From funnel to flywheel

Today we live in an attention economy where every company has to fight for the attention of new and existing customers.

We’re seeing that

• competition is increasing and marketing channels are becoming ever more expensive,
• customers constantly have to be won over,
• the funnel as a framework only works to a limited extent, as it’s not customer-centric, but purely sales-centric.

So, what’s the solution? The entire approach is called the “flywheel” and is intended to provide significant support for customer acquisition and customer retention. This article explains the flywheel, its advantages, and how it’s already being used profitably in existing companies.

What’s the flywheel system and how does it work?

Marketers have been working with the classic sales funnel for many years.

That’s all very well but the traditional funnel strategy has one major disadvantage: funnels are primarily sales oriented and not very customer oriented. The flywheel puts the focus on the customer and their customer journey.

The term “flywheel” was originally coined by Jim Collins in his book “Good to Great”. The majority of marketers only became aware of the flywheel through HubSpot, which defines the term as follows:

Drawbacks of the classic sales funnel

It’s true that all the important key figures such as CTR, conversion rate, etc. can be measured and optimized with the funnel. In the short and medium term, the return on investment can be significantly increased.

The problem is that every customer, including existing customers, generates additional advertising budget costs. The classic sales funnel does not fully utilize customers' potential. The customer journey follows a linear path and ends with the purchase.

That’s a real shame because a company’s existing clientele is one of its greatest levers when it comes to acquiring new customers and getting them excited about a brand. At the same time, with the right strategy, existing customers can also be cost-effectively guided towards repeat purchases.

The funnel system views customers differently – they’re simply considered as the output of an invested budget.

Advantages of the flywheel

The flywheel promotes a different approach and expectations in relation to customers. Unlike the classic funnel, the flywheel model focuses on the customer.

The Amazon flywheel

Most of us are aware that Amazon is extremely successful. But hardly anyone knows how Jeff Bezos successfully implemented a flywheel from the very beginning.

The Amazon flywheel model is fundamentally about the customer experience. To make this as positive as possible, we work specifically with the price and its ongoing reduction.

In summary: lower prices lead to more customers. More customers result in greater sales volumes and also attract more commission-paying third-party providers to the marketplace. This approach enables Amazon to get more from fixed costs such as servers and fulfilment centers. This in turn enables price reductions, and so on.

The book “The Everything Store: Jeff Bezos and the Age of Amazon“ describes this phenomenon in greater detail.

The core concept of the approach is that when a specific phase of the flywheel is fed, the entire cycle automatically accelerates. The influx of third-party vendors and the low prices make Amazon what it is today – number 1 in e-commerce.

Flywheels in content marketing

As a content marketing agency (in German) it was the flywheel model from HubSpot that inspired us to rethink our approach. A classic content marketing flywheel is based on three reciprocal phases: attract, engage, delight.

In the first phase (Attract), you attract the customers' attention. At the same time, you eliminate possible information and communication barriers between you and the company.

We see the difference between the funnel and the flywheel in the next phase of the flywheel (Engage). In this step, you strengthen the relationship with customers by actively encouraging them to engage with the company.

Once this stage has been successfully implemented, it’s followed by the Delight phase. The aim here is to excite customers and help them to achieve their personal goals using own content, software or products.

Only then will they enthusiastically recommend the product or service to their work colleagues, friends and acquaintances (word of mouth). Once this happens, it leads to the inexpensive acquisition of more high-quality new customers while simultaneously tying existing customers more closely to the company.

Then everything goes back to the “Attention” phase. The difference is that if you correctly implement the flywheel, the wheel will turn faster and faster. Existing customers go through all the phases repeatedly while ever more new customers join the company's flywheel.

Have flywheels now replaced funnels completely?

In fact, funnels and flywheels are not mutually exclusive models. They tend to complement each other and support companies or marketing strategies in equal measure.

Funnels are particularly useful for testing marketing activities and tactics. However, the classic linear funnel model is not economically viable in the long term because the customer is (and always will be) king!

And that’s exactly how customers need to be treated. This means you need to implement the flywheel strategy exactly where the classic funnel strategy ends. It will allow you to implement both models in the best possible way.