In this post I look at the third of 3 stated functions of a sales funnel.

Help you identify opportunities to improve your sales process

There are 2 main areas where you will always want to improve your sales process:

1. Effectiveness
2. Efficiency

Your sales process is more effective when the probability of sales success is increased – you convert a greater number of sales opportunities or prospects in to customers that actually pay. To put it another way, instead of converting 1 prospect in 20, or 5%, you may convert 1 prospect in 19, or 5.3%. It’s not much, but it is an improvement – you’d actually be getting, on average, 6% greater revenue than before!

Your sales process is more efficient when you get a greater return or revenue/cash for the same effort & use of resources. For example you get a higher selling price even though you are putting in the same effort as before and the cost of your sales operation per individual sale stays the same.

A more efficient sales operation leads directly to higher profit for each individual sale. If you are also closing more sales for the effort involved, then you are getting more and more of these higher profit sales – that’s a double bonus!!

Having accurate funnel data, even if at times it makes uncomfortable reading, will quickly point you at opportunities for improving either or both the efficiency and the effectiveness. You’ll be able to look at which stage in your funnel is not as good as it could or should be, and in what way. This will guide you quickly and directly towards the kind of actions to take to improve things, instead of guessing your way to a better set-up, or using trial and error approaches, both of which will take more time and money to maybe get you to a better place…

The exact approaches and techniques to use in improving these have had whole books written about them – big books, some with hard maths in them, so I’ll save these details for another article. Just know at this stage that you can get a 25-40% improvement just by using the simpler of these techniques, with no difficult maths involved.

Let me give just one example. Say you want to increase the amount of profit you make in a given time. You know that it’s unlikely in the time available that you can suddenly bring in new prospects and get them all the way through your sales process and to giving you cash. You look at your funnel and determine that improving the ratio of conversions that each stage achieves means you will have more prospects getting through each stage of your funnel, and this will work right away, with what’s already in your funnel – great! Some quick research suggests adopting different wording in your sales letters may help. You commission a professional copy writer to create what you need. It costs you the profit from 2 sales, but that’s OK – soon your conversion ratios are better, and the increased sales not only cover the fees of the copywriter but give you greater close rates – for ever!

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In this part I look at how to access the second of 3 listed functions of a sales funnel.

Set priorities on where to focus next.

You can use your funnel data to see which parts of the funnel are in need of attention. You can only do so much on any given day so, you’d like to focus on doing things that give you a better outcome without working any extra hours. The challenge is to keep your funnel suitably stocked at every stage with enough prospects.

If your sales process converts 1 in 20 or 5% of all the prospects that come in to it at the top or start of the funnel, then for every sale you make you need at least 20 new prospects coming in at the same time. Anything less than this and in short order your funnel will be delivering falling sales revenue…

Your funnel data can help you spot if a particular stage is low in prospects so you can dome something about it in a targeted way.

You see, the tendency of less experienced sales people is to pay the most attention to the prospect that is just about to buy, and very little on the more numerous prospects at the start or top of the funnel or sales process. This is very understandable, but if you’ve been very helpful and supportive of this prospect all the way through, you’ve done about all you can for and with them at this late stage. Sure, keep in touch with them in the right way, but ‘hassling’ them will probably not speed up the sale much, if at all, and may just annoy them…

But if you neglect your early stage prospects and the business of getting more in to your funnel, at some point the pipeline runs dry and then you go in to panic mode – fine if you have enough cash in the bank to survive, but if not, your business is dead.

Generally only one thing kills a business – gets it every time – a lack of cash flow.

To ensure you don’t suffer from this, you have to keep that pipeline or funnel well stocked.

So your priorities will probably be something like this:

1. Close the sale with those prospects at the bottom of your funnel – just don’t over play it!
2. Get new prospects in to the top of your funnel – if your close ratio is 1 to 20 then get at least 20 new prospects in for every sale you close…
3. Work your way down through descending stages in your funnel as you support & interact with the prospects in each of those stages – move them through the funnel one stage at a time…

With this you’ll know how to allocate your available working time and resources…

Simple!

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In Part 2 I mentioned 3 functions a sales funnel can perform. In this post we’ll look at the first of these – forecasting sales.

Sales forecasting

You can forecast future sales income using the sales funnel by looking at how many prospects you have at each stage and taking account of the time a prospect typically takes to move from the stage they are at to actually paying you cash. You also have to take account of the percentage of prospects that drop out at each stage and the likely value of the potential sale.

