Sales Pipeline vs. Sales Funnel – What is the Difference?

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Perhaps the idea of sales pipelines and sales funnels are confusing to you.

You may have heard the terms dropped nonchalantly in sales lingo by salespeople or hospitality teams at companies, yet you have not fully understood the meaning or significance behind these terms.

Sales Pipeline Vs. Sales Funnel What is the difference

In truth, neither are complicated, but just standard terms within the sales industry with which you will soon be very familiar.

What Is a sales pipeline?

A sales pipeline refers to the processes and steps that it takes for a salesperson to close a deal.

What is a sales funnel?

A sales funnel defines the steps the potential customer went through until they closed the deal

Imagine that the sales funnel could also be considered the customers who went through the sales pipeline and ended up closing the deal with the salesperson.

What does a sales pipeline look like?

Different companies select programs where they can build their pipeline virtually. These programs are called Customer Relations Management Programs, most commonly referred to as CRM programs.

What does a sales pipeline look like

A few examples of CRM programs are HubSpot, Dynamics, Insightly,  Salesflare, Salesforce, BIG Contacts, Pipedrive or Monday, among others. These programs allow you to track each step of the sales pipeline along the way.

For example, if a salesperson has identified a new company to reach out to, they would log the name and identification process into the CRM program.

The next step would be for the salesperson to identify who they should contact at the prospective company, prepare for the meeting and reach out to the prospective customer.

Steps of a pipeline

No sales pipeline is created equal, but generally, it follows the main steps of prospecting, making contact, identifying the decision maker, scheduling a call, hosting a demo call, verbal commitment, negotiating a contract and closed.

Prospecting

In this step, the salesperson is trying to get in touch with the lead at the prospective company. This step involves cold emailing, messaging on LinkedIn, or whatever other creative methods the salesperson can use.

Making contact

Prospecting is considered complete when the salesperson has made contact with someone from the company. The next step, however, is crucial.

Identifying the decision maker

Once the salesperson has been able to reach the prospective company, they must identify who is the decision maker there. 

A good salesperson does not want to waste time pitching to the wrong person. Rather, they want to quickly find who the decision maker at the prospective company is.

Scheduling a demo call

At this step, the salesperson effectively schedules a live demo with the decision maker and, possibly, the team.

Hosting a live demo

Depending on the industry, this step could look quite different. If a salesperson has a program that they are selling, a demo call might be defined as a video chat where they share the screen and walk the customer through different parts of the program.

If the customer is in manufacturing and trying to sell the product, this could be a call or video chat where they show different products and capture information to send samples.

Each field has its own definition, but the main concept at this point is the salesperson showing the product to the prospective company.

Verbal commitment

Hopefully, the live demo ends up being a success for both parties. If this is the scenario, then the decision maker provides verbal commitment that they would like to move forward with the sale.

Negotiating

Nothing is final, however, until everything is in writing. Perhaps the decision maker spoke to his/her team and they decided that the price point was a little too high.

If this is the case, they would come back with a negotiation for a lower price or better terms (faster lead time, better payment terms, etc.). This step may sometimes take several weeks as approval may be given at different levels.

Closed

Finally, the moment the salesperson has been waiting for: closing the deal! Hopefully, the deal will be closed, the contract will be signed and the salesperson has effectively won the deal and earned their share

If that is not the case, however, and the prospective customer decided to not move forward with the deal, then the salesperson marks the pipeline as closed in the CRM program and moves on to the next potential customer.

What does a sales funnel look like?

A sales funnel is, essentially, the other side of the pipeline: the potential customer’s side.

What does a sales funnel look like

As a salesperson goes through their sales pipeline, the customer goes through the sales funnel. Each step of the way gets them closer to the end of the funnel. If the customer decides to close the deal, they make it through the funnel.

Steps of a sales funnel

Just as a sales pipeline can be described differently by different people, so can a sales funnel be described differently. The definitions given below are just one example of a sales funnel.

Steps of a sales funnel

Keep in mind that these steps are what the potential customer is going through as the salesperson goes through their sales pipeline.

Awareness

At this stage, the potential customer has become aware of a new product, service, program, etc. This could mean that their colleague referred them to a new company, they saw an ad, received a cold call/ e-mail/ message, or anything within that realm.

Interest

Perhaps the paid ad or blog post they came across led to interest from a potential customer. Now, they might be interested in what is being sold.

They might take their interest a step further and look at the website or social media pages from the company.

It is important to make sure that the potential customer has the ability to ask questions or contact the right person at this stage.

You can do this by adding in live chat software so customers can quickly get help, having a helpline number ready at all times, and a CTA that makes visitors want to move to the next step of the funnel.

