Sales Funnel: Definition & Steps to Create One (+ Tips)

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A sales funnel is the visual representation of your customer journey, from their POV, as they progress from brand awareness to contract renewal. Typically, a sales funnel consists of the following six stages: awareness, interest, evaluation, decision, sale, and renewals. Salespeople and marketers build, manage, and analyze funnels, often in a CRM, to understand what any individual lead is doing or thinking at the time, and to measure and improve funnel performance.

How Does a Sales Funnel Work?

Marketers, sellers, and business owners divide their business’s typical customer journey into several distinct stages — awareness, interest, evaluation, etc., — and document them inside of their CRM, thus creating a virtual, tangible sales funnel. You can then track funnel metrics like conversion rates between stages, and pinpoint any lead’s current location within the journey.

Though funnels vary across businesses, most contain the following six stages:

1. Awareness: Leads just learned about your brand from marketing’s blogs, videos, social media posts, and other content. They might’ve also received a cold email from sales.
2. Interest: Leads are now interested in your brand or offerings thanks to marketing’s efforts to promote different products or services through email, blog posts, etc.
3. Evaluation: Prospects are actively researching your offerings by reviewing pricing pages and online video demos, and maybe asking questions to the sales team.
4. Decision: Prospects are considering purchasing one specific offering and are having conversations with salespeople, attending demos, and negotiating the deal.
5. Sale: Customers are using your product or service and interacting with your customer service team when they need training or assistance.
6. Renewal or Repurchase: Customers are thinking about buying from you again, and might be reviewing marketing’s upsell or cross-sell promotions.

A funnel is typically depicted as an upside-down triangle, widest at the top (awareness) and narrowest at the bottom (renewal). In other words, a company usually has more leads in the awareness stage than the interest stage, more in the evaluation stage than the decision stage, and so on. That’s because leads drop out of the funnel and only the best-fit leads make it to loyal customer status. Though dropout is inevitable, there are ways to reduce it.

Through sales funnel reporting in your CRM or sales funnel software, you can spot leaks in your funnel, be it a poorly written sales page or a lame email sequence, and patch them up. Further, a visual funnel gives you insight into what your leads, prospects, and customers are currently doing and thinking, so you can pick the right strategies to propel them forward to the next stage.

6 Common Sales Funnel Stages

There are usually six sales funnel stages in a business’s sales funnel. But, two different businesses might call the same stage by two different names. For instance, one business might use “discovery” for “evaluation.” Below we’ll cover the six stages, what buyers typically think about your brand in each stage, and what activities salespeople and marketers use to move buyers through each stage.

Now that you know the different stages, let’s go over how to create, digitize, and manage a sales funnel for your specific business.

How to Create & Manage Your Sales Funnel

The steps for creating and managing a sales funnel include identifying your typical customer journey, breaking it into the six sales funnel stages, documenting it using sales funnel software (often a CRM), and managing the funnel and tracking its metrics in order to optimize the customer experience and increase conversion rates.

1. Identify Your Typical Customer Journey

Take a step inside your average customer’s shoes and go through the experience of becoming a customer. Jot down the various pathways they might take from awareness to purchase. Document the touchpoints — the ads, cold emails, blog content, live demos, checkout pages, etc., — that they experience. Once you have a few common paths, maybe one for each buyer persona, write down the actions that almost every buyer takes. This is your archetypal journey.

For example, an online course creator might have the following journey:

• Get Web Traffic: Leads learn about the site via Google and read the blog posts.
• Capture Lead Info: They see and download a free ebook from the website.
• Market Online Course: Prospects receive and read emails promoting the course.
• Sell the Course: They click a link and visit a sales page explaining the course benefits.
• Close the Sale: Prospects pay for the course on a secure checkout page.
• Onboard Customers: Customers receive a welcome email with critical info.
• Cross-sell Customers: Customers see ads for other courses on the course platform.

If you’re starting fresh and don’t have any customers just yet, you get to start from scratch and imagine your ideal customer journey. What would be the best step-by-step method for convincing a stranger to become a customer, and what marketing content and sales tactics would that require? The next step should help you start thinking about the touchpoints at your disposal and how they work to move people through the stages of the sales funnel.

2. Divide Your Customer Journey Into Funnel Stages

Now that you have a sequence of touchpoints, divide it into the six sales funnel stages. Each touchpoint’s stage will depend on how the average customer feels about your brand during that touchpoint. For example, touchpoints where leads are just learning about your brand, like social media posts, will fall under the awareness stage. Others, like visiting the pricing page, signify that the lead is researching your product, and should thus go in the evaluation stage.

Here’s an example of how a business might divide its touchpoints into six stages:

• Awareness: Watching social media posts, reading blogs, and seeing ads.
• Interest: Watching YouTube product videos and receiving marketing emails.
• Evaluation: Visiting testimonial pages, pricing pages, and product pages.
• Decision: Attending live demos, sales presentations, and negotiations.
• Sale: Signing the contract and using the product or service.
• Renewal: Seeing renewal reminder emails and upsell/cross-sell emails.

The benefits of dividing the journey into distinct stages will be most apparent when you build a virtual sales funnel using software. Because each funnel stage is associated with certain behavior and desires, dividing your customer journey into stages will allow you to quickly assess any specific buyer’s needs with a quick glance at the sales funnel dashboard. Via reporting, you can also monitor conversion rates between stages and identify chokepoints in your sales funnel.

