How do I grow? As software publishers, it is the question which is always on our mind. Of course, there isn’t a one-size-fits-all answer, the answer depends on a lot of variables. However, as a software publisher, there is a simple starting point that you can use to systematically determine where to focus your attention so as to grow your software business.

The Sales Funnel

There are many derivatives of the sales funnel concept, but the general idea is this: the top of the funnel are prospects and the bottom are customers. People continue to drop out as they progress through various stages of the funnel.

Below is a high-level application of the sales funnel concept to a shareware business model. You will have 4 main steps in the funnel:

• Leadgen: Marketing/PR activities
• Step 1: Visitor to your site
• Step 2: Download/Install
• Step 3: Order

Lead generation (Marketing/PR): As a publisher, you perform various marketing/advertising activities to attract potential customers. This can be any of the following: online marketing, partner promotions, PPC, catalogs, social media (reviews/word of mouth referrals), affiliates, etc.

Collectively, all of your activities drive traffic to your site – which takes us to step 1.

Step1 (Website): The goal of the website is to tell the story – that is to convince your prospect that your product solves their problem. If your site does its job, it will result in a download/order.

A customer may buy the product outright – without partaking in the trial – but generally most new prospects will download the software first.

Note: as your product becomes more popular, prospects may not come to your site, they may download/purchase through other channels. But, in the interest of simplicity, we will use the website as the starting point in our funnel.

Step 2 (Download): The prospect arrives at your site and you convince them that your product has the ability to solve their problem, so they download a trial version of your software. Here is where your product must ultimately sell itself.

Step 3 (Order): If you’ve done your job as a publisher, the customer will like the product and will continue using it. At some point, the prospect will make the decision as to whether or not he/she would like to purchase your product.

When they decide “yes”, it’s an order! That particular person made it through the entire funnel and converted – that’s the goal!

How to use the sales funnel to grow?

So, how does this help to grow your software business? It’s an analysis tool to help you find the weak points in your marketing/sales process.

As you can see, at each point in the funnel you are potentially losing customers. By analyzing the sales funnel, you can identify leaks, or under-performing segments, and then develop strategies/tactics to correct them.

Note: the tendency typically is to focus on increasing the “top” of the funnel. Focusing on getting more people into the funnel is always good – in theory the more people who enter, as a matter of percentages, the more people will come out on the bottom. This is true, but… you may find that there are greater gains available if you will focus on other points in the funnel first.

How does this work in practice? Here are some examples.

Example (Not enough traffic)

Consider you receive about 10,000 unique visitors to your site per month; your download ratio is ~20%; your download to order ratio is about ~5%; and your average sale is $100. The funnel might look like this:

Website Visitors	10,000
Downloads:	2000	(20%)
Orders:	100	(5%)
Revenue:	$10,000

Your sales funnel will produce $10,000 (100 orders x $100/avg sale) in revenue.

Your download/order ratio’s are performing relatively well, your problem is primarily a traffic (visitor problem). So, your goal would be to focus on strategies/tactics that would increase traffic (prospects) to your site.

Example (Under performing website)

Consider this example:

Website Visitors	100,000
Downloads:	2,000	(2%)
Orders:	100	(5%)
Revenue:	$10,000

Your sales funnel will produce $10,000 (100 orders x $100/avg sale) in revenue.

Clearly, your problem is an under-performing website. Your site is not effectively convincing the customer that your software solves his/her problem so they move on to a different (competitors) site .

You can spend a lot of time/effort increasing your traffic via SEO/PPC, but there is a big opportunity for improving sales simply by improving your site (downloads). If you’re website was converting 15%, that would generate $75,000 in revenue (+ $65,000). Get your website working for you first then focus on building traffic.

Example (Application not converting after install)

Consider this example:

Website Visitors	100,000
Downloads:	20,000	(20%)
Orders:	200	(1%)
Revenue:	$20,000

Your sales funnel will produce $20,000 (200 orders x $100/avg sale) in revenue.

You’ve got a lot going for you. Your traffic is good, your site is telling the story – convincing the prospect to download/install the software. Your problem is of course a low conversion rate (1%). You can up your PPC budget, redesign your webiste, but your big opportunity for improvement is your application. If you were able to increase your download:conversion ratio as high as 5%, you would generate $75,000 in revenue.

Goals and Strategies for each stage

This is by no means an exhaustive list, but I’ve outlined below a few basic tactics to help improve your business at each point in the funnel.

Traffic

Goal: The goal of marketing/PR activities is to drive qualified prospects to your site. If your traffic is suffering, you need to look at marketing/pr activities to increase awareness/visibility of your product.

Benchmark: A benchmark is difficult to ascertain, but a good starting point would be to analyze the traffic from search engines or traffic going to your competitors sites. There are a variety of sites available that will help you with this – alexa.com, Google’s keyword tool, and compete.com are a few good sources.

Here are some tactics to help improve at this stage:

• Search engine optimization
• Pay per click ads
• 3^rd party/blogger reviews
• Partner promotions
• Social media
• Download sites
• Etc…

Downloads

Goal: The goal of the website is to tell the story and convince the prospect that your product solves his/her problem.

Benchmark: A typical visitor to download ratio should be in the range of 10 – 20%.

Here are some tactics to help improve at this stage:

• Call to action
• Graphic Design/Visual impression
• Screenshots/Video Demos
• Copy – compelling and telling the story?
• Navigation/Usability
• Etc…

Order

Goal: Sell More Software! Hopefully, if you’ve done a good job with your product, prospects can use it to solve their problems.

Benchmark: 2-5% This seems low, but according to some research I have obtained, this is a fairly standard download:order conversion rate.

Here are some areas to look at to improve this stage:

• Does it meet the customers needs – does it do what it is supposed to do?
• Is it user-friendly?
• Price?
• Piracy – Piracy to an extent is inevitible, but can you make it a little harder to casually pirate the software?
• Is your trial method too generous that the prospect can complete their task(s) without purchasing?
• Are there technical issues preventing people from installing/using the software?

Caveats:

• Caveat 1: For many of you reading this, this funnel may not be “exact science”. For instance, your customers may not follow the well-defined process they may pickup the download from another site – this is especially true when using social media – and convert without having ever visited your site. There are ways to measure the exact funnel, but if you’ve never done this type of analysis, use this model as a starting point and improve your metrics over time.
• Caveat 2: I will admit, it is easy to say things like “increase your download:conversion ratio to 5% (400% increase)”, but it may be harder in practice to do. Each product is affected by many different variables – customer attitudes/perceptions, competition, external market factors, etc – so you may know that a particular metric is immovable. That’s fine, focus on the next one… The point is that the funnel helps you to analyze the sales process and to identify where you can improve, and – possibly more importantly – to measure the effect of your strategic/tactical actions.
• Caveat 3: These are by no means the only metrics you should use in analyzing your business. You may have other metrics such as geographic region, offline marketing sales, etc. Again, the purpose of this post is not an all encompassing scorecard, it is a starting point to get you thinking about measuring your business in different and enlightening ways.
• Caveat 4: The scientist in me wants to focus on one variable at a time, but the pragmatist says to focus on improving multiple areas at one time. That being said, your improvements do not have to be independently focused. But, as you are inevitably constrained by time, use this analysis to prioritize your actions.
• Caveat 5: Finally, this sales funnel is more applicable to the low-price/high-volume type of software; rather than a high-price/low-volume which typically requires “high-touch” sales processes – consultative selling, multiple interactions with the customer, onsite visits, etc..

This entry was posted on Tuesday, December 22nd, 2009 and is filed under Marketing, Strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.