What Is a Sales Funnel and How Does It Work in 2022?

sales funnel

The term ‘sales funnel’ is often used in online marketing platforms, and the concept may seem daunting to those who are new to online sales.

So, what is a sales funnel? They are an effective tool to manage, monitor, and improve your sales process from potential leads to purchasing customers.

A sales funnel is a method of visualizing and representing the stages of a customer’s journey from when they become aware of your product or services to when they decide to purchase. The sales funnel works by using conversion rate data to improve sales and prevent obstacles in the transition from potential leads to paying customers.

They facilitate ease of sales from a customer-oriented viewpoint, and studies have shown that well-planned funnel systems can improve customer buying activity considerably.

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Once optimized, sales funnels simplify the buying process from traffic to the point of sale in a measurable and adaptable stage-by-stage process. If you wish to learn more about what a sales funnel is and how they operate, please read on.

What Is A Sales Funnel?

A sales funnel is a theoretical model representing every stage of a potential customer’s journey, from when they learn about a product or service to the moment they take action to purchase.

As the name suggests, a sales funnel is wide at the top and narrows towards the bottom. Each stage of the funnel should function to move your most qualified prospects onto the following stage and streamline them into converting their interest into sales. 

Sellers often overlook creating a strong and well-thought-out sales funnel system, leading to a ‘responsive’ sales approach. Responsive sales approaches take the customer’s lead and provide all the data to guide the potential buyer in their decisions.

By laying out multiple options and adjusting the offers as the customer’s interaction evolves. 

Unlike the prescriptive, pre-designed sales funnel system, studies have shown that the responsive sales approach decreases ease of sale by 18% and increases sales regret by 50%.

Whereas the same survey showed that the prescriptive sales approach with a delineated sales funnels system increased customer buying ease by up to 86% and reduced purchase regret by 37%.

How Does a Sales Funnel Work?

This very effective marketing tool provides a visual step-by-step process throughout each stage of a customer’s path. From initial brand exposure all the way to the sale conversion.

The top-end represents the brand’s customer awareness, while the narrowest point represents the point of decision, where potential buyers convert into actual customers.

It provides a set of steps the visitor needs to go through before taking the action your company prescribes, such as signing up or purchasing, known as a conversion.

As customers move through the funnel system, their numbers thin, and those who are not serious about their engagement drop out of the funnel. 

A simple way to view a sales funnel is the Amazon purchase funnel.

The steps a customer must go through are as follows:

  • Customer visits the Amazon site 
  • They view a particular product
  • The potential buyer adds the product to their cart
  • A sale occurs when the customer makes a purchase. 

Although there might be other activity between these steps, these movements are not relevant to the sales funnel system, which focuses on streamlining the potential customer through the conversion process.

The funnel’s top is the widest, where everyone goes in, and only the most interested buyers move down the funnel. 

At a precursory glance, you could see your sales funnel as such:

Untouched > Contact made > Qualified > Offer presented > Decision > Sale.

Sellers aren’t limited to using this funnel system merely for sales and sign-ups. You can place funnels in multiple sites on your website to analyze how visitors move through the website flow.

You may track such actions as a newsletter sign up or basic page conversion, for example:

Viewing a newsletter form > Submitting form > Confirming email. 

Once you establish your goals for what action you want your visitors to take on your site, you can create a funnel for it. You may then analyze the data and eliminate obstacles and optimize your funnel flow. 

Why Is A Sales Funnel Important?

Customers may encounter obstacles at each stage of the funnel process and having a well-researched and effective sales funnel increases your chance of converting customer interest into sales.

A Harvard business review puts forward figures from a study that show that suppliers that make buying easy are 62% more likely to win a sale over their competitors. 

The most prevalent obstacles to sales are:

  • Information challenges such as difficulty in interpreting information or distinguishing between irrelevant or relevant information
  • People’s problems such as purchase criteria and hidden concerns
  • Option issues such as too many purchase options and difficulty distinguishing implementation. 

With data from funnel tools such as Google analytics, suppliers can visualize where they are losing customers in the sales process.