Make sure to specify the action in each stage that leads must take to move into the next stage in the funnel. For example, the rule for getting into the evaluation stage might be that customers have to fill out a “contact us” form. To get into the decision state, they might have to request or receive a proposal. Defining the gateway actions that separate stages helps you ensure that each buyer is always in the appropriate stage, and as a result your funnel reporting is accurate.

3. Digitize Your Virtual Sales Funnel Using Software

Now that you’ve turned your customer journey into a written sales funnel with the appropriate stages and their corresponding touchpoints, it’s time to make it virtual, trackable, and open to analysis. Using a CRM or sales funnel point-solution, you can build a virtual funnel. You’ll be able to choose the stage names and set up automation rules that move leads through the stages when they take a specified action. Then you can track leads as they move through it.

After you’ve documented your sales funnel in a software platform, you’ll be able to track it and analyze it to uncover key metrics such as funnel conversion rate. Plus, you can use the tool’s sales and marketing features, like an email campaign builder or a landing page builder, to create and manage digital assets that propel buyers through the funnel toward a purchase. 

Quick Note: Many B2B salespeople using a CRM may create a horizontal virtual sales pipeline and not use a virtual funnel. They’ll use stage names associated with the salesperson’s actions rather than the customer’s journey — e.g., “contract sent” instead of “decision.” If this is how you prefer to visualize your customer journey, that’s okay, but you should make sure the digital pipeline stages line up with your funnel stages, and you should run funnel reports regularly.

4. Manage & Track Your Sales Funnel 

Sales funnel management is the ongoing process of monitoring, reporting on, and improving your funnel. It includes activities like monitoring key funnel metrics, identifying and patching funnel leaks, and optimizing your re-engagement process. Most of these activities you’ll do on a weekly or monthly basis, but others, like assessing your funnel software, can be done less frequently. Consistency and diligence in this regard lead to a well-functioning sales funnel.

Best Sales Funnel Example

Below is a HubSpot sales funnel example from the point of view of a small business owner who’s trying to improve their marketing strategy. By studying effective sales funnels like the one below, you can find techniques and content ideas to integrate into your own. Read on to see how HubSpot turns a curious internet browser into a long-term customer.

Awareness

You’re on the internet trying to learn about A/B testing and you come across an article written by HubSpot. You click it and read the article. It’s informative, and you vibe with the writing style. A few weeks later you return to Google and search for the best A/B testing tools. HubSpot pops up again, this time with a listicle of the 15 best options.

Interest

After reading the blog post, you scroll back up to the top of the page to check out an offer that caught your eye — a free A/B testing toolkit. You click on it and are taken to this landing page that asks you to input your contact information. You do so and receive the toolkit.

Evaluation

For two weeks you use the A/B testing toolkit and like the results. But you’re hungry for more functionality, especially for your email marketing campaigns. You’re also in need of a full-service CRM to support your expanding business, and from what you’ve read in HubSpot’s content you know HubSpot has a great one. You go to the product page and review the pricing and features.

Decision

The free CRM is tempting for the price, but you feel that the Starter plan unlocks features you need. You’re still not convinced it’s the right option for you though, so you read a few customer reviews of the product, ask their live chat some questions, and do some more research. You want to know how it looks to use the software, so you book a free demo with a sales rep.

Sale

The demo goes well and you decide to make the purchase. The salesperson sends over a contract and you sign it. Next, you experience onboarding and implementation. A customer service rep helps you integrate the software with your other tools and shows you some A/B testing tricks. Over the next several months, you use the software religiously and love it. You also frequently visit HubSpot’s Help Center to get quick answers to your questions.

Renewal

10 months after purchasing the CRM, your contract is up for renewal in two months. You’re confident that you want to continue working with HubSpot, but you think it might be time to upgrade your plan to the Professional Tier, so you contact sales via chat and discuss the benefits and implications of upgrading.

❮ ❯

In this example, you end up deciding to stick with the current product due to budgetary concerns, but you have the goal of upgrading next year. For this renewal period, the company uses auto-renew, meaning the contract is automatically extended. You don’t have to do anything unless you want to cancel the subscription. You find this convenient and consider it just another sign to continue working with this brand.

3 Best Sales Funnel Software

Sales funnel software is an online tool that helps you create, manage, and optimize your business’s sales funnel. Most businesses use a CRM with sales funnel features such as a funnel builder, lead and prospect tracking, and funnel reporting. They should also offer sales and marketing automation, which helps you move buyers through the funnel toward a purchase while saving time. Read on to learn about the three best CRMs for managing your sales funnel.

Choosing the right software ensures that you’re able to effectively manage and optimize your funnel, but it’s not the only best practice you need to follow. Read on to learn some tips that will help you make the most of your sales funnel.

Top 4 Sales Funnel Tips

Every business is going to have a different sales funnel, but there are some principle tactics that no one should ignore. These are creating lead magnets to capture lead information, running email nurturing campaigns, leveraging your CRM for time-saving automations, and using A/B testing to optimize the content in your sales funnel. Read on to double-click into each tactic.

When you combine a powerful sales funnel with the right software and best practices, you’ll create a rushing river that consistently sweeps up and carries leads downstream towards customer status.  

Frequently Asked Questions (FAQ)

Bottom Line: Sales Funnel

A fine-tuned sales funnel that’s documented in your sales funnel software will enable you to consistently make sales, track the effectiveness of your marketing and sales techniques, and optimize your funnel gradually over time. To see how the sales funnel fits in with other concepts like sales pipeline and sales methodology, read our article on the sales process.