals will be more likely to close and a better use of your account executives’ time.”
For salespeople (e.g., account executives): “Don’t waste your time on bad opportunities. If SDRs are sending over better-qualified deals and disqualifying weaker ones, you’ll spend more time on deals that are likely to close and waste less time with unqualified prospects.”
For sales development (e.g., MDRs, SDRs, ISRs): “Let’s work together to make sure the leads you work from marketing are likely to move forward to a discovery call and result in more deals.”

Remember, your goal is building consensus with the sales team that this demand funnel represents their world of converting leads into deals. There should be some give and take between informed opinions from marketing and sales.

Sales opinions carry weight because they’re the ones talking to customers and prospects all day and are responsible for the company’s future. So, hear them out, let them know you really listened, and think critically about how their suggestions might improve or detract from your funnel. Then get your agreement down on paper.

Building alignment between your sales team, executives, marketing team, and instrumenting your tools could take a while. With healthy debate and skin in the game from all sides, it took us about six months to launch our finalized demand funnel—all while working as best we could without a firmly defined one.

Conclusion

After you’ve…

Researched the different demand funnels;
Selected the one that fits your sales cycle;
Adapted the demand funnel’s stage definitions and hand-off criteria to your company’s maturity and sales cycle length;
Won the sales team’s agreement; and
Instrumented your marketing automation platform to track your leads within the funnel…

…you’re off to begin running campaigns.

If you’re a regular reader of CXL, you won’t be surprised to hear that you need to optimize your funnel to stay competitive. But they’re not the only ones warning against complacency:

Profitwell says overall Customer Acquisition Cost (CAC) is up nearly 50% over the past five years for B2B and B2C companies.
SiriusDecisions says buyers encounter 32% more marketing campaigns now than they did just two years ago.
IDC shows B2B businesses have to produce 50% more leads now to generate the same amount of revenue they earned two years ago.

The bottom line is that it’s getting harder than ever to do demand generation (even without the current crisis). There’s no time to rest—the world’s best funnel can still get better.