We all know that selling and marketing go hand-in-hand. Your marketing attracts potential buyers, and the sales team transforms them into revenue.
However, this is far from guaranteed. External and internal factors can influence whether the prospect will buy from you. A better value from a competitor, loss of interest in the product or service, lack of responsiveness in engaging the prospect and changing market conditions are just some of the reasons that initial interest can fizzle.
In fact, studies show that most sales opportunities end up not generating revenues. Depending on the research you use, conversion rates on existing opportunities hover anywhere between 2% and 10%, with obvious elements, such as dealing with an existing customer or the presence of unqualified opportunities, raising or sinking those percentages.
The bottom line is that most of the opportunities you’ve identified will not generate revenue. But there’s good news. One of the largest causes of lost opportunities, according to most studies, is something that’s easy to control: lack of nurturing.
Lead nurturing is defined as the process of creating and strengthening the relationship with the buyer from the moment the opportunity is identified until a purchase decision is made. To ensure maximum success through nurturing, we must implement a system that allows us to properly manage each opportunity.
That’s where the sales funnel—a visual representation of the phases of a sales process—comes in. It can be represented as the series of steps a prospect experiences (selection, evaluation, decision, etc.), or as the series of activities we need to manage to maximize the chance of conversion. That conversion can be anything: a purchase, filling out a form or any other action we consider valuable.
We’ll focus on a funnel that leads to a purchase. Sale process funnels should be a vital tool in your organization’s strategic toolkit because they:
- Help visualize and design a repeatable process that guides sales professionals through the nurturing stages.
- Provide a quantitative value of the opportunities each sales professional, and the company, are managing.
- Allow the development of statistics that improve revenue projections, investment plans and more.
- Offer visibility into the sales activities that drive opportunities, revenues and profits for the company and for each sales professional (which also provides an important occasion for training).
A funnel can be viewed from the perspective of the buyer and the seller. You’ve probably seen the typical buyer’s funnel, which includes the stages of awareness (becoming aware of a problem), research (learning about potential solutions, as well as vendors who provide them), comparison (a smaller number of vendors/solutions are evaluated and compared with one another) and purchase (a selection is made).
The seller’s funnel is similar to the buyer’s, but from the perspective of the vendor. It contains all the necessary steps to maintain engagement with prospects and, most importantly, the activities needed to bring answers to the buyer’s stages of awareness, research, comparison and decision.
While most seller’s funnels are similar because they’re complementary to the buyer’s journey, the details of each organization’s funnel have unique elements. They need to represent the sales process that the company deploys based on what they sell, to whom they sell it and how they sell it. This is why each company needs to design its own funnel stages.
From a broad perspective, all the funnels I deploy are made of three macro stages. Each macro stage is made of sub-stages—detailed activities the sales professional must perform before moving from one macro stage to the next. Each macro stage serves a unique purpose based on what the prospect needs in order to make an education decision.
The macro stages I always deploy are:
Top of the funnel (ToFU), which represents the preliminary sales activities designed to qualify the opportunity and set the relationship’s foundation. This is where trust is built, and also where the prospect learns about the organization, our sales process and the knowledge of our sales professionals. Additionally, the sales professional learns about the needs and pain points of the prospect.
Middle of the funnel (MoFU) is where sales professionals showcase their knowledge and the consultative approach to the sale. The trust created in the top of the funnel truly bonds here, and it’s time to prove that your organization has the best interest of the prospect at heart.
Most importantly, the proposal starts to be co-authored. By continuing the education process through product-specific questions and alternatives provided by the sales rep, the prospect can make decisions that shape the final proposal, giving them a feeling of shared ownership.
Bottom of the funnel (BoFU). Next, the sales professional needs to ensure that the prospect overcomes the natural tendency to delay commitment, often through new objections or through behaviors such as wanting other people in the organization to make the decision or an outright ghosting of the sales professional. If ToFU and MoFU phases have already been successfully completed, the sales professional will have earned the trust of the prospect, explained the benefits of the solution and co-authored a proposal that gives the prospect a feeling of partial ownership. Therefore, overcoming objections at this stage should be much easier.
Each macro stage has its own individual goal; sales professionals need to complete an action that always requires the participation of the prospect. Until that action is completed, the process remains at that macro stage. This ensures that sales professional isn’t rushing through the funnel, but graduates through its stage at the right pace.
