What is a Sales Funnel? Stages and How to Build an Effective Sales Funnel
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What is a sales funnel?
A sales funnel is a marketing term used to capture and describe the journey that potential customers go through, from prospecting to purchase. A sales funnel consists of several steps, the actual number of which varies with each company’s sales model.
Well-built sales funnels without gaps allow companies to shepherd potential customers through the buying process towards purchase completion. By contrast, those funnels with gaps will lead to potential customers dropping out of the sales process, like water flowing through a sieve.
Why is the sales funnel important?
A sales funnel helps marketers understand a customer’s purchasing journey, while also identifying what stage of this journey the customer is at. These insights can be used to decide which marketing channels and activities will best guide the customer towards a purchase. A sales funnel also allows marketers to tailor and optimise their activities and messaging to increase conversions.
So, how does a sales funnel work?
As the name suggests, a sales funnel takes in a large number of leads and prospects and narrows them down towards the bottom, giving you a smaller number of paying customers. While the specifics of the sales funnel differ from industry to industry—in fact, even from company to company—we can understand how it works with a simple example:
Let’s look at the B2C sales funnel for an e-commerce website. A potential customer for the site will start their journey as a visitor: someone who might visit the site by clicking on a Google search result, social media post, or advert. When they visit and browse through the website, they might (and should) be offered a chance to sign up for the e-commerce site’s email list. If they do, they become a lead. Depending on the contact details they share, they can be engaged through various channels such as email, text, and phone. Their interaction with these marketing campaigns is likely to nudge them to return to the e-commerce website to browse relevant products or special offers, turning them into a prospect. From prospect to customer is then a matter of incentivising them enough with product offerings, messaging, or even a simple coupon code.
The 6 stages in a sales funnel
Again, it’s important to note that not all companies’ sales funnels will have six levels or stages. Sales funnels vary in size and shape from company to company and industry to industry. However, a basic sales funnel can be described as consisting of six levels. Marketers can take inspiration from this basic structure to design a sales funnel that suits the needs of their organisation.
1. Awareness:
At the very top of the sales funnel is the awareness stage that is populated by the largest number of people. These people, not quite ready to be prospects yet, have just had their first interactions with your company and its offerings. They don’t know much about your brand at this stage, but are aware that it exists.
2. Interest:
The first interactions will hook some of these newly-aware people and draw them slightly deeper into the funnel. With their interest piqued, these people will spend some time getting to know more about your company and your offerings. They might browse your website or catalogue, read your blogs, or peruse reviews from past customers.
3. Evaluation:
Armed with knowledge gathered during the interest stage, your prospects will double down on their efforts to know your company and offerings better. They may reach out to your customer service team with specific questions, or fill out a form to access more information. Remember, by this stage they may have already compared your offerings to those of your competitors. So, it is important to clearly answer their questions and help them understand how your offerings can solve their problems or needs.
4. Negotiation and decision:
The prospect has now almost decided to purchase your product or service. Depending on the nature of your offerings, they might begin a negotiation over the price, terms of purchase, or both. But it’s fair to assume that they have a purchase intention at this stage.
5. Sale:
We’ve reached the bottom third of the sales funnel—the prospect and seller have negotiated the terms of the sale to their mutual satisfaction, and the prospect pays the seller to officially become a buyer.
6. Renewal or repurchase:
The sale stage is not the end of the sales funnel. Soon a time will come when the sales contract is up for renewal. The customer must now decide if they want to continue with the same seller. If so, there might be a fresh round of negotiations over price and purchase terms, followed by a renewal or repurchase.
As mentioned earlier, many companies may not experience a sales funnel like the one described above. Many purchase journeys might end at the ‘sale’ stage, while others might be complex enough to warrant even more steps. The above framework, however, is broadly applicable to most business models.
