Sales Funnel

Published by MBA Skool Team, Last Updated: January 10, 2021

What is Sales Funnel?

Sales funnel is the stepwise process of converting a targeted customer to a paying loyal customer. The sales funnel approach is where a targeted customer is attracted, converted to a lead, prospect & eventually converted to a loyal buyer. At every step, disinterest customers drop off, creating a funnel like structure. Sales funnel uses the expertise of sales team to basically convert a business opportunity to a revenue generating customer.


Stages of Sales Funnel Process

The entire process of creating a sales funnel can be broken down in several stages or steps.

Sales Funnel

The main steps to sell products to a customer are:

1. Target customer promotion- the sales funnel starts with the company targeting the customers who they want to sell their products & services. At this stage the company reaches out to the entire target audience via mass advertising.

2. Lead Generation- out of all the people targeted, the people show an interest towards the product or service are qualified as a lead. Leads are generated by capturing customer email ids, phone number & other details.

3. Sales Calls- once leads are generated, the sales team contacts these set of interested customers & briefs them about the product, benefits & price in details, and also removes any doubts which the person has.

4. Prospects- out of all the leads, many customers drop off as they do not seem ready to buy the product immediately. Even though they are interested, they decide not to purchase the product at this moment.

5. Customers- after narrowing down from target to lead to prospects, some interested prospects find the product beneficial & they pay for it. These paying customers bring in revenue to the company.

6. Loyalty- the sales funnel can be further analyzed & evaluated to keep a track on repeat customer purchases who are loyal to the brand & product. These loyal customers are essential is being in repeat business & are also advocates of the brand and product.


Sales Funnel Example

Consider a company selling a product worth $100. The company identifies that target audience they want to promote it to are around 1000, and they promote to them. Out of these, 20% customers respond, and hence these 200 people are the leads. The sales team then reaches out to them to explain the product & benefits. However, out of these 200 leads only 25% seem interested buy. Hence the total prospects are 50. Out of the 50 prospects, around 40% or 20 customers actually pay for the product, generating a revenue of $2000 for the company. Further, 10 customers become loyal & give a repeat business.

Thus, the overall sales funnel can be summarized as:

Stage 1: Target audience= 1000

Stage 2: Leads- 20% of 1000= 200

Stage 3: Prospects- 25% of 200= 50

Stage 4: Paying customers- 40% of 50= 20

Stage 5: Loyal repeat customers- 50% of 20= 10

This shows the funnel like trickling down of customers at every stage based on their interest & purchasing decision.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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