Sales Pipeline vs Sales Funnel: Find the Difference

Picture of Zach Burnett
Executive Vice President, Global Field Operations

Sales pipelines and sales funnels, same thing, right? No, not really. When you began your career in sales, it’s likely that you stumbled across a sales pipeline or found yourself somewhere in the sales funnel fairly quickly. But did you really understand the difference between a sales funnel and a sales pipeline? By the time you’ve read this article, you’ll be very clear as to which is which and why you need them.

What is a Sales Pipeline?

A sales pipeline is a selling approach based on the assumption that sales opportunities move through a typical set of stages before being closed.
 
Your sales pipeline will provide you with a visual representation of your sales prospects and where exactly they are in the purchasing process.
 
The objective is to advance sales opportunities through the pipeline to the next stage. In certain cases, sales opportunities might skip stages. Others may not move to the next stage and are lost.
 
Here’s a visual representation of what a sales pipeline looks like. Note its inverted pyramid form:
 

Sales Pipeline

 

The widest layer is where many prospects begin, but few survive to the narrow sale tip.
 
Let’s take a closer look at each of these stages:

 

Prospecting
 
There’s a good reason this first stage is called “prospecting.” A great lead is as desirable as a pan of pure gold. At this stage, you’ll be focused on advertising, public relations, and other promotional activities to ensure that potential customers know that your business exists.
 
Qualification
 
This stage is where both customer and sales reps put their cards on the table and start to talk offers. To help move your leads downstream, you can offer prospects marketing collateral (such as white papers, ebooks, or webinar invitations) or other lead magnets to establish if they’re interested in learning more about your product. You could also schedule a demo.
 
Proposal and Post Proposal
 
This is your opportunity to make your case by articulating how your business (or its products and services) can address the prospect’s needs. Follow up to ensure you and your proposal remain top of mind.
 
Commitment
 
Be open to discussions regarding adjustments to the initial scope of work, pricing, or other expectations to arrive at a mutually beneficial agreement with your potential customer.
 
Sale
 
Congratulations! You’ve closed the sale and are moving towards order fulfillment. Remember to ensure you provide exceptional service during customer onboarding and regularly monitor the account’s progress.
The best sales pipeline software can help sales managers and their teams at each of these critical stages – learn more here.

Benefits of a Sales Pipeline

The sales pipeline model works so well for businesses of every size because it covers the sales process from the first contact with an opportunity, prospect, or lead through the sale to aftercare and repeat business, while also giving a business a better level of control and visibility over the sales cycle.
 
This methodology wasn’t dreamt up just to give analysts something to do. A study carried out by Harvard Business Review showed that companies with an effective pipeline management system had an average growth rate of 5.3 percent. That’s a 15% higher rate of growth than companies without an effective sales pipeline management strategy.
 
In short, a well-managed sales pipeline, in tandem with supporting sales software, potentially provides the following advantages:
 
  • More streamlined sales
  • The ability to forecast business results
  • Clarity on how to allocate resources to support sales
  • An analysis of whether the sales strategy is working for your business
  • An overview of current fiscal and territorial progress
  • Insight into where you are in terms of your KPIs and targets

In an ideal sales environment, your team is ready and able to sail through each stage, securing the fruits of a successful deal in a timely and financially rewarding manner. But, without implementing the right tools, you’re exposed to the dangers of sticking midway or even going backwards.
 
A watertight SPM (sales performance management) tool can help your teams move forward without having to fight through a thicket of spreadsheets, unreliable data, or lose focus and drive due to poorly directed resources and a lack of adequate compensation.
 
Now that we’ve clarified what a sales pipeline is and its many benefits, let’s turn our attention to the definition, specifics, and applications of the sales funnel.
 

What is a Sales Funnel?

We’ve established that the sales pipeline focuses on the series of actions taken by salespeople. In contrast, a sales funnel is customer-focused. It looks at the whole customer journey from the point of view of a lead. It’s a representation of the quantity and conversion rates of prospects through the various pipeline stages.
 
The use of the term “funnel” is due to its shape:
 
The funnel is at its widest point at the very top, where sales opportunities or prospects enter. It gets increasingly narrower as they’re lost or disqualified.
 
Benefits of a Sales Funnel
 
Sales funnel analysis and reports give you a clear picture of how many leads you need to generate a sale.
These reports are useful for sales managers who need to forecast sales based on their current lead volume, and it helps in setting accurate departmental targets and planning organizational growth.
 
It can also help them identify weaknesses in the sales process and pinpoint precisely where deals are getting “stuck.” This, in turn, allows them to:
 
· Review and hone their processes
 
· Coach their sales teams (for instance, if qualified leads from a reliable channel are failing to convert, managers may want to ensure their sales team has all the training and collateral they need)
 
Maximizing the Sales Funnel
 
In appearance, the sales funnel is akin to taking off the prospecting/lead generation and qualification layers of the sales pipeline upside-down triangle, then reshaping it into a new inverted triangle with its own specific layers and stages.
 
If you’re still unsure of the difference between this and the sales funnel, let’s break that down and display this process in the infographic below.
 

Sales Funnel

 

Customers captured and engaged by marketing are on target to make a purchase.

