What Is a Funnel and How to Build One

In today’s business world, a “funnel” refers to the process of tracking a person from their first contact with your brand (usually your website) to the time they purchase a product from you. Typically, the “sales funnel” is visually shown as an inverted pyramid (as shown below).

The funnel is the widest at the top because many people are looking at your website, but only a percentage of them decide to engage, downloading product information to read or asking questions of the chat bot. An even smaller percentage of them decide to put your product in their cart.

As you can see, the funnel is getting narrower as site visitors drop out on the journey toward a purchase. The percentage of people who actually buy is usually a small fraction of the total number of people who visited your site.

Besides knowing how many people are buying your product, the really important thing about you “managing” this funnel is that you can figure out why people are dropping out at a certain stage and work to do new things to keep them in the funnel. You can actually affect the performance within this funnel, so you convert more people into sales. The funnel is meant to help manage the process to drive more sales conversions.

You can widen the top of the funnel by increasing brand awareness activities, attracting more people to your site. Thirty-five percent of 10,000 people is naturally better than 35 percent of 5,000 people.

Also, if you want to increase the number of people in the middle of the funnel to put products in their carts, you can take action, such as doing a product promotion or sending them a webcast that addresses the concerns that your research has shown why too many people don’t put products in their carts.

Think of the funnel in three parts:

  • The top of the funnel, which is the widest part, is where a company encourages everyone to explore the company, but there are no filters or qualifiers. People have looked at the website, for example, but they have not taken any actions to show interest in the company – no sign-up or engagement yet.  
  • The middle of the funnel is where a person moves a step beyond and takes an action. The level of engagement may be to download a white paper or signed up for a webinar. It demonstrates interest and a minor commitment to learn more about your products.  
  • The bottom of the funnel is where the strongest leads are converted into sales. These are people who have engaged with multiple pieces of content on your site, perhaps had a demo, and has engaged in dialogue (even if with only a chat bot). 

Grayscale Photography of People Walking in Train Station

A good customer resource management (CRM) system is the most important tool to manage every stage of a sales funnel. It captures information on people from the start of the sales process and all along the way, thereby providing the transparency.

Managing a sales funnel effectively is one of the most fundamental things for a well-run business to do. Not only will good sales funnel management increase sales, but it also enables a company’s leadership team to calculate and assess the cost of sales. Each stage along the funnel has a distinct cost, and the efficiency of the funnel affects a company’s financials.

In this module, we are only touching upon the funnel at a high level. There is so much more about sales funnel management that is provided in more advanced courses.

The purpose of this module is to introduce the concept to you and to convey the reality that marketing is not about a fancy advertising campaign anymore; marketing has evolved into a systematic, strategically managed function that uses data analytics, customer relationship management software, automation and the “buyer’s journey” to increase sales without even human interaction with the customer in an increasing number of cases.