If you visualize a funnel, you’ll see that the top is significantly wider than the bottom. This is the case for the flow of your sales process through a sales funnel, as well.
Through the top of the funnel, you’ll likely have many more prospective customers, known as leads, than prospects who come all the way through the funnel to become customers. The key is to understand each stage of the relationship so that you convert as many prospects into customers as possible.
What is the sales funnel?
The three key stages that make up a sales funnel are lead generation, prospect nurturing, and customer conversion. As you’re getting started, you can create a manageable funnel process, adjusting and scaling as you learn and grow.
- Lead generation: Lead generation is activity introducing your business to the right audience and gathering contact information from members of that audience so you can continue communications. A lead is not yet a customer but fits the demographic you’ve identified of those likely to become customers. You can capture leads through a variety of marketing activities, such as purchasing a list, advertising or partnering with an organization that markets to your desired audience. Initially, you may cast a wide net to capture leads because some will drop out during later stages. Over time, you’ll get a sense of the percentage of leads you convert into customers. With this information, you will determine how many leads to generate in order to deliver the number of sales you’re projecting for a given time period.
[For more, see: How to Create a Biz Dev Strategy to Grow Your Business.]
- Nurturing: Once you capture leads, you treat them as prospective customers, or prospects. In this stage, you educate them on your company and product or service, and share how becoming a customer benefits them — also known as your value proposition. This can take little effort, or may require ongoing communications over a long period. Either way, it is ideal to communicate via various media (e.g., email marketing, phone calls, meetings and events) to guide a prospect toward a relationship with your company.
- Conversion: The goal is, of course, to turn a prospect into a customer. You’ll need to determine the right time to ask the customer to buy from you. For an online business, this may be in an email or on a web page. For service businesses or products that require a substantial budget commitment, your salesperson may have one or several conversations before closing the sale.
You can capture leads through a variety of marketing activities, such as purchasing a list, advertising or partnering with an organization that markets to your desired audience.
Speed bumps to avoid
There are two snafus to avoid as you develop your sales funnel process:
- Not enough leads: If you’re busy with customers or nurturing prospects, you may not realize when the beginning of the funnel is getting thin. You’ll soon see your sales start to drop. To be successful, you must keep an eye on all stages. Be sure your lead generation plan includes consistent ways to find and reach new leads.
- Too much nurturing: There’s a danger in nurturing prospects for too long and expecting them to self-select, or make their decision to purchase without prompting from you. Your marketing team can find great leads, nurture them well and track response rates, but at some point, there must be a sales action or prospects may stay prospects indefinitely.
Managing your funnel
While you can manage your leads using a spreadsheet, even a one-person sales “team” can benefit from marketing automation and customer relationship management (CRM) tools to track communications and manage prospects and customers. You can initially use free or inexpensive versions and then upgrade to paid services, if needed.
[For more, see: Customer Relationship Management [CRM] Software Guide.]
It takes time to finesse your sales funnel. Every few months, assess what’s working and what’s not. Adjust to get the right number of leads in and to move them through at the right pace. As you adjust, you should see that your conversion rates go up. If not, make further adjustments.
CO— does not review or recommend products or services. For more information on choosing the best CRM software, visit our friends at business.com.
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