Sales funnel vs sales pipeline: the complete guide
Posted on: November 9, 2020
Reading Time: 8 minutes
Category: B2B sales
Sales funnel vs sales pipeline: The complete guide
Sales funnel vs sales pipeline. It might not make it onto Sky Box Office any time soon, but it’s an often confusing battle in the sales and marketing world.
Many people think of them as the same thing, when in fact, they are distinct concepts. From the seller’s point of view, the sales funnel is the story of leads, whereas the sales pipeline is the story of deals.
It might seem like a needless marketing theory definition, one learnt in lecture halls and books rather than down in the sales trenches of the real world, but knowing the difference can be key to understanding and optimising.
I have no idea why these important processes are named after plumbing items, but there we go. I’d have jazzed them up a bit to add a touch of excitement: the sales pipeline could have been the sales flume and the sales funnel could be, I don’t know, the sales zipwire? As it is, we’re stuck with the names. But don’t let that stop you from reading on.
Sales pipeline vs Sales funnel: what’s the difference?
A sales pipeline represents the stages a consumer goes through to become a customer. The sales funnel represents the number of prospects who make it through those stages.
A sales pipeline looks at the different steps in the sales process, from gaining the lead to closing the sale. It is brand-focused, in that it looks internally at the stages that your sales and marketing teams need to move a prospect through in order to make them a customer and retain them.
A sales funnel looks at the whole customer journey. From first becoming aware of a brand to making a purchase. It is customer-focused, in that it looks at the various stages a consumer will go through in their journey towards purchase.
What is a sales pipeline?
We’ve established that a sales pipeline is a set of stages a prospect journeys through as they progress from a lead to a customer. What does this mean in practice?
If we break down each stage of the pipeline, we can see why some might confuse it for the sales funnel. As each stage passes, fewer prospects make it through to the next stage.
By looking at each step in detail salespeople can better organize, manage, and optimise each part of the sales process.
The first step is generating new leads. For us, that’s prospecting, but any type of lead generation will be assigned to this first stage of the pipeline. A big chunk of the sale funnel is concerned with this first stage.
Next up, your sales team should qualify those leads in some way. Lead scoring is a common way to do this. Qualifying leads allows sales teams to become more efficient, as they focus on quality rather than volume.
Call or meeting
The reason salespeople get out of bed in the morning. The sales call or meeting comes next. In reality, this stage might consist of multiple contacts. Clearly a key stage, the amount and quality of leads that have come through the previous stages of the pipeline will have a direct affect on the success of the sales meetings.
After the sales call, the salesperson sends the prospect a detailed quote outlining the cost, and the terms, including the length of contract and what is included.
Coming into the home straight, sales conduct any final negotiations, signs the contracts and closes the deal. At this stage, the prospect has journeyed through the pipeline to become a customer. Yey.
What’s this? Another step after closing? Although often left off sales pipelines, customer retention and loyalty should be considered as part of the process. While the responsibility will shift away from the sales team and towards client services and marketing, reducing churn rate and increasing customer lifetime value is an important part of the journey and vital for business success.
What is a sales funnel?
The sales funnel looks at the whole customer journey, from the point of view of a lead. The funnel is often illustrated in different ways, so it may not always feature the six stages we’ve outlined here.
Broadly speaking, everyone agrees that there are three overarching stages. First is top of the funnel (TOFU), which describes the awareness and discovery phases. Here the lead is first brought into your orbit through marketing.
Next is middle of the funnel (MOFU), which covers evaluation and intent. The lead begins to consider making a purchase with you.
Finally (and I think you’re probably ahead of me on this one), is the bottom of the funnel (BOFU), where purchase and loyalty happens.
The awareness stage is where the prospect first hears about your service or product. That could be via a google search, a social post, a radio ad, or a prospecting campaign.
The prospect may be looking for a solution to their problem, or they may become aware at a stage where they have no immediate need.
During the discovery phase, a prospect has become interested enough to learn more about you. They begin to undertake further research. This is an opportunity to create educational content that sits beyond the brand awareness phase and begins to dive into further detail about ways you can help.
Create the right content, and the prospect may read more of your content, check your social media feeds, and browse your website. The prospect will most likely be undertaking the same research with other possible solutions.
Research steps up in earnest; the prospect will begin to really dive into your offering. Comparisons between competitors also come to the forefront of the consideration. Review sites and word-of-mouth become more important, but well-crafted content will still play an important part.
By the time they have entered the intent phase, the prospect intends to buy from you. Job done right? Not so fast.
The prospect wants (and in the B2B world, must) make sure your proposal encompasses everything they need, and that it is within budget. Proposals are finalized, terms are negotiated, objections are handled.
The ink dries as the deal is done, and your sales team can bang a gong and light a victory cigar.
Although this is often referred to as the honeymoon phase, it’s not a time to sit back. Depending on what your business sells, a well-designed onboarding process can be a vital follow up to the purchase, and can greatly reduce customer churn.
Beyond closing, opportunities exist to provide further value, foster loyalty, upsell, and gain referrals. By continuing to market to your customers you increase the likelihood of another sale or contract renewal.
Why optimise your sales pipeline?
OK, so it’s pretty clear that any business should optimise their sales funnel. But in keeping with highlighting the difference between a sales pipeline and a sales funnel, we’re going to outline how the two differ.
Analysing your pipeline can help you gain a clearer picture of timescales. How long do leads take to convert? We recently analysed our conversion timescales and made some surprising discoveries. You may find that one part of your process is taking too long, so you can focus efforts on optimising that stage.
One great way of doing this is calculating your sales velocity, which can reveal the speed at which deals move through your pipeline, and highlight any issues.
Digging into your sales pipeline reports allows you to understand pipeline weaknesses. There may be ineffective or unnecessary processes which can be removed to improve the flow of leads towards the sale.
Optimising your pipeline can be highly efficient; if the change is quick to implement it will have an immediate effect. You can analyse on a team or individual level, understanding if blockages are down to a team process or an individual weakness.
Why analyse your sales funnel?
Understanding the ROI of marketing is key to driving new business, and that’s obviously a benefit of analysing sales funnels.
A proper analysis of your sales funnel allows you to understand how many leads you need to generate a sale. From this, you set departmental targets, and plan organisational growth.
This data crunching will also reveal the varying quality of leads from different channels. If the conversion rate from a particular source is significantly lower than others, you may want to examine if that channel is working as well as initial numbers suggest.
Finally, and importantly, you can speed up your sales process. If qualified leads from a reliable channel are not converting between the call and the close, it may be that leads are taking too long to get through the funnel.
Looking for more leads for your sales pipeline and sales funnel? Sopro is an award-winning prospecting service like no other.