Sales funnel

What it means

A sales funnel is a model showing the path of a potential customer from first contact with a company to purchase. The name reflects the fact that there are many people at the start and fewer at each stage, until at the end only those who buy remain.

The funnel is usually divided into stages of awareness, interest, consideration, decision and purchase. At each stage the conversion rate is measured, meaning the percentage of people who move on to the next stage. This shows where prospects are lost.

The sales funnel is closely related to the customer journey. The customer journey describes the experience from the customer’s point of view; the funnel tracks it from the sales and numbers side. For services such as accounting, the funnel often does not end with the purchase but continues with retention.

How it works in practice

In our own sales we track the funnel from a website visit through form submission and an initial call to signing the contract. Each prospect is recorded as a lead in the CRM with its current stage, so we know how many proposals are in progress.

When we see many people dropping out at one stage, we focus on it. If many visitors do not submit the form, we rework the landing page; if they do not reply to a proposal, we shorten our response time or simplify the offer.

We link the funnel to costs. Knowing what one lead costs and what the conversion rate is, we calculate the customer acquisition cost and compare it with the value of a client. We help clients run the same analysis for their own business.

What to watch out for

The funnel simplifies reality. Customers in fact go back to earlier stages, compare several suppliers and buy on recommendation without passing through every step. The model is a measuring tool, not an exact description of how people behave.

Focusing only on the top of the funnel, meaning as many visitors as possible, often improves nothing. Improving conversion at the weak point and the quality of leads has more effect. A hundred relevant prospects bring more than a thousand random ones.