With data to help understand customers’ flow on your website, you can spot problem areas with high drop-off rates.

Once you have a clear idea of how many visitors exit the funnel at each step, you may remedy the obstacles that prevent your potential customers from purchasing your product.

What Does A Sales Funnel Pipeline Look Like?

Although sellers often use the terms sales pipeline and funnel interchangeably, there are critical differences between the two systems.

A pipeline measures the stages that a customer moves through from a prospect to a new customer.

A pipeline statistics report depicts the consumer value of all transactions during each pipeline stage, the sales funnels measure conversion rates throughout the actual sales process itself.

A sales funnel represents the quantity and conversion rates within the pipeline stages. The sales funnel is essential to forecast sales according to lead volumes and identify obstacles in the sales process.

While each business has its way of managing its sales process, and the number and name of each stage may vary, there is general agreement on the steps of a well-defined sales funnel.

Top of the sales funnel or ToFu: Awareness

At the broadest part of your sales funnel, your potential customers are in the research stage. Your customer is facing a challenge and seeking a solution in the form of products and services.

They may have discovered your services from several sources such as blog posts, social media, or advertising, or your sales team may have reached them through cold email or cold call.

At this stage, the sales focus is on educating your customer on their chosen topic and not necessarily pushing for a sale.

Marketing material such as blog posts, videos, or infographics helps your potential customer decide which product or services they require.

Typically sellers will use the AIDA method when creating their funnels which focus on these critical elements:

  • Attention. This stage is sometimes called the awareness stage, where your customer becomes aware of your product or services that may solve their problem. It is the stage where you catch your potential customer’s attention. 
  • Interest. The interest stage is where you pique your customer’s interests and share information about solving their problem. There is no selling at this point, and the aim is to be helpful and provide free content where possible to entice your customer to invest in your brand.
  • Desire. The desire or decision stage is the make or break stage, and sellers need to make the “Yes” option enticing through offers of coupons, bonuses, or accelerate the urgency of their offer.
  • Action. This stage is the final stage of the funnel, and the customers opt for the sale. In operation, this takes the form of a checkout page, payment invoice, or contract submission.

Another way of looking at the sales funnel stages is to break the sales funnel into three distinct stages:

Middle of the sales funnel or MoFu: Qualify

At the MoFu stage, your customer is informed about their needs and actively seeking solutions to achieve their goals.

At this stage, the sales funnel should allow the customer to identify the solution to their challenges.

This stage may take the form of a presentation, like a video sales letter(VSL), or an exchange of information to initiate a discovery call. It is a crucial stage of the sales funnel process where the sales pitch needs to convert a lead into a sale.

A company may choose several sales qualification techniques, the most common being the BANT sales framework. This acronym refers to: 

  • Budget
  • Authority
  • Need
  • Timeline.

These elements form a gauge that marketers and salespeople employ to determine a prospect’s readiness to make a purchase.

Systems such as these are essential to ensure that potential buyers move through the funnel smoothly and prevent clogging the sales line with non-buying customers.

 It is useful to employ marketing content at this stage of the process, such as:

  • In-depth guides
  • Product comparisons with competitors
  • eBooks
  • Instructional videos
  • Case blogs. 

Bottom of the sales funnel or Bofu: Decision and Close

At this stage of the funnel, your lead should make an informed decision to purchase your product or services.

Your sales representatives should present proposals and terms of the contract if necessary or other agreements to win the leads’ business. Even at this late stage of the funnel, success may be unpredictable.

If your business wins the sale, the deal moves over to the won stage; if the sale is lost, there are still benefits to the process.

Sales lost at this point in the funnel may be outside your control, however, lost leads may provide data on why the closing was ineffective.

Marketing content at this stage of the funnel would typically include feature comparisons, product videos, and webinars. 

What Are The Components Of A Sales Funnel?

Opt-in Page 

To convert your potential customers to paying customers, you need to build your email list effectively. Although it seems counterintuitive in these social media-driven times, email marketing is still one of the top digital marketing methods.

