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Guide to Building a Sales Funnel

Updated Apr 20, 2023

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David Gargaro
Contributing Writer at businessnewsdaily.com
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  • A sales funnel is a tool used to track leads as they progress from prospects to customers.
  • You can optimize your sales and marketing efforts by examining your sales funnel and making strategic changes and improvements.
  • A sales funnel comprises three segments: top, middle and bottom (or high, middle and low).
  • This article is for small business owners and marketing managers who want to improve their sales and marketing strategies.

Whether you have a brick-and-mortar or online business, you must attract visitors and convert them into customers. This means you need a robust sales strategy. Most small business owners use the sales funnel model to flesh out this strategy. 

Your sales funnel’s goal is to move people through the various sales process stages until they’re ready to buy your products or services. We’ll explain the sales funnel’s four stages, how to build a sales funnel and how a sales funnel can help your business.

What is a sales funnel?

A sales funnel describes the steps someone takes to become your customer. The sales funnel applies whether you have a brick-and-mortar store or sell online. It consists of three parts:

  • Top of the sales funnel: The marketing strategies that attract prospects to your business are at the top of the sales funnel. For example, your physical storefront advertising or your website’s landing page are at the top of the sales funnel.
  • Middle of the sales funnel: The middle of the funnel involves all elements of your sales cycle before the sale. For example, people trying on clothing in your store or website visitors reading about your products’ benefits are in the middle of the sales funnel. 

Bottom of the sales funnel: The bottom of the funnel is the final purchase. For example, when customers pay for products at checkout or when website customers enter their credit card information to complete

Did You Know?Did you know

Your sales cycle consists of generating leads, researching and connecting with them, presenting to qualified prospects, curbing objections, closing the deal and following up with your customers.

What are the 4 stages of the sales funnel?

Prospects will pass through four sales funnel stages ranging from when they first learn about your product or service until they purchase (or don’t purchase). The four stages represent a prospect’s mindset; each requires a different messaging approach. 

You can remember the sales funnel’s four stages using the acronym AIDA:

  • Awareness
  • Interest
  • Decision
  • Action

Awareness

The first sales funnel stage is when someone becomes aware of your product or service. 

Awareness may arise when someone encounters your advertising, learns about your brand on social media or hears feedback from friends or family via word-of-mouth advertising. Additionally, a prospect may discover your business via a Google search or by reading your business blog.

If the timing is right, the prospect might become a customer immediately by clicking a link and buying your product or entering your business and making a purchase. However, you’ll likely have to convince the prospect to visit your store or website ― or contact you by phone or email ―  to engage with your business.

Interest

The second stage of the sales funnel is interest. The prospect now knows about your company, brand and products or services. They’ve decided to evaluate it based on their interest level.

At this stage, it’s crucial to utilize a content strategy by publishing excellent content that informs and educates the prospect but doesn’t overtly sell to them. If you become too pushy or aggressive with your sales approach during this stage, you could turn off the prospect and compel them to leave. Your content should demonstrate your expertise and help the prospect make an informed decision.

TipTip

When creating a content strategy, focus on evergreen content that remains valid and relevant to your audience for a long time and use a content calendar to stay organized.

Decision

Decision is the third sales funnel stage. The customer is ready to buy and may consider several options before purchasing. They’ll compare pricing, packages and other factors to find the best option.

At this stage, you should make your best offer. For example, you might provide free shipping, a discount code, an online coupon or a bonus product when they place their order. The key is to make the offer irresistible so the prospect will move forward and choose your offer. 

Your content can boost customer engagement and help compel the prospect to make a decision. Sales pages, webinars or phone conversations can also help turn prospects into customers.

Action

Action is the final sales funnel stage. The prospect becomes a customer by purchasing your product or service (or they decide to leave without purchasing). If the customer makes a purchase, they are part of your company’s ecosystem.

Although the sale is complete, the process never ends. Your goal is to focus on customer retention strategies so customers make ongoing or future purchases. Building customer loyalty is vital. For example, thank the customer for the purchase, ask them to provide feedback, offer after-purchase support, invite them to sign up for your newsletter or enroll them in a customer loyalty program for rewards.

How do you build a sales funnel?

Creating a sales funnel is essential for moving prospects from initial contact to final sale. After creating a sales funnel, you can track prospects’ behavior and engagement at each stage to determine where they are in the sales funnel and see how well it works.

There are many ways to create a sales funnel and different businesses and industries have various sales funnel types. However, most have essential elements in common. Follow these steps to create a sales funnel for your business:

1. Create a landing page.

The landing page is often the first opportunity for a prospect to learn about your business and its products and services. Users will arrive at your landing page in various ways. For example, they might click an ad or link on a social media page, download an e-book or sign up for a webinar.

Your landing page should clearly describe your company and the unique benefits of your product or service. The landing page might be your only opportunity to impress prospects, so the copy should be strong and compelling. It should also include a lead capture form so you can gather prospects’ information and communicate your value to them.

Key TakeawayKey takeaway

You can create your own online forms for lead capturing, conducting surveys or accepting payment information with tools like Google Forms and Microsoft Forms.

2. Offer something valuable.

For a prospect to provide their email address, you must give them something in return. For example, you might offer a free e-book or whitepaper with valuable and informative content.

3. Nurture the prospect.

Now that the prospect has shown enough interest to provide their email address, it’s time to nurture your lead with content that educates them about your offering. You’ll want to stay in touch with them regularly (once or twice a week) ― but not so frequently that they get bored or turned off by all the content. Ensure the content addresses their key needs and overcomes any potential objections.