Benefits of a sales funnel
A well-defined sales funnel can offer several benefits to your company:
1. Relevant and timely messaging:
A proper sales funnel allows marketers to understand the customer’s purchasing journey, and anticipate the questions and doubts they may have at various stages. These insights can be used to create and deliver relevant and timely marketing messages to the customer.
marketing-and-sales-alignment">2. Marketing and sales alignment:
In case a customer has questions and can’t reach a salesperson because they are too high up in the funnel, they can still receive the information they want through marketing outreach. An effective sales funnel allows marketers to answer the customer’s product/service questions without involving a salesperson that early in the process.
3. Time and effort savings:
A good sales funnel allows marketers to filter out bad sales leads early on, and focus precious marketing dollars only on leads that exhibit the highest likelihood of converting into paying customers.
How to build and nurture a sales funnel—fast
Building a sales funnel doesn’t have to be a very time-intensive effort. With a little bit of understanding, you can build and maintain a sales funnel that will allow you to identify and harvest quality leads again and again. Building a sales funnel is all about knowing your leads, prospects, and customers, engaging them in a timely and relevant manner, and following up diligently:
1. Analyse your existing customers
A good sales funnel is built on a deep understanding of your existing customers. The more customer data you can gather and analyse, the more effective your sales funnel will be. You can gather customer data by actively communicating with your customers, and by tracking their interactions with your digital and offline presence. An analysis of your customers should include their pain points, needs, goals, aspirations, and past solutions. Using this data, you can find lookalike audiences, and put out the right messaging at the right time to attract prospects.
2. Captivate your target audience
Your audience is likely to be distracted by the multiplicity of demands on their attention. To compel them into your sales funnel, you need to capture their attention across online and offline platforms. Use compelling content that educates and informs prospects, assures them that their needs are known and will be met, and hooks them into asking for more information. The content used to capture your audience’s attention can be organic (non-paid social media posts, blog posts, email newsletters, SEO) as well as paid (social media advertising, targeted keywords, influencer content). Find ways to align this content and related campaigns with the interests and needs of your target audience.
3. Create a great landing page
All your content should lead your prospects somewhere – typically, a landing page. This is where you make your first impression. A great landing page communicates who you are as a company, what your offerings are, and what needs you can solve. Landing pages can also entice visitors with offers and should be used to capture contact data like email addresses. Lastly, but very importantly, landing pages should have a clear call-to-action that takes the prospect further down the sales funnel.
4. Create a powerful email campaign
Having captured email information from your leads, keep them engaged with a powerful email campaign. A good email campaign starts by informing and educating leads, helping them understand how your products and services can meet their needs. Only then should it progress to offering your leads offers that compel them to convert into paying customers. Focus on inspiring leads to become customers instead of just bombarding them with crude product pitches.
5. Keep following up
When a customer purchases your products and services, they don’t move out of the sales funnel. Instead, they stay at the very bottom of the funnel, and you want to keep them there. These customers have paid for and used your products and services, and you want them to come back for more. Keep them engaged with recurring communication. Thank them for their purchase and incentivise them to return through promotional (offers) and informational (new product information) campaigns.
Your sales funnel is a dynamic tool; feel free to tweak it in response to changes in the market and your company’s offerings. The important thing is to have a sales funnel that captures the widest number of prospects and effectively narrows them down to a smaller pool of loyal customers.
Example of a sales funnel
Imagine a sales funnel for a company that manufactures, markets, and sells stylish furniture online. The company knows that most of its customers are 30-40 year olds who spend a lot of time online, specifically on visual social media platforms like Instagram. So, the company runs a series of Instagram ads using compelling content targeted at potential audiences aged between 30 and 40 years. The Instagram ads route users to the company’s landing page, where a pop up encourages them to sign up for the company’s newsletter to receive tips, updates, and, crucially, offers. The people that sign up have now become leads.
Over the next few weeks, these leads are sent content that informs and educates them about the company’s furniture designs and quality. The intent is to inspire them to think about how they can redesign their personal spaces with this company’s furniture.
At the end of the email campaign, the company sends these leads a discount coupon. Primed with ideas for their spaces, the discount coupon helps push the leads towards an actual purchase. After the purchase, the company doesn’t forget about these buyers. They become recipients of yet another email campaign with the same goals but different content.
