Sales Funnel: The Basics

Sales will not happen all at once. You, as an entrepreneur will need to do many different things if you want to transform potential customers (possibly interested) into the customers who pay you.

Small businesses can have a huge number of potential customers. However, until they become real customers, they can’t expect to benefit from them, and actually, anyone can be a potential customer. In the retail store, the potential customer can be anyone who passes through or lives in the area of the store location. For importers and wholesalers, the potential customers can be all small businesses in the state that are targeting the same market, or come from the same industry. For online sales, the whole world’s internet users are potential customers.

From such many potential customers, only a small portion will become real customers. Therefore, we use the funnel as a term, which means we want to collect a larger amount of potential customers to come into the beginning of the funnel and only a small part of them will pass in the narrower part of the funnel in a specific period of time.

A sales funnel is also sometimes called a sales tube or a sales tunnel, but as a tool for visualization of the sales process in a specific company. It would be much easier if the potential customer immediately becomes a real customer. But, it would be possible only if we don’t have the competition, or our business is unique and all must pass through our business. However, that is not in the reality.

For every potential customer, there is a battle between you and your competition. Anyone who will have a better sales funnel which will mean a more productive sales funnel will succeed with the better transformation of potential customers into real customers. So, the sales funnel if we use the laws of physics is something that will transform the business potential energy in the business kinetic energy.

Sales Funnel Stages

sales funnel

In this picture is presented the sales funnel and the way how it is functioning. Everything that is out of the funnel is unlimited space, which represents an unlimited number of potential buyers for companies competing for them. Therefore, you as an entrepreneur must fight with your competition. Your first task is to use marketing campaigns to attract as large as a possible part of these potential customers into the funnel, or in your sales process. With such campaigns, the customers will become aware of you and your offer, your company, your products, and your services. So, your marketing campaign is the first need to attract attention to your business.

As potential customers become aware of your business, your sales funnel start reducing the number of potential customers who come in your sales funnel from that unlimited space. This number will depend on your marketing strategy, the type of the business and the market, or the industry in which operate a business (local, national, global, web…). So, there can be 100, 1.000, 10.000, million potential customers that are already passed into your sales funnel…

Your next task as an entrepreneur is to focus on those potential customers and to ensure that they will become interested in the products and/or services that you offer.

You must find your customer’s needs and provide opportunities for them in the form of trying the products (through the presentation) to determine that exactly those products and/or services will meet their needs. For example, the company that sells software offers the possibility of a 30-day free trial of the software to ensure potential customers that the software satisfies their needs and desires. The purpose of this is to make them desire for buying. So if you raise the interest in your products and/or services that you offer, your job will be to make the interested person become persons who will have a desire for the offer.

This desire came from information about the price, type of delivery, payment method, and so on. All these will result from some of negotiating from which some part of the potential customers will become real buyers, or they will make the final decision to buy your product and/or service.

How the Sales Funnel Will Look in the Form of Numbers?

From an unlimited number of potential customers, your business will be noted from, for example, 1000 potential customers. From these 1000 potential customers, interest in your products and/or services will provide, for example, 500 potential customers. From these 500 potential customers, a desire for buying will show only 200 potential customers. But, in the end, the decision for buying will be made only by ten customers.

As you can see, only 1% of potential customers at the beginning of the sales funnel became real buyers. This percent is called the conversion rate of your sales funnel.

Your goal as an entrepreneur and the goals of your sales team is to ensure that the sales funnel at any time will be full in all phases. This will be achieved through the good marketing campaign and excellent value that you offer to customers. After that, you must find different ways to improve your conversion rate. Analyze your sales funnel and consider how to improve it. Remember, nothing is perfect. Each process can be improved, and so your sales funnel.

You can download free sales funnel template that can help you in designing and improving it.

Dragan Sutevski

Posted by Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan