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Your go-to guide to understanding sales funnel and tips to creating one for your business
The sales process is not a straight line. This is why converting a lead to a customer often takes its own course, and varies from business to business. Whether B2B or B2C sales, it’s important for sales reps to understand and visualize a lead’s journey; otherwise, they’re shooting in the dark. This is done by a series of steps that develop into what’s called the sales funnel—a concept that finds its way back to the 1890s.
Here you’ll find the answers to all your sales funnel questions—including why you need one, and how to create your first sales funnel. This guide also talks about how the right CRM software can help manage and measure your sales funnel, and help improve the efficiency of your sales process to convert more leads to customers.
Sales funnel is an illustration of the stages that a prospect goes through before becoming a customer. It resembles an inverted pyramid—it starts with a lot of your potential customers at the top. And, as your sales reps start engaging with them, only your most qualified prospects move to the next stage, and ultimately towards the close. So, at the bottom of the sales funnel are your most committed customers.
Sales funnel and buyer’s journey are the two sides to the buying process. The buyer’s journey is the process buyers go through before purchase. This journey is from the point of view of the buyer, not the seller as in the sales funnel. It’s typically broken down into three stages:
Awareness (Top-of-the funnel): Buyer becomes aware of their problem or issue. They look for solutions, discover products or services, and pursue opportunities.
Consideration (Middle-of-the funnel): Buyer evaluates different products to address challenges, and engages with sellers.
Decision (Bottom-of-the funnel): Buyer decides on the solution for his needs.
Although sales funnel and buyer’s journey have distinct differences, the two concepts overlap when the buyer enters the consideration stage and is ready to convert. It’s at this stage that the buyer enters the sales funnel of the seller. Ideally, the buyer’s journey should align with your sales process.
Learn more about how to build your sales process ->
While each business has its own way of managing the sales process and the buyer journey, the number and name of each stage may vary based on business type and sales process.
A lead looking to buy your product enters the sales funnel but may or may not pass through each stage. Let’s look at how sales teams approach leads in each stage of a well-defined sales funnel, and why conversion rates matter at each stage.
In this stage, your potential customers are facing a challenge and are researching and learning more about it. They are looking for a solution and are discovering products and services to solve their pain points.
They have either discovered your solution via advertisements, blog posts, social media, etc. and are in touch with your sales reps. Or, your sales team has reached out to the prospects through cold outreach channels—personalized cold email or on a cold call.
At this stage, your sales reps are only trying to educate your prospects about their problem and are not pushing for a sale. Marketing material such as blog posts, videos, whitepapers, and infographics can help them be more informed about the topics that matter to them.
Once your sales reps get in touch with prospects, they become leads in the CRM system. It’s time to move them to the next stage—discovery—by either getting on a call with them or meeting them face-to-face to ask them questions to move them further down the sales funnel.
At this stage, your leads understand their problem and are actively looking out for solutions that can help them achieve their goals. Your sales reps initiate a discovery call, sales meeting, or demo with the prospect to identify their challenges and explain to them how your solution can help solve the prospect’s pain points. It is this stage that it’s crucial for sales teams to impress a lead to convert.
There are various sales qualification techniques like CHAMP, MEDDIC, GPCT, BANT, and more but it’s best to choose a framework that best suits your customer journey. The most common sales qualification framework used by most businesses is BANT—Budget, Authority, Need, and Timeline. Only leads that meet the qualification criteria become potential opportunities and trickle down the funnel. Pushing leads without proper qualification into the sales funnel will clog your sales pipeline, and won’t necessarily lead to revenue.
Marketing content such as in-depth guides, competitor comparisons, ebooks, how-to videos, and use case blogs will help leads at this stage.
The lead discovers more about your services and the benefits of working with you. If they determine you’re right for their needs, they proceed to the next stage and are considered an opportunity.
In this stage, your lead has made an educated decision to purchase your solution. In turn, your sales reps present proposals, terms of contract, and other agreements to successfully win their business. The outcome of the opportunity may sway either way— win or loss—depending on the prospect’s interests at this stage. Although sales reps set the table for success—handling sales objections and negotiations—when it comes to closing the deal, win rates are quite unpredictable.
If the deal is won, your sales reps move the deal to the won stage in the pipeline and begin onboarding the new customer. Some leads may slip through the cracks for reasons that are beyond the control of your sales techniques, like budget constraints. It is important to keep a record of the lost leads too so you can track the reasons why you lost them, and nurture those prospects in the future to win back their business and relationship.
The content that will help them make the purchasing decision are feature comparisons, competitor battle cards, product video, etc.
Sales funnel and sales pipeline are often misunderstood to be the same thing. Like, two sides of the same coin carrying the same value but different design. Except not. Sales funnel and sales pipeline are discrete, both in data and the representation of the data. Sales funnel is about leads. Sales pipeline is about deals.
Sales funnel is the stages in the sales process your leads go through before becoming customers. Whereas, sales pipeline comprises of every stage in your sales process a sales rep takes to move a deal from start to close. Ideally, your sales process should align with the buyer’s journey.
Learn more about building a sales pipeline for your business
The sales funnel simply depicts how leads traverse through your sales process from start to close. It’s only a visual representation of the numbers game in the form of a funnel; there’s more to it than meets the eye. If you analyze the number of leads who enter your funnel and the number who convert to customers, you’ll probably find that there’s a huge dip. Sometimes prospects drop out of the sides of your funnel when their needs don’t match your services. While it’s nearly impossible to retain every prospect who enters your funnel, it’s important for your sales team to make efforts to retain the ones who are ready to buy.
But, given the volume of leads that fill your funnel, sales teams have a hard time converting leads into customers because they cannot discern the hot from the cold. This results in unqualified hot leads in the top of the funnel that either drop out due to slow response times, or remain stuck in the middle of the funnel, eventually becoming cold leads. For a business, this means missing out on golden ($) opportunities. And, that’s just one leak. There are more ways you lose leads in the sales funnel.
So, how can you spot and stop the leaks to take advantage of all the potential revenue in your funnel? Make use of a sales funnel software like a CRM where you can qualify leads, track their activity at every stage of the buyer journey, and follow-up automatically at the right time.
Adopting a CRM with sales funnel management capabilities positively impacts sales teams’ performance. But what most users fail to realize is that it is not just a customer database; it’s also the most beneficial tool for managing the sales funnel and pipeline. It helps you define your sales process, identify leaks in the sales funnel, and streamline the conversion process to bring leads down to the bottom of the funnel.
From defining your funnel stages to automating emails, you can set up your sales funnel software to help your salespeople advance their leads and stop leads from leaking out of the sales funnel.
One of the ways a sales funnel software will speed up the sales process is by helping you organize data. It is broken down into modules for managing leads, customers, and opportunities.
Capturing leads is the first step to the sales process. Some sales funnel software have the capability to capture leads who visit your website, submit a form, email your company, etc. So it’s easier for sales reps to start working with leads instead of wasting time on data entry. It can also segment leads based on predefined criteria and assign them to the right sales reps.
When a lead enters the CRM, it’s marked “new”. Every lead in this stage is at the top of the funnel. As sales reps interact with leads, they’re subsequently moved to the next stages. Filters and views in the software reveals the number of leads at every stage in the sales funnel to help you analyze their progress—how many new leads are in the funnel, how many have engaged with sales reps, how many are in the bottom of the funnel and ready to close, and how many need to be nurtured. This knowledge about your sales funnel becomes an actionable tool allowing you to plan your sales strategies.
We can’t stress this enough—the biggest challenge for a sales rep is to be able to identify qualified sales leads. Experienced sales reps probably know how to qualify their leads over time, and therefore effectively work on the right opportunities. But for the rest of them, this is still a burning issue. The struggle to pick out qualified leads in the funnel forces sales reps to chase them all. The result—getting nowhere.
Sales funnel software these days are smart. Thanks to AI, they can qualify the leads for you based on the lead’s property, interest and behavior; saving you time and energy from scrambling inside the funnel. AI-powered funnel software helps sales reps identify hot, warm and cold leads by creating an effective lead scoring system.
You can configure the lead scoring rules to match your ideal buyer persona by simply adding or subtracting points for the lead property. For example, if your business is purely local, then for a lead to become your customer the minimum criteria is to be within your service area. Add 20 points. If the lead doesn’t belong to an industry you serve, subtract 10 points. In addition to that, you can also customize scores for email, application and web activity. Bring everything together, and you have a list of hot, warm and cold leads in the sales funnel for your sales reps to focus and close more deals faster.
Now that leads can be organized and scored, the next step for sales reps will be to reach out to the priority leads over phone or email. Tracking conversations—when was the last email or phone conversation, what did you speak, did they read your email—is an advantageous feature to know how to strategically plan your next course of action.
But if you still use separate tools to email and call your leads, then visibility into their different touchpoints at different stages in the funnel can be difficult to figure out. Use a sales funnel software with built-in email and phone instead. You can create email templates in your funnel software to quickly reach out to leads. Even better, you can automate sending out the first welcome email to new leads using workflows.
