Traditional Funnels Are Ruining Marketing

The idea being, you throw some leads in the top - and woosh! Money comes out the bottom! Now you’re rich. You know you’re rich and that this works because you can SEE  the coins coming out of the bottom of the funnel!

But this is the real world and marketing simply doesn’t work like that. More importantly - humans don’t work like that.

Yes people are going to tell you that if you do this step - and then this step and then this one, you can make 6 figures a month just like they do! And boy, it sounds so easy! So simple! Watch this one webinar and you can be rich just like me!

It’s tempting to believe in the marketing Easy button. But it doesn’t exist. There is no easy button. And that’s because you’re working with humans. If it really was easy, EVERYONE would be doing it, and 80% of small businesses would not shut down in their first 3 years....

This is the traditional funnel broken down:

In essence, you give a lead some bait - they take it -> you send them some emails -> they buy the thing -> send them some more -> now they buy a more expensive thing -> and then send them some more emails and they will buy your most expensive thing etc.

And this is lovely - the diagram is nice and neat, it moves left to right, nice bright colours and some awesome all important $$$ signs - that means you’re really in business.

This is the traditional low priced to high priced funnel. Or the value ascension funnel. Or funnel stacking. Or funnel hacking. Or whatever sexy name the next hot shot marketer is rebranding the traditional funnel as.

We have become reliant on tactics to create subscriber lists, and then more tactics to sell and convert.

A lot of marketers cling to the traditional funnel tactic because it’s easy. It streamlines marketing into simple to cope with processes. It pretends to simplify the mess that humans are.

But we can’t really simplify the process because we’re all human, and we’re all messy.

Our logic is deeply tempered and flawed with emotion, and we don’t think in the way that we build funnels. So in reality what is actually going on is kind of like this:

Today - I’m going to show you exactly how your thinking about funnels is flawed, how we really think, and how you can fix those assumptions so that you create marketing that actually works - I’ll give you a way to understand the human mess so you can structure your marketing to account for it.

First, let’s deconstruct the current concept of marketing funnels so you can see where you may be going wrong.

The first thing that strikes me when looking at traditional funnels is that while the purpose of the funnel is to convert the prospect, it’s not built for the prospect, it’s built for you. It’s built so that you can convert them from A to B to C. Straight away, you're coming at it from the wrong angle.

Let’s reframe that. When your prospect wakes up in the morning, are they really thinking: “I want to go and buy a lot of stuff from your company today so that I can keep you in a comfortable lifestyle!”

Ridiculous right? So why have you built your funnel like that??

What your prospect has woken up thinking is “How do I solve this pain I have” or “How can I achieve this desire?”

Your prospect is going, “I need to solve x - it’s a real problem for me” or “I really want to achieve or have y - that’s my desire”. If you prove value to them, and help them solve their problem or satisfy their desire, they will buy from you. That bit is simple.

Now you may already have this bit nailed, but here we get to the second issue: If your prospect wants something, surely all you need to do is show them the value, and provided the value outweighs the cost, they will buy, right?

Unfortunately not. That would be the Easy button attempting to exist there.

What you’re doing there is trying to build on an outmoded traditional economic model.

Here is where it gets clever: The idea that if you can show x value outweighs x cost and therefore they will buy, is part of what is called “Expected Utility Hypothesis”

Don't worry - it's simpler than it sounds!

EUH (or ew - as I like to call it) - is a traditional economical model that was widely used by banks and financial institutions to get you to buy stuff - up until the 80’s. It’s not used any more. But why?

Well EUH is what is referred to in classical economics a normative theory. Basically a theory on how people SHOULD behave.

If we were logical, we would all see that the value outweighs the risk, and we should do the thing. But we hardly ever do the thing that is good for us - because we’re human.

Effectively - your funnels are all built on EUH. You’re assuming that if you know what your prospects want, and you can prove its value, and how that outweighs the risk or cost to them, they will take you up on your offers.Totally logical. But normative. How we should behave - not how we actually do.

Because we’re human, and we’re messy - emotional stuff gets in the way of logic.

EUH doesn’t work in the real world because it doesn’t take the messy emotional stuff into consideration.

Humans are fundamentally flawed, and EUH doesn’t account for this - and neither do the traditional funnels.

