What is a sales funnel? The term comes up in almost every discussion about sales, revenue optimization, and business growth. But what exactly does the term sales funnel mean?
A sales funnel is a series of stages customers go through when interacting with a brand towards a sale. Each step influences your customer’s behavior. Understanding the sales funnel means understanding your customer’s buying journey. The more you know about the path to purchase, the better you can close the sale.
Today, we’re diving deep into sales funnels, how they work, and how to build your own. By the time you’re done reading, you’ll know how to funnel endless new opportunities into your company, one step at a time.
What is a Sales Funnel? The Basics
The term “sales funnel” refers to potential consumers’ journey when interacting with your company. Most people don’t come across a product and immediately jump to buy it. There are multiple sales funnel stages and multiple steps, from research to consideration.
Around 68% of companies haven’t identified their sales funnel, according to Salesforce. This makes it difficult for those brands to guide their customers through their buying journey.
While sales funnels don’t guarantee successful conversions, they improve your chances of a sale. When you know what it takes to move a customer from being “aware” of your company to be ready to buy something, you can nurture each opportunity.
The sales funnel is very close to the idea of a customer buying journey, but:
- It’s from the company perspective.
- It only shows the stages concerning sales.
- Limited to a customer-company relationship (so not outside)
Here you can see that a sales funnel and sales pipeline are related concepts.
Many businesses struggle to visualize and map the customer journey and order the entire sales funnel. It’s easy to miss micro-interactions and crucial steps which impact the path to purchase. This is why there are so many tools available today to help companies collect data relevant to the sales funnel. The more information you have, the more holes you can patch.
Sales funnel example:
Sales funnels are unique to your company and the customers you’re trying to convert. For this example, imagine how people would buy from Netflix. The steps in your funnel might include:
- Discovery: A customer finds your website on Google when searching for a “streaming service”. They click on a page you’ve optimized with SEO.
- Exploration: Your customer visits your homepage, where you advertise the free trial of your service. Here they decide to click on your pricing page.
- Comparison: The customer compares your pricing packages and looks for prices from similar streaming services.
- Decision: The prospect signs up for the free trial of your service and gives you their email address. You can use this information to contact the subscriber later.
- Retention: You send your customer an email when their free trial is about to expire, offering a discount on their monthly renewal.
Why is a Sales Funnel important?
Sales funnels are tools designed to build relationships with your customers. The right funnel can help you understand what potential customers are doing at each stage of the purchasing journey.
Insights into your customer’s journey allow you to invest in the right marketing channels and activities. Plus, you can create more relevant messaging to drive consumers through the funnel.
With a sales funnel, you can:
- Improve your marketing efforts: Sales funnels improve marketing. With a sales and marketing funnel, you don’t rely on random strategies to promote your products. Instead, you invest in the campaigns most likely to connect with your target audience. Using your knowledge of the customer journey, you can create content or ads for each stage of the sales pipeline.
- Increase sales: An effective sales funnel is an opportunity to learn. Your well-defined sales funnel teaches you what motivates your target audience. You can learn which actions lead to customer retention and churn. The more you learn about getting customers to the bottom of the funnel, the more successful the stages of your sales funnel become.
- Boost revenue: Sales funnels help identify and convert qualified leads. Adding certain steps to your sales funnel can increase the amount your customers spend. You might create add-ons for certain buyer personas to increase their future purchases. The bottom of the sales funnel should also include strategies for retaining customers. This can help you convert clients into long-term advocates for your brand.
- Create accurate forecasts: Forecasts are important in sales. Tracking how customers move through your sales funnel makes it easier to predict business outcomes. You can determine how long it takes for new customers to reach the decision stage. This gives you an idea of how much time you need to dedicate to each conversion.
- Reduce expenses: Cost per acquisition is an important metric for sales teams. If you’re using the wrong tactics at the top and middle of the funnel, you may be losing prospects. A good sales funnel will help you to determine which actions drive conversions. This ensures you can spend your budget on the strategies with the best ROI.
Some companies even create sales funnels for each potential “group” of customers they reach. This helps with planning strategies to connect with new audiences.
Understanding the Sales Funnel Stages (AIDA)
To build a sales funnel effectively, you need to understand the stages. From the top of the funnel (Awareness) to the bottom of the funnel (Retention), each step is crucial. There are many ways to define the stages. Let’s start with the sales funnel stages as “AIDA”. This stands for Attention, Interest, Desire, and Action.
But of course, no one explains it as well as Alec Baldwin in the classic. Explaining Always Be Closing & AIDA in one go:
Awareness is the first stage at the top of the funnel. At this point, customers are becoming aware of your product or service. “Awareness” sometimes refers to a prospect becoming aware of an issue they need to fix, too. Users become aware of your company in a range of ways.
But to become aware you first need to gain their Attention. Some people will hear about you from social media or advertising. Others will be driven to your business through word-of-mouth. How and why people move from “Awareness” further down the sales funnel depends on you.