4. Close the deal.

Make your best offer ― one that is difficult for the prospect to ignore or turn down ― to close the deal. For example, you could provide a product demonstration, free trial or special discount code.

5. Keep the process going.

At this point in the sales funnel, the prospect has either become a customer or decided not to purchase. In either case, you should continue the communication and relationship-building process.

  • If the prospect becomes a customer: If the prospect becomes a customer, build the relationship by educating them about your products or services, engaging them regularly to build loyalty and offering them excellent service to retain them as valued customers. 
  • If the prospect does not make a purchase: If the prospect does not make a purchase, stay in touch via regular emails. Continue to work on converting them into customers by using different email marketing campaigns to nurture them.

6. Optimize your sales funnel.

Even though you’ve created a sales funnel, your work is never done. You should continually look for ways to improve and optimize your sales funnel and determine where you’re losing prospects. Focus on the areas where prospects move from one stage of the sales funnel to the next:

  • Evaluate the top of the funnel: Evaluate each content piece. Are you capturing enough prospects with your initial content? Your content’s goal is to get prospects to click the call to action (CTA). If they’re not responding to your CTA ― or one piece of content is getting fewer CTA clicks ― rework that element or try something new.
  • Evaluate your landing page: Your offer and CTA should mirror the content, such as a blog post or Facebook ad, that brought the prospect to your landing page. Are prospects trusting you with their contact information? Test every part of your landing page, such as headline, images, body copy and CTA, to find out what works and what doesn’t.
  • Test every offer in the action stage of your sales funnel: Compare the results of different offers, such as free shipping vs. discounts. How many purchases are you getting with your email nurturing campaigns and other marketing efforts? If one offer gets much better results than another, focus on using that offer to close prospects and see if you can improve it.
  • Track your customer retention rates: Determine how often customers return to purchase your products or services. Do customers return more than once and are they buying other products or services? Keep track of how often they refer others to your company.
TipTip

To calculate your customer retention rate for a given period, take the number of total customers at the end of the period, subtract any new customers acquired during the period and then divide that number by the total number of customers you had at the start.

What is the sales funnel’s importance?

The sales funnel shows the path your customers will take on the way to purchasing your product or service. Analyzing your sales funnel shows you what’s working and not working in your sales process. You can identify problems in the various funnel stages where prospects drop out and work to fix them. 

When you thoroughly understand your sales funnel, you’ll gain insight into what customers think and do at each stage. With this knowledge, you can:

  • Influence how prospects move through the sales funnel and whether they convert into buying customers.
  • Invest in marketing activities that attract more prospects.
  • Develop more relevant messaging at each stage of the sales funnel.
  • Convert more prospects into paying customers.

Sales funnel FAQs

Here are answers to some commonly asked questions about sales funnels. 

How is a sales funnel different from a marketing funnel?

The sales funnel begins at the end of the marketing funnel. The marketing funnel builds prospects’ interest in your brand, guiding them from their first interaction to the point where they have some interest in learning more about your products or services. The marketing funnel also helps with generating and nurturing leads. Once the prospect is aware of your brand, they exit the marketing funnel and enter the sales funnel.

What is the difference between a sales pipeline and a sales funnel?

A sales pipeline is a sequence of steps for turning a prospect from a lead into a customer. The prospect moves through each step until they make a purchase and become a customer. The sales pipeline and the sales funnel have the same stages but are represented differently. The sales pipeline explains the value, quantity and stage of different open deals at a given time. In contrast, the sales funnel helps sales teams understand the total number of deals and what percentage of those deals have passed through each stage of the sales process.

What is a sales funnel manager?

A sales funnel manager helps oversee the customer journey ― from attention to action ― and identifies and closes sales funnel leaks. The best customer relationship management (CRM) software automates and streamlines sales funnel management, including qualifying leads, tracking prospects’ activity at each buyer journey stage and following up automatically when the time is right. CRM software can also help define the sales process, identify leaks in the sales funnel and streamline the conversion process so prospects reach the bottom of the sales funnel.

Is the sales funnel obsolete?

The answer to this question depends on whom you ask. Some will tell you that lifecycle marketing ― tailoring communications to a customer’s stage in the funnel ― is overtaking traditional sales funnel approaches. However, you can’t tailor communications based on a customer’s movement along your funnel without knowing how sales funnels work in the first place. The sales funnel is thus far from obsolete. If anything, the fact that salespeople and marketers have found great success with it for decades speaks to its continued value.

Guiding your customers from start to finish

A strong sales funnel can capture and convert leads you might never have found otherwise. It also breaks down the customer’s typical journey into straightforward steps. 

Put yourself in the customer’s shoes and ask yourself what you need to know at each step of the funnel. Your answers will guide how you communicate with your customers ― and help you make the most of your funnel.

Max Freedman contributed to this article.

David Gargaro
Contributing Writer at businessnewsdaily.com
David Gargaro is a content writer and copy editor with more than 20 years of experience in multiple industries, including publishing, advertising, marketing, finance, and small business. He has written on B2B-focused topics covering business technology, sales, marketing, and insurance. David has a Bachelor of Arts degree in English and Actuarial Science from the University of Toronto. He served as the managing editor of a small publishing company, and self-published a book called How to Run Your Company… Into the Ground.
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