Most business leaders want to build a sales funnel to improve their business. But their understanding of what a sales funnel is varied widely.
- Some leaders believe that a sales funnel (or purchase funnel) categorises their leads into cold, warm and hot.
- Few leaders believe that sales funnel shows how many customers have bought from them and how many are planning to buy.
- According to others, it’s a system to identify the leads they should pursue business.
Each of these definitions is good but incomplete. A “Sales Funnel” is much more than categorising leads, identifying customers who want to buy, and system to identify qualified leads.
In this post, we shall cover:
- What a sales funnel means
- Why your business needs a sales funnel
- The most common mistakes while building a sales funnel
- How Enjay deploys a sales funnel
- Sales Funnel Best Practices
What is a Sales Funnel?
How many customers make a purchase the first time they interact with a brand? 20%? 30%? Or 15%?
The answer is none of the above. It’s less than 2%.
Yes, less than 2% of sales occur in the first meeting. The remaining 98% buy only when trust gets built. In fact, 73% of leads don’t want to be sold to even when they interact with a business or brand.
Most businesses commit two mistakes. One, they chase everyone to buy their offering because they believe that everyone is their customer. Two, they try to convert first-time prospects into customers. They’re so keen on doing so that they forget to reconnect and follow up with existing prospects in their database.
This is why only 20% of sales leads get followed up, which means that businesses lose 80% of potential opportunities because they don’t stay connected with prospects.
A sales funnel tracks the customer journey that your prospects (top of the funnel) follow to be ready to buy and finally get converted into customers (bottom of the funnel). It records which stage of the buying journey your leads are in and how many of them are in each stage.
In other words, the journey of potential Customers through the Sales process – starting from capturing leads to closing the deal for product or service is Sales Funnel. The tools and method used for managing that process are known as Sales Funnel Management tools.
Why Your Business Needs a Sales Funnel?
A sales funnel presents plenty of benefits for your business. Some of them include:
- Increasing the number of first-time customers from 2%.
- Identifying problems areas in processes that lead to prospects disengaging with your business and addressing them. This improves efficiency and effectiveness.
- Sales volumes and revenue become predictable because a business can see how many customers have moved to the next stage.
- Better awareness and relations with customers, which positively impacts your brand reputation.
- More accurate sales tracking, which leads to a more accountable sales team.
Companies that nurture their leads can see a 450% increase in qualified leads, a 50% increase in revenue and a 33% reduction in marketing costs.
Are you convinced about the advantages and benefits of a sales funnel? Great. Let’s discuss what to avoid and what to do to make your sales funnel work for your business.
Four Dangerous Mistakes While Building a Sales Funnel
Many businesses understand the benefits of building a sales funnel for their company. But despite good intentions, such funnels fail to work in ways that companies expect. This is because businesses commit the same mistakes over and over again. Some of them, in no specific order, are listed below:
Mistake #1. Not defining the sales funnel.
How useful is a smartphone if we don’t know how it works? Like that, a sales funnel is useless if the team doesn’t know how to use it.
When sales managers and leaders don’t define Sales Funnel stages and the optimal timeline for which a prospect should stay in each stage, a funnel is as useful as a hammer to a heart surgeon. To use a sales funnel optimally, salespeople and telemarketing agents should be aware of what each stage means.
But this doesn’t mean that stages and timelines should be carved in stone. Leaders should consistently redefine them based on feedback from the teams and analytics from the funnel tool.
Mistake #2. Lack of training.
Everyone needs training on new tools. But many business leaders complain that they’re growing too fast to spend time on training employees. They expect their people to pick up how tools work in their organization on their own.
The result is that each employee uses tools according to his or her own understanding. This leads to a lack of alignment and causes chaos. Business leaders spend a lot of time cleaning up this chaos. In corporate terms, this is lovingly called “fire-fighting.”
The time spent training employees is never “wasted”. It’s the best investment that leaders can make in their business. Training doesn’t just help employees; it also enables leaders to gain a deeper understanding of how to optimize the sales funnel.
Mistake #3. Lack of follow up.
Value investor Parag Parikh wrote that human beings are lazy by nature. Give them extra work and they’ll put all their effort trying to discover innovative ways to avoid it.
Updating a sales funnel is one such work for salespeople and leaders. Despite all the long-term benefits, they think of it like a “task” which they don’t have time for. The result is that even though the funnel has been defined and people were trained, the funnel lies empty and business owners think of it as a useless expense.