Making an opt-in page for your sales funnel is a reasonably straightforward process and can be divided into three distinct steps:

  • Building an effective landing page with a submission form for traffic
  • A thank you page to thank your new visitor for their visit
  • An automatic email responder to verify the validity of your potential customer’s email address.

Opt-in pages are typically designed to collect email addresses for a customer database.

Often, sellers use a lead magnet, an item or service given for free, in exchange for visitor information. The lead magnet could be an eBook, training video, or PDF printables

Bridge page 

The bridge page is the page ahead of your sales page that bridges the understanding of what they know and what they need to know to buy the product or services on the next stage of your sales funnel.

The bridge page is also an excellent way to direct traffic toward your affiliate sites.

 Affiliate marketers are up against cold traffic, which does not convert well to sales. A bridge funnel helps you warm up and presell your traffic so that they are more likely to buy your products or an affiliate product.

You benefit from collecting emails for your email database and increasing your conversion rates further down the sales funnel. 

Sales Page

Your sales page is an integral part of your funnel and focuses on convincing your subscribers to buy your product.

Although all sale pages are landing pages, not all landing pages are sales pages. A sales page’s singular goal is to sell something, whereas landing pages focus on conversions, such as converting browsers into subscribers. 

The main components of an effective sales page for your funnel should include:

  • Who you are selling to
  • What you are selling
  • Testimonials from previous buyers or present customers
  • A prominent “Buy Now” or “Call to Action” (CTA) button.

How Do You Build A Sales Funnel From Scratch Fast?

Implementing an effective sales funnel needn’t cost an arm or a leg, nor should the process take too long.

Luckily in the digital age, there is a variety of software available to streamline the funnel process and allow anyone with an investment in the virtual market to create an effective sales funnel strategy. 

Some of the best software tools for creating a highly effective sales funnel quickly that I highly recommend are:

  • Thrive Architect
  • Lead Pages

Whether you choose to use software or prefer to create the funnel yourself, the following steps are essential in creating an effective sales funnel on the fly.

Identify Your Target Audience.

To effect a productive sales strategy, you need to understand your target market before creating your sales funnel.

This process entails research into what potential buyers would be most suited to your product or services. It would be best if you focused on:

  • Identify a particular problem for which your product or services provides the solution  
  • Choose which social media platforms your potential customers frequent the most
  • What interests your potential market the most
  • Find out their preferred method of online shopping, including obstacles.

Create a Buyer Persona

It is essential to create a buyer persona or customer avatar when attempting to target your marketing campaigns. A buyer persona is a fictional person who represents the traits and characteristics of your best potential customer.

You may give the persona a name, demographic, behavior, points of interest, and traits much like a real customer.

To create a compelling buyer persona, you should ask the following questions:

  • Why would they purchase your product/services?
  • What would influence them to buy your product?
  • How will they utilize your product or services after the purchase?

Create a Plan to Generate Traffic

However amazing your product or services might be, you will not generate traffic to your pages without awareness of your brand.

It is important to adopt lead generation strategies to drive traffic to your website. You can generate traffic through a variety of means such as:

  • Search Engine Optimization strategies
  • Pay-per-click (PPC) campaigns
  • Landing page optimization
  • Guest posts
  • Enlist influencers to promote your product
  • Use social media marketing to create awareness. 

Engage Your Target Audience

Lead generation can only go so far if you fail to engage your target audience. To make your potential customer aware of your product and services, you need to employ strategies to engage their interest such as:

  • Create high tier blogs with quality content
  • Create engaging videos
  • Gather reviews from high profile sites such as influencers
  • Promote your content on social media platforms 
  • Create a strong email campaign linked to your blog posts and create a newsletter relating to your product/services.

Focus on Converting Your Leads to Buyers

Lead conversion is vital in your sales funnel process’s final stage and ensures that visitors convert into paying customers. It would be best if you strived to eliminate any obstacle in this process and expedite the process by:

  • Reducing the amount of form field to the bare minimum
  • Reducing the number of steps it takes to complete the sales process
  • Offer one-click options for sign-ups and upsells

How Do You Generate Leads?

If you have created strategies to gather attention and awareness, your leads will typically interact with you by interacting with your page, sharing contact information, or subscribing to your blog.

