What is a sales funnel

Want to transform total strangers into not only loyal customers but brand evangelists? The secret is in the funnel . . . the sales funnel, that is.

Your sales funnel lays out a clear roadmap for how a lead navigates through the buying journey (and therefore your sales pipeline also.) The specific “stages” of the sales funnel can vary—sometimes, there are more, sometimes fewer—but generally, they’re defined by what the lead is thinking or doing regarding your offering at different parts of the process.

While each company and customer is unique, there are general steps that organizations can take to make a sales funnel work for their needs.

In this article, we’ve broken down what a sales funnel is, the core sales funnel stages, and what you can use to effectively map out and manage your business’ sales funnel.


What Is a Sales Funnel?


A sales funnel is the visualization of a multi-phase journey where a casual observer is transformed into a loyal buyer. Every business’ customer goes through a buying journey. One that goes from them never having heard of the company to being a satisfied and, hopefully, long-term customer.

It’s referred to as a “funnel” because, much like an actual funnel, you’ll have fewer leads each step of the process as you go down. This is vital because it will help you weed out casual observers from genuine prospects. As your potential customers reach the lower stages of the funnel, you can be more confident in their quality and potential revenue value.

Whether or not you have mapped yours out, every business has a sales funnel. By consciously mapping out a visual depiction of your sales funnel, though, you can identify weak points in the buyer’s journey and create a near-frictionless experience for your ideal customers.

This will enable your sales reps and marketing team to provide valuable information and attention when your prospect wants it and offer the right insights at exactly the right time. For example, your customer may not be willing to discuss your various packages if they haven’t even decided whether your product can solve their problems. However, when you have your sales funnel mapped out, you can perfect your sales efforts.


How Is a Sales Funnel Different from a Sales Pipeline?


What is a sales funnel
While a sales pipeline describes the SELLER's journey through the sales cycle, the sales funnel is the buyer's journey from awareness through action.

The answer to this question lies in the sales funnel definition. As you can see above, the sales funnel is from the buyer’s perspective and follows where the buyer mentally is along their path to making a purchase decision.

Alternatively, the sales pipeline is from the seller’s side of the process and includes the variety of sales activities that sales reps perform to help drive the buyer from a lead to a customer. These include things that revolve around lead generation, qualification, and nurturing.

With clear sales funnel stages, sales managers have the insight needed to proactively take advantage of growth opportunities and tweak the relevant pipeline actions for each stage of the funnel. You’ll be able to pinpoint any unnecessary friction that leads may be encountering in the buying journey, address it, and plan for long-term growth.


The Stages of a Sales Funnel


Sales funnel stages
While business can customize their sales funnel stages, most find that these stages best describe their buyer's journey.

A sales funnel can be broken up into several different stages. Each step of the process qualifies the prospects and further establishes their intent to buy. As the lead goes further down the funnel, the more time and energy they will take. How long you need to spend on each step of the funnel depends on your product or service.

Different types of businesses could also have varying stages in their sales funnel. Typically, sales teams with higher dollar items will not only have to spend more time at each phase of the sales funnel, especially the Interest phase (see more on this stage below), but they may even break the Interest stage down further into Discovery and Evaluation stages.

But, in general, there are four core sales funnel stages: Awareness, Interest, Decision, and Action. If you are wondering how to build a sales funnel, it’s important to understand these four stages. Within each stage, there are distinct buyer behaviors that occur:


Awareness


The term “awareness” refers to two things in this stage. Firstly, the lead’s awareness of their problem or need. Secondly, this stage is where the lead first becomes aware of your company/offering, largely due to the sales prospecting efforts of your team as well as the buyer’s own research. During this stage, the buyer will be:

  • Researching what features they would like in a product/service
  • Asking friends and family for recommendations
  • Reading online reviews
  • Starting to initially browse options from different sellers to find out what is out there

This stage will always be the largest part and very top of your sales funnel for one simple reason: people can’t buy your solution if they don’t know that they need it. So, this stage will be filled with a large number of people who are at the very beginning of their buying journey.

From your team’s lead qualification process and their initial sales efforts, some of the leads from this stage will move onto the next stage of the sales funnel.


