What Is a Sales Funnel?

Updated October 11, 2022

Marketing helps a business appeal to a wide range of customers, which helps to drive sales. Ultimately, all types of customers from prospective to paying fall into various groups within a sales funnel. Understanding what a sales funnel is and how it works can help you reach your target audience and implement the most successful marketing strategies for your business.

In this article, we will discuss what a sales funnel is, the different stages in the sales funnel, how to create and optimize your sales funnel and also walk you through an example of a sales funnel.

What is a sales funnel?

A sales funnel is a marketing strategy that represents the customer's sales journey from prospective customer to purchasing customer to loyal customer. The sales funnel is a metaphorical funnel, but it works in the same way as a traditional funnel. However, in a sales funnel, some customers make it through the sales funnel and some do not.

The top of the sales funnel is where prospective customers are browsing and learning about your product. To be successful in moving customers through the funnel, businesses must attract and capture the attention of these prospective customers as well as build demand for the product. Typically, businesses attract customers through blogging, social media and paid advertisements, among others. Businesses should educate customers about the products and share the value of their products. As the funnel narrows, businesses must work harder to keep the customers interested in the product so that they are likely to purchase it. Once the customers are through the sales funnel and are purchasing the company's products, the company must ensure that they remain loyal customers.

Related: A Guide To Funnel Charts

Why is a sales funnel important?

A sales funnel is important in sales and marketing because it helps a business analyze and optimize its sales process. Additionally, a sales funnel helps a business measure the overall success of each component of the sales funnel. When a business studies its sales process through the use of a sales funnel, it can determine the strengths and weaknesses of the process.

It is the role of the business to influence how customers move through the sales funnel and whether or not they purchase the product. The ultimate goal of a sales process is to enhance the conversion rate, or the ability of the business to convert leads into customers, at each sales funnel stage so that all customers make it through the entire sales funnel.

Sales funnel stages

There are four main stages in a sales funnel including:

Awareness
Interest
Decision
Action

Awareness

The beginning of the sales funnel is the awareness stage, and it includes ways to make customers aware of a company's product. This stage is also where the company builds credibility with its brand. Customers may find a business through social media, an online search, advertisements or a recommendation from a friend or family member. No matter how a customer learns of a company, the company will have to raise awareness of their products for the customers to purchase them.

Prospective customers can enter the sales funnel through a variety of ways such as email newsletter signups, e-book downloads, online tutorials and videos, among others. A business needs to capture the attention of a prospective customer first and then work on establishing rapport with that customer. The awareness stage is a company's repeated point of contact with its customers. Customers tend to purchase from companies that are reliable, relatable and honest from the very beginning of the sales process.

Interest

After the customer is aware of a business, the business must appeal to the prospective customer's interests. Typically, gaining a prospective customer's interest happens through email. For example, a business may choose to email potential customers the back story of the business in detail as well as its mission and overall goal. Businesses need to tell the truth and be completely transparent with potential customers to build trust with them.

Of course, a business should tie in information regarding its products, but first, it is best to illustrate to customers your past and your goals for the future. Consider maintaining a steady, but not overwhelming flow of emails to prospective customers. For example, sending out an email or two the day the customer first signs up for emails is a standard business practice, and then it is usually followed by one email per day. No matter how often you email, be sure to pique the interest of the customer by sharing your story in an influential way.

Decision

The next stage in the sales funnel is the decision stage. In sales, the most common way to get customers to decide to purchase a product is through product reviews and testimonials. Customers tend to purchase products that they know are of high quality and that many other people can attest to.

For example, publishing video testimonials and customer reviews of your products on your website is a great way to get customers to purchase your products. Additionally, if your company has been reviewed or mentioned in a media publication, you can display that information for customers to see. When customers view a business as reputable, they tend to trust that business and value its products.

Action

Lastly, the action stage of the sales funnel is when the customer buys your product. If a customer is at this point in the sales funnel, they have already made the decision to purchase your product, so it is up to your business to create top-quality products that the customer will return for. Businesses can also benefit from loyal customers that share their experiences with other potential customers. In this way, these loyal customers help the business by marketing its products to their friends and family members.