The sales funnel is the initial customer engagement, marketing, and conversion journey. If there is no existing relationship, then this is where all those customer relationship management (CRM) tools and tactics are pulled out of the box labeled “Acquisition” and used to maximum effect.
 
As you journey through each stage of the funnel, your prospect is ever nearer to making a purchase. A well-planned sales funnel will define the actions your business needs to take to push prospects to the next stage. The funnel offers plenty of chances to use marketing and customer experience to capture the customer and their business.
 

Anatomy of a Sales Funnel

Let’s take a closer look at each layer in the sales funnel before citing some examples as to when it should be applied.
 
Awareness
 
This can be an awareness of the brand or product and its uses, the business behind it, or both. You can increase or create awareness through direct marketing mail-outs, emails, brand and advertising campaigns, social media platforms, influencers, blogs, competitions, and offers. These are the enticements. It’s also about identifying a gap in the market for your product or brand and offering the right solution, at the right time to the right prospects. Therefore, we stress the huge power of online searches and SEO that could bring your customer right to your digital doorstep and onto your website. How then, do you get them to come through the shop door and onwards to the next stage in the sales funnel?
 
Interest
 
Well done, you’ve grabbed a prospect’s attention, which isn’t easy in the age of short attention spans. They’re not only on your website landing page, signing up for further info or a possible product demo at that conference booth or downloading an ebook or white paper, they’re giving serious thought to going one stage further. If you have their details, it’s time to pull out the CRM big guns and start approaching them via an email campaign. The higher the level of personalization and relevant storytelling in this approach, the stronger the likelihood they’ll still be with you and sharing critical information such as an email address and further contact information.
 
Decision (and Desire)
 
When you first apply the sales funnel methodology, the gap between interest and decision is likely to feel daunting. The trick is in making your prospect really want to be a customer.
 
Some of the ways to drive desire and get a decision to further the purchasing journey, include:
 
  • Customer reviews/testimonials
  • Targeted ads via Facebook and Google
  • Case studies
  • Webinars/product training
  • Offers and discounts – if time-limited, all the better

Behind the scenes of all of this marketing and brand activity is a deeper campaign, where the object is to get a potential customer to trust in you, agree with your approach, and see the value to their business in what you’re trying to sell.
 
Action
 
One thing to make clear. The “action” may not yet be a sale. It could be a meeting with a buyer, a trial run, or in-store promotional activity and giveaways. The good news is that achieving the “action” stage means the sales and marketing activity is working and people are taking notice of your product.
 
At Varicent, we take the sales to funnel and its benefits so seriously, we’ve even acquired a bespoke sales performance management product (SPM) to help businesses navigate this more successfully.
 

Sales Funnel vs. Sales Pipeline

Sales funnel vs. sales pipeline – that is the question. It’s understandable that some people get confused between a sales pipeline and a sales funnel.
 
If that ever happens to you, here’s a simple summary:
 
Sales Pipeline
 
· A sales pipeline represents the stages a lead or prospect goes through to become a customer.
· It looks at all the steps in the sales process, all the way from gaining the lead to closing the sale.
· It looks internally at the stages that your salespeople have to move a prospect through to turn them into customers.
 
Sales Funnel
 
· The sales funnel is a holistic view of the entire customer journey.
· It starts from when a prospect first becomes aware of a brand or product to when they make a purchase.
· Rather than being internally focused like the sales pipeline, the sales funnel is customer-focused – it looks at all the different stages a consumer will go through in their journey towards a purchase.
 

Can I use the Sales Pipeline and Sales Funnel Together?

The short answer is “yes.”
 
While it’s worthwhile to consider the sales funnel separately, it’s never entirely operating in isolation from the sales pipeline.
Yes, there’s a chance that if “action” equates to a sale, you can skip along rapidly to the sales stage of the sales pipeline. However, transitioning from the sales funnel into the sales pipeline is more likely to put you around the “proposal” and “commitment” stages – which is still so much more optimistic than facing a dead lead.
 
A Varicent, we recommend that sales managers engage regularly with both their sales funnel and sales pipeline. If you hone your processes for pipeline and funnel engagement, you’ll put your sales team in a strong position to achieve their goals and sales targets.
 

Tools and Techniques of the Trade

There we have it. We’ve answered the (often confounding) question of “sales funnel vs. sales pipeline?” And now you know the place and value of the sales funnel within the sales pipeline.
 
But are there any tools and techniques that can help you perform sales cycle completion well while hitting targets?
 
Of course, there are hundreds of books that expound various theories on navigating funnels and pipelines and plenty of sales gurus that preach their own brand of motivational good practice, but aside from all of that received wisdom, we recommend partnering up with some great sales software before creating some sales magic of your own.
 
The right sales performance management platform can produce value-rich reports and relevant metrics, which in turn will help your sales teams conquer both funnels and pipelines in style and on target.
 
Some may argue otherwise, but there’s no exact science to selling. Sudden economic downturns, breaks in the supply chain, and global pandemics; these situations all carry the weight of the unexpected and the ability to ruin a perfectly good sales strategy. But with the tools to analyze market conditions, you and your sales force can successfully sail through the choppiest waters.
 
Or find out more about our products and service by visiting www.varicent.com today or by talking to your local Varicent rep.

Tags: Revenue Intelligence

Picture of Zach Burnett
Executive Vice President, Global Field Operations

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