What Is A Sales Funnel: The Ultimate Guide

If you’re a business owner, you’re probably using — or have heard of this buzzword:

Sales Funnel

You’ve probably been told that you need a sales funnel, but don’t understand its purpose and value.

In this post I’m going to explain everything you need to know and more:

• What is a sales funnel?

• Sales funnel stages
• Sales funnel vs. sales pipeline
• Building and managing sales funnel using CRM software
• Sales funnel key metrics

What Is A Sales Funnel?

The sales funnel visually describes the sales process from initial contact to final sale from the seller’s perspective that a prospect goes through before becoming a customer. A funnel is used as a metaphor because a large number of potential customers enter the sales cycle, but only a small percentage of these people actually end up making a purchase.

Sales Funnel Stages

The origin of the sales funnel goes way back to 1898, when E. St. Elmo Lewis an advertising advocate developed a model which mapped a theoretical buyer journey from the moment a brand or product attracted consumer attention to the point of action or purchase.

St. Elmo Lewis’ idea is often referred to as the AIDA-model, an acronym which stands for Awareness, Interest, Desire, and Action.

This model is summarized below:

• Awareness: People have to know a product or service exists before they can buy it.
• Interest: Salespeople pique curiosity, and potential customers learn more about the product or service.
• Desire: Having learned about the product or service, would-be customers decide they need it or want it. Salespeople play a key role here too.
• Action: The customer follows through on their desire and makes a purchase.

Considering that AIDA was first proposed over a century ago and is more product-centric than buyer-centric, the model has been updated to be more relevant for today’s digital world where the buyer has more power than ever before.

The following 3 sales funnel stages are the foundation for a modern day sales funnel. It’s directly correlated to the buyer journey, however each stage can be broken down into further steps based on your business for more granularity.

• Awareness: Buyer becomes aware of their problem or issue. They look for solutions, discover products or services, and pursue opportunities.
• Consideration: Buyer evaluates different products to address challenges, and engages with sellers.
• Decision: Buyer decides on the solution for his needs.

Now that you know what the sales funnel, read on to learn the difference between a sales funnel and a sales pipeline.

Sales Funnel Vs. Sales Pipeline

As you can see like a sales pipeline, the sales funnel is split into stages, however, the focus of this model is entirely different. 

Sales Funnel

The sales funnel measures the conversion rate of leads between each of the stages awareness, consideration, and decision.

Sales Pipeline

The sales pipeline is comprised of the stages in the sales process that a sales representative takes to help move the deal through the sales cycle from start to close.

Sales Funnel Stages

By assigning contact lifecycle stages to your lead database you will be able to get clarity on how many leads are moving through your sales funnel, your conversion rates, and the overall health of your sales funnel.

In order for your sales process to have a successful conversion funnel and provide value for your leads and subscribers, you need to have a content strategy for each stage in the buyer journey.

Read on to learn about each of the contact lifecycle stages and the type of content that you need to have available to increase conversion rates.

Step 1. Awareness (Top of Funnel)

Awareness is the first stage of the buyer’s journey. Buyers in the awareness stage are in the top of funnel (TOFU) and are labeled as subscribers or leads in your CRM software's lifecycle stage.

In this stage, your potential customers are facing a challenge and are researching to learn more about their problem by searching online. 

Subscribers

They have either discovered your solution via online ads, blog posts, social media and more... 

At this stage, your objective is to educate your prospects about their problem, you should not be trying to sell them on your product or service. Instead you should be demonstrating that your company is a leader in solving the pain points that they are experiencing.

You can use the following type of content to help educate them on the pain points:

• Blog posts
• videos
• whitepaper
• infographics 

Leads

A lead is a contact that has shown interest in your company, product or service based on behavioral activity which may include:

• Downloading an ebook
• Attending a webinar
• Subscribing to a newsletter

While not fully qualified, they are loosening the status quo.

Step 2. Consideration Stage (Middle of Funnel - MOFU)

Buyers in the consideration stage are considered to be in the middle of the funnel. The contact is classified as a Marketing Qualified Lead (MQL) or Sales Qualified Lead (SQL).

At this stage, your leads have decided to to action to solve their problem and are actively looking out for solutions that can help them achieve their goals.

Your sales development representative (SDR) or business development representative (BDR) initiates a discovery call, sales meeting, or demo with the prospect to identify their challenges or pain points. 

During this call the representative should be focused on getting the prospect to commit to change. They should express interest in continuing the conversation before going to the next stage. 

Marketing Qualified Lead (MQL)

MQLs are leads that have shown a substantial deal of interest in your product or service.

This increased interest can be identified through behavioral activities like visiting a pricing page, downloading a case study, attending a webinar and more. By using lead scoring in your CRM you can get notified automatically when these buying signals are triggered. You can set a scoring strategy that changes the lead's status to MQL if they meet the scoring threshold.

Sales Qualified Lead (SQL) 

A Sales Qualified Lead (SQL)  is a Marketing Qualified Lead (MQL) that sales has accepted from marketing. Your inside sales team will reach out to the SQL and confirm they are a good fit before scheduling them for a demo. 

It's important for your sales team to stay focused on aligning the solution to the pain point of the buyer. If they don't align then the lead is not a good fit and they should be returned to marketing. 

They should validate that your solution is viable and they need to provide you with information on who are the decision makers at the organization before you move them to the next stage. 

Step 3. Decision 

The final stage in the buyer journey is the  decision stage, where the intent is to close the deal. The buyers in this stage are classified as opportunities or customers. 

The buyers have received approval from upper management, they’re ready to select a vendor and make a purchase. 

Opportunity

An opportunity, is a qualified contact or account that has met all the qualification criteria in the sales process and now represents a sales opportunities. 

It's important to be prepared for objections prior to closing.  You are likely to encounter questions, concerns, and even doubts in this stage. This is your opportunity to be prepared for the objections in a advance, so that you can close the deal with confidence.

Customer

This is the stage where sales opportunity has converted into customer or they exit your sales pipeline as a closed-lost deal. If you closed the deal, you can move the opportunity into the closed-won stage and ring the bell in your sales office.