Say you have 17 prospects at a certain stage, and it will take 3 weeks on average for a prospect at this point to move all the way through to closing the sale and paying you cash. Say that on average about 25% of these prospects will actually go all the way, the other 75% dropping out somewhere along the way. This means that you will have about

17 * 0.25 = 4.25 prospects going all the way.

Well, you can only have whole numbers of prospects! So let’s call it 4.

You are likely to have 4 of these prospects buy from you. If the average sale is worth $45 then you are looking at $45 x 5 or $180 of sales income in 3 weeks, from the prospects at this particular stage in the sales funnel.

Repeat this process for every stage of your funnel and you’ll end up with a forecast of sales income for the future.

This seems pretty reasonable in terms of approach, though it is full of pitfalls and assumptions and while you do get a forecast it can be way off. The reasons for this are that few prospects in most industries actually behave like an ‘average’ prospect. You also need to collect, and keep collecting, accurate data on how your funnel performs and how many prospects fall out at each stage and how long they take to go through each stage. However, get good at collecting and analysing this data and you’ll soon be getting better forecasts.

There are still pitfalls with this approach, and I’ll go in to these in another article but at this point I’d say in my experience have an imperfect funnel as a sales tool is better than not having one… it helps you make better informed decisions…

How does this apply to internet marketing websites where the sales process is gone through pretty quickly – almost to the point of hardly looking like much of a sales process – or funnel?

Each page you ask a prospect to click to, each action you ask of a prospect, could be equated to a stage in your sales funnel. Prospects can and do drop out at any and every stage, but the data is still useful to know in helping you refine and improve your sales process. More on this later.

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In Part 1 I introduced the concept of the sales funnel and gave an insight in to what it isn’t. Now we get in to the meat!

What it is

A sales funnel is sometimes referred to as a sales pipeline or also a sales tunnel.

A sales pipeline is a simple way of acknowledging that prospective customers go through different stages when they are buying something. For example, first they may simply be asking for information, researching options and so on. Your matching sales activity would be to provide them with the information they are asking for, ask more questions about what they are trying to achieve and so on.

For some prospects this will be the end of the road – they’ll either stop everything right there, at this first stage, or they’ll continue, but not with you.

Some will however want to go further. You may suggest a longer (or initial) meeting or telephone call to explore needs and constraints further. Some will drop out at this point, some won’t.

So over time the prospects and you will go through a sequence of activities that lead right up to a sale.

At each stage some prospects will drop out for what ever reason – price, change of mind, priorities, solution fit, didn’t like your hair colour (seriously!) – you name it almost any reason will apply!

This pipeline is often drawn as a funnel with the wide opening at the top. This is because at the wide, top end is where the majority of the prospects will be, in terms of numbers – the width of the funnel represents the number of prospects at that stage in the funnel.

As you go through your sales process you will see prospects drop out at each stage, so the numbers of prospects at each next stage is generally less than the stage before – hence this narrowing effect.

You only truly have a customer right at the bottom of the funnel, when a prospect not only decides to buy from you – but actually pays too!

And it’s possible that some, perhaps many, of your prospects don’t come in to the sales process right at the start, at the top of the funnel. They may come to you in the middle – they’ve done the research or are just fixated on buying what you have – it doesn’t matter because often you can’t know and few sales people find out fully, fearing that if they take the prospect back to the start of the process, the prospect might change their mind and go away – another lost sale in the minds of many a salesperson (even though that’s not true!)

The secret is in making sure that your funnel is populated – you have enough prospects at every level so that you have a good, steady-ish stream of paying customers (giving you cash!) coming out the bottom of it – always!

Why have one?

A sales funnel or pipeline – what ever you call it – has its uses. For example, you can use it to:

• Forecast future income
• Set priorities on where to focus next
• Help you identify opportunities to improve your sales process

There are other ways to do all of the above, but the funnel’s visual and actual simplicity make it the tool of choice for many sales professionals.

The more successful operations actually design their own funnel that reflects the characteristics of the markets they are in and the nature and structure of their own sales processes, though you can use an ‘off the shelf’ funnel structure to get you started. I’d actually recommend you build your own tailored funnel as quickly as possible though…

In part 3 we’ll look at how to access these 3 functions of a sales funnel.

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There seems to be some confusion about what a sales funnel is. From what I can tell, the concept used by sales operations in the larger organisations is different to the definitions being used in the world of internet marketing. As the larger sales organisations were using this term long before the Internet was a reality, and it’s a definition that I’ve found much more useful as a true sales tool, I’m going with that definition.

