What is a sales funnel - and why is it so important for companies?

What is a sales funnel?

A sales funnel, also known as a sales funnel, is a model that depicts the customer buying process from the first interaction to the conclusion of the purchase. It is typically divided into different phases:

1. Awareness: Potential customers become aware of a product or service.
2. Interest: They show interest and find out more about the offer.
3. Desire: The interest deepens into a concrete desire or need for the product.
4. Action: The potential customer makes the decision to buy and carries out the purchase action.

The model is structured like a funnel, with many interested parties at the top end and only the buyers coming out at the bottom. The aim is to use various marketing and sales strategies to convert as many potential buyers as possible into actual buyers.

Every company, whether a sole trader or a corporation, has such a sales funnel. Why? Because everyone gets new customers in some way. The customer could come via:

• Personal recommendation
• Via a website enquiry
• Via an advert
• And much more.

But how many people who contact you actually become customers at the end of the day? If you are aware of your company's sales funnel, you have a great opportunity to improve it. I'll show you what I mean with an example:

Sales funnel using the example of a website

The sales funnel for a company website usually looks like this:

• Website visitors
• Enquiries via the website
• Initial discussion with potential customers(lead)
• Conclusion of contract with customer

Now the volume model could look like this:

• Website visitors 10,000 / month
  • o 1 % of people also make an enquiry
• Enquiries on the website 100 / month
  • o In 80 % of cases, a conversation actually takes place
• Initial discussions with the potential customer 80 / month
  • o 10 % of customers buy from you after the initial meeting
• 8 new customers / month

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If the owner of this company would now like to have more customers, he has several options to start with:

1. Increasing website visitors to his website to 20,000 / month would bring in 16 new customers.
2. Improved web design on the website could increase the rate of enquiries from 1 % to 2 %. This would also result in 16 new customers / month.
3. The people who conduct the initial consultation are better trained and achieve a completion rate of 20 %. This would also result in 16 new customers per month.

Sales funnel using the example of a retail shop

In this example, there are other criteria that you can look at. The following things come to mind:

• How many people pass by my shop per day?
• How many people enter my shop per day?
• How many people buy in my shop per day?
• How much money do these people spend per purchase?

Let's visualise this again in a quantity structure:

• 1.000,000 people per day pass by my shop
  • o 1 % come into my shop
• 10.000 go into my shop
  • o 30 % buy something
• 3.000 people buy something
  • o people spend an average of €20
• We therefore generate a turnover of € 60,000 per day

Here again, we have various options and starting points to increase turnover:

1. We could try to organise the display better.
2. We could entice people into the shop with offers.
3. We could entice them with free samples in front of the shop.
4. And much more.

Sales funnel helps you to generate more profits

The most important thing is to collect relevant data and information. If I don't know how many visitors I have on my website, I can't create a proper sales funnel.

So I can't see the potential for improvement either. A sales funnel can help you enormously to measure and evaluate marketing and sales campaigns.

Search engine optimisation increases the number of visitors to your website. This campaign could bring you 10,000 more visitors to your website. However, this will cost you €20,000. Would you do it? Based on a gut feeling, €20,000 is a large amount for a small company. Isn't it?

Once you have calculated your sales funnel, you can easily judge this:

10.000 visitors / month currently bring you 8 new customers / month. These 8 new customers bring you a contribution margin of €8,000

This means that 20,000 visitors / month bring 16 new customers / month and therefore +€8,000 contribution margin. After 2.5 months, you would have recouped the SEO agency 's investment and earn €8,000 more every month.

As an entrepreneur, I would see this as a great opportunity for growth and profits for my company.

• So think about the phases a customer goes through with your company.
• Start documenting the data.
• Think about individual improvement measures and observe the impact in your sales funnel.