How To Create a Business Funnel in 5 Steps (Plus Tips)

By Indeed Editorial Team

Updated September 27, 2022 | Published May 25, 2021

Updated September 27, 2022

Published May 25, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

An infographic showing a sales pipeline funnel. The image shows a person on a ladder putting a coin with a figure on it into the top of the funnel, and coins with a dollar sign on them come out the bottom of the funnel.

Marketing and sales professionals use a wide range of tools to model customer behavior, including a business funnel. A business funnel can help you illustrate a customer's sales process journey and give you an opportunity to understand each aspect of the sale the customer takes part in, from when they first find out about a company to when they make a purchase. If you're a sales or marketing professional, learning how to make and use a business funnel can help you make strategic decisions that maximize revenue.

In this article, we discuss the business funnel, why it's helpful and the four main stages of the funnel, and we provide tips for building and optimizing a business funnel.

What is a business funnel?

A business funnel, also known as a marketing funnel, is the visual image that signifies each part of a customer's journey. Sales and marketing teams use this model to understand their role in promoting the brand and closing sales. Typically, there are four stages to the business funnel, but you can add more steps to the funnel depending on the sales process. Much like an actual funnel, the stages at the top are wider when the audience is larger and become narrower like a funnel as you reach the bottom and close the sale.

Related: What Is a Sales Funnel?

Why is the business funnel important?

The business funnel allows business development, sales and marketing professionals to visualize the steps that customers take when they're shopping for a product or service. Here are some tasks they can accomplish by using this model:

  • Identifying the brand's total marketing reach

  • Finding areas for improvement in the sales process

  • Deciding where to focus marketing efforts

  • Training sales staff to overcome objections

  • Predicting revenue based on past conversion rates

4 stages of the business funnel

The four stages of the business funnel are:

1. Awareness

The first stage of the business funnel is the awareness phase when most people enter your funnel. Awareness is when a prospective customer first finds the product, whether through social media, an advertisement or word of mouth. This first stage is when a customer realizes what the company offers and begins to understand the brand's values. They might be searching for a solution to a problem at this point, but they may also simply become aware that a company exists without needing its services at the moment.

Related: Brand Awareness: How To Define, Measure and Improve It

2. Interest

The second stage of the business funnel is when the customer becomes interested in a product because they believe it may help them achieve their desired goal or solve a particular problem they have. At this stage in the funnel, the customer might also look at other prospective businesses that offer similar services or products, so marketing teams might create appealing content, like webinars, blog posts and videos, to increase the customer's interest in the company and show the benefits of the company's service or product.

The customer might contact the company's representatives directly during this stage. They might visit a store to speak with a sales associate, call the company's main office or use a chat box on the company's website to speak with a representative. During this stage, they gather information and ask questions about how the company can help them.

Related: How To Measure Brand Value in 6 Steps (Definition and Tips)

3. Decision

The third stage of the business funnel is even thinner, but the people in the funnel are more likely to make a purchase. At this point in the funnel, potential customers have done their research, narrowed down their options and believe the company's product or service might meet their needs. They now decide between the company's product or service and competing options. During this stage, sales representatives might offer discounts, promotional items or other extra benefits to persuade the customer and overcome their objections.

Related: 11 Strategies for Overcoming Objections in Sales

4. Action

Action is the last stage in the funnel, and it's at this stage when the prospect often converts into a customer. They might enroll in a service over the phone, make an online purchase or come into a physical storefront to choose a specific product. After they complete this stage, they move into the customer service or account management portion of their relationship with the company. At some companies, the sales representatives also provide account management, but in others, the customer's account goes to a different department.

Related: Account Management and Sales Management: Similarities and Differences

How to create a business funnel

If you're a sales or marketing professional, you might work with other employees to create or improve a sales funnel that boosts revenue. Typically, building a business funnel requires input from several departments and the leadership team. A project manager might lead the strategic initiative to build a new business funnel, directing other employees to complete specific steps. Here are five steps that the team might follow to build a business funnel:

1. Analyze audience behavior

The first step is to research the company's target audience and analyze the type of content they enjoy and which platforms they're likely to use when looking for new products. Some demographics are more likely to use digital platforms like websites and social media and others are more likely to see a business on commercials or in paper mediums like newspapers or magazines. Once the marketing team identifies potential channels, they can begin to develop the brand's media presence.

Related: What Is Customer Research? (Plus Why It's Important)

2. Capture their attention

Creating targeted content for consumers can help them move from awareness to interest. A marketing team's content creator might write blog posts about issues affecting the target audience, with information about how the company's products or services can help them. They might also create videos. These shareable resources can attract customers who see them on social media feeds or search engine results. Once they click on a resource for the company, they move into the interest phase.

Related: What Is Content Creation? (Plus How-To and List of Tools)

3. Build a landing page

After you've captured the attention of your target audience, it's useful to have somewhere for them to go to get them closer to closing the sale. A landing page is a page on a website that makes a call to action to your visitors, like attending a free webinar, subscribing to an email list or downloading an infographic. The landing page can also give the consumer more information about how to make a purchase online, which can be an attractive option for many customers.

Related: How To Create an Effective Landing Page in 6 Steps

4. Send out newsletters

Building a relationship with prospects can help the sales team persuade them to make purchases from the company. One way to do this is by sending emails to the company's web subscribers. People who subscribe to a company's newsletter might be interested in the company's products, but not ready to make a final decision. By sending content to subscribers, the marketing team can convince them of the product's value and offer promotional pricing. Newsletters also make it easy for prospects to contact the company's sales team if they have questions.

Related: How To Write an Effective Newsletter

5. Upsell to encourage purchases

Once a prospect has gone from the interest to the decision stage of the business funnel, the sales team can use upselling to encourage the prospect to make a purchase. Upselling involves offering bonuses or encouraging an upgraded version of a product the customer is considering. This process allows the sales team to identify the product or service that best fits the potential customer's needs, which can increase their chances of closing the sale.

Related: What Is Upselling? Tips and Examples

Tips for optimizing a business funnel

Here are some ways to make a business funnel more effective:

Use a sales management software

Many companies use specialized software programs, which allow sales and marketing professionals to create and monitor the business funnel. Large businesses might have thousands of potential customers entering the funnel every month, so using software to process customer data and identify trends can help the company's leadership team understand their customers' priorities. This knowledge can help them launch initiatives that boost revenue. Some customer management software platforms include funnel management, which connects to specific customer accounts and revenue reports.

Focus on one stage at a time for improvement

After creating a business funnel, a company's sales and marketing leaders might revisit the funnel every year to evaluate how effective the company's strategies are at moving prospects through the funnel. If they decide to optimize the funnel to increase revenue, it can be effective to choose a single stage to focus on during each improvement project. For example, the team might focus on the awareness stage and launch a strategic initiative to widen brand exposure. Choosing one stage allows the team to understand the effects of their efforts on the overall funnel.

Continue communication after the prospect leaves the funnel

If a prospective customer makes a purchase from the company, they might be on a contact list for current customers. If they don't, they might become a lost prospect. It can be valuable to continue contacting prospects, even if they chose a different company. By sending surveys and other feedback forms, marketing and sales teams can learn about the competition's strengths, which can help them improve their sales strategies.

Explore more articles