Before I get in to that I will just take a quick look at the other definitions as they have their own merits and/or potentially dangerous distractions.

What it isn’t

I made a quick non-exhaustive survey by visiting a few forums, and found several ‘definitions’.

One definition is that your sales funnel has various differently priced products. The free and low-cost products exist at the top of the funnel because these will attract the largest number of ‘takers’. As you go down the funnel, as it narrows, you have increasingly pricey products but fewer ‘takers’ or customer numbers, due to the higher costs.

With this definition there is no sense or implication of a sales process. This kind of funnel doesn’t work too well as a forecasting or sales strategy tool.

Should you have a range of products & services at different price points? I guess that depends on the market, though in general I’m inclined to say yes!

What I would say is that assuming there are lower numbers of customers for the higher priced offerings is too simplistic. Some standard analysis techniques will tell you that the middle priced products & services probably bring in the most revenue, closely followed by some of the higher priced items, so focus your resources here. Yet these customers may have first come to you via the free or lower cost items, and neglecting them too much may actually stop the flow of lower-paying customers to higher paying ones (where the bigger profits usually are to be found).

Related to this definition is a similar one, where you have more products at the free/low price points (top/wider part of the funnel) where there are the most ‘takers’ or prospects and converting one of these is more likely if you have a wider range of products and services that connect with a wider range of needs. Over time you convert these prospects in to higher paying customers as you now have a relationship with them and know critical things about them, based on the free and low cost products & services they’ve taken from you.

Again, there is no sense of a sales process and sales tool at work here.

I would say that you operate one of these (or other) strategies, but that you use a sales funnel as I will describe below as part of your sales process. Then you can extract the maximum benefits of greater sales conversions, greater revenues and greater profits.

There are other definitions kicking around, but these two above seem to be the ones most in use.

In the next part we’ll get in to what a sales funnel really is, and the benefits it brings.

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And this is the first of those blogs.

You might think that the biggest challenge is finding a topic each and every day for 365 days – and actually, it’s not a problem (lucky I’m not doing this in a leap year – that extra day could be the straw that breaks the camel’s back…!)

Actually, the problem is writing something relatively brief yet having something useful in it. This is a particular challenge for me – I can easily write 35,000 words, as I did for my Masters thesis, but struggled with the 10,000 word limit I was set for the thesis…

Until I came across 2 wonderfully simple techniques, courtesy of Patrick Hare, a wonderful mentor, sadly now departed…

The first is the 4-MAT system by Bernice McCarthy (see http://www.aboutlearning.com/) – simply put, and slightly adapted, the 4-MAT system challenges you to consider the WHY, WHAT, HOW and (WHAT) IF of the subject. This approach covers the major learning & thinking styles & preferences of almost everybody. This means that the impact of your writing will be larger for each person, and will affect more people too – better breadth & depth of impact. It doesn’t mean you have to split your article or presentation in to 4 separate sections, 1 for each of the 4 areas, though many do and it works well. If you give it a go you’ll soon get the hang of it and notice results almost immediately. And if you do give it a go you can also begin to adapt it to your own style and strengths…

And the sharp eyed amongst you will have spotted that the previous paragraph covers these 4 areas also… 4-MAT in practice, even for just a paragraph…

The other tip Patrick shared with me is to simply ask myself – or a subject matter expert – what are just 3 things to know about the subject at hand. For example, with 4-MAT, there are just 3 things you need to know in order to put it in to immediate practice:

1. The first is that 4-MAT is a simple, powerful framework to help you quickly structure an article or presentation, no matter how big or small – you can even use it on each section in the article or presentation. This leads to a more effective outcome.
2. The second thing to know about 4-MAT is that it only comprises 4 elements or questions to consider – WHAT, WHY, HOW and (WHAT) If.
3. The third thing you need to know about 4-MAT is that you can consider each element in any depth – deep or shallow, and in any order. You don’t have to explicitly structure your work along the lines of the 4 elements, just so long as you cover all 4 elements – for maximum effect do so within the first 2 minutes of your presentation or the reader’s reading session.

And that’s it!

I came across the subject for my first piece of original content when I was bombarded recently by stack of stories about how everybody else seemed to be successful yet so many of my clients in the past had been frustrated by them.

Right, time I headed off to write the content for day 2 of my year of original content!

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