A sales funnel is an inverted pyramid that draws potential customers through a company’s sales process. As the name indicates, it is wide at the top because customers with all level of engagement enter and eventually the strongest leads are channeled to the bottom to be turned into successful sales.
In this article, we look at: 1) the composition of a sales funnel, 2) the importance of qualifying sales leads, 3) benefits of a sales funnel, 3) effective sales funnel management, 4) how to build the perfect sales funnel, and 5) mistakes made in sales funnel management.
COMPOSITION OF A SALES FUNNEL
The sales funnel can be generally divided into three simple sections.
Top of the funnel
Everyone enters here, possibly as a result of the interest generated in your product through an effective marketing or promotions strategy. The top of the funnel is the widest because no filter mechanism is at play and there is encouragement for everyone to explore.
Middle of the funnel
At this stage a customer has taken a step beyond just going through basic information regarding your product. This minor initial commitment tags them as a sales lead. It means that something about your offering moved them beyond just observing to actual action albeit a minor gesture. This does not mean that they business value however. That will be assessed based on their level of engagement or attractiveness. This is a tricky stage because there is access to a wide variety of expressions of interest and identifying potential sales correctly can make the difference between successful sales and wasted efforts.
Bottom of the funnel
A potential client (sales lead) at this stage is someone who is qualified and ready to make a purchase. This assessment is based on their degree of interest based on observing how they behave. If they have made repeated inquiries, shown repeated expressions of interest etc., then they become an opportunity. A client at this stage is ready for a proposal or personalized pitch to allow them to formally commit to your product.
IMPORTANCE OF QUALIFYING SALES LEADS
Marketing qualified leads are those entrants into the funnel who have the engagement or attractiveness to merit focus on them as potential successful sales. These are identified somewhere in the middle of the funnel and this identification is extremely important. The sales team needs to figure out whether an attractive client is more important to qualify or if an engaged one is. Attractiveness is a relatively constant measure (revenues, industry type, number of employees etc) and it is what flags a prospect as a person of interest for the business. Engagement is a more dynamic quality which can change frequently and signifies whether a prospect is ready to buy.
When a marketing qualified lead rates high on both attractiveness and engagement, they become a Sales Qualified Lead. These prospects show the most signs of being turned into a successful sale and are therefore worth a concentrated effort to pursue. At this point, most effort should, if a SQL is attractive and engaged than they should be pursued fully. Efforts should be scaled back for those leads which are less attractive even if they are engaged and more effort assigned to those who remain attractive even if they rate low on engagement.
BENEFITS OF A SALES FUNNEL
There are several benefits to use a sales funnel:
- It helps focus attention on the customers most likely to purchase the product.
- No business wants to spend time trying to turn every single person into a sale.
- Instead of wasting time on those people who are not actually interested, the sales teams can target their efforts.
- It also helps add some predictability to the sales process which is otherwise very variable.
- A customer that has reached the bottom is most likely to be engaged enough to be turned into a successful sale.
EFFECTIVE SALES FUNNEL MANAGEMENT
Successful sales are characterized by identifying potential leads that will convert to purchasing customers. Because of the extremely large number of people showing initial interest and the relatively smaller number of people actually looking to buy, it is a difficult process to correctly identify and focus your efforts on the right people.
This is where an efficiently managed and effectively created sales funnel acts as a filter. When it flows smoothly, a sales funnel can offer tremendous benefits to the business. Conversely, if the funnel becomes needlessly complicated, it can actually become a hindrance to the process and slow things down. It therefore remains imperative to ensure that the sales funnel is long enough to act as an effective filter, but not so long that it becomes too complex and starts leaking prospects from the side.
An ideal funnel will smoothly channel prospective leads downwards while horizontally removing the rest to avoid clogging the entire passage.
Among other things, a sales funnel can be kept relevant through the following activities.
It is vital to ensure that no leads move horizontally within the funnel. Instead, they should be able to move relatively smoothly downwards, with only the occasional pause to address concerns and gather more information. If it is taking too long to convert leads into sales, then the funnel and the processes built into it need to be carefully evaluated to eliminate any unnecessary steps. By asking pointed questions as to why the delays occur, you can identify if it is a problem outside the funnel such as access to decision makers or a fault in the marketing communications. But more often than not, it will also lead to an identification of redundant process steps within the channel as well.
It is important to note that steps should not be removed just for the sake of simplification. If an intelligent process study is not undertaken, it will result in incomplete or missing steps that may result in a loss of leads. Any steps that add no value or require additional actions that are not necessary should be targeted for removal only.
Target qualified leads
There are many instances where those responsible for the top of the funnel pass of all leads to the sales teams rather than properly qualifying them. This is a key mistake as a majority of those leads will never turn into sales. By having them all in a pool to target, the sales team will end up spending vital time, effort and resources into targeting someone who will never turn into a successful sale. Instead, owners of the top and middle parts of the funnel should be trained to properly identify only those leads that can be turned into sales, whether now or at a later time.
Since not all leads require the same information and support, a smaller pool of leads will allow the sales team to offer diversified products and services to meet many different requirements.
Use a CRM
A simple but effective Customer Relationship Management application will supplement the funnel and allow the sales team to keep a track of different customers and their specific requirements. It can also help automate and simplify certain processes and make the funnel function even more smoothly. But it is key here to choose a system that is simple and does not add further complexity to the process.