Modern CRMs also track your emails and notify you when the lead opens your email. This is a nifty feature to know when to take action and move your lead to the next stage. You know, strike while the iron is hot? So now you’ll know if your email is getting read or not. You can also use email metrics to test your email performance, and craft better ones to increase open rates.
Phone is still an effective tool for sales reps to sell. And, a phone in your CRM means your sales team can capitalize on this feature to call leads without any hassle. A productive CRM allows you to make calls in a single click, auto-logs and records calls, and transfer calls to other agents without the need for wires or third-party tools.
A good practice when managing your sales funnel in a funnel software is to be consistent in updating the lead stage. As leads progress down the funnel, you must be able to analyze the number of leads by stage in order to ensure your funnel is always full to the brim with leads. It’s also important to know what stage each lead is at to know what to do next. So once the lead has been contacted, move the lead from new to contacted stage. Actually, the CRM can move it down the funnel automatically.
Let’s be clear—leads won’t automatically move down the funnel. Sales reps have to continue to do their part of selling and allow the sales funnel software to update the lead’s stage in the funnel by completing certain actions. You can setup workflow automations in the CRM to change lead stages. For example, after you’ve contacted a lead, the CRM will automatically update the lead’s stage based on the last activity.
Remembering to update the sales stage can be dicey. So make use of the CRM software to fill the gaps with automations rather than relying on mental ability. You can also set up task reminders to actively follow-up with a lead.
After you’ve met or spoken to the lead, and if they’re committed to buy, you’ll have to quantify the value of the opportunity. This is where the sales pipeline in CRM helps; you can track each opportunity with maximum visibility. Visual sales pipeline provides an overview of your deals by stage, allowing you to see how leads are moving down the sales funnel. It also gives sales reps a quick estimate of their targets, and urges them to close more leads in the funnel.
You must know by now that the sales funnel defies gravity. Not every lead who enters your funnel finds their way to the bottom. Sometimes, even all the qualified leads don’t reach the bottom of the funnel. This can be due to the negligence of sales reps to engage with the lead, or simply because the lead is not ready to take the next step. It’s important for sales reps not to perceive a qualified lead leaving the funnel at any point as a lost opportunity. CRM helps you win back lost opportunities through lead nurturing.
Lead nurturing is the process of actively engaging with leads via email campaigns. By interacting with leads, whether top, middle or bottom, with relevant nurturing campaigns you keep them interested and groom them into paying customers. With CRM software, you can utilize tools like sales campaigns to be in contact with leads from the time they enter your funnel to when they make a purchase. Send out scheduled emails based on lead’s behavior, use templates, and track the performance of every campaign in the CRM to turn your prospects into customers.
Tracking KPIs and conversion rate at every stage is important for sales teams to get a clear picture of the sales funnel. With a holistic sales management software like CRM, you can easily track sales funnel metrics with the help of funnel reports.
This metric refers to the growth in your qualified leads, month on month, and it measures how many leads you’re currently working on converting to customers. This metric is a real-time indicator of growth and sales revenue, so if you have a high lead velocity rate, this means that you can expect high sales revenue for the months ahead.
Measuring how well your sales team is converting leads is imperative to determine the quality of leads and individual sales rep’s performance. With a sales funnel software, you can create funnel reports to know how your leads are converting through different stages by sales reps, and by campaign too. Analyzing which leads are moving down the funnel and converting allows you to plan better conversion strategies.
This is exactly what it sounds like—the total number of opportunities across each stage of your sales funnel. Here, you’ll want to ensure that you have a good balance of leads in each stage of your sales funnel. If you notice an excessive amount of leads in any one stage, this might mean that your reps are struggling to move them down the funnel, which is cause for concern.
Intuitively speaking, it makes sense to try and minimize the time spent on each stage, so that you shorten the length of your average sales cycle. That said, remind your sales reps to exercise discretion when doing this—they shouldn’t rush their leads into the next stage of the process if their lead isn’t ready to move on. Remember: no one likes a sales rep who’s too pushy or aggressive, and moving your lead along too quickly can ultimately backfire on you.
Freshworks CRM is a full-fledged CRM software with sales funnel management capabilities designed for sales teams to manage leads from start to close. It handles every step of the sales funnel allowing you to focus on the right leads at the right time. You get complete visibility into your funnel—from real-time insights on lead behavior to how quickly your team converts leads to sales. Freshworks CRM comes with built-in phone, email, and funnel reports. This means all of your customer data is accessible in one place. To add to that, you can automate tasks, create your sales pipeline, and schedule sales campaigns. Every tool you need to advance leads in your sales funnel is already in Freshworks CRM! Get your free
21-day trial, and discover new ways to convert more leads into customers.
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