Monday, November 28, 2011

The Various Applications of The Sales Funnel

By Tina Archer

When someone speaks of a sales funnel, it may be helpful to picture a normal funnel. You use a funnel when pouring liquid into a container with a smaller mouth. The funnel lets you avoid spills when you pour liquid as it runs from a large end into the smaller.

A sales funnel is a graphic representation of the way in which your sales processes actually function. At the wider opening of your funnel are different sales opportunities. They make their way into the funnel, undergo several layers or processes and come out at the other end as actual paying customers.

Although there are numerous sales opportunities, they do not translate to actual sales. The sales funnel filters out these potential customers and represents the actual sales that remain. Sales funnels are also called "sales pipelines".

Sales funnels and sales pipelines are different because of their orientation. A funnel filters things from the top down, while pipelines filter from left to right. The concept is the same, except that potential sales enter from the left, are filtered by a series of steps, and end up as clients on the right end f the line.

Companies that use these concepts do so in order to gain a more profound understanding of the functioning of their sales processes. Business owners now have evidence to help them understand why there are so few clients at the funnel's smaller end. Business owners will also be able to adjust their sales processes so that more potential clients become actual clients.

Many sales prospects are available at the top of the funnel, but they are filtered out somewhere in the funnel. Generally these prospects already have a stable supplier, need something slightly different, or do not have the budget to choose you. These people are called unqualified prospects.

All of your potential customers enter the funnel as unqualified prospects. The layers that function inside the funnel are initial communication, discussion, solution, customer evaluation, negotiation, verbal commitment, delivery and payment. Customers work their way through all of these process, and fewer and fewer get through each phase.

The ultimate goal, of course, through the funnel or along the pipeline, is actual payment, a closed deal, a purchase. Most businesses use sales funnels to help predict how many paying customers they will have after the funnel process, and not to guarantee purchases. You now have the skill to forecast sales and make the necessary adjustments to marketing and production to meet demand or boost interest.

Essentially, if you have a limited number of qualified prospects introduced at the top of your funnel, you will get bad results at the bottom. If there are a few mailings in a month, for instance, there may be very little sales in the next few months. By interpreting your sales funnel, you will know to make more mailers in the future.

Another benefit of the funnel is that it will bring roadblocks in your sales process to your attention. When you are aware of these blocks, you will know which areas need more attention. Your funnel may tell you to improve in one sales process, implement additional sales training for your sales representative, increase solution development or negotiation, and so on.

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