Sales Pipeline vs Sales Funnel - What's The Difference?

Do you often wonder why your sales teams aren’t hitting their targets? 

Maybe you’re struggling to understand where your potential customers are in their buying process - and why they aren’t converting from prospective customers to raving (paying) fans.

Survey any company’s sales or marketing team, and you’ll likely find that they use the terms “sales pipeline” and “sales funnel” interchangeably.

It’s not surprising, as these two terms are often used to describe the same thing - a way to visualize and track the progress of potential customers through your sales process. However, sales and marketing teams typically work together to move a prospect through the stages and ensure successful lead generation and qualification.

However, while they may seem similar on the surface, there are key differences between a sales pipeline and a sales funnel - and confusing them can have a pretty significant impact on your sales strategies and overall success.

After all, stats show that enhancing your customer retention rate via sales nurturing by even 5% can potentially boost your profits by nearly 25%! That's a lot better than trying to find new leads all the time.

To give you a better idea of the differences between the two, let’s take a closer look at what each term means and how they differ from one another. We’ll also take a look at some key techniques to help you make the most out of both your sales pipeline and sales funnel.

What Is A Sales Pipeline?

First, let’s define what we mean by a “sales pipeline.”

Simply put, your sales pipeline visually represents your entire sales process. It includes all the steps necessary to convert leads into paying customers - from prospecting and lead generation to closing the deal.

The key thing to note here is that a sales pipeline represents the actions taken by the company or sales team during the selling process. This includes activities such as contacting potential customers, holding meetings or demos, sending proposals, and negotiating deals.

The Anatomy of a Sales Pipeline

While every company is different, most sales pipelines consist of a series of stages that reflect the typical steps taken to convert a lead into a customer. Knowing what each level is—and what actions a sales rep must take to move a lead from one stage to the next—is key to effectively managing your sales pipeline.

These stages typically include:

• Prospecting: This is the initial stage of the sales process, where potential customers are identified and qualified.
• Lead Generation: Once you have identified potential customers, this stage involves gathering their contact information and qualifying them further.
• Initial Contact: This is when you make that first connection with a potential customer, whether it’s through an email or phone call.
• Needs Assessment: In this stage, you gather more information about the prospect’s needs and pain points to determine if your product or service is a good fit.
• Solution Presentation: Here, you present your solution to the prospect and show how it can address their pain points and meet their needs.
• Proposal/Quote: This stage involves providing a detailed proposal or quote outlining your solution's cost and benefits.
• Negotiation: Once the proposal has been presented, negotiation may occur as both parties work towards reaching a mutually beneficial agreement.
• Closing the Deal: The final step in the sales pipeline is closing the deal - when all negotiations are complete and the customer agrees to make a purchase.

Naturally, your sales pipeline may have more or less stages depending on your business and industry. For example, a longer, more complex sales process may have additional stages, such as product demos or multiple proposals.

A Sales Pipeline Example:

Sometimes, showing is better than telling. Imagine that you’re a portfolio manager for your company, and your goal is to attract new investors. Your sales pipeline may look something like this:

• Prospecting: You attend a networking event and meet potential investors who are interested in your industry. You may share information about your company and collect their contact information for future follow-ups.
• Qualification: After the event, you reach out to these potential investors and have a brief conversation to determine if they meet your qualifications as an investor (e.g., minimum investment amount, risk tolerance, etc.)
• Initial Contact: You meet with qualified investors to discuss their investment goals and introduce them to your company’s portfolio management services.
• Needs Assessment: In the meeting, you ask questions about their current investments and financial goals to better understand if your services align with their needs.
• Solution Presentation: Based on the information gathered, you present a tailored investment plan to the potential investor, highlighting how your portfolio management services can help them achieve their goals.
• Negotiation: The potential investor may have questions or concerns about the proposed investment plan, and negotiations may take place to address these concerns and find a mutually beneficial agreement.
• Closing the Deal: Finally, after all negotiations are complete and both parties are satisfied with the proposed investment plan, the investor agrees to make a purchase and become your company's client.

