What is the Sales Funnel?

When making any kind of big and important decision, we usually go through a process in order to make the best choice. Think to that time you bought a new house or car, looked at different venues for an event, or even just wanted to buy a new tv. You probably didn’t buy the first thing you saw. Even if you went to the store and looked at the wall of tvs and bought one 20 minutes later, you still examined your options. You gathered the information and examined the options, weighed the pros and cons of each, and then ultimately decided on what you saw to be the best pick for you. What you just went through was the Sales Funnel (AKA Sales Pipeline) from the consumer perspective. But what does that look like from the outside? What is the sales funnel?

Simply put, the sales funnel is the process or pathway that customers go through when deciding what to consume, all viewed from the business providers’ perspective. It holds true for both Business to Business (B2B) and Business to Consumers (B2C) interactions. To think of it visually, picture yourself trying to fill up a large container of water using a funnel. The container is your business, the water represents your customers and the funnel is the process that customers go through. You begin to pour water through the funnel and some makes it into the container. However, you notice that there are holes in the funnel so water is escaping and falling away.

At the top of the funnel, all of your customers are exposed to your product or service and enter the funnel or pipeline. These are called leads. They’re all potential customers. As the water (customers) move down to the middle of the funnel, they become prospects. There are less than before as customers do research and shift their attention to other options (water falling through the holes). Finally, at the bottom of the funnel water makes it through and begins to fill the container. The consumers that make it all the way through the funnel then become your customers. See a visual representation of the funnel here.

While being a simplistic way to view how customers pick your business, the funnel is very apt and illustrates a great truth. All vendors must attract far more leads than it needs to close, because some leak away at every stage. [Graham] It’s all a game of numbers:

Leads10
Prospects (50% of leads) - 5
Customers (40% of prospects, or 20% of leads) - 2
Total Sales (at $10,000 each) - $20,000

The sales funnel is just a way to explain the behavior of customers as they move from leads, to customers. It’s a pathway that all consumers go down, no matter how long or short the deciding process is.

 

DKB Strategies
orging Tomorrow’s Business Solutions