• A sales funnel is a tool used to track leads as they progress from prospects to customers.
• By examining your sales funnel, you can optimize your sales and marketing efforts.
• A sales funnel consists of three segments: top, middle, and bottom (or high, middle, and low).
• This article is for small businesses that want to improve their sales and marketing strategies.

Whether you have a brick-and-mortar or online business, you need to create a sales funnel to attract and convert visitors into customers. The key goal of your sales funnel is to move people through the different stages of the sales process until they are ready to buy your products or services.

What is a sales funnel?

A sales funnel describes the steps an individual takes on the way to becoming your customer. It consists of three parts:

1. The top of the funnel is the marketing that attracts prospects to your business (e.g., the advertising on your physical storefront, or the landing page of your website).
2. The middle of the funnel involves all the parts of your sales process prior to the sale (e.g., people trying on clothing in your store, or website visitors reading about the benefits of your products).
3. The bottom of the funnel is the final purchase (e.g., customers paying for clothes at checkout, or website customers entering their credit card info to complete a purchase).

Key takeaway: A sales funnel describes where an individual is in their buying journey, whether they’ve only just become aware of your brand or they are a brand-loyal repeat customer. 

Importance of a sales funnel

The sales funnel shows the path your customers will take on the way to purchasing your product or service. Analyzing your sales funnel will help you understand how it works and where it does not. It will also help you identify the holes in the different stages of your sales funnel (i.e., where prospects drop out and do not convert into customers).

Understanding your sales funnel will help you influence how prospects move through it and whether they convert into buying customers. It will also provide insight into what customers are thinking and doing at each stage of the sales funnel so you can invest in marketing activities that attract more prospects, develop more relevant messaging at each stage of the sales funnel, and convert more prospects into paying customers.

Key takeaway: Solid knowledge of your sales funnel is essential for understanding your customers’ buying journeys so you can identify gaps in the process and invest in the most effective marketing strategies. 

4 stages of the sales funnel

Prospects will pass through four stages of the sales funnel, from when they first learn about your product or service until they purchase (or don’t purchase) your product or service. The four stages represent a prospect’s mindset, and each stage requires you to take a different approach with your messaging. You can remember the four stages using the acronym AIDA:

• Awareness
• Interest
• Decision
• Action

Awareness

The first stage of the sales funnel is awareness. This is when a person first becomes aware of your product or service. They might develop this awareness from encountering your advertising, learning about your brand on social media, or hearing feedback from friends or family. Or, a prospect might have found out about your business by doing a Google search that brought up your company’s website, seeing one of your ads, or reading your blog.

If the timing is right, the prospect might become a customer by clicking a link and buying your product. However, it is more likely that you will 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. At this point, the prospect has learned about your company, your brand, and your products or services, and they have decided to evaluate it based on their level of interest.  

At this stage, you should publish great content that informs and educates the prospect but does not 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.

Decision

The third stage of the sales funnel is decision. Now, the customer is ready to buy and may be considering several options before making the purchase. This is when they will be comparing pricing, packages, and other factors to find the best option for them.

At this stage, you should make your best offer. For example, you might provide free shipping, a discount code, or a bonus product when they place their order. The key is to make the offer irresistible so the prospect will want to move forward and choose your offer. Your content can compel the prospect to make a decision. Sales pages, webinars, or phone conversations could help turn the prospect into a customer.

Action

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

Although the sale is complete, the process never ends. Your goal is to focus on customer retention so the customer makes ongoing or future purchases. Your content should help to build customer loyalty. 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 rewards program.

Key takeaway: The four stages of the sales funnel are awareness, interest, decision, and action. Use these stages to optimize your sales funnel and compel leads to become customers. 

How to build a sales funnel

Creating a sales funnel is essential for moving prospects from initial contact to the final sale. You can then track the level of behavior and engagement at each stage to see where the prospect is in the sales funnel and determine how well it is working.

There are many ways to create a sales funnel, and different businesses and industries have their own types of sales funnels. 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 different ways; 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 way to capture the prospect’s contact information so you can continue to communicate your value to them.

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 useful and informative content.

3. Nurture the prospect.

Now that the prospect has shown enough interest to provide their email address, nurture the prospect with content that educates them about your product or service. 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. Make sure 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, a free trial, or a 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 make the purchase. In either case, you should continue the communication and relationship-building process.

If the prospect becomes a customer, continue to build the relationship by educating them about your products or services, engaging them regularly to build loyalty, and offering them great service to retain them as valued customers. If the prospect does not make a purchase, stay in touch with them through regular emails. Continue to work on converting them into customers by using different email nurturing series.

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 are losing prospects. Focus on the areas where prospects move from one stage of the sales funnel to the next.

Begin at the top of the funnel. Evaluate how well each piece of content is doing. Are you capturing enough prospects with your initial content? The goal of your content is to get prospects to click the call to action (CTA). If they are not doing that, or one piece of content is getting fewer clicks on the CTA, then rework that element or try something new.

Evaluate your landing page. Your offer and CTA should mirror the content (e.g., blog post, 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 (e.g., headline, images, body copy, CTA) to find out what is working and what is not.

Test every offer in the action stage of your sales funnel. Compare the results of different offers (e.g., free shipping versus 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 upon it.

Track your customer retention rates. Determine how often customers return to purchase your products or services. Do customers come back more than once, and are they buying other products or services? Keep track of how often they refer others to your company.

Key takeaway: To generate sales funnel leads, create a landing page and use digital content to drive users to your website. Then, capture their contact information to continually market to them throughout their buying journey. 

Sales funnel FAQs

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 they are represented differently. The sales pipeline explains the value, quantity, and stage of different open deals at a given time, while 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 with overseeing the customer journey, from attention to action, as well as identifying and closing any leaks in the sales funnel. Customer relationship management (CRM) software automates and streamlines the process of managing the sales funnel, including qualifying leads, tracking prospects’ activity at each stage of the buyer journey, and following up automatically when the time is right. CRM software can also help to define the sales process, identify leaks in the sales funnel, and streamline the conversion process so prospects reach the bottom of the sales funnel.