For example, in today's technologically advanced society, a customer has a positive buying experience with a certain product and later they post their experience on social media. Their post is seen by hundreds or even thousands of other people who could then potentially go out and purchase the product for themselves. Therefore, one person's post about a particular product could generate additional sales for the company.

How to create a sales funnel

A sales funnel can be created using the following steps:

Determine your target audience.
Attract attention.
Create a website landing page.
Email potential customers and leads.
Build rapport.

1. Determine your target audience

You will need to determine your target audience and analyze their interests to see which products will appeal to them. Your sales funnel becomes more effective as you gather more information regarding your target audience. You only need to reach customers who need your product.

2. Attract attention

The next step is to get customers to enter your sales funnel by attracting attention to your product. Businesses can do this by creating quality content that engages the target audience. Examples of content could include blogs, videos and advertisements.

3. Create a website landing page

Content such as advertisements must take your prospective customers to a landing page. This landing page should include a promotional offer that the customers are likely to accept. The focus here should be on converting prospects into leads. Be sure to include a specific call to action that leads the customer to the next stage of the sales funnel.

4. Email potential customers and leads

Set up an email campaign containing good quality content for potential customers and leads. Be sure to email often, but not too much. You can also include educational information regarding your product as well as background information on your company. At the end of the email campaign, include a promotional offer that will push the leads to action.

5. Build rapport

After you establish trust with potential customers and turn them into leads and ultimately into loyal customers, it is important to continue to build rapport with your customers. Continue emailing existing customers as well as potential customers. You could thank existing customers for their purchases, offer extra promotions and invite them to follow you on social media. Establishing regular communication with customers is key to gaining their trust and loyalty.

How to optimize your sales funnel

There are a few steps you can take to optimize your sales funnel to market efficiently. They are:

Focus
Advertise
Test
Track

1. Focus

To improve your sales funnel, pay close attention to those areas in between the stages of the sales funnel. For example, focusing on the area between the decision and action stages can help you improve your sales strategies to help customers make decisions and to generate sales.

2. Advertise

Advertising is important in marketing, but don't just focus on one advertisement. It is important to run numerous advertisements in a range of locations including social media sites. You are trying to appeal to a wide audience, so you want them to be able to view your advertisements wherever they go.

3. Test

Be sure to test landing pages to see what strategies, layouts, content and themes work best for your target audience. Make sure your promotional offers and calls to action align with each other and that all of that information is accurate. Additionally, you can test your emailing strategies to see what appeals most to your audience. It may also be a good idea to test your offers. For example, you could ask your audience if they would prefer free shipping or a discount on the product.

4. Track

For optimization, you will need to track the results of your marketing strategies. You can also track your customer retention rate or the number of customers that returned to you multiple times. Also, you can track the percentage of customers that are referring your products to their friends and family.

Sales funnel example

The following example illustrates the concept of a sales funnel:

A business sells vintage T-shirts with a diverse customer base containing both males and females between 18 and 30 years of age. This age group tends to be active on social media sites, so you run advertisements on these sites. The advertisement will direct web traffic to a specific landing page, which is simply a single web page that appears when the customer clicks the advertisement. On this web page, the business has set up incentives such as free e-books and videos in exchange for the customer's email. When the customer provides their email address, they become an actual sales lead instead of a prospect.

Once the business has these lead customer email addresses, the business can help move the customers through the sales funnel. Now that the business has a list of emails, they can send out casual content related to their T-shirts. The business can share design information, how the shirts are made and how the shirts fit in with the latest fashion trends.

After sending each email address a few emails concerning its t-shirts, the business decides to offer a 15% off coupon on every customer's first order, which helps the business sell its t-shirts rapidly. The business makes a new email list containing the emails of the customers who bought t-shirts using the promotional 15% off coupon. These are the customers who have moved through the sales funnel, and now it is up to the business to keep these customers coming back to purchase t-shirts in the future.

The business can use its new email list of paying customers to send the customers new and updated content on its t-shirts. Additionally, the business can suggest buying t-shirts as a gift for someone else. In these ways, the business is thanking the customers for their business and asking them to continue buying t-shirts from them. Once customers move through the sales funnel, businesses need to keep the business exciting to retain these customers. Customers tend to be loyal to businesses that create high-quality products and that constantly update their content.