Flip the Funnel: How to Use Existing Customers to Gain New Ones [ハードカバー]

Marketing consultant and blogger Joseph Jaffe was the keynote speaker at the MarketingSherpa Email Summit in January 2010. Each member of the audience received a copy of Flip the Funnel courtesy of the event's sponsor. I've just returned from the conference and read the book on the trip home.

As is common in business books, Jaffe synthesizes a few new facts and concepts, with back-to-the-basics common sense, a collection of case studies into a strongly presented New World View. Jaffe's main point is compelling. The funnel that gets flipped in the book's title is the new business acquisition sales funnel of AIDA: Awareness, Interest, Desire, and Action.

Jaffe asserts that in today's new media environment - fueled by new social media connections - companies should instead focus on customer retention by having the highest quality customer experience. By focusing on the funnel that begins with a customer's first purchase, delighted customers can then be activated to become evangelists for the company. Thus, the company will grow it's customer base through a powerful word of mouth effect.

Jaffe's new flipped funnel is ADIA: Acknowledgement, Dialogue, Incentivization, and Activation.

As a Marketing Director who is developing a new social media strategy, Flip the Funnel has caused me to view our plans with a new perspective. On Monday, I will be taking the concepts from his keynote and the book to my colleagues at MCH, and I will be incorporating some of the ideas into my strategic plan.

That said, the book isn't perfect. It would have benefited from sticking closer to its most important concepts. Also, some of its case studies and examples aren't fresh. The YouTube PR horror stories of Domino's Pizza and United Airlines have already made the rounds. I spotted some typos and minor factual mistakes, too.

All in all, I recommend the book, and I highly recommend Jaffe's speaking events. He's a terrific presenter with an important approach to business in the age of social media.

Synopsis: It's more profitable to grow your business by convincing current clients to buy more often and refer others, rather than spending most of your time and money chasing new clients. The subtitle says it all: How to use existing customers to gain new ones.

By creating a more memorable customer experience and acknowledging your clients, you set the stage for increased customer loyalty -- and profits.

Like Delivering Happiness by Tony Hsieh, this book has a timely message. Anything you do to build loyalty and word-of-mouth with your existing clients in a recession will pay you back in spades.

Three takeaways:

1. Flip the funnel

Traditional marketing dumps many prospects in at the wide top, to get out a small number of customers at the bottom, where the process ends. This is time-consuming and costly.

By flipping the funnel, you can start with the first purchase and turn a small number of existing customers into many new ones. This can be faster and less expensive, because you are building from a base of people who already trust you -- your customers.

2. Deliver a memorable customer experience

The customer experience is the sum of all contacts, transactions, and encounters between customers and your company, your brand, your people, and your products and services.

Companies like Apple, USAA Insurance, Virgin America, Zappos, and others put serving the customer ahead of profits in the NOW, when customer service happens. This has made them highly successful -- and profitable -- over the months, quarters, and years that follow.

3. Do more of what really matters

You can grow your business in four ways: getting more clients, getting them to buy more often, getting them to spend more, and getting them to refer their friends.

Most businesses spend most of their time on money on the first goal only. This is insanity. Don't be insane. Instead, follow Jaffe's ADIA model:

Acknowledge - Clients, like all people, crave recognition. Examples: a personal thank-you note, regular progress reports, a gift.

Dialogue - Encourage clients to engage in conversation by giving them multiple ways to contact you, such as Twitter or the old-fashioned phone.

Incentivize - Encourage clients to recommend your business to their friends. Example: Reward them, either in cash or with gifts, for every new client they send your way.

Activate - Use social media to communicate with your clients, and encourage them to pass the word via blogs, Twitter, Flickr, YouTube, and Facebook. Example: Create a money-saving tip sheet that clients can download from your blog and share with friends.

Overall, though written mainly for big dumb companies, this book can benefit nimble smart companies that adapt and adopt the ideas.

As a consumer, I sure do like Jaffe's ideas, unfortunately, Jaffe, like pretty much everyone else endorsing similar ideas, fails to address the fact that customer service costs money. Like another reviewer mentioned about Jaffe's airline experience, treating customers to full refunds, discounted flights when inconvenienced, and other measures is simply not a feasible strategy when most flights barely make a few dollars profit per customer.

The real problem Jaffe and similar authors ignore, is the fact that in the vast majority of mature markets, price is a primary factor for most customers and customer service costs money. Even something as simple as employees speaking to customers in a "nice" way when dealing with complaints costs money...you have to train those same employees on handling customer complaints more effectively. Nearly every single aspect of improving a customer's experience costs money, and when the market clearly declares that it would rather have ill-tempered employees or limited interaction with the company than price increases, Jaffe's entire model breaks down.

Another practice Jaffe indicts are company websites without contact info (other than support request forms). I own a web marketing company and we also do web development and design. More than 90% of the customer support issues we have are user error. I've spoken with others in the software business and I'd venture to guess they'd all have similar stories. We currently service those customers, but we've had to move to a premium support model where we charge hourly for support after the first month because we would have to significantly raise prices in order to service all those requests. While we get plenty of complaints about not providing free support, our marketplace has clearly spoken that price is far more important than service.

I've also tried that customer-obsessed service model in the past when I was in the mortgage business about 10 years ago. Of all places, the mortgage business (in the US) was overrun with shady companies trying to bilk customers out of every dollar they had, so I thought customers would really appreciate a loan officer taking the time to try and save them money on their house payments and help them find a mortgage program that would fit their goals the best as opposed to just selling them whatever made me the most money. I thought, after these customers see how much I truly care about their welfare (and I did), they would undoubtedly send me referrals and become lifetime customers. Didn't happen. Not even close. Don't get me wrong, I absolutely had a number of customers who swore by me and flat out told me they wouldn't work with anyone else. Unfortunately, they were out-numbered by customers complaining that my closing costs were 10% higher than Ditech's, even though I'd spend hours and hours on the phone going far above and beyond what any other loan officers were doing.

That was a lesson I only had to learn once, and that lesson was, even though I, personally, look for a company with a good balance between price, service, and a quality product, most people don't do that. Most consumers place significantly more weight on price when making a purchasing decision...to the extent that they'll ignore long-term cost increases (due to poor quality, poor service, etc) in favor of short-term cost savings. Entire industries have been built around this concept.

Jaffe mentions Apple as an example of a company that "gets" service, specifically referring to their "Genius Bars" where you can get your computer serviced by experienced and helpful staff. That all sounds great, but Apple computers are significantly more expensive than their PC equivalents, and as a result their market share is only a small fraction of the entire computer market. Let's also not forget the fact that Apple has a visionary leader in Steve Jobs and an incredibly talented staff pumping out unique products that nobody's tried before...not to burst your bubble, but it's highly unlikely you have a similarly-capable team. Let's also not forget that there was no serious competitor to Windows before Apple took off so the market was hungry for an alternative.

The bottom line is the best chance a business has of growing is by cutting costs, and customer service is expensive (especially in Tech, which this book seems to be focused more on).