What is a sales funnel?
The stages from prospect to closed deal, and how many customers remain at each stage.
In detail
A customer usually goes through several stages from “knowing about you” to “placing an order and paying”, such as generating a lead, first conversation, confirming needs, quotation and closing. The number of people shrinks at each stage, so drawn out it looks like a funnel. Looking at the funnel means looking at how many customers are at each stage and what the conversion rate is.
For example
This month there are 200 leads, 80 move into conversation, 30 receive a quote, and 10 finally close. Only one third of quotes turn into deals, which suggests the quotation stage is the most worth analyzing.
How companies use it
Find the stage with the heaviest losses and improve it in a targeted way. You can also work backwards from the conversion rate at each stage: how many leads are needed to reach the sales target.
Common misconceptions
Focusing only on the final number of closed deals. Problems at different stages call for different solutions, and looking only at the result makes it hard to know what to fix.
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