What is a Sales Funnel – What it is And How it Works

What is a sales funnel? You’ve likely heard of a sales funnel before, especially if you’re familiar with marketing concepts, but besides marketing jargon, what does a sales funnel actually entail?

Knowledge of the sales funnel is important for many reasons, particularly for securing sales. 

If you want to identify, interact with and target your ideal customer with the right message at the right time, helping them to move from an interested party to buyer, then knowledge of your sales funnel is imperative. Whether you’re a marketing intern, sales rep or the CEO, you’ll want to understand how it works and how to utilize it in order to convert consumers into loyal customers.

Below is an in-depth look at a sales funnel with everything you need to know to get started targeting your ideal customer with the right message.

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What is a Sales Funnel?

A sales funnel is a lot like an everyday funnel that you would use while cooking, or putting oil in your car – hence the name. However, the term sales funnel describes the journey a consumer goes through on their way to purchasing a product or service. Marketers use this concept to develop marketing campaigns based on where consumers are at in their buying journey.

As a consumer makes their way through the funnel, they get closer and closer to making a purchase. The very bottom, in this case, represents a sale. Like a typical funnel, a large majority of your customers will come in through the top of the sales funnel. These people are made aware of your product or service however, few of them will actually make a purchase.

The ultimate goal of any marketer is to turn as many leads, people in the beginning stages of the funnel, into loyal customers. If everyone who heard about your product or service ended up buying from you this would look more similar to a cylinder than a funnel. However, this isn’t realistic – as the funnel gets smaller and smaller near the end, so do the number of potential buyers and therefore a marketing funnel is formed.

How Does A Sales Funnel Work?

The goal of a sales funnel is to help marketers identify where a particular person or group of people are at in the buying process and to move potential customers through, from awareness of your product or service at the top of the funnel, to an actual purchase at the bottom. To answer the question of what is a sales funnel, it’s essentially a strategic sorting of a customer’s path towards action. 

By understanding the stages of the funnel and where particular consumers fall in this journey, a marketer or salesperson can help to solve problems for their potential customers. 

Identifying the pain points, or problems, faced by consumers in each stage, marketers can develop ways to solve these problems, offering them solutions in the form of a product or service. 

What Are The Stages of The Sales Funnel?

what is a sales funnel stages

There are four main stages in your sales funnel. An in-depth understanding of these stages, and the types of content that can help you reach consumers in each stage, can help significantly in boosting sales.

Starting at the top and moving down, these stages include:

1. Awareness

The awareness stage is where consumers are first made aware of your product or service. This stage is where the most people come in.

This awareness can come about through many different forms including ads (online or traditional media), word of mouth, Google search, social media, etc.

Blogging, for example, is a great way to help build awareness about your product or service. By using valuable keywords related to your business in your blog posts, you can position yourself high in the search returns and gain people’s attention by appearing when they Google a term or phrase.

Once consumers are made aware of your product or service, the next step is to start building their interest in it. This requires building a relationship with them and demonstrating how your product or service can help them solve their problem.

2. Interest

Interest is the next step in your sales funnel. At this point, the individual is aware of your product or service and is looking for a solution to their problem. 

Although they may not yet be ready to make a purchase from you, you have officially attracted their attention and they are interested in learning more about what you have to offer.

Individuals in this stage will show interest in your product or service by taking an extra step to connect with you in order to learn more. Therefore, this is the best time to present your potential customer or client with an easy way to express this interest. For example, by connecting them to your social accounts or by offering them a way to sign up to your mailing list.

During this stage you should focus on building a relationship with your potential client or customer. Concentrate on understanding what their goals are and what types of solutions they are interested in and providing them with helpful information in their search for a solution.

Lead magnets are great tools for interacting with consumers in this stage. For example, offering a free guide or trial of your product or service. This enticing offer will provide the consumer with something of value, while helping you to build your email list for further contact.

Offering a free trial is a marketing psychology that can help increase your Conversion Rate Optimization for more leads and customers. Learn about 9 more in  10 Marketing Psychology Fundamentals to Take Your CRO to the Next Level.”

3. Decision

The next phase is the decision stage. Here the consumer is deciding what course of action to take in order to fulfill their need. They are aware of your product or service, have shown interest in it and are now considering purchasing something from you. Your goal – to get the consumer to come to the decision that what you have to offer is the best option for them. 

At this stage, it’s important to focus on demonstrating to potential customers what using your product or service actually looks like. In addition, make it as easy as possible for them to make and carry out their decision.

Some of the best types of content for use in this stage are reviews and testimonials. If a consumer is aware of your product or service, recognizes that it can fulfill their goal or solve their problem and then sees that many other people have used your product or service and had success, you are much more likely to see them through to the next stage.

4. Action

Getting consumers to the fourth and final stage is the ultimate goal. In this stage the consumer carries out the action that you intend – making a purchase, signing up for your service, etc.

Making it as easy as possible for the consumer to take this action is essential. For example, make purchase and sign up forms as simple and straightforward as possible.

To make things more clear, here is an example of your sales funnel at work:

You’re walking down the street one day and see an eye-catching billboard ad for a new pair of waterproof sneakers. This puts the sneakers on your radar – you’re in the first stage of the sales funnel – awareness.

You log in to Instagram and see a post about the same pair of sneakers. The post tells you that the shoes are made locally and shows people walking around in the rain happily with no need to worry about wet feet.

A link at the bottom suggests that you click to learn more about the shoes. This ad is meant to target consumers in the second stage of the sales funnel. You have already seen and heard of these shoes and are interested in learning more about them – you’re in the interest phase.

The next day, while surfing the internet, you see the sneakers again – you’re offered 20% off if you make a purchase now. You are in the third stage of the sales funnel and are deciding whether to make a purchase or not. This coupon is meant to target consumers in this stage and is intended to guide them to action.

You decide you’re sick of walking around in the rain with wet feet – you’re ready to take the plunge. You head over to the company’s website and purchase your first pair of waterproof shoes. You’ve taken action and have officially reached the fourth stage of the funnel – the ultimate goal of any marketing campaign.

While it may not be obvious all the time, a sales funnel is used to sell every product and service available. Each and everyday marketers and salespeople use this funnel to target consumers and make sales. 

If used correctly, a sales funnel can be a very successful tool and can boost sales significantly.

What is a Sales Funnel? Key Takeaways

An understanding of your sales funnel can greatly contribute to a business’ success. Knowledge of the stages of this funnel and how to interact with consumers that are in each stage can help you to increase sales and gain new customers and clients.

The four main stages of sales funnels include:

  1.   Awareness – in this stage consumers become aware of your business and the solutions you offer.
  2.   Interest – consumers show an interest in your product or service and want to learn more about it.
  3.   Decision – the consumer is aware of your product or service, has learned more about it and is now deciding whether or not what you have to offer is right for them.
  4.   Action – the consumer purchases your product or service.

Although not one of the main four steps in a sales funnel, customer retention is another important factor to consider. A purchase may have already been made in stage four, the action stage, however, in most cases, a single purchase is not all you want. 

Companies more often than not are looking for loyal returning customers who they can count on to keep coming back time and time again.

In order to retain a customer and turn them into a brand advocate, you’ll need to keep up the hard work that led them to make a purchase in the first place. 

Offering customers value and keeping them happy and engaged with your company is the best way to do this. 

For example, provide a special offer to your email subscribers or social media followers. This will keep them engaged and also contribute to word of mouth and the sharing of your message.

The most difficult part of customer procurement involves the initial steps in a funnel. Therefore, it is important to have a strong grasp of the funnel and to know what types of media will help in catching the attention of and interacting with consumers in each stage.

Hopefully, this guide has given you some insight into answering your question on what is a sales funnel,  some guidance on its many stages and how you can use it to maximize your CRO.

Terry Say

Written By Terry Say

Terry's an editor and SEO strategist for Advesa. There’s nothing content and SEO he won’t get involved in. We tried, he just always finds a way to put his hands on things! Aside from work, Terry calls himself a ‘stand-up comedy connoisseur’, and enjoys watching intense tournaments in the world of E-sports.