What is a Sales funnel and How Does it Work?
In our previous article, we explained how the marketing funnel talks about your target audience’s problems, and makes them aware of possible solutions. In essence, you’re “warming up” your target audience before approaching them with a sales offer.
This may sound laborious, but it’s an essential step. If you open your first contact with a sales offer, you’re like one of those unannounced door-to-door sales persons whose obvious interest is not helping the customer, but closing the sale.
So, only those potential customers who have moved through your marketing funnel enter into your sales funnel. But what is a sales funnel? And how does it work?
This article explains everything about the sales funnel – from its advantages to how it works in a concrete example.
What is a sales funnel?
The sales funnel consists of (automated) messages that communicate concrete sales offers to a target audience that has shown interest. The messages are short and clear so that there can be no confusion from the (potential) customers’ side. The offers are tempting in order to stimulate action in the form of making a purchase.
What is the purpose of a sales funnel?
The purpose of a sales funnel is to follow (potential) customers throughout an organization’s sales process. It outlines every phase of the sales process and provides a complete overview of all the current (potential) customers. In effect, an organization can target marketing and sales efforts more effectively, and generate realistic revenue forecasts.
What are the advantages of a sales funnel?
By outlining the sales funnel of your organization, you can:
- Segment the various phases of your sales process
- Indicate in which phase each (potential) customer is
- Map out your sales strategy
- See which phase goes well, where problems arise, and where you need to improve most
- Streamline your sales process
- Make sales and revenue predictions
- Devise strategies on how to target specific prospects
- Visualize how you’d like your marketing and sales efforts to be
- Calculate the costs and profits of specific sales campaigns
- Use your learnings of past campaigns in new campaigns
How does a sales funnel work?
The sales funnel visualizes the sales process in the form of an inverted pyramid – broad at the top, narrow at the bottom. The broad top reflects the multitude of potential customers for your organization; these are the suspects of your target audience. Suspects who show interest in your marketing communications turn into leads – a smaller segment that fits in the narrowing part of the funnel. Suspects and leads are part of your marketing funnel.
Leads who show interest in your brand, products or services become prospects – visualized in the middle of the funnel. This is where the marketing funnel overlaps with the sales funnel, meaning that you target prospects with concrete sales offers. Those prospects who make a purchase move down into the customer segment of the funnel, and the returning customers make up the bottom of the funnel.
Difference between customer journey and sales process
While the marketing funnel and sales funnel look a lot like the customer journey, the difference is in their perspective. While the two funnels analyze and reason from the organization’s perspective, the customer journey looks at the purchasing process from the customer’s perspective. Accordingly:
- Suspects are in the phase of latent or concrete needs
- Leads are in the orientation phase
- Prospects are in the deliberation phase or at the decision moment
- Customers are in the purchasing, delivery or use phase
- Returning customers are in the loyalty or ambassador phase
Example of a marketing funnel and sales funnel
Let’s say you’re a retailer of CBD products – edibles, skin products, oils, and tinctures. On your website, you don’t just sell products, but you also have a blog about CBD, and options to sign up for your newsletter and get a free e-book about CBD by mail.
- Your blog and e-book are targeted at suspects, meaning that they should talk about their problems (e.g. anxiety, stress, lack of sleep, chronic inflammation, etc.) and not about your products.
- Those who download your e-book or sign up for your newsletter have shown interest and thus become leads. With them you go into further detail, for example through tips for how certain products solve specific problems. You can also offer very low-entry products like (free) testers.
- The ones who click on your newsletter or who have been in touch with your company in any other way become prospects.
Prospects move into your sales funnel. These you target with your primary products – a complete CBD product set, a subscription for your best products, or the product that earns you the most revenue. Anyone who makes a purchase becomes a customer, and moves into a different mailing list.
- Your customer communication focuses on thanking them for choosing your brand, asking for feedback, and/or offering refill discounts or a similar product.
- Communication with returning customers focuses on appreciating their loyalty, rewarding them for it, and involving them in your company’s progression. Think of referral codes, early access to sales, showcases of upcoming products, or asking for feedback on your near-future plans.
Why mini conversions make up a good funnel
As you can see, having an effective marketing and sales funnel is all about defining, strategizing, and tracking mini conversions. By slowly but gradually preparing potential customers for your first sales offer, you prevent coming across as pushy and annoying, and they will feel like they’re making a well-considered purchase – a win-win situation.
So, although you can still make plenty of mistakes that cause even a warmed up audience to pull out of their purchase, focusing your funnels on mini conversions helps to smoothen their ride. Accordingly, you increase your odds for not just converting prospects into customers, but also to convert customers into returning customers – those who elevate your startup to scaleup and ultimately into an established business.
Stay tuned for tips & tricks for how you align your marketing funnel with your sales funnel!