On Funnels and Flywheels

There’s a lot of jargon around marketing funnels, motions, and flywheels. Here’s what you should know.

4 min. read

An industrial flywheel at a defunct Bethlehem Steel plant

There’s been a lot of talk lately about flywheels.

Every year Hubspot holds its user conference, Inbound. I should preface my next comments by saying, I’m a fan of Hubspot. I’ve used their product for years and I’ve spent a lot of my career doing marketing for companies at the size Hubspot is optimized for. One of my favorite growth blogs is For Entrepreneurs which is run by David Skok, an early investor in Hubspot. 

Basically, I have a bias in favor of Hubspot on most things. 

Hubspot announces the death of the funnel

In Sep 2018 at Inbound, Hubspot founder Brian Halligan gave a keynote in which he announced the retirement or death of the marketing funnel in favor of a new concept, the marketing flywheel. I’m sharing a YouTube link to his talk below. And you can read more about this on the Hubspot blog.

I get it. Funnels are SOOOO last year. Marketers everywhere should stop what they are doing, do not pass go, and immediately make the following change.

WTH? Really?

This raised eyebrows for me. 

I get it. The funnel model might not encompass everything about the customer experience. It’s essentially a production line with customers as it’s output. 

Maybe that tempts marketers to ignore the value of existing customers, to pass them off as client success’s problem now, and to miss out on some of the value to be found in an avid customer base.

But look at the flywheel graphic. Where in this merry-go-round do customers actually get on? 

The usefulness of the funnel

How did we get the funnel metaphor in the first place?

While probably in use in some form or fashion for years, one of the best-known articulations of the funnel is the SiriusDecisions Demand Waterfall. (A new diagram was introduced in 2017, but an examination of the changes will have to wait for another post.)

This introduced many of the concepts now ubiquitous among marketers and populating Salesforce opportunity pipeline stages everywhere. Concepts like inbound vs. outbound, marketing qualified lead, and closed won opportunity. 

There’s a lot of utility in viewing the customer acquisition process as linear.

The customer story has a beginning, a middle, and an end. You can examine each step in context of the one that came before and the one that should come after.

I saw Halligan’s flywheel model, and asked, how can I execute a CRO strategy with that? 

While not exactly similar, this struck me as reminiscent of another fallacy that gets a lot of play with marketers. The cost of retaining a customer. 

Image Credit: Pillars of Inflection

The cost of retaining a customer, so the saying goes, is 6x (or 5x or 7x) less than acquiring a new one. Heavens-to-Betsy, we should all abandon our new customer acquisition efforts and stop wasting all that money!

As I explain this in my book, Pillars of Inflection, cost isn’t the only concern marketing has. What about the impact on revenue? It turns out new customers have an average of 12x the impact on revenue that existing customers have (according to a study conducted by Eric Shulz).

You cannot retain your way to growth in customers or sales. 

You cannot retain your way to growth in customers or sales. #flywheel #CAC #CAM #customeracquisition #marketing  Click To Tweet

Suffice it to say, that I was unconvinced that Hubspot had articulated something truly revolutionary about how marketing was changing, and ought to be done. 

I had written flywheels off as only so much ephemeral marketing puffery.

And then…

The latest on flywheels from Jim Collins

Then, I caught Jim Collins’s interview with Tim Ferriss on the Tim Ferriss podcast. 

I am an unabashed fan of Jim Collins. I’ve read all his books. Good to Great, Built to Last, How the Mighty Fall, Great by Choice—you name it, I’ve read and deployed tactics from these books. 

Collins has released a new book. Well, not a book exactly. He calls it a monograph

I had to look that up. It’s a shorter, more direct writing, and tied inextricably to a concept from his previous and best-known book, Good to Great. The title? Turning the Flywheel.

And I was forced to revisit the idea of flywheels for marketing and for growing companies in general. 

Turning the Flywheel was a very good read. I particularly enjoyed Collins’s description of how relentless execution in step A, creates a certain inevitability in step B. For example, if you continually execute on your well-defined sales and marketing motion, the impediments to scale reveal themselves. You hire more sales people. Or, you invest more in your proven customer acquisition channels. 

Why?

Because you can’t ignore that these are the next natural and inevitable step in your growth. Your company is outgrowing step A and demands the next action to service it’s progression.

On funnels and flywheels

I’ll be honest, I had a predisposition in favor of flywheels. 

Left: Medieval kickwheel-style potter’s wheel. Right: the modern version of the same technology.

Here’s a picture of a medieval and modern kickwheels used in making wheel-thrown ceramics. In college, I used one like this. 

To operate it, you kick the wheel. Just like an industrial flywheel, it gains momentum with each kick. Once it’s up to speed, the flywheel turns almost on its own with smaller kicks now and again to keep things going.

So, should I drop the tried and true funnel metaphor and focus on the flywheel? Or should I stick with what I knew and dismiss the flywheel as a fad that was just having a good season?

At the end of his monograph, Jim Collins delivered the answer. In his conclusion, he summed up lessons from all of his previous works in a single principle. One key that separated winner companies from losers, champions from also-rans, and survivors from failures.

What was the key? Discipline.

Discipline to make difficult choices, to confront brutal facts, to avoid looking for rescue in anything but execution. Discipline to eschew distraction, but openly test the merits of innovation.

And I think that’s what’s required here. 

The funnel isn’t dead, nor has its usefulness seen its day. It’s every bit as useful to marketers as it always has been. But so too is the flywheel. There are some beautiful lessons in the flywheel model.

Savvy marketers don’t need to pick. This isn’t a boolean OR function, it’s an AND. 

Funnels and flywheels can coexist, and I think should coexist in the highest functioning of marketing teams.

What do you think? Share your thoughts in the comments below.


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@cmo_zen is a blog of micro meditations for marketing leaders, designed to help them find clarity and peace in the marketing maelstrom.

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