Sales jargon and the terms used in the sales ecosphere are complex enough to make a language of their own.
Churn, MQL, CAC, USP, BOFU, MOFU, lead generation, qualified leads, buyer’s journey, customer journey - these are just some examples of words thrown around daily. And while most of these terms have a clear definition and are used in correct contexts, some words tend to be confused and used interchangeably, albeit wrongly. These words have specific meanings and refer to different things.
Sales pipeline and sales funnel are two such terms.
Both these terms are indeed directly related to your sales process, but they don’t mean the same. So, if you’ve been using them interchangeably or have been confused about which term to use between sales pipeline vs. sales funnel, you’re in the right place.
While sales pipeline and sales funnel both define the flow of prospects through your sales process, there is a key semantic difference between these terms. And because of this semantic difference between the two, there is also a difference in how these are implemented.
So, if you are confusing these terms while communicating, you might have been mixing up these processes, too, which might have adversely affected your plans. That makes it even more important for you to understand how they differ and do the due diligence.
Let’s start by understanding what a sales pipeline is and what stages it includes; then, we will similarly define a sales funnel. At the end, we will draw out some key differences between the two to ensure you never confuse them. Hopefully, by the end of this guide, you’ll have a much clearer idea about the subtle differences between ‘sales pipeline’ and ‘sales funnel’. This will help you define better processes and create strategies that increase conversion rates.
What is a sales pipeline?
Think of the stages that your prospects need to go through, starting from them discovering you to them becoming a closed deal. You might have a vague mental map at this point. That map, when clarified and constructed properly, is what makes the sales pipeline.
It is important to know how this map operates to construct proper sales strategies for different prospects, offer them improved content and messaging, and nudge them towards becoming your customers.
Suppose you are running a SaaS business, and your software sells on a monthly subscription basis. As soon as you get a new lead, your sales pipeline starts with the first stage, where your sales reps give the prospect an overview of your solution and how it solves their problem. Likewise, a series of many such stages, all designed to convert the deal and aligned properly, make up your sales pipeline. It will be good to have insights into the different pipeline stages in order to get more sales done!
The important stages of a sales pipeline
Here are the different stages of your sales pipeline that your prospect goes through. Please note that this is not set in stone, and they can vary depending on your business, but at the core, it will be about these sales pipeline stages:
- Qualification: This is the first stage of a sales pipeline. This is where your sales reps determine whether the prospect needs your solutions, what precise problems can be solved, what constraints the client is under, etc. The goal should also be to set up an in-person or video call meeting to take things forward!
- Meeting: This is about your sales team discussing with the prospects and offering them the best-fit solutions for their problems.
- Proposal: Post meeting, the sales team, creates a detailed proposal to send to the prospect. This outlines the current and potential problems, their solutions, the costs, the required timelines, and, if possible, the list of resources that will be allocated to each task.
- Closing: If the proposal goes through, last stage negotiations are carried out before closing the deal and signing important contracts. This is when the prospect has completed their journey of your sales pipeline and has been converted into a customer.
So, a sales pipeline is like a sales process?
At this point, it is important to clear out one more confusion before we move ahead to what a sales funnel is. There’s often confusion between a sales pipeline and a sales process. So, before we move ahead, here’s a quick clarification of how these two differ.
A sales pipeline may be similar to but is by no means the same as a sales process. Sales process refers to the actions that all the involved teams, like sales, marketing, customer support, and so on - take on different leads to help them navigate different pipeline stages. So, in short, a sales pipeline is the stages, and a sales process is the set of tasks and strategies designed to take your prospect through those stages until the very end!
Another thing to note is that sales professionals often use the term “pipeline” to quantify the current pipeline deals and not the stages themselves. Sales reps often lament that the “sales pipeline is down in numbers”. They mean to talk about the value of their pipeline and not the sales pipeline itself.
The ‘sum of amount’ that you see in the above graph is what represents the pipeline value, and that is what is used to measure and quantify the leads at different pipeline stages. This is briefly how sales pipeline reports are generated, and sales pipeline management takes place.
With all that in place, let’s look at a sales funnel.
What’s a sales funnel?
Sales funnel is simply a visual representation that gives you the information on the number of prospects across different sales stages and the conversion rate across different stages.
As the name suggests, it really is a funnel, wherein the top is wider and marks the entry or prospects. This is generally higher in number, and the number keeps getting lower, and the list of potential customers keeps getting trimmer as it moves through the next stages of the sales process and reaches the bottom of the funnel. This is the natural course of things, and prospects tend to get disqualified or drop off as they move across stages.
