What is a sales funnel and how is it useful?

A sales funnel is an indispensable tool for your sales team, and can help you figure out where and how to refine your sales processes.

But with so many competing sales funnel definitions out there on the Internet, we thought we’d clear up some of the confusion. Read on to learn what a sales funnel can tell you, the difference between a sales funnel and a marketing funnel, and how to use CRM reporting tools to optimize your funnel.

Jump to:

What is a sales funnel?

How is a marketing funnel different than a sales funnel?

Sales funnel stages

The real-world benefits of a sales funnel

Funnel templates

A sales funnel, summarized

Sales education resources

What is a sales funnel?

In a sales organization, a funnel represents the number of prospects you have in each pipeline stage, and the conversion rates of prospects through those stages. It looks something like this:

Example sales funnel template

Sales funnels are useful because they show you the stages of your pipeline that are converting well (hooray!) and help you identify the not-so-successful parts of your pipeline where leads are getting snagged or floating away.

They’re also a big help with sales forecasting; by knowing your average conversion rates in each pipeline stage, you’ll be able to estimate how much revenue your current set of active leads will likely generate.

Some CRM platforms create sales funnel reports automatically, dynamically updating your conversion rates at each funnel stage over time. With this tool, you can identify the weak points in your pipeline and make targeted improvements in the right stages. For example…

If your leads aren’t converting past the qualification stage-

Ask yourself, “is this really a lead?” You might want to do some adjusting to your lead-gen process, or how you qualify leads in the first place. Are you targeting the right companies? Are your expectations for buyer-fit reasonable? A little bit of analysis will go a long way to make sure you’re really filling the pipeline with sales qualified leads.

If your leads aren’t converting past the meeting stage-

You’ve described your product and your offer, and people aren’t buying. The biggest opportunity for improvement at this stage is to refine your offer to ensure that it is focused on the buyer. Don’t creep them out by trying to insert your solution into all of their pain points, as if you’re the magical fix-all they’ve been waiting for. Get to know them and their unique set of problems before speaking about your solution. It might also be worth it to brush up on your sales pitch.

Related: 19 ways to nail your next sales presentation

If your leads aren’t converting past the proposal stage-

You thought your sales pitch generated interest, but when you followed up with a proposal and tried to get a commitment, they went silent on you. What happened? Does your proposal need work? Did your suggested timeline or price structure make them balk? Did the pointy-haired boss shoot you down? There could be many reasons why you’re struggling to convert at the proposal stage. It’s important to get as much feedback from your prospects as possible, and tailor your processes to make your proposal more acceptable.

How is a marketing funnel different than a sales funnel?

“Marketing funnel” (or “purchase funnel“) is a term commonly used by marketing teams to visually represent the buyer’s journey as a prospect learns about your offer, compares your product or service with other solutions in the market, and eventually makes a decision to purchase.

Example marketing funnel template

The labels TOFU, MOFU, and BOFU refer to the top of the funnel, the middle of the funnel, and the bottom of the funnel. Each stage of the marketing funnel represents a different step in the buyer’s journey based on their overall awareness of your product or solution, and is influenced by the marketing content they’ve been interacting with.

TOFU:

The top of the marketing funnel is comprised of buyers who are just becoming aware of your product. They may have just visited your website, read a piece of content, or engaged with a social media post. They’re not ready to buy yet, but they’re in the process of learning more about your company. SEO tactics and online advertising ensures that your top-of-funnel content is highly discoverable, so that more potential buyers can encounter it.

MOFU:

The middle of the marketing funnel consists of conversions from the top of the funnel. These are people who have engaged with your marketing content—perhaps by filling out a survey, attending a webinar, or downloading a piece of educational content—and are now evaluating your company against competitors. At this stage, you begin to target them with content and information that positions your product or service as the best solution to their pain points.

BOFU:

The bottom of the marketing funnel is where the magic (selling) happens. It is appropriate to target people at this stage with requests for a demo, but you don’t want to be too eager to close that you start spamming them. Valuable marketing assets in this stage include customer success stories and comparison sheets, which make the buyer totally comfortable with your solution before your sales team goes in for the close.

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Sales funnel stages

The stages of a sales funnel reflect your organization’s existing pipeline stages. Sales funnel stages typically look something like this:

Sales funnel stages

Once again, your sales funnel measures your prospects’ conversions through these stages, which is instrumental in helping your team determine which sales tactics are working, and which need to be overhauled.

The real-world benefits of a sales funnel

It’s important to understand how to use a sales funnel to get the most out of your sales initiatives. Here’s an example of how I personally used sales funnel insights to boost my sales team’s effectiveness at a previous company:

A new year had started, and new sales and marketing initiatives were underway. Our sales team began to fall behind their projected sales, and we wondered why. A look at our funnel report determined that our conversion rate between prospects who had attended a webinar and our next pipeline stage (request a demo) was disproportionately low.

Guided by this knowledge, we were able to automate a targeted email drip to prospects at that stage in our pipeline and help them convert more quickly by informing them of the benefits of a personalized demo. This process refinement was a direct result of the impact a sales funnel had on our organization’s sales process.

Funnel templates

If you came here looking for sales funnel templates…you might be in the wrong place, or at least using the wrong terminology. Remember: A sales funnel reflects the quantity of leads in each of your pipeline stages as well as the conversion rates of those stages. It’s just simple math.

Your sales pipeline, on the other hand, is the sequence of stages that your customers travel through from new lead to sale (commonly recognized as the thing your sales director draws on the whiteboard in every sales meeting).

Example pipeline stages

So, if you’re looking for examples of the stages you can use for your pipeline, you want sales pipeline templates, and those can be found right here.

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A sales funnel, summarized

A sales funnel is a method of tracking and illustrating your prospects’ conversion rates between pipeline stages. A sales funnel report plays a key role in any sales strategy by helping you figure out where to re-focus your efforts in order to close the most deals. And of course, your sales pipeline is the path your customers take, separated into stages. Think of it this way: A pipeline reflects what your sales team does during the course of a sale, and a funnel measures how well they’re doing it.

Sales education resources:

Because confusion between sales funnels, sales pipelines, and sales processes is still common, we’ve included a few links to help you sort everything out.

Sales process templates

The difference between a sales pipeline and a sales funnel

How to build a sales process

Sales tactics encyclopedia

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