What are Sales Funnels?

What are Sales Funnels?

What are Sales Funnels? Sales funnels, defined.

In sales, the form of a funnel describes well the rudimentary stages a customer goes through in a sales life cycle. Customers usually start out as leads that are either sourced or proactively contacted the company. Once qualified, they are then called prospective customers—or prospects—and are handed over to the sales team. Once they purchase the product or subscribe to the service, they are now officially paying customers. Even better, if customer success reps are actively trying to retain their custom, then they become repeat customers.

For each stage of transformation in the customer’s status, multiple factors contribute to the actual whittling down of the customer base. Leads might not become qualified due to bad response times or poor qualification techniques. In the sales cycle, even good leads might prove difficult to convert to an actual customer. And, sadly, even a paying customer might decide not to renew his subscription due to either bad experience and relationship with the company, or due to uncontrollable external factors.

In a way, the customers are “funneled” or filtered in each stage, with only a relatively small percentage of the large customer base eventually becoming good custom for the company.

Through Sales Funnels: The Seven Degrees of Sales Turbulence

On the side of the seller, the sales funnel can be broken into seven (7) stages. A sales agent ideally wants to guide a lead through all of these stages to eventually get him to become a paying—and even loyal—customer. The seven steps can be summarized as follows:

  1. Awareness – Making a lead know about the existence of your services and the solutions you can present them given their disposition or situation.
  2. Education/Interest – Educate the lead about how they can benefit from the company’s products and services. This is also the phase to present all the pros of the product to fully engage the lead’s interest.
  3. Evaluation – In this stage, customers slow down to review the products of competitors or to finalize if they actually need the product. For the sales agent, this is the right stage to overcome hesitation.
  4. Engagement/Decision – In this part of the sales funnel, the customer is 99% in control. This is the part where they make the decision to purchase. A sales agent’s sole job at this point is to try to inch the customer to purchasing the product without coming off as too desperate or pushy.
  5. Commitment/Contract – Once a customer makes a commitment to buy, it is time to close the deal and—depending on the nature of the product being sold—sign contracts.
  6. Purchase – More of a technical stage, this is where payment information and confirmation of the exchange is finalized.
  7. Loyalty – This stage is technically the aftersales cycle. Existing customers can be encouraged to promote the product or—in the case of customers with expiring licenses, contracts, or subscriptions—renew their custom with the company’s services.
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Patrick Hogan

Patrick is a Co-Founder & Chief Executive Officer of Tenfold.