Sales Funnel

The Definitive Guide to Understanding Sales Funnels (Updated for 2020)

Imagine a sales system focused on one thing: turning cold prospects into hot buyers. That is exactly what we design a sales funnel to do. In this article (updated for 2020), we will analyze what the best sales funnels do well and how you can implement them into your business.

What is a Sales Funnel? (Sales Funnel Definition)

Roughly 96% of people who visit your website aren’t ready to make a purchase (yet). We can describe a sales funnel as the journey each prospective buyer takes to go from browser to buyer. Let’s imagine your business operates from a brick-and-mortar storefront. At the top of the funnel will be the potential customers who are just walking by your store. The next step of the funnel would be the individuals who actually stop walking to read your signage (or peek in the window).

The next phase of the funnel would be those who come into the store and look at merchandise, immediately followed by those who pick up an item and take it to the counter for checkout.

The last step of the funnel will be the completion of the transaction. While some businesses operate from a physical storefront and others digitally, the same process will play out for each consumer.

According to Harvard Business Review, companies that create an easy purchasing process are 62% more likely to win a sale.

The job of the business is to streamline the funnel (as much as possible) and remove friction at each stage to make completing the transaction as simple as possible.

In each of these phases, the individuals who are interacting with your business go from prospects à contacts à leads à finalists à sales.

In order for a prospect to complete a sale, they must travel the customer journey through the four stages of the sales funnel which we will discuss next.

Understanding Sales Funnel Stages (The four stages of a sales funnel)

Each sales funnel will have four stages that trace the customer journey and originate from the classical marketing AIDA model. The Aida model outlines the cognitive stages that a person goes through when making a purchase.

  • Awareness: creates awareness of the company and product or service.
  • Interest: buyer has enough information on your product or service to have a genuine interest and may research further.
  • Desire: buyer goes from the “I like it” stage to “I want it”.
  • Action: buyer interacts with your company by taking action on your offer (note: an offer may not always a purchase but can also download a resource, taking a phone call or returning an outreach email).

Sales Funnel DiagramSource

Here is a more in-depth look at each step of the funnel:

Awareness

This is the stage where you catch the consumer’s attention and they know you exist. It may be from an ad, a social media share, a Google search or overhearing someone mention you: they realize your business and offer. Considering it takes 6 to 8 interactions with the brand for a prospect to become a viable sales lead, the awareness stage is essential.

Interest

When consumers reach this stage of the sales funnel, they’ve typically had a few interactions with your brand and are ready to learn more. Unfortunately, this doesn’t mean that they are ready to buy yet, which is the mistake that many brands make at this stage. Instead of selling your prospects here, focus on educating them and adding value in the form of content with the information that they are seeking. Establish your brand as the expert and logical choice for consumers who need a solution in your industry and be readily accessible to help and guide your prospects, who will be actively researching your brand and comparing you to other providers in your niche.

Desire

At some point, your prospect will be ready to buy (and hopefully your solution is one finalist). This is the stage where it’s not a matter of if they want the product or service, but who to buy it from. Who has the best offer? It is now your job to ensure that you create an irresistible offer that is the logical choice for individuals who are seeking your solution.

Action

This is where the transaction happens (and hopefully some magic on your part). Many brands focus on securing the transaction (or the front end of the sale) but equal attention is required on the fulfillment of the offer and ensuring that your customer is happy with their purchase. Happy customers return (and refer to their friends) so be sure you make the experience unforgettable.

Sales Funnel Examples:

Imagine that you are a new real estate agent hoping to sell your first home. You host an open house to attract prospective buyers to your listing. You place signage all across the city and even run social media ads targeting people within 25 miles of the county. Every person who sees your signage (or ad) and thinks about coming or engages with the ad through a comment or by sharing it with others is a prospect.

On the day of your open house you place a sign-in sheet at the entrance and ask each person who comes in to fill out the form with their name, email address, and phone number. You mention that if they sign up, you will send them new homes that become available on the market as soon as they post. Each person who comes to the open house and enters their data into the sign-in sheet is now a contact.

Over the next few days you reach out to each person on that list and while all do not pick up, there are a few that do (and some that return your call). We now consider each of these individuals a lead.

You stay in touch with these new relationships and offer valuable guides and resources related to the home-buying process. After several weeks, there is one couple that informs you they would like to see a few houses in the area and desire for you to be their personal realtor. We now consider these individuals finalists.

Finally, you help this couple close on their first home and complete the sale. You continue to support them as they transition to being first-time homeowners.

That’s all there is to it! You have taken your customer through each stage of the funnel.

  • Awareness: You hosted an open house to attract prospective home buyers.
  • Interest: You create an opt-in form for people to sign-up to receive more information
  • Decision: You follow-up with each new contact and educate them on the home-buying process
  • Action: You encourage interested parties to take the next steps on the home buying journey with you

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