What’s a Sales Funnel, and How Do You Create One?

by QuickBooks

4 min read

    There are many different steps to making and finalizing a sale. As a way to illustrate the sales process and its different stages, many salespeople and companies visualize the process as a funnel. A sales funnel can be broken down into three essential sections, each one related to each step in making a sale.

    Section 1: The Awareness Stage (Leads)

    This is the widest part of the sales funnel, because technically, you should have a lot of people who qualify as leads. Leads are potential customers who are aware of your company or product, or people you have identified as customers worth pursuing.

    This part of the funnel can also be referred to as the “awareness” stage; through your marketing actions, other customers or your sales force, the general public becomes aware of your product or service. It should be noted that many marketing professionals, however, do not consider awareness itself to be enough to qualify a person as a lead.

    Those people believe that in order for someone to qualify as a lead they must have either a need for the product or service you offer (e.g. cloth diaper washing service for parents who use cloth diapers), or demonstrate an active interest in your product or service (e.g. signed up for a newsletter or filled out an online form). These people are also sometimes referred to as warm leads.

    Section 2: The Consideration Stage (Prospects)

    Some companies may call these customers qualified leads. Essentially, these are the leads that have shown an interest in your product or service and therefore have moved further down the funnel toward a sale.

    This part of the funnel can also be classified as the “consideration” stage. For example, someone seeking to purchase a new television might have already conducted online research or spoken to friends to get an idea of what TV they want. The moment this person walks into an electronics store, they become a qualified lead because they have taken the active step to approach you about your products. In other words, the products you sell are now under consideration by this consumer.

    After consideration comes preference. If the purchase comes with a high enough price tag, consumers will typically put many TV models or TV retailers under consideration. While they are shopping around, they are forming an opinion of the model or retailer they would prefer to go with; they now have a preference.

    Section 3: The Purchase Stage (Customers)

    Customers are the folks who you actually make a sale to, or convert from a prospect into a sale.

    This is the purchase stage of the funnel. Remember, to get to this point, the consumer was made aware of a product he or she wanted, conducted research, considered the options, determined a preferred outcome and actually forked over the cash to make a purchase.

    Section 4: The Customer Loyalty Stage (Brand Ambassadors)

    Some salespeople do not consider the purchase the bottom of the sales funnel. Often marketers will add a fourth stage, characterizing the bottom of the funnel as the loyalty and advocacy phase. This is when customers are converted from passive consumers to active brand ambassadors.

    Making your customers into brand advocates can lead to the ongoing success of your business. These people can be as important for an organization as any advertising or marketing effort, and can make the sales process much easier for your sales team.

    Creating a Sales Funnel

    The most important aspect of creating your sales funnel is to identify potential customers at each of the levels. One trick to correctly categorizing consumers is thinking about the messaging you use to reach them.

    It’s important to remember that in the course of a consumer moving down your sales funnel, your messaging has to change for each stage. At the top of the funnel, the widest part, you will be using the broadest message. The goal is to identify prospects by raising awareness of your brand or business.

    Once a consumer is aware, you can consider him or her a prospect. It’s also possible for you, as a business owner, to identify a particular group as prospects. For example, let’s say that your target market is parents of school age children in a 10-mile radius. They may or may not know of your product or service, but you can also consider them prospects by identifying them as potential customers.

    In the middle of the funnel, where consumers change from prospects to leads, your messaging will also change, becoming a bit more focused on a particular group and its needs, wants or desires. That prospective market of parents of school age children are also looking to purchase a new home computer. They might be most interested in a flexible payment plan or the ability to purchase educational programs as part of a bundle. In this case, messaging that emphasizes great pricing would be ideal for them, but might not necessarily appeal to other prospects.

    Lastly, once your prospects have made their way to becoming purchasers, you need to determine how important an ongoing relationship with these customers is. For many small businesses, retaining customers is easier and cheaper than starting over at the top of the funnel and working your way back through all of the steps.

    Relationship marketing, ongoing social media interaction and outstanding customer service are just some of the ways to convert your one-time customers to repeat customers.

    Utilizing a sales funnel is a way to not only visualize the sales process, but to keep track of your prospects, leads and customers as well. It can also help you craft your marketing strategies for a diverse range of potential customers. Remember to gauge which marketing strategies are and aren’t working, and your business will be in the black for years to come.

    Ready to dive further into how you understand your customers? Go on to our article on how to calculate your customers’ lifetime value.

    Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

    Related Articles

    106 Business Tools for Freelancers, Consultants and Side Hustlers

    For freelancers, productivity is an asset. The more efficient you are, the…

    Read more

    100 Best Business Blogs You Need to be Reading (and Taking Lessons From)

    There are many business blogs on the Internet. Some of the most…

    Read more

    Your Financing Options

    Current financing options are broken into three categories: Small Business or High-Growth…

    Read more