Interest


This phase is the second core stage of the sales funnel. At this point, the prospect will evaluate your offering against both their current level of interest and the offerings from your competitors. During this part of the buying journey, they’re hoping to “discover” all the options available to them to help solve their problem or pain points. Some things that have a massive impact at this stage are:

  • Price
  • Success guarantees (money back, etc.)
  • Features
  • Benefits
  • Testimonials

During this time, your prospect is also comparing your solution with your competitors’.  They will use all of the information they’ve acquired in this stage to narrow down their search and get to a point where they are ready to make a decision.


Decision


At this stage, the prospect is ready to make a decision based on their research and the information that has been presented to them. They have zeroed in on a couple of options and are in the final step of trying to determine the best one for them before making a purchase.

During this stage, your prospects will be digging deeper into your pricing and the different options you offer. They will compare your company’s different packages and other factors to decide on which of your offerings is going to be the best fit for them.


Action


As the last stage of the sales funnel, this is the smallest section. At this point, the prospect takes action on the decision that they have made and either pulls the trigger and buys from you or decides to not purchase your offering. If they do buy your product, they then become part of your company’s customer ecosystem and the focus shifts to long-term retention and upsell/cross-sell opportunities. If they do not buy at this point, the best move is for them to be put into an active nurture campaign to try and convert them into a customer further down the road.

Even after you’ve mapped out your sales funnel, there will be times when you need to concentrate on different parts of it. As your business grows, for example, or if the economy becomes more or less sales-friendly, you may have to adjust your funnel to account for these factors. For example, your team may need to spend more time during the awareness stage if you are not attracting enough leads or spend more time qualifying leads if your marketing efforts have grown.

By recognizing and developing each stage of the funnel, you can make sure that your team is spending time where it counts the most.


Using Templates to Visualize Your Sales Funnel


sales funnel templates
Templates to visualize sales funnels can be an easy place to start understanding the sales funnel stages. Source: EDrawSoft

The most important thing is that you can visualize exactly what your sales funnel looks like and easily make changes to it along the way as needed. So where do you start when it comes to doing this? One option is with a pre-built sales funnel template.

There are templates you can use to visualize your buyers’ journey, start to pinpoint any areas of friction within that journey, and strengthen the activities within your sales pipeline to mirror it. When you are looking for sales funnel examples, these templates offer a starting point to help build out exactly what your sales funnel looks like for your business and begin to strengthen it.

Take a look at our full article on sales funnel templates for five great examples of pre-built templates you can use to get started.


Optimize the Management of Your Funnel Stages with Powerful Sales Funnel Software


sales funnel software
Sales funnel software like Hubspot can help your team manage your sales funnel. Source: Hubspot

Excel or Google Sheets templates can be a good place to initially visualize your sales funnel, but for successful long-term management of it, your answer is going to lie in some of the powerful software options that are available.

From CRMs to sales funnel-specific software, there are some great tools available that can help you and your team effectively manage your sales funnel and, more importantly, scale it as needed over time. Sales funnel management/tracking software capabilities also more effectively enable you to identify speed bumps and problems that may be present in your customer’s journey from the beginning.

Check out our article on sales funnel software for some of the best options in tools you can use.


Take Advantage of Powerful Tips for Successful Sales Funnel Management


Your goal should not just be to simply map out what your business’ sales funnel looks like. You should then be using that sales funnel as a guide to help you and your team further improve processes and increase revenue opportunities.

There are some tips to keep in mind while building and then managing your sales funnel to ensure it serves as the most effective map for you and your team. For example:


  • Don’t overcomplicate your funnel - Your funnel should not be broken out into unclear or unnecessary stages. A clear and direct sales funnel will equal an effective sales pipeline.

  • Focus on opportunities for improvement in the earlier parts of the sales funnel - To help improve opportunities for revenue increases, look towards the beginning stages of your sales funnel. Streamlining the buying process at the beginning, where areas of friction usually lie, will be significantly rewarding in the end.

For more tips on ensuring that your sales funnel is successful, check out our article on building robust sales funnel stages.