And there you have it—a sales funnel. At the top, social media users were made aware of the company and its offerings and drawn into the funnel. Their interest was piqued, they evaluated the offerings, and decided to purchase the product. Hopefully, they will renew their relationship with the company by repurchasing in the future.
Measuring a sales funnel’s success
A sales funnel is a dynamic tool. It is likely to change in shape and size as your business grows, as you understand your customers’ needs better, as these needs evolve, and as your product and service lines diversify. A good sales funnel is regularly changed in response to evolving business environments.
Marketers should also actively tweak their sales funnel based on how well it’s performing. A key metric to track when evaluating sales funnels is the conversion rate—how many visitors are being converted into leads, how many leads into prospects, and how many prospects into paying customers? Understanding these conversion rates will allow you to pinch or expand the funnel in relevant places and eventually arrive at a shape that maximises conversion at that point in time.
Optimising the sales funnel
The best way to optimise your sales funnel is to try different things and track the resulting changes in conversion rates. The points at which visitors convert into leads, leads into prospects, and prospects into customers are crucial. Marketers need to ensure that the content and activities they use at these points are highly effective.
A good way to measure effectiveness is to fervently run A/B testing. Let’s go back to the example of our direct-to-consumer furniture brand. To optimise their sales funnel, the marketing team could run several Instagram ads and check their performance before settling on the most successful one. They should also run A/B testing on their landing page, where visitors are converted to leads, and on their email campaigns, where prospects are converted to customers.
Optimising the sales funnel is a constant cycle of testing and incorporating the results.
Sales funnel FAQs
1. What is the difference between a sales funnel and a marketing funnel?
A marketing funnel precedes a sales funnel. A marketing funnel is meant to draw visitors towards the brand and acquaint them with it. A sales funnel, on the other hand, is supposed to take unaware or partially aware audiences, and guide them towards an actual purchase.
2. Is a sales funnel a marketing activity?
Yes and no. In the top levels of a sales funnel, the marketing team is heavily involved in converting visitors to leads and leads to prospects. In the middle, the sales team steps in to close the sale. At the bottom, the marketing team steps in again to hopefully renew existing customers’ interest in the company and its offerings.
3. Who needs a sales funnel?
Every company needs a sales funnel because every company has customers. A sales funnel is a useful tool for all companies, irrespective of their size or industry.
4. Do sales funnels really work?
If you take away the marketing jargon for a moment, you realise that a sales funnel is nothing more than an exercise in paying attention to your customer and their journey towards making a purchase. Since the customer is king, paying attention to them can only work in your favour. Moreover, by helping you optimise the use of your marketing resources, a sales funnel helps stretch your marketing dollar.
5. When do sales funnels not work?
A sales funnel may not work if it is poorly built and executed. Without a clear marketing goal, as well as proper targeting and compelling content, a sales funnel is unlikely to draw in enough prospects or keep them in the funnel.
6. What is sales funnel leakage?
Sales funnel leakage is when prospects and leads slip out of the funnel before they become paying customers. Sales funnel leakage usually happens if marketers can’t keep prospects and leads engaged with their company and offerings through relevant, interesting content and outreach.
Conclusion
Sales funnels work best when they are built with specific goals for defined target audiences, and are executed using compelling marketing content. Without these three basic tenets, sales funnels tend to be leaky—they let out prospects and leads before converting them into paying customers.
If you are trying to build a sales funnel for your organisation, or optimise the one that you have, LIKE.TG solutions can help you. Here’s how:
- Pardot, our B2B marketing automation tool, enables you to fill your sales funnel with high quality leads, and intelligently nurture them. With it, you can create beautiful landing pages, forms, and email campaigns to personalise customer engagement.
- With our contact management tool, marketers and salespeople have an ever-present snapshot of customers. Meanwhile our opportunity management capability helps you close deals faster by staying connected to the people and information you need. The LIKE.TG Engage tool allows you to draft and send personalised communications to customers with just one click. It also helps you maintain and view a detailed history of prospect or customer interactions.
- Powerful reports and dashboards help you ensure that all your sales and marketing decisions, including the building and optimising of your sales funnel, are data-driven and well-informed.
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