Understanding The Sales Funnel

The sales funnel, sometimes referred to as the sales pipeline, is a term often used in sales, many of us have heard the expression, but what does it actually mean?

I’d like to explain why the sales funnel is an very important element of sales management and how it can help you eliminate peaks and uncomfortable troughs in your sales cycle.

Imagine a funnel used to pour a fluid into a bottle. It has a wide top narrowing down to a tapered ending which fits into a bottle. You pour the fluid into the funnels top and then the fluid flows down through the funnel and into the bottle, (if you’re not careful or pour too quickly, some will spill, the same is true in sales…read on).

Just as funnels vary in size and therefore will allow the liquids to flow through at different rates, every business will have a typical time it takes for a sales lead to flow through it’s funnel, i.e. convert into a sale. This could be minutes, days, weeks, months, or even years in some cases.

sales funnel

Just like pouring liquid into a funnel and watching it flow through to the bottle, so your marketing efforts will deliver a steady stream of sales opportunities into the top of the sales funnel. This is where the sales process starts. As you build trust and explain the clear benefits of your products or service so the sales begin to flow into the business. The harsh reality is that not all sales opportunities will convert into sales.

It’s very rare to see a sales person win every sales opportunity. Some will drop away for a variety of genuine reasons as they work their way through the sales process; wrong size, doesn’t meet their want or need etc. Just as I explained, if you pour too quickly some fluid will spill out of the funnel and not into the bottle. If you try to rush the sales process to meet your needs rather than those of your prospect and attempt to bulldoze them into a purchase decision they really aren’t comfortable with you can generate what I call “buyers remorse”. This can result in returns, cancellations and bad feelings. It’s not where you want to be. It’s not good for your business or your reputation.

If you are effective with your marketing, it will work out that there are a lot more sales leads compared with completed sales at any moment in time. In fact if you were to draw a diagram of the value of all outstanding sales opportunities at each stage of the sales process you should see the shape of a funnel – Wide at one end and narrow at the other.

In sales we often talk about ‘filling the sales funnel’. As sales opportunities flow through the sales funnel resulting in a sale or fall out along the way they need to be replaced. It is a continual process. Its the best way to develop a healthy and predictable stream of revenue and the most effective way to avoid uncomfortable peaks and troughs in your sales.

From a sales perspective, a well run business will measure and track the value of opportunities in their sales funnel and manage the flow of opportunities within the funnel too. Managing the flow is all about “follow up” – and the focus of another of my blogs to come.

Steve Clarke 0845 053 4937