Sales leaders play a crucial role in allocating resources for new opportunities, goals, and individual targets based on the prospect's pipeline stage.

What Metrics Should You Track in Your Sales Pipeline?

Once you know the stages in your sales pipeline, it’s important to know what metrics to track to effectively monitor and improve your sales pipeline management and overall sales performance.

Statistics shows that top-performing sales reps need around five unique touchpoints to move leads through to conversion - so knowing how well each step works will uncover any inefficiencies in your pipeline.

• Conversion Rates: This measures the percentage of prospects who move from one stage of the sales pipeline to the next. Tracking this metric can help identify areas where your team may need improvement or where there may be bottlenecks in the process.
• Time in Each Stage: Knowing how much time is spent on each stage of the sales pipeline can provide valuable insights into which stages may need more attention or resources.
• Average Deal Size: This metric tracks the average value of each sale, which can help you determine the effectiveness of your pricing strategy and identify opportunities for upselling or cross-selling.
• Sales Velocity: This measures how quickly deals are moving through the pipeline, from initial contact to closing the deal. Tracking this metric can help identify areas where your team may be able to speed up the sales process.
• Customer Acquisition Cost (CAC): This is the cost incurred to acquire a new customer, including all marketing and sales expenses. Monitoring this metric can help ensure that your sales efforts are cost-effective and sustainable.
• Win/Loss Ratio: Tracking the number of successful deals versus unsuccessful ones can provide insights into the effectiveness of your sales strategy and help identify areas for improvement.
• Customer Lifetime Value (CLV): This metric measures the total value a customer brings to your company over their lifetime as a client. By tracking this, you can assess the long-term profitability of your clients and make strategic decisions about future investments in customer retention.

What Is A Sales Funnel?

A sales funnel offers a more top-down visual representation of the buyer’s journey, from initial contact to final purchase. The sales funnel represents the various stages or steps that a potential customer goes through before making a buying decision. These stages can include awareness, interest, consideration, and ultimately, conversion into a paying customer.

The concept of a sales funnel helps businesses understand and analyze their customers’ behavior and identify areas for improvement in the sales process. By tracking key metrics at each stage of the funnel, such as those mentioned above, companies can optimize their approach and increase their chances of converting leads into customers.

Think of a sales funnel as a roadmap for your sales team. It guides them on how to effectively communicate and engage with potential customers, ultimately leading them toward a successful sale. With the right tools and strategies in place, businesses can streamline their sales process and increase their chances of closing deals.

The Anatomy of a Sales Funnel

The sales funnel usually has four main stages, each representing a different customer phase:

• Awareness: This is the initial stage - where potential customers encounter your brand or product through your marketing efforts such as social media, advertising, or word-of-mouth - also known as TOFU - top of the funnel marketing.
• Interest: Once customers become aware of your brand, they may show interest in learning more about your products or services. This could involve visiting your website, signing up for emails, or engaging with your content.
• Consideration: In this stage, the potential customer actively evaluates your offerings and compares them to competitors. This is where your sales team can step in and provide personalized information or solutions to address any concerns.
• Conversion: The final stage of the funnel is when a lead becomes a paying customer. This could involve purchasing, signing up for a service, or completing a desired action.

Compared with a sales pipeline, the funnel often has a wider top and a smaller bottom, representing the gradual narrowing down of potential customers as they move through each stage.

A Sales Funnel Example

Sales funnels are often more effective when tailored to fit the specific needs and goals of a business. Let's take a look at an example of how a sales funnel could work for an e-commerce company:

• Awareness: A potential customer comes across an ad for your online store on social media.
• Interest: Intrigued by your products, they click on the ad and are directed to your website.
• Consideration: On your website, potential customers browse various products, read reviews, and compare prices before adding items to their cart.
• Conversion: The customer completes the checkout process and makes a purchase.