Although you may have plenty of traffic, not all qualified leads intend to purchase on their first visit.

 Lead generation refers to the process of attracting and nurturing potential customers to close a transaction with your business. Lead generation may take a variety of forms such as:

  • Content marketing
  • Email campaigns
  • Blog posts
  • Promotions 
  • Real-world events
  • Applications

To generate leads effectively, you should follow these steps:

  • Create an Effective Lead Magnet. Offer a once-off enticing giveaway fitting to your product or services, such as exclusive content or one-time discounts. 
  • Create Social Media Strategies. Research which social networks your ideal customer is likely to frequent and align your sales with the chosen platform. You may run promotions or giveaways or share links to your product or services.
  • Employ effective follow-up tools. Emails are an efficient tool to offer value to your customer and offer an incentive to buy your product. Your emails should always end with a call to action that will move them further down your sales funnel.
  • Cultivate and maintain a strong network. It is essential to maintain a network of contacts to boost your referrals. You may offer perks as part of your referral process because a strong network of contacts will create a strong review database you may use to generate further leads and sales. 
  • Harvest your data. Use your data from the sales funnel stages to create more effective lead generation strategies. You may use various analytics programs to effectively target your potential market and create a more detailed view of your customers.

What Is A Sales Conversion?

A sales conversion need not be a concrete sale as such but refers to any action taken by a potential customer that you have defined as adding value to your business, such as subscriptions or calling your business from their mobile phone.

You may measure your conversions through conversion tracking and measure your sales campaign’s effectiveness through a conversion rate.

Conversion rates are the number of conversions divided by the number of total visitors. For example, if your website has 200 visitors a month and has 50 effective conversions to sales, the conversation rate would be 25%.

Tracking conversions allows you to measure your sales funnel’s performance in the various stages and improve your sales.

Why Is Optimizing Your Funnel So Important?

If you deploy a sales funnel system and merely take a passive role in your potential conversions and sales, you will lose prospects who could have been paying customers.

Optimizing your sales funnel allows you to influence potential customers’ purchase decisions and impacts your wider sales and marketing strategies.

Funnel optimization involves actively analyzing your metrics at each stage of the funnel and eliminating obstacles to conversions to increase your sales. The benefits of optimizing your sales funnel include:

  • Increased sales through a higher conversion rate 
  • Identifying the right marketing strategy to target the correct potential customers at each stage of the purchase journey
  • Understanding why your process may fail in converting leads to sales so that you may improve the sales funnel system
  • A well-designed and optimized funnel gives your business the edge over your competitors with less effective sales strategies. 
  • Once you optimize your funnel, you can minimize your average cost of sale and the time and effort in making your sales strategy work. 

What Is The Difference Between A Sales Pipeline And A Sales Funnel?

The sales pipeline is a visual representation of your B2B(business to business) leads on each step of their purchasing journey. Pipelines allow you to isolate your prospects, forecast sales and align your team and ensure proper follow-ups.

Typically sellers will use Customer Relationship Management software (CRM) to streamline the pipeline process. Sales funnels take the form of an inverted pyramid and allow businesses to measure their conversion rate at each sales process stage.

The essential difference between these two models is that sales pipelines are activity and value-oriented, while the sales funnel is performance and quota-focused.

The pipeline model is the visualization of the buyer’s journey through the sales stages from the sales representative’s perspective. In contrast, the sales funnel adopts the customer’s perspective.

Sales pipelines function to help teams focus resources to increase conversion rates. In contrast, sales funnels use conversation rates to improve the sales process’s stages and prevent leaks and obstacles in the sales funnel.

Final Thoughts

It is essential to use a sales funnel system to streamline the purchasing process, increase your conversion rate, and ultimately drive sales. Sales funnels are an invaluable tool in isolating your purchasing process problems and finding methods to best convert leads into paying customers.

Creating an effective sales funnel need not cost you an arm and a leg, and there is software available to make the process quick and easy. With the multiple benefits of a sales funnel system, you could be losing out on an untapped market, just waiting to put your brand on the virtual map.