The sales funnel is a fundamental concept in demand generation. It is a framework you use to define the different stages for potential sales. Let’s discuss the purpose and benefit.
The image above shows 6 stages. The funnel is wider on the left because the early stages contain the most contacts. As you move to the right, and closer to a closed sale, the smaller the number of contacts gets.
There’s another way to view the sales funnel – in terms of conversion points. “Conversion” here means how likely it is for a contact to move from one stage to the next.
This shows a scenario where you start with 5,000 contacts in the first stage (respondents) and get 4 of them to become customers. What you see along the way is that only a percentage of your contacts make it from one stage to the next. Demand Generation is centered around knowing the stages for your sales cycle, tracking your conversion for each stage and constantly trying to improve those figures.
You may decide to use different stage names, use different terms or have different definitions but it shouldn’t be too far from the following:
- Prospect– any contacts you have or people who are aware of your service/product. This can include unknown visitors to your website as well as your Aunt Judy in Iowa. You have no idea if these people are interested in your business.
- Respondent – a prospect who reaches out to you or somehow engages with you. They may have downloaded your content, submitted your contact form, stopped by your office or asked a question via chat. Hopefully, you know how to get back in touch with all Respondents. If not, then ask why you are spending this effort but not getting anything out of it.
- Marketing Qualified Lead– respondent who fits your criteria for someone you’d like to become a customer. Usually, you qualify people based on their behavior or their demographic information. If someone fills out your “contact me” form but is just doing research for a school project, they aren’t an MQL.
- Sales Accepted Lead – a marketing qualified lead that your salespeople feel is worth spending time on. This term is often used to distinguish a lead that moves from the marketing department to the sales department.
- Sales Qualified Opportunity – when a qualified person has a specific need that your company can fulfill. This opportunity should have an expected dollar amount, close date and probability.
- Closed Won/Lost– when the opportunity no longer exists and you’ve either won or lost the business.
My next steps are to help you create your own set of sales & marketing stages as well as what you do once you’ve created it. In the meantime, now is a good time to list out your sales cycle/process and see how this model applies. If you have figures on what your conversion is at each stage then create a diagram that helps you visualize your pipeline.