A sales funnel is effective only when it gets used effectively. And it won’t get populated by itself. The onus to get this done lies on managers and should be an integral part of their KRA’s.
Mistake #4. No funnel flushing.
The most dominant reason for sales being exhausting is that people try to sell to those who don’t need what they offer. This is because it’s easier to try and persuade anyone to buy the product than to find prospects that need what your business offers.
The first way is a massive drain on a business’ resources. The second — identifying and pursuing qualified leads — makes revenue generation effective and efficient. This is why sales funnels should be flushed (or cleaned) to retain only qualified leads.
But most salespeople avoid doing this because they feel that a smaller database of prospects might reflect negatively on them and they might lose their jobs. The result is that the sales funnel always looks full, but the revenue funnel still looks empty because most leads are irrelevant.
How Enjay Uses a Sales Funnel?
As a company that builds Mobile CRM software and other tools that help Indian SME’s, we have a sales funnel that we’ve optimised over the years. Our simple 3-step process is as follows:
Step 1. Qualification
When a lead enters our CRM software, the platform that it arrived from gets tagged, and we check whether the lead is qualified. If the leads qualify, we mark them as Deal (signifying that they’re prospects); otherwise, we mark them as Dead.
We don’t just mark prospects as dead if they’re unqualified. We also mark them as dead during the buyer journey if their demands are unreasonable (demanding deep discounts and freebies), or when they don’t answer calls up to three times in a row.
Step 2 – Clear Funnel Stages
Our statuses to map the buyer journey are Qualification Done, Demo Done, Proposal Quote, Negotiation/Review, Hold On, Closed Won, and Closed Lost. Our sales team clearly knows what each status means and how long a prospect can stay in one before corrective action should be initiated. Each time a prospect moves from one stage to the next, the status gets updated.
Step 3 – Regular Weekly Sales Team Meetings
We conduct weekly sales reviews to track how many customers are in each stage and whether the salespeople can justify the same for their respective leads. As a result, we can forecast how much revenue Enjay will generate at the end of the month and the quarter.
In these review meetings, we also measure the effectiveness of our lead generation tools like Lead magnets, Advertisements, blog posts, landing pages and Social Media. The conversion rates of our website visitors to Leads.
Our Sales Team meetings are always joint meetings with Sales and marketing team members.
Our sales team spends all its “free” time servicing existing customers. Happy customers share enough qualified referrals and keep our sales funnel full.
Sales Funnel Best Practices
Fat Funnel does not Guarantee Increased Sales
Most sales managers and leaders think that having a sales funnel is enough to increase revenue. But like I mentioned before, a funnel doesn’t get updated automatically. Nor is the funnel useful if no action gets taken on its data.
The supporting step that makes sales funnel effectively is sales reviews. While most businesses conduct sales reviews, most of these just end up wasting resources like time and money.
Why does this happen? Because most sales managers look at the finger when it points at the moon. They either focus on incorrect metrics or expect their subordinates to solve all problems on their own.
For instance, a common point sales managers raise in reviews is conveyance cost. They prioritise making salespeople justify their conveyance costs over discussing lead statuses and action points. Like I said, looking at the finger while pointing at the moon.
Continuous Monitoring of Funnel
Another point is that they confuse forecasts with targets. A common reason why salespeople and managers feel stressed at the end of every quarter is that they have no idea what the revenue figures will be. They just thrash their hands and feet and try getting as close to the target as they can. Sales leaders should compare the stage that prospects are in with the defined timeline. They should also look at data user-wise, location-wise, product-wise, and so on. All of this will help them forecast sales accurately and reduce pressure on everyone.
Thirdly, sales managers look at sales reps current performance during reviews and simply say things like “better pull up your socks” and “improve your numbers.” This is like a doctor telling a low-blood-pressure patient, “You’d better reduce your blood pressure.” Sales managers must guide their people to take concrete steps to improve their performance. This should be the foundation of every sales review.
Would you buy from someone who tries to force their product down your throat? Then is it fair to treat your leads in a different way?
The goal of a sales funnel is to lead the prospect to connect with you offline. It could include connecting with your sales team, requesting for a demo, or even asking for enough information to make a purchase.
Nurture your leads. Show them that you understand their needs. Win their trust the right way. They will reward you with a loyalty that will make it worth your while.
Suggested Further Reading
- Complete Guide to Sales Tracking
- Definitive Guide to CRM Dashboard for Sales.
- 5 Reasons Why Most Sales Team Meetings Fail and the solution