Usually, during the Attention stage, the focus of your company should be on engaging your audience. You want to capture the attention of new leads with content. Blogs explaining how your products solve certain problems can encourage further investigation. Posts on social media encourage people to follow you online.
The interest stage is where things start to get more exciting. After your new leads have become aware of your company, they need to decide to investigate it. During the “interest” stage, people make the effort to learn about you.
This is usually when your content marketing strategies are most valuable. Every blog post or article gives your potential customers a chance to learn more about you. You can create landing page offers to highlight the specific benefits of your products. Or you might design videos and podcasts to answer common customer questions.
The more information your audience can easily find online, the more interested they’ll become. The goal of your sales and marketing efforts here is to get people interested in making a decision.
If you do your job of “informing” leads well, they’ll move to the next stage of the sales process. In the “decision” stage, your customer gathers the details they need to make a purchasing choice. They might contact your sales team to arrange an appointment and discuss options.
In the decision stage, a successful sales funnel will usually provide lots of information on value and pricing. Sales pages and landing page deals are particularly valuable here. Webinars and calls from sales reps can also help handle buyer objections.
To succeed during the decision stage of the sales funnel, ask yourself what you’d need to buy something new. Aside from an idea of the price, what else will you be looking for? Would you need to compare pricing packages or ask questions about subscriptions? Remove any friction in the journey preventing customers from taking action.
The bottom of the sales funnel focuses on action. If your sales cycle and marketing strategy are successful, your leads will be ready to do something. During the action stage, you’re convincing your clients to take the final step.
Qualified prospects might complete a purchase or sign up for a webinar. If your sales funnel works correctly, your interaction won’t stop at the point of action. After your customer converts, you’ll start to focus on building a new relationship with them.
Following the “action” stage, look into earning long-term loyalty from customers. You might start them on a new sales funnel, introducing them to new products. You can also ask converted customers to advocate for your brand. Referrals and reviews are excellent for bringing in new leads.
7 Sales Pipeline Stages
There are multiple ways to define sales funnel stages. Say we are building a sales pipeline with manual sales involved, very common in B2B, and you’d use paid media, marketing automation, and CRM in combination with email. It may look like this:
- Lead qualification
- Demo or meeting
- Negotiation and commitment
- Opportunity won
Related: 11 best sales books to master the art of selling
An Effective Sales Funnel Example
Let’s look at another sales funnel example. Imagine you’re an ecommerce company selling retro bikes. Your target audience is between 24 and 55. You know that you appeal to a very social-media savvy crowd on Instagram.
You run an Instagram ad driving traffic to your landing page. On this page, you ask your prospect to sign up for an email list in exchange for an eBook about bikes. Now you have leads for your business.
Related: The 22 Best eBook Creation Software (Free & Paid)
Over a few weeks, you’ll send an email to educate subscribers about bikes. Maybe you even offer advice on how to maintain each model. At the end of the email sequence, you offer a 20% discount to new customers.
Next, you add the customers who convert to a different email list. You start the process again, but this time upselling bike accessories. You give them ideas for bike racks, helmets, and seats they might want to buy. At the same time, you can also ask your existing customers to refer new clients. Maybe you can offer a discount on their bike check-up appointment when they refer someone new.
Throughout this sales funnel, you’ve used the following steps:
- Awareness: Your Instagram ads drive people to your landing page.
- Interest: On your landing page, you offer an eBook to give relevant info and get an email address.
- Desire: You provide customers with valuable information to drive their purchasing choice.
- Action: Your coupon code gives leads an offer they can’t resist.
How to Create a Sales Funnel Fast
By this point, it should be clear sales funnels are critical to your conversions. Unfortunately, creating amazing sales funnels often takes time and effort. Depending on the nature of your business, your sales funnels may be simple or complex. Creating paying customers with a high-price product is often tougher.
If you’re starting from scratch, don’t panic. Here are a few ways to create a sales funnel fast.
Step 1: Get to know your audience
The first step is understanding your target audience. You need to know where to find your customers to start the sales process. Remember, you shouldn’t be marketing to everyone. Your sales team will be much more successful with a targeted audience.
Start by designing a buyer persona. This document outlines your preferred customer. The more detailed your persona is, the better. Think about things like: age range, location, gender, hobbies, skills, education, and income.
But also focus on motivations, goals, frustrations, and what the product can do for them. Here is an example of a buyer persona sheet.
Once you have a vision of your intended audience, the question is where you’ll find them. You may connect with a younger target audience on TikTok or Instagram. Perhaps you’ll reach your B2B clients through LinkedIn or Google. Knowing your audience and where they are will help capture audience attention or the awareness stage.
Step 2: Capture customer attention
The next step in your sales funnel stages is earning customer attention. You know where your prospective customers are, so go and connect with them. Create brand awareness by writing blog posts optimized for search engines.
Pull people into the “awareness stage” of your campaign on social media. You can use both organic and paid campaigns to reach your target customer. You might even run a few ads with PPC. Showcasing your site on Google can be a good way to generate leads.
