The Stages of a Sales Funnel

Successful companies map the buyer journey through different stages of a funnel – from the point they attract visitors to their website to the moment they convert those visitors into customers, each stage is carefully planned to maximize conversions.

Whether your goal is increasing your conversions or simply understanding how your target audience is reacting to your marketing and sales strategy – a funnel view is what you might need to grow better.

A study states that 68% of companies have not attempted to maintain or build a sales funnel.

If you too are sailing in the sea of competition without having a well-defined funnel strategy, ultimately, you’ll be missing out on a lot of sales opportunities (since you’ll never know what’s working for you and what’s not).

In Part 1 of our sales funnel guide, we talked about the definition of a funnel and how we’ve all been a part of one.

In this part, we’ll break down the different stages of a sales funnel in detail and understand the significance of each stage for consistent sales growth.

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How does a sales funnel work?

Assume that you’re running an online business.

To generate sales, you run a few online ads and manage to get 1000 visitors to your website within a week.

This means your marketing efforts generated one thousand leads, who got interested in knowing what your product or service is all about (and how it fits in with their needs, desires and wants).

Now out of these one thousand leads, let’s assume only 100 people show interest in your business by taking an action (like signing up for your newsletter or a requesting a product demo).

Next, it’s time for your sales reps to call these hundred leads and talk to them about the features, benefits of your products (or give them a demo if they’ve shown interest in that).

At this stage, let’s assume only 10 people show a clear intent towards making a purchase decision.

This means, out of one hundred marketing qualified leads, you generated ten sales ready prospects who are ready for making a purchase.

Based on the budget, authority, need, etc. shown by your prospects, let’s assume that you successfully converted 5 prospects as end customers or buyers.

If we sum up this example, this is what your sales funnel will look like:  

• Stage 1: 1000 visitors or leads
• Stage 2: 100 qualified leads
• Stage 3: 10 sales ready prospects
• Stage 4: 5 end customers

Notice how the funnel gets narrower at each stage, which simply implies that not every visitor that you attract to your website will become a customer.

Next, let’s understand these stages in detail.

The Stages of a Sales Funnel

Every funnel goes through a predefined set of stages, which can vary according to your industry or business.

As a starting point, here are the four important stages of a sales funnel you need to know –

Stage 1: Awareness/Discovery

This is where you make people aware about your business or brand.

You can do this through marketing activities like online ads, billboard ads, videos, social media posts, blogging, etc.

At this stage, visitors who have seen your marketing, will come to your website, casually browse and discover how your business fits with their worldview.

The more information people can gather during their awareness stage, the better they get to understand your business. Based on their information and impression, they can decide whether to move to the next stage of their buying journey or not.

The discovery stage of a sales funnel is critical – if you can answer the questions your target audience at this stage, you can successfully generate interest about your products or services.

Stage 2: Interest

During the interest stage, people who are aware about your business, will start showing an interest in your products, services or business.

You can consider them as marketing qualified prospects, since they match your ideal buyer persona or target audience closely.  

As they continue to further familiarise themselves with the features, use-cases – some of them would also verify that they have a clear need, a budget and the authority to make a purchase.

At this stage of their journey, they become sales-ready.

Basically, a sales ready prospect is someone who has agreed to be contacted by your sales team.

Stage 3: Decision

It is during the decision stage, where prospects start considering buying or trying something.

Here, they start comparing and evaluating the pros and cons actively.

This is sometimes also referred to as the ‘consideration’ stage – at this point of their journey, prospects start considering how the features or benefits will translate into value for their money.

They can now be considered as sales accepted prospects, which implies that they are now seeking specific and direct assistance from your sales team.

Often, sales accepted prospects need to be convinced on the following:

• How can your product or service match their needs or desires, or solve their problems?

• How are you superior or better than a similarly priced competitor?

• Why should they trust you with their money?

The prospects who are successfully convinced, become purchase-ready and they move on to the final stage of their buying journey.

Stage 4: Purchase

Now that your sales professionals have spoken to sales ready prospects, and also communicated the benefits, features and value of your products or services, it’s selling time.

After manoeuvring your prospects through your funnel, it’s time to nudge them into making a purchase decision. At this stage, some prospects might need a special offer, a coupon or some sort of reward before making a commitment.

Also, it is still likely that not all prospects end up buying or trying what you’re selling – the key is to nurture such prospects till they become purchase ready in future.

The ones who do make a purchase decision, come out of the sales funnel as your customers.

• Top of the funnel (TOFU) is where you attract visitors through marketing and attract them to visit your website or store (Stage 1)
• Middle of the funnel (MOFU) is where you start talking to these leads based on their interest and qualify some of them as sales ready prospects (Stages 2 and 3)
• Bottom of the funnel (BOFU) is where you go forward with convincing your prospects and converting them into customers (Stage 4)

So, why does a sales funnel matter?

If you’ve been following all along, one thing should be clear – a sale happens only when a lead shows interest in your products or services, has the budget or authority to make a purchase and is willing to be contacted by a salesperson.

If they don’t move down the sales funnel, the opportunity for a sale doesn’t exist.

This is why a sales funnel matters – it shows you the opportunities that exist and how you can tap into them to make your sales processes more efficient and effective.

Here are two critical advantages of having a funnel in place:

1. Insights: A funnel gives you a closer view into the challenges, pain-points and perceptions of your potential customers. In today’s complex buying journey, whoever understands the customers better, closes more sales.  

With a funnel, you find insights about the buyer’s journey at every stage. With these insights, you can smartly tailor your messaging and deliver it to your target audience with the right timing for maximum impact.

2. Clarity: A funnel will offer better visibility on the overall sales numbers and show how your current processes align to meet your sales goals. To improve something, you must understand it first, and for that, you need a clear view that a funnel can provide.

With a funnel, you also get clarity about which stage is leading to more conversions and drop-offs. With this clarity, you can easily measure and improve your sales strategy.

In Conclusion

Ultimately, a funnel tells you how people are responding to your marketing and sales strategies by giving you an accurate view on your conversions at each stage. And by doing so, it helps you improve both marketing and sales, two essential functions for business growth.

Now that you know what exactly is a sales funnel and its different stages, it makes sense to start applying what you’ve learned.

If you’re all set – read Part 3 of our step-by-step guide on how to build a sales funnel.