Continue to Analyze & Improve Your Sales Funnel


A sales funnel should never be done. Instead, it’s vital to take time to review it to make sure it is as smooth and effective as possible. When taking the time to perform a funnel analysis, ask yourself:

  • Have there been any major changes since creating your sales funnel?
  • Are you attracting enough attention during the awareness phase?
  • Is there any part of the funnel where you are losing a lot of prospects?
  • Is there any point where reps are losing track of potential customers?
  • What actions typically land a sale?
  • Do your customers continue to come back to buy from your company again?

An analysis will help guide you in improving your sales funnel and focusing your efforts. For most businesses, not everyone is a good fit for your product or service. By perfecting your funnel, you can make sure you attract and spend time with the right type of customer.

A regular review of your sales funnel also helps keep potential prospects from getting lost between steps. If there is a weak part of your funnel where customers lose interest, or you fail to contact them, you can concentrate your efforts on improving that stage.


Use Key Sales Metrics to Measure the Success of Your Sales Funnel


There’s no better way to gauge success than through tracking metrics and KPIs. But, with hundreds of different business metrics, it’s no surprise that information overload can happen quickly. As a sales leader, the last thing you want is to confuse the sales analysis and have a pile of worthless data.

There are some core sales metrics you can focus your attention on tracking to ensure you are accurately measuring the success of your sales funnel and therefore your sales pipeline to mirror it. These metrics include:


New Opportunities Gained


Tracking the number of new leads going into your sales pipeline will help you and your team track the success of the Awareness stage of your sales funnel and understand what fuels your success. You should be tracking both the number of leads and exactly what channel they are coming from. This metric can also give you insight into your market dominance and the demand for your product or service.


Qualified Leads


Measuring the number of leads that turn into qualified leads will help you gauge the success and quality of your team’s prospecting efforts (the first sales pipeline stage) and the effectiveness between the Awareness stage and Interest stage of the sales funnel. Tracking this metric will also give you an idea of how effective the lead qualification efforts are, especially if reps are qualifying a lot of leads but not achieving a high close rate.


Pipeline Conversions


Tracking pipeline conversions means knowing the percentage of leads moving from one stage of your pipeline to another. This metric can be tracked on both a team level and individual rep level and help pinpoint any areas of friction in the sales funnel and any bottlenecks in the sales pipeline.


Win Rate


This metric measures the number or percentage of wins based on the opportunities gained. With this, you can effectively gauge the success of your sales funnel and the corresponding sales actions, both on a team level and an individual rep basis. The win rate can also help you pinpoint the number of opportunities needed to meet required business targets and set measurable goals for your team.


Revenue/Deal Size


Past just tracking revenue, it’s important to understand the deal size and how much revenue each deal is bringing in. You want to look at things like how the larger deals are moving through the pipeline. Understanding deal size will enable you to proactively boost efficiency and results.


Sales Cycle Length


Of course, most sales are not going to happen immediately, but tracking your sales cycle length will help you make sure that the buyer’s journey (and therefore your sales process) is not taking longer than it should. When that starts happening, your team will be letting too many opportunities fall through the cracks. Measuring your sales cycle length will ensure that your sales process is optimized for the best effectiveness.


Sales Velocity


Tracking your team’s sales velocity will show how much revenue is generated monthly and help you and your team understand the worth of their efforts. Of course, your sales pipeline is not dependent on your sales velocity but tracking it can help your team maximize the efficiency of the sales funnel and the pipeline.

Check out this sales velocity calculator from Heinz Marketing to help you measure this metric.


Retention


A seamless sales funnel and well-executed sales strategy will result in highly loyal customers. These customers can continue to provide new leads in the form of referrals or even more deals in the form of upsells or cross-sells. So, tracking retention can help you understand the success of your current funnel and sales process.


Putting It All Together for a Strong Sales Funnel


In sales, it’s all about closing the deal as efficiently as possible. The first step in doing this is clearly mapping out your business’ sales funnel. Once you have a sales funnel that works, it’s time to optimize your pipeline to make it easier, more cost-effective, and less time-consuming.

To do this, audit your funnel and find places where leads are dropping off. For example, if you have a lot of people who ask for demos but aren’t converting, maybe reconsider how you structure your demos and the type of information you give during them.

With effective sales funnel management, you can find the best ways to turn casual observers into repeat, evangelical customers. Utilize the resources we’ve covered above to ensure the success of your sales funnel. Give it a try today!