Attorney Brian White does this successfully on his website:

Interest

Consideration

Now, the potential customer is genuinely interested. They may have accepted a demo call or product sample to further understand the service or product that is being sold.

Intent

Hopefully, the prospect will soon move on to this stage and let their intent be known. If this is the case, the prospective client is now considering being a client and moving through the next steps.

Evaluation

Before making any firm decisions, however, the prospective client conducts some market research and tries to find out competitor’s pricing to have an idea on how they should negotiate the contract or price with the salesperson.

Purchase

Finally, the customer has decided to finalize the deal by signing a contract or purchasing the product and the sales funnel is final.

As you can see, there are several steps to the sales funnel, and all are essential.

How do the sales pipeline and sales funnel intersect?

The sales pipeline is the steps that the salesperson goes through as they work with a prospective customer. The sales funnel is the steps the prospective customer goes through as they work with a salesperson.

How do the sales pipeline and sales funnel intersect

As shown in the photo above, with each new step in the sales pipeline there is a corresponding step in the sales funnel.

Hopefully, there will be a positive outcome for both the customer and the salesperson, and they will reach the final stages of closing the deal and purchasing the product or service at the same time.

Why stick to the sales pipeline?

A good salesperson knows how important it is to stick to the steps in the sales pipeline

If the salesperson tries to skip a few steps and move directly to the negotiating or contract, they have probably missed a golden opportunity to really show their product or service and how it would be essential to the prospective customer.

The sales pipeline has been around for many years and is the result of much research and many studies.

If one were to simply skip over steps, they might miss the overall goal of closing the deal since they did not give the prospective customer the time and attention they deserved that would, in turn, guide them to the goal of closing the deal.

Why is a sales funnel important?

Since a sales funnel shows the stages the prospective customer goes through until they decide to close the deal or not, it is primordial that the salesperson is aware of these stages.

If the salesperson tries to rush the stages, they will probably not be successful in compelling the prospect to close the deal

If the salesperson takes too long to move on to the next stage, they will probably lose the prospective customer’s interest who will soon move on to the next proposal or idea.

Therefore, knowing the sales funnel and all its stages is a very useful tool for a good salesperson.

Sales pipeline and sales funnel in action

Imagine that a bathtub manufacturer’s hospitality team is trying to score a significant deal where they would produce 300 custom bathtubs for a new project.

The salesperson from the hospitality team will start the sales pipeline by prospecting the potential customer and giving them a call or sending an email. 

It is at this point that the sales funnel starts for the prospective client as that will have created awareness of the product being sold.

Eventually, the salesperson will make contact and then identify the decision maker to schedule a demo call. On the sales funnel side, the prospective customer now has interest in the product. 

The customer may have done some quick research online or read a flyer that the salesperson left them.

The salesperson hosts a live demo call where they give a presentation on the different materials and price points the company may offer. 

The prospect is genuinely interested in the product and is in the consideration phase of the sales funnel.

The salesperson gives some time for the potential customer to think about the pitch of the bathtubs as the potential customer has shown their intent on possibly purchasing with the salesperson. 

The potential customer is also evaluating other companies and comparing price points, lead times, etc to ensure they are receiving the best terms out there.

The customer decides they would like to purchase the 300 bathtubs with this salesperson so negotiating begins until they reach an amicable conclusion for both parties, close the deal and the customer purchases the product. 

The manufacturer will then send over the details to their order management team.

Through the example above, it is easy to see how both the sales pipeline and the sales funnel go through similar steps along the way – just from different viewpoints.

Conclusion: Why it is important to use the sales pipeline and sales funnel together

A salesperson does not necessarily need to follow the steps in the sales pipeline, nor does the salesperson need to be aware of the steps the prospective customer goes through in the sales funnel.

They could easily go about their job without following the flow of the steps.

Whether or not they would be as successful without the use of the sales pipeline and sales funnel is up for debate.

When a salesperson truly commits to following the sales pipeline and is well studied on the steps in the sales funnel, the salesperson is able to provide the best possible experience and have the best possible outcome in their sales venture.

This does not mean that following the sales pipeline translates to the deal being closed every time. It could be that the prospective customer just was not ready for the product or service at that time.

However, if the prospect had positive dealings with the salesperson because the salesperson respected the sales pipeline, the probability that they will reach back out to the salesperson for future negotiations when they are ready is very high.

It is important to understand that the positive experience, whether a deal was closed or not, plants a seed for future sales opportunities with the potential customer

About the author 

Peter Keszegh

Most people write this part in the third person but I won't. You're at the right place if you want to start or grow your online business. When I'm not busy scaling up my own or other people' businesses, you'll find me trying out new things and discovering new places. Connect with me on Facebook, just let me know how I can help.

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