The Competitive-Positioning Compass and The Sales Funnel

What is the Competitive-Positioning Compass? Why is the Competitive-Positioning Compass important? What is a Sales Funnel? and How can the Competitive-Positioning Compass and the Sales Funnel be used together? 

This week's blog will answer the above questions. We will also look at how we can apply what we learn from these answers in our entrepreneurship project.

Competitive-Positioning Compass

Figure 1: Competitive-Positioning Compass

Over the last 3 blogs, we have spoken about the Technology Adoption Life Cycle (TALC). We have discussed the different aspects of the TALC, including the Chasm portion. "As products move through the TALC, the domain of greatest value to the customer changes" according to Geoffrey Moore, author of Crossing The Chasm. There are four domains of value in high-tech marketing: technology, Product, Market, and Company. The Competitive-Positioning Compass, shown in figure 1, illustrates the dynamics between the 4 domains and the different stages of the TALC. 

The Vertical Axes of the Compass measures a buyer's attitude towards the proposed value proposition of a product. The Horizontal Axes of the Compass measures the range of the buyers' interest in and understanding of high-technology issues. 

As we can see from figure 1, the story begins with the "techies", for them the technology is the most important domain. These are people that are specialist in the technology domain. As the product develops in the early market, the domain of importance shifts from technology to product. The product domain is important for the "visionaries". Afterwards, the "chasm" must be crossed to reach the "pragmatist", for these people, the market is the most important domain. Finally, as the product is developed in the mainstream markets and reaches the "conservatives" the company becomes the most important domain.

The Chasm Transition portion of the Compass, in figure 1, represents an un-natural rhythm. This transition requires moving from an environment of supporters among the visionaries to an environment of skeptics among the pragmatists. The transition is a move from the familiar ground of product-oriented issues to the unfamiliar ground of the market-oriented issues. 

Depending where a product is on the Competitive-Positioning Compass defines the challenges that will be faced by the company selling that product. A company must adjust its sales and marketing strategy as it moves through the Competitive-Positioning Compass. 

The Sales Funnel

Figure 2: An Example of a Sales Funnel

A sales funnel is a tool that can be used to describe the change in the number of people that go through the sales process of a company. Figure 2 on the right shows an example of a sales funnel. In this example, we see that the company has 1000 leads that are generated. 10% of these leads become prospects, resulting in 100 prospects. And finally, 10% of the prospects become customers, leading to 10 customers in this example. Every business can build a sales funnel. The values provided in this example are not specific, they are different for different companies and different industries. Understanding the science of the sales funnel is very important for success of a business.

Each company can build its own sales funnel. The stages of a sales funnel are not limited to the 3 stages in the example in figure 2. A company must identify the key stages of their funnel and try to anticipate the numbers and ratios needed. The goal of the sales funnel is to understand what it takes to acquire a new customer. In the example in figure 2, 10 customers were acquired from a 1000 leads. This means that every 100 leads generate a new customer. 

The stages of a sales funnel and the values associated with the sales funnel are not necessarily static. The stages and values can change as the product related to the sales funnel goes through the different stages of the TALC. Therefore, to be able to properly anticipate and estimate the values and ratios of a sales funnel, a company must first identify where they are positioned on the Competitive-Positioning Compass. Depending on the location, the values on the funnel will change. For example, as the pragmatists adopt a product, the total conversion rate of leads to customers will be higher than at the innovators stage. The total conversion rate is the percentage of people who enter the top of the sales funnel and make it out the end. In the example shown in figure 2, the total conversion rate was 1%.

Application: Entrepreneurship Project

What we discussed above can be applied in our entrepreneurship project for the Telfer Business School class of MBA6262. As we discussed in our last blog, our product idea currently falls in the "Early Adopters" group of people, also known as the visionaries. Based on the Competitive-Positioning Compass, we fall in a category where people are specialists and supporters of the product, the most import value domain for this group of people is the product. Therefore we need to adjust our selling strategy to showcase this value domain. However, to reach the main stream we need to cross the chasm and make it to the side of the compass that values the market domain. Therefore we need to be ready to adjust our value proposition as we cross the chasm.

From the validation work that we have completed so far in our project, we can build a simple sales funnel. The first stage of the funnel shows the number of individuals we attracted. We used Google Adwords, Facebook and other methods to drive traffic to our landing page. The second stage of our funnel is the number of potential customers that saw our ads and clicked on them. Between stages 1 and 2, we had a conversion rate of 1.45%. The third stage shows the number of people who left us their emails. Between stages 2 and 3, we had a conversion rate of 8%. This is a very good conversion rate, meaning that 1 in every 12 people who visited our website showed interest in our product. 

From the validations we have done so far and from the values calculated in our sales funnel, we can conclude that our product is attractive to a good percentage of individuals. Our idea is viable. For these reasons we are very interested in pursing the idea and going forward with the project. 

Sources

Moore, G. (2014). Crossing the chasm: Marketing and selling high-tech products to mainstream customers (3rd ed.). New York: HarperBusiness.