Just like with any stage of the funnel, track your result. Whether using paid ads or organic content, pay attention to how each campaign influences your customer. This will help you to make the most of your marketing budget.
Step 3: Design your landing page
The landing page is a crucial part of your sales funnel. It helps to show prospective customers what you have to offer. What’s more, landing pages keep your ideal customers focused. When your client clicks on one of your ads, your landing page will convince them to do something.
Use a landing page builder and don’t link to other pages on your website or provide navigation. Instead, directly introduce your offer on the page. This offer will get people on your email list, so you can nurture them to the next stages of the funnel.
The best landing pages have:
- A clear insight into the value being offered.
- A strong call to action which tells customers exactly what to do.
- A lead magnet (such as a free download or eBook) to convert customers.
Step 4: Create email sequences
Once you have the contact details of your new prospects, it’s time to nurture them. Email marketing sequences allow you to connect with followers and build relationships. The best campaigns will drip content out regularly, consistently providing value.
Don’t immediately bombard your customer with offers. Educate them about your service, market, or company first. Provide links to your most popular content or share stories from existing clients. Find ways to demonstrate your authority and credibility.
Using your buyer personas, ask yourself what would convince someone in your audience to buy your product. What can you provide to encourage a sale? At the end of the campaign, provide an incredible offer to encourage your leads to act.
Step 5: Keep in touch
As mentioned above, a great sales funnel shouldn’t end with just one action. You need to keep your customers connected to your brand. With this in mind, move every converted customer into a new email list. Here, you can continue reaching out to your clients.
Ecommerce brands may want to offer coupon codes to encourage repeat sales. Ask consumers to join your loyalty program. You could also ask for reviews and testimonials. Social proof from existing customers can go a long way towards making a sale.
Repeat customers are consistently more profitable and less costly to convert than new prospects.
How to Optimize your Sales Funnel
As you’d expect, sales are never done. And sales funnels aren’t set-and-forget. You’ll need to continue updating and optimizing each of your sales tactics. The more you learn about your audience and market, the more effective your funnels will become.
Your prospective customers often have a lot of other options to choose from. If you want to keep your potential customers returning for more, you need to put the work in. Use Google Analytics and other SEO reporting software to track conversion metrics. Pay attention to how each part of your sales funnels helps ensure conversions.
It’s also worth listening to your audience. Your customers can tell you more about their buying process and which sales funnel stages they struggled with. Don’t just consider the bottom of the funnel for optimization. Think about all of the different stages.
During the awareness stage, ask your marketing team to create dozens of different versions of your Instagram ads. You can A/B test each campaign to see how it reaches your potential customer. You’ll also be able to use targeting features offered by your social media platforms to home in on the right prospects.
You can also A/B test different stages of your sales funnel. For instance, if you create content for your emails, split test different copies and images to see which works best.
Optimize your sales funnel in the following steps:
- Start at the top: Start by A/B testing the content you create to attract awareness. Examine which ads appeal to your potential customer most. Create content for different audiences.
- Look at your landing pages: Make sure this funnel stage is perfect. During the middle of the funnel, your landing page is among the top customer touchpoints. Test everything from headline and body copy to images and CTA buttons. Something as simple as changing the offer on your landing page can get you more prospects.
- Experiment with email: Send different variations of your email to segments of your audience. A/B test your end-of-sequence offers and pay attention to conversion rates. Most email marketing tools come with tools to help with experimentation.
- Track retention: How often do people buy again? Is it easy to convince customers to keep coming back for more? How many people join your referral program or loyalty campaign?
Conclusion: What is a Sales Funnel?
In simple terms, a sales funnel is the relationship between you and your customer. It refers to the various stages large and small businesses take to connect with a prospect. Each stage in the sales funnel plays a part in getting a conversion.
A good funnel doesn’t just attract new customers. The right strategy will also convert more leads and build long-term loyalty.
Take the time to build sales funnels that work for your brand. Expect to have to update and enhance your strategy over time. As you learn more about your marketplace and audience, your sales funnel will inevitably change.
Sales Funnel FAQ
What is a sales funnel and how does it work?
What is an example of a sales funnel?
While some people will convert immediately with their offer, others need nurturing. You’d use your email addresses to nurture customers with information about your cupcakes. You might share blogs about the baking process or reviews from customers. At the end of the email sequence, you remind your customer of their offer or provide an even better one.
How do I create a sales funnel?
Organic content (like blog posts) and paid ads can attract your prospects. These should lead customers to landing pages where they can sign up. Creating an email sequence will help nurture your prospects into paying customers.
What is the key purpose of a sales funnel?
Once your prospects become leads, you can focus on building relationships with them. Emails can help to convert visitors into paying customers. You can also use content and marketing campaigns to create loyal brand advocates.
What is the difference between marketing funnel and sales funnels?
While the sales funnel is dedicated to sales, the marketing funnel is more focused on generating future opportunities. Marketing funnels and sales funnels often go hand-in-hand.