You may be thinking - but why has this been working all along for all those other guys? Or even for yourself for some time? But have you also noticed that your conversion rates aren't doing as well? That despite there being more traffic on the internet than ever before, your numbers have not increased accordingly?

There is an element of right place, right time that comes into play here. As well as that of information saturation. The internet is full. And we have to adapt accordingly.

So EUH is flawed because humans are flawed and therefore your funnels are flawed too.

Now you can see the problem.... How do we fix it?

We need to start with how humans really work.

For that we need to look at a Nobel Prize winning theory in economic science:
Prospect Theory

Prospect theory is a descriptive theory - it’s how people DO make decisions, and it’s also a predictive theory, it can correctly predict people’s choices.

What makes Prospect Theory different from EUH is that it takes flawed human reasoning into consideration. It was created by Kahneman and Tversky in 1979 and it went on to win the Nobel Prize in Economic Science in 2002.

They won the Nobel prize for their work because they were able to demonstrate that people make decisions based on the potential value of losses and gains, rather than the final outcome.

Not only that, but that people evaluate how important those losses and gains are by using certain heuristics.

Heuristics are the important bit here. They are the mental shortcuts we all use to form judgements and make decisions. This works quite well in most situations, but in today’s complicated world, it often leads to logical errors or cognitive biases.

We are getting deep into behavioural economics here, but stick with me.

Understand this and your marketing will be fundamentally changed for the better forever.

What sets prospect theory aside from all the older models was that it accounts for the logical errors we make. If you understand your audience, and you know what logical errors they will get stuck on, you can help them overcome them. This allows for a much smoother sales process, and a customer that feels like you have been able to cater to their exact needs.

In today’s overcrowded online world, a personalised experience wins life long customers, not to mention setting you apart from your competition. If you can’t or won’t provide that, your prospects will go to someone who can and will.

With understanding of prospect theory, you can create your funnels to be able to adapt to the logical flaws of your audience, and that is the first step to creating a funnel that is purpose built for your prospect, rather than for yourself.

Let's look at a few logical errors or cognitive biases as an example of what you’re up against.

It is important to note that these errors are unconscious - your prospects don’t know they are making them!

There are many types of cognitive bias, many discovered by Kahneman and Tversky during their research, but here is my favourite:

The IKEA effect
The tendency for people to place a disproportionately high value on objects that they partially assembled themselves, such as furniture from IKEA, regardless of the quality of the end result.

I find this hilarious. And true - my kitchen table has my blood, sweat and tears built into it, and even though it’s a little wobbly, I made it! So it’s the best table ever.

The fascinating thing about these biases is that they enable us to plan for messy human behaviour. We can account for deviations from logic because we know our audience will be predisposed to them.

Here are 4 examples of cognitive bias that are useful to know and watch out for yourself, as well as use in your marketing:

Confirmation bias
The tendency to search for, interpret, focus on and remember information in a way that confirms one's preconceptions.
This one can be nasty - because your prospect (or yourself!) is only looking for what they want to hear - not the truth. You need to show evidence to stop this. Yay for case studies!

Denomination effect
The tendency to spend more money when it is denominated in small amounts (e.g., coins) rather than large amounts (e.g., bills).
This one accounts for why people are happier to pay MORE money, if they pay in installments, rather than a lump sum. Yay for payment plans!

Hot-hand fallacy
The fallacious belief that a person who has experienced success with a random event has a greater chance of further success in additional attempts.
Very useful for watching out for what industry experts are saying you must do and trust them on, evidence is key. Don't believe something just because you saw it on a webinar....But equally, remember your audience will fall for this too - so gain their trust by helping them see it.

Authority bias
The tendency to attribute greater accuracy to the opinion of an authority figure (unrelated to its content) and be more influenced by that opinion.
Similar to the above - evidence is your best friend. This accounts for why the big guys can sell huge amounts without road testing something - it's not their system - it's their authority. But also use evidence to  build trust with your own audience , as well as authority.

Before we move on to what this all means for your funnels, here are 2 takeaway points:

1 - People make decisions based on the potential value of losses and gains - not the final outcome
In other words, how much they will lose if they don’t do x, or what they could gain by doing y - not what they outcome will be (ie how successful they could become)

2 - They decide how important those losses or gains are by using mental shortcuts which can often lead to logical errors (cognitive biases)

Here comes the really awesome stuff: System 1 and System 2 thinking

Based on these errors we exhibit in thinking Kahneman and Tversky postulated that human reasoning and decision making is not as linear as once believed.

