If you’ve been using “pipeline” and “funnel” to mean the same thing, you might want to pay attention.
What is a sales pipeline?
A sales pipeline is a set of stages that a prospect moves through, as they progress from a new lead to a customer. Once each pipeline stage is completed, the prospect is advanced to the next stage.
Though the structure of a sales pipeline can differ from company to company, here are some of the more common stages:
Qualification. The rep asks questions to determine if the prospect has the need, budget, and authority to buy in the near future.
Meeting. The sales rep and prospect discuss the solution that would best fit the prospect’s needs.
Proposal. The rep sends the prospect a detailed quote laying out what will be provided, at what cost, and for how long.
Closing. Final negotiations are made and contracts are signed. The prospect is officially a customer.
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Now, here’s where things start to get confusing…
1) A sales pipeline is similar—but not identical—to a sales process, which refers to the recurring actions that a team takes on every lead to move them across those stages (i.e., distributing leads to the proper team member, calling new leads to qualify them, or doing research in advance of a presentation). The actions in a sales process are divided into pipeline stages.
2) Many sales professionals use “pipeline” to mean the quantity or dollar value of the deals currently in their pipeline, not the series of sales stages themselves. It’s very common to hear a sales rep lament that their “pipeline is looking rough” because they let their prospecting efforts fall by the wayside, or to hear a manager call a “pipeline meeting” to discuss the specific deals that the team has in progress.
What they’re really talking about is pipeline value, which is measured by a pipeline report.
A pipeline report shows the value and quantity of all deals in each stage of the pipeline at the moment when the report is run.
Pipeline reports help sellers keep track of the status of every deal and understand whether they have an appropriate distribution of deals in order to meet their sales targets.
While Nutshell uses the “series of stages” definition when referring to “pipelines” in our CRM, don’t be thrown off when you hear seasoned sales pros use it to mean “value of deals in progress.” As a wise band once sang, sometimes words have two meanings…
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What is a sales funnel?
Unlike a sales pipeline, which focuses on the set of actions taken by sellers, a sales funnel represents the quantity and conversion rates of prospects through your pipeline stages. It’s called a “funnel” because of its shape: wide at the top as prospects enter, then increasingly narrow as they are disqualified or decide not to buy.
Unlike a pipeline report, which shows the value and quantity of deals at the moment when the the report is run, a funnel report is based on a cohort. This means that a funnel report can tell you, for example, of the 100 leads you received last quarter, what percentage of them advanced through each stage of your pipeline.
A sales funnel report is important for sales leaders because it can help them forecast sales based on current lead volume and identify where deals are getting stuck so they can improve their process and better coach their team.
So when you’re thinking about the difference between a pipeline and funnel, remember this: A pipeline reflects what a seller does during the sales process, and a funnel measures conversion rates through the sales process.
Want to turn your sales pipeline into a conversion machine? Take a tour of Nutshell and learn how our CRM’s sales process tools and insights help sales reps win more deals. With our Multiple Pipelines feature, Nutshell Pro users can even configure multiple sets of stages for distinctly different sales efforts.