To move from ToFU to MoFU, for example, the sales professional must complete a discovery meeting so the rest of the sales process can continue on solid foundations based on the information gathered. To graduate from MoFU to BoFU, a proposal must be developed, delivered and presented while offering the prospect several options and educating them on the pros and cons of each. This ensures they feel some ownership of the proposal’s content and that they understand the value. Co-authoring is also vital in instances where the proposal is presented to a group of people within the organization, but it’s subsequently socialized by those people to other stakeholders. The finish line for the bottom of the funnel is crossed when the proposal is accepted, and the contract is signed.
Within each macro stage, you should also design micro stages: activities that lead from one macro stage to another and provide a step-by-step plan to manage the entire sales process through to success. Micro stages include activities such as setting appointments for discovery or developing an ROI overview. They also describe what the next step is, and offer a checklist to ensure that the sales process is properly followed.
Not every sales process requires every micro stage to be completed. Easier, smaller sales opportunities may not include micro stages such as a showroom demo or having a top-to-top meeting, but your funnel should indicate what micro stages are the minimum, mandatory activities to complete for any sales process.
Once you’ve designed your funnel, it’s important to analyze it and evaluate its effectiveness. Over time, you’ll be able to confirm that it represents your ideal sales process; if it doesn’t, simply adjust the stages as needed.
Tracking and Reporting–What Reps Need to Do
Funnels should represent real-life activities, so it’s important to make sure they depict reality. By tracking and reporting on their performance, you can see if the funnel matches what you expect a sales professional to do when managing a sales opportunity.
Reporting on the funnel also helps you understand if the current plan is the best way to manage your sales process. You can chart the real-life process on the funnel to understand if you have redundant or unnecessary steps or if certain activities are missing. This is possible only if every sales professional is tracking activities. If the funnel exists only on paper, it remains a plan—and mere plans do not achieve results.
To really take advantage of the funnel, you have to overlay results and actual activities to the course you’ve chartered. This is where most companies usually fail.
Let’s take a look at some examples of how to use funnel real-life data to make strategic and tactical decisions.
Evaluating How Much Opportunity Is in the Pipeline
- Overall value. By knowing how much opportunity has been created and is being managed by the company overall, you’re able to project how much revenue will be generated over time.
- Conversion rates. You’ll know how many opportunities your team converts into actual revenue. If your conversion rate is 20% overall, you need to generate $100 million worth of possibilities to realize $20 million in revenues.
- Conversion by opportunity type. You can further dissect your opportunities based on the source and type. This process, like the one that allows you to analyze performance by source, is called segmentation. We know that maintenance and lease renewals are easier to convert than net-new customers; this can inform you on a more accurate revenue projection based on how many net-new opportunities you have in your funnel.
- Conversion rate by source: Just as important, you can start measuring the conversion rate by source of the opportunity; maybe some sources such as forms on your website or referrals from current customers have a much higher conversion rate than cold calls. Once you know that, you can invest more resources toward those sources.
Evaluating Individual Performance
Analyzing individual sales professionals or individual teams is also critical. If you know that some of your reps are knocking it out of the park while others are struggling, you can create focused development plans that will constantly improve the overall performance of your team. A few examples of the data to look at are:
- Stage bottlenecks. Imagine knowing that the reason a specific rep isn’t producing as expected is because they have a problem at a specific point in the sales process. Being able to pinpoint where the problem is gives you an opportunity to train in specific areas or to create shadow programs with high-performing sales professionals in that area.
- Conversion speed. Keeping track of how fast the average opportunity is converted can inform the sales team of when it’s time to cut your losses. If the average time to convert is 45 days, opportunities that are 180 days old are going to be very difficult to turn into revenue. They might not be impossible, but there needs to be a justification as to why the sales professional should invest time and resources chasing something that, statistics suggest, won’t result in a signed deal. Conversion speed might change based on the size or type of deal, so segmentation is important here, too.
- Activities per opportunity. Touchpoints are the lifeline of conversion because it takes dozens of different touches (emails, calls, visits, letters, invitations, etc.) to build momentum for each opportunity. Looking at the quantity and quality of the activities might provide details as to the lack of success for some sales professionals. Once again, segmenting might further help: maybe Joe has higher activity on current customers and might not like dealing with new people, or might only focus on emails and not calls.
There are dozens of possible reports that a properly managed funnel can provide to allow assessment (or self-assessment) of performance. This helps identify areas where successful sales behavior should be amplified and areas of concerns that need to be effectively addressed.
A sales funnel can revolutionize the way your company manages the sales process by outlining a uniform sales process, providing a compass for sales professionals to organize their work and opportunities, and by serving as a planning and analytics platform for individuals and the organization.
The most important thing is to develop a funnel that represents the activities as they actually take place in your organization. This is done by training the sales team to use the funnel (and the CRM that’s used to manage and track it) consistently, and by amplifying the successes that will inevitably come from using it.