But the sales funnel doesn't end there. To encourage repeat business and foster brand loyalty, the company can continue to engage with customers through personalized emails, social media campaigns, and targeted promotions.

What Metrics Do You Track In A Sales Funnel?

Did you know that studies find that 68% of companies with a sales funnel fail to go back and analyze whether or not it's actually working to their benefit? What gets tracked gets improved - so here are the key metrics you'll want to track in your funnel:

• Conversion Rate: This measures the percentage of leads who move from one stage of the funnel to the next, ultimately resulting in a conversion.
• Average Order Value: This tracks the average amount spent per customer during a transaction.
• Customer Lifetime Value (CLV): This measures the total value of a customer over their entire relationship with your business, taking into account repeat purchases and referrals.
• Churn Rate: For subscription-based businesses, this metric tracks the rate at which customers cancel or do not renew their subscriptions.

READ ALSO: 10 Essential Sales Metrics You Have To Know

Sales Pipeline vs Sales Funnel: What's The Difference?

Now that you know a bit more about sales pipelines and funnels, knowing which one to use for your business can be a bit confusing. Let’s look at some situations where using one or the other may be more beneficial for your sales reps.

Sales Pipeline

A sales pipeline may be the better option if your business involves a longer and more complex sales process, with multiple touchpoints and decision-makers involved. It allows for more detail in the sales pipeline stage and provides insights into any potential roadblocks in your lead conversion.

Examples: B2B sales, enterprise sales, high-ticket items

Sales Funnel

On the other hand, if your business has a shorter and simpler sales process, such as an e-commerce website, a sales funnel may be more effective. It provides a broad overview of the entire customer journey from initial interest to final purchase, making it easier to identify areas for optimization. Automated sales funnels can further enhance this process by streamlining customer interactions and ensuring consistent follow-up.

Examples: e-commerce, low-cost items, one-time purchases

Which Is Right For You?

You may have to do trial and error to see which option works best for your business. One of the best ways to do this is to track the metrics discussed above and see which provides the most valuable results - both in the short and the long term.

You may find that a combination of both a sales pipeline and a sales funnel is the perfect solution for your business. Ultimately, it's important to remember that every business is unique, and what works for one may not work for another.

Remember - whether you use a sales pipeline or a sales funnel (or both), the goal remains the same - maximizing revenue and driving growth in your sales processes. As you refine your sales process, always keep an eye on these key metrics and adjust accordingly. Happy selling!

Are you looking for the best way to nurture your sales pipeline vs sales funnel in your organization? With CallPage, you can offer potential customers and clients the tools they need to jump into the pipeline or funnel - boosting your conversion rate.

FAQ

Why Do Sales Teams Use Sales Funnels?

Businesses use sales funnels to better understand their customers' journeys and identify areas for improvement in the sales process. They also allow them to track key metrics such as conversion rates and customer acquisition costs.

Can a Business Use Both a Sales Pipeline and a Sales Funnel?

Yes, depending on the complexity of their sales process, a business may find it beneficial to use both a sales pipeline and a sales funnel to track different stages of the customer journey.

How Do You Make a Sales Pipeline?

To create a sales pipeline, businesses should identify the stages of their sales process and assign specific actions or tasks to each stage. This allows for a clear and structured approach to managing leads and converting them into sales.

Does Every Business Need a Sales Funnel?

Every business doesn't need to have a formalized sales funnel. However, clearly understanding your customer's journey and tracking key metrics is crucial for any business looking to drive growth and maximize revenue. A sales funnel can help with this process, but it may not fit every business model best.

Can You Use Automation Tools With a Sales Funnel?

Absolutely! Automation tools can significantly enhance the efficiency and effectiveness of a sales funnel. They can help with tasks such as lead nurturing, email marketing, and tracking customer interactions at different stages of the funnel.

CHECK ALSO: Future is Automated: 14 Marketing Automation Examples