What Exactly is a Sales Funnel?
Sales funnels are an important part of your marketing strategy and their use will even improve your business mindset, but what exactly are they? Imagine a real funnel, wide at the top and thin at the bottom. Now imagine all your potential customers dropping onto the top of the funnel. These might be visitors to your website for example. Some of these customers will move down the funnel and others will leave, never to be seen again.
The ones that stay make up the next layer down in the funnel as it gets thinner. They might be the ones who request more info from you or join a mailing list etc. These are a your leads. Some of these leads might buy a product from you and move further down your funnel, others will leave your funnel not buying anything. As people move down the funnel they become more and more valuable to you but more and more scarce.
The further down they go, the more they buy and the bigger fans of you and your business they become learn more. Only a small percentage will make it to the thin end of the funnel but those few will generate a large part of your income, so treat them well and try to keep them in your sales funnel.
Why Do You Need A Sales Funnel?
Funnels are a great way of visualising how your customers pass through your sales process, firstly becoming leads, then becoming actual customers and finally becoming raving fans. However, the real power of your sales funnel becomes more obvious when you start adding some numbers. If you add conversion rates to each level of your sales funnel you can see exactly how well you’re doing at moving customers from each level of the funnel to the next.
Conversion rates are the percentage of those who move to each level of the sales funnel from the level above. The higher the number the better. You can also add the average amount each customer spends at each level. From this you can work out how much money you’re willing to spend transitioning each customer the next level.
For example if customers give you an average profit of $10 at one level but $50 at the next level, spending anything up to $39 to move each customer to the next level is profitable, spending any more simply isn’t worthwhile. I don’t want to make this a mathematical exercise but adding conversion rates and numbers to your funnel can be extremely useful and will complement your business mindset by helping you focus more on what matters in your sales process.
Creating a Sales Funnel Isn’t Difficult
My last word on funnels is that they’re not that complicated at all. It’s a lot easier to actually draw one than to explain how they work, so grab a pen and paper and start sketching your own.
The sooner you create a sales funnel, the sooner you’ll be able to visualise how your customers behave and more importantly, remove some of the guess work from your marketing costs.