What information does the sales funnel give? How to leverage it?
A sales funnel, therefore, gives insights for improving the efficiency of your sales teams by taking a customer-centric approach. If you know which stages tend to have lower conversion rates, your salespeople work towards optimizing the processes of that stage and gain better results.
Let’s take an example to understand the sales funnel. Your sales team takes your prospects through various stages, starting from discovery calls to the very end. When you look at these stages, you realize that the conversion rate is lower at the intent stage. So now, you just need to revisit that stage and look into the processes. This will help you identify the core flaws where your sales strategy is lacking and will eventually enable your sales team to perform better.
A sales funnel is measured using a sales funnel report. A pipeline report focuses more on the quantity and numbers, whereas the funnel report works on cohort data and deals more in percentages and proportions. So, it can give you information about the percentage of your received deals that have qualified for different stages of the pipeline. This can help you explore better sales opportunities and create achievable sales targets.
Similar to a sales pipeline, a sales funnel, too, is important for getting relevant insights required to make smarter decisions. But the difference is that a pipeline helps you observe the actions taken and the quantified results received, whereas a funnel helps you measure the conversion rates across different stages.
The different important stages of a sales funnel
Like a sales pipeline, a sales funnel, too, has different stages. And again, these are not hard and fast and can be modified based on your business needs.
- Awareness: This is about getting the prospect to explore your company and offerings. The awareness stage is when the prospect comes across you for the first time - via any channel, like social media, newspaper, or other sources. At this stage of the sales funnel, they are just trying to know you and explore whether or not you solve their problems.
- Discovery: This is about getting the prospect to discover your company and services in-depth. By this time, they are interested in what you have to offer, and it is up to you to kindle that interest and take it further. You can use this stage to offer them more educational material on your offerings, the problems you have solved so far, and so on, without boasting about it. This could include case studies, blogs, landing pages, webinars, and more. Bring the brand visibility across and let them know your worth.
- Evaluation: This is when the prospects start looking at competitors to measure your offerings against them. After this, they shortlist the final options and go ahead with that. This stage requires careful nudging without overwhelming your prospects and letting them take their natural time. This is where the role of your marketing team and sales representatives comes into picture.
- Intent: Once the evaluations have ended in your favor, the prospect will show an intent to make a purchase. This may also involve them diving deeper into your offerings, asking more insightful questions, and generally getting to know your solutions inside out. More often than not, this stage takes care of all the financial and budgeting discussions. It ends with the final proposal being drafted and signed.
- Purchase: This is when the prospect has moved forward with the purchase. You can improve this stage by offering good onboarding material, support, and so on to make things smooth for the prospects-turned-clients.
- Loyalty: Customer loyalty is as important as customer acquisition. Some would even argue it is much more important. The point is that your funnel ends at purchase, but your work does not. You want to keep your customers loyal, and how you do that depends on your sales and marketing strategies. The goal should be to continue providing excellent service while periodically checking up with the customers and trying to up your offerings. This will also determine how good your customer retention is, which will in turn help you find better potential customers.
Sales pipeline vs sales funnel - clearing the confusion
You should already have a good idea about the difference between a sales pipeline and a sales funnel. But let’s make it even simpler. While thinking about sales pipelines vs. sales funnels, start by thinking about the primary actor.
If your primary actors are your customers and their journey, you are looking at a sales funnel. Whereas if your primary actors are your sales reps and sales processes, you are looking at your sales pipeline. Both of these are complementary tools, albeit fundamentally different.
Even in terms of tracking and measuring, sales pipelines and sales funnels operate differently. As we mentioned earlier, you use a pipeline report to measure and quantify your sales pipeline activities, whereas a funnel report to visualize your funnel movement. And we saw how these two are different things. Apart from that, while tracking your sales funnel, the metrics you will be focusing on will be:
- The average volume of sales
- Conversion rate
- Drop off rate, and so on.
On the other hand, to track your sales pipeline, you’ll use metrics such as deal slippage, churn rate, CRM score, sales cycle length, and so on. All of these will, in a way, quantify the stage and dollar value of the deals that your sales team is working on and how it is going so far. It is important to efficiently monitor this data to find gaps in your sales process and fill them in order for shorter sales cycles and faster conversions.
We hope this guide will help you never confuse these two common different sales terms. With a clearer understanding of these terms, you are now in a better position to create sales processes that align with your sales pipeline as well as the sales funnel.
And you know how to do that to the best of your ability? By using data to make informed decisions!
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