Rather, they suggested that we have two systems of thinking: System 1 and System 2.

System 1 is our fast, automatic, intuitive and largely unconscious mode. It’s our “lizard brain”. Made to be fast for survival. It’s emotion.

System 2 is our much slower, more deliberate, analytical and consciously effortful mode of thinking. A result of evolution favouring those of our ancestors who managed to not get into too many survival situations by learning to avoid them in the first place. It’s logic.

It is System 1 that gives you the “gut feel”, but it’s also system 1 that leads you to experience cognitive biases.

System 2 is lazy. It’s slow and energy intensive. You can only do so much system 2 thinking, so to get ahead, your brain shortcuts to system 1.

As you experience life, you build more shortcuts based on experiences. You build stereotypes and default responses. This makes us more efficient. But also prone to error.

So how does this affect your funnels and your marketing?

1. Well firstly, we need to pander to system 1. System 1 is a bully. It often overrides system 2.
   If your prospect's system 1 dismisses you, you’re going to have a bad time.
   We need to get the attention of system 1 for long enough to let system 2 kick into action. Appeal to emotion - grab the attention of system 1, and then back it up with logic, and let system 2 take over.
2. Understand that your prospects make decisions based on the potential value of losses and gains - not the final outcome - this is a system 1 activity too. Which means you need to pander to it.
3. Get clarity on how cognitive biases will be affecting the decision making process and develop strategies to overcome them.
   Your mission is to get the attention of system 1 and then keep the attention of system 2!

Ready to know how you do that?

Well you can kickstart your own system 2 by frowning at whatever you are reading. Which is a hilarious and unintended discovery of the system 1 and 2 studies. However not so useful for your funnels....

What is actually useful though is that you can kick system 2 into life by making things ever so slightly harder to read/ understand:

Princeton University psychologist Adam Alter and colleagues, examined how subtle changes in contextual cues, like changing the legibility of a font, can help switching between System 1 and System 2.

They created the Cognitive Reflection Test, which is designed to assess the degree to which System 1 processes are engaged in decision-making. Isn't behavioural economics awesome? So much research done into how we spend money! It makes me all happy inside 🙂

In the test, they ask a seemingly simple question which prompts a seemingly simple answer. The gut reaction answer is invariably incorrect.

An example of a question: if a bat and a ball together cost $1.10, and the bat costs $1 more than the ball, how much does the ball cost? If you find yourself wanting to shout out “10 cents, of course,” then you’re in the majority, but sadly also wrong.

Importantly, Alter et al. found that by making the problem simply more difficult to read - by using grayed-out, reduced-size font, participants seemed to shift to more considered, System 2 responses, and as a result answered more of the questions correctly.

The takeaway here is that you can help your prospects be a little more logical, by slowing them down.

By making it a little harder, you can get your prospects to think deeply about something - System 2 thinking.

If you can account for biases, and help your prospects think with System 2 rather than our flawed System 1 - you're creating a personalised, behavioural journey. That's where truly effective marketing is at.

So in summary the TL;DR (“Too Long Didn’t Read”) of this is that humans are messy. You can’t simply check some boxes and voila! Perfect funnel!

Nope. You need to understand your audience deeply. Once you understand your audience you can appeal to their emotion - system 1, once you have their attention, you can talk to logic or system 2.

And if you have serious clarity on their behaviour, you can pick up the cognitive biases that will be blocking your sales.

Now the question is, how well do you understand your audience?

I’m betting not enough to be able to identify what cognitive biases they will be suffering from...

If that’s the case, you’re in trouble. Because they will go find some one else who “gets them”.

To conclude: it’s not just what your audience wants and values that is important to your marketing - but also how they think and how they behave. Traditional funnels are too linear and simplistic to allow for this. Your funnels need to be adaptive. They need to be emotion and logic friendly.

Here is a bonus video that I LOVE on Life Coaching - no disrespect to GOOD life coaches (of which I know quite a few), I just love the bit about the funnels and it exemplifies how you make your prospects feel with the way you’ve built your marketing: