What Is a Sales Funnel?

If you run a business or work in sales or marketing, you’ve probably heard the term “sales funnel.” The sales funnel describes the customer journey from cold lead to warm lead to prospect and finally, customer. One of the most commonly used sales funnels follows sales leads through four steps:

• Awareness.
• Interest.
• Decision.
• Action.

How does a sales funnel work?

Some organizations call the sales funnel the “revenue funnel or “sales process.” It is the steps leads and prospects take as they learn more about your company and then decide whether or not to buy. As you nurture a lead down the funnel, the goal is that they will come out from the bottom as a customer.

However, unlike an actual, physical funnel that you would use to pour liquids into a bottle, there is no guarantee your leads will come out the other side the way the liquid does. It’s all about how you nurture and guide those leads that determines whether they will exit the funnel or convert into a sale.

Understanding the four-stage sales funnel

You can describe a sales funnel as a graphical representation of the customer journey. At each stage, the lead makes the decision of either continuing to learn more about your brand or seeking another way to solve their problem (possibly by finding another company to meet their needs).

Stage 1: Awareness

The first stage of the funnel, awareness, occurs when a lead learns about your company for the first time. Maybe they found your website in a Google search, stumbled across a social media post or saw an ad for your brand.

These leads are often called “top of the funnel” leads, which means they are just beginning to discover if your brand is a good fit.

Stage 2: Interest

Interest, the second stage of the funnel, can happen very quickly after awareness. Leads can make a split-second decision about whether or not your company can help them solve a specific problem. They might push themselves through your sales funnel without much coercion or action from you.

But with some leads, it takes a bit more time. You’ll need to nurture them to this second stage through targeted emails, social media advertising or a special offer.

Some marketers consider people in this position “middle of the funnel” leads, and they are more likely to buy than someone just beginning the customer journey at the top of the funnel.

Stage 3: Decision

At the decision stage of the sales funnel, your sales lead has become a middle-of-the-funnel prospect. They might be comparing their options and considering multiple brands or companies besides yours. A member of your sales team may have already reached out to them, or they could be continuing their research on their own.

You can use several strategies to help your prospect make a decision. You might try to get the prospect to commit to a free offer, since that’s an important first step toward closing a sale. You may share stories of happy customers that serve as social proof. Depending on the industry, it might be appropriate to create a “fear of missing out” (FOMO) by presenting a “limited time offer” special.

Stage 4: Action

Once a prospect has reached the bottom of the funnel, they are ready to make a buying decision, or take action. If they’ve made it this far, they should now turn into a paying customer, as long as you continue to make it easy for them to buy. If you run an e-commerce company or accept payments for services online, your website or app should be intuitive and easy to navigate and accept their preferred form of payment.

If you run a brick-and-mortar business, you’ll want to make sure you can accept multiple forms of payment securely, which often means having a point-of-sale system that accepts EMV chip credit cards and other digital forms of payment. Once the prospect has made the choice to take action, very little should change their mind.

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