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Sales Funnel and Sales Pipeline

Last updated March 1, 2021

The first thing to say is that a sales funnel is not the same as a sales pipeline and although many people use the two terms interchangeably it can be really helpful to understand the difference.

The sales funnel is how you understand at what stage some potential customers drop outof the process and don’t buy.

The sales pipeline is how you understand where a potential customer is on their journeyto making a purchase, and what you need to do next to move them further along.

So, you can look at your sales pipeline and use the knowledge that your sales funnel gives you to understand how likely your sales pipeline is to result in actual sales.

Both rely on you understanding the sales stages that your customers go through. This will depend on your business but will broadly be along these lines:

  • Lead - this is someone that fits your ‘ideal customer’ profile. They are either not awareof you or what you offer at the moment or are becoming aware as you communicate with them;
  • Prospect - this is a Lead that has indicated that they understand your offering and cansee a need to buy it;
  • Opportunity - this is a Prospect that has decided that they need what you are offeringnow and have the money to make a purchase
  • Customer - this is an Opportunity that has decided to buy.

Depending on your business you may have additional steps. For example, some businesses have a step between Prospect and Opportunity called ‘Qualified Prospect’.

We suggest you start with the basics and develop your funnel as time goes on.

The crucial thing is that your stages ‘fit’ into a ‘funnel’ that moves through (broadly) the following stages:

Sales- Funnel

Naturally, you want all your customers to drop out of the bottom as a sale, but we all know that potential customers fall along the wayside.

Understanding where and why potential customers take the decision not to proceed is far more powerful than understanding why customers do complete the journey.

For example, funnel A below indicates that a huge amount of really good work and investment is being done early on which is then wasted because of ‘late stage’ drop outs; funnel B shows that the business may need to improve it’s qualification of prospects.

A B

Make sure you understand how many customers leave the funnel, how much they were potentially worth and why?

Last bit - some people call Leads, Prospects and Prospects, Leads - it really doesn’t matter as long as you define what you mean!

Sales planning is a crucial skill to master as it determines the success, or failure of your enterprise.

shirley-mansfield-CoachSME
Shirley Mansfield
Master Business Problem Solver

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