HOW TO BUILD THE PERFECT SALES FUNNEL
Creating the perfect sales funnel for your business is not a daunting task provided you understand the basics of a sales funnel, your own sales team and their performance and buying behavior and motivations of your customer. The following steps can be used to create and sustain an effective high performing sales funnel.
Use Value-Selling and the Buyer’s Perspective
The hallmark of a successful funnel is that the company knows and understands its customer and their motivations. What are the target company’s core values and belief systems and what do they value the most for their business. It is this understanding of the buyer’s perspective that can ensure more successful sales than a more need oriented approach. This insight into the customer can be achieved through some basic research, initial conversations as well as available market studies and trends. When you address the customer’s values, they will differentiate you from your competition and be less bogged down by the costs associated with purchases.
Use Proper Language When Speaking With Prospects
By carefully using personalized language for each different customer, the number of quality leads can be enhanced. Ideas need to be put forward to the client concisely in words and terminology that is understood by the client and appeals to them. They need to clearly understand what is being offered and how this can be crucial for business. If the language used in customer communication needs to go beyond the sales pitch and speak to the customer’s unsaid and unmet needs and their deep seated corporate values. This will also help downplay the anticipated effects of the potential change on the client.
Target at Each Level of Your Funnel
It is a natural tendency for sales people to lose focus and begin targeting customers for quantity rather the higher value brought by a smaller number of relevant clients. By pointed targeting at each level of the funnel, leads with low potential can be moved out right at the beginning. By effective targeting at the bottom of the funnel possible clients can be converted into definite sales. The end result is a funnel that channels promising leads to the bottom and is not overflowing with relevant and irrelevant possibilities
Effectively Manage Your Sales Force
Through simple means like proper training programs, effective reward systems and motivation techniques, a sales team driving the sales funnel can boost sales performance and ensure customer satisfaction. A team that can sell optimally is crucial to the very concept of the sales funnel. In general the sales team should endeavor to gain knowledge about changing market trends, new sales concepts and methods, innovations in products, changes in company policies and processes as well as how to adapt to any major or minor developments, both within their own organization and their clients,
Actively Monitor Your Sales Funnel
As important as it is to target all levels of the funnel it is also imperative to keep a close eye on any potential threats or hitches that may clog the funnel to identify improvement areas. Instead of waiting for a total system failure, if small issues are identified and addressed in a timely fashion the improvement process is greatly helped. One way to approach this is to use brief surveys for customer insight into potential problematic areas.
Make the Most of Prospecting
Approaching the right prospective clients is where the funnel begins and by identifying a complete profile for a desirable client, the sales teams have a great referral point to go back to when consulting with varies potential customers. Both traditional and newer techniques can be used to approach including cold calling potential prospects, internal referrals for credibility, advertising, conferences and seminars, email, social media and websites.
Ensure Proper Sales Team Hiring and Training
It is imperative to hire the right people into the sales team. Just like an ideal client profile, there should be an ideal salesperson profile and this should be used to hire people with the drive mix of drive, ambition, experience and ability to function as part of a sales team. Once hired, identify the most beneficial training programs to ensure that sales people from various backgrounds and levels of experience are brought up to par with each other wherever possible.
Optimize Research, Preparation and Presentation Skills
Worth mentioning separately is a dedicated focus on certain areas within sales training sessions. Effective research, adequate preparation and exceptional presentation skills are all vital to a successful sales team. Through proper research, the salesperson can get to know the client and what drives them. They can learn what values are important to a client and can target proposals accordingly. Proper preparation for sales calls based on data gathered in preliminary research allows the sales team to be ready for any turn a client conversation takes. A successful conversation and sales pitch is only possible with the help of excellent presentation skills. Confidence, knowledge and an articulate manner of speaking portray the sales teams passion for their product and in turn increases the prospective client’s confidence in the product being sold to them.
MISTAKES MADE IN SALES FUNNEL MANAGEMENT
Despite preparation and focus, many sales funnels can go in the wrong direction. Below are some of the common mistakes that can make the difference between success and failure.
Not balancing lead generation and lead management
Do not constantly attempt to work on generating leads to add more traffic into the funnel. It is not enough to just create a lot of leads. Instead, it is equally important, if not more to work on managing these leads through ranking, sorting, nurturing and following up on them. Sales results can improve drastically by focusing on the existing leads that show the most potential than on increasing their quantity
Not focusing on the sales process
Do not lose focus of the sales process by diverting attention to expensive or overly complicated CRM applications. CRM is a means to supplement sales strategy and action plans by providing a platform to automate where needed and organize customer data to allow customizability. A CRM application can allow you to identify problem areas but cannot be relied on to fix these.
No sales training
Do not get complacent when it comes to constant learning and training. These exercises are not just for those new to the sales game. Instead, all levels of the sales team no matter their level of experience need periodic refreshers to allow them to stay abreast of the latest techniques and to learn by sharing knowledge and experiences with others.
Not measuring each stage of the funnel
Do not just focus on the end result and measure that as a success or failure. Instead, focus on the outcome at each stage within the funnel. Perhaps every move was done right in an instance where a sale did not end up happening. Perhaps all the wrong moves were made but a sale happened anyway. Each stage needs to be measured and assessed to understand it’s efficacy within the process as well as to ensure that the sales team is following protocol as it should.
Here is a video by PipeDrive that will help you further understand sales funnel management: