MSM FULL-FUNNEL CONVERSION GLOSSARY
What is a Sales Funnel?
A sales funnel is the set of stages an opportunity moves through from first enquiry to closed sale, along with the conversion rate between each stage.
THE SHORT ANSWER
The Definition
A sales funnel is the set of stages an opportunity moves through from first enquiry to closed sale, along with the conversion rate between each stage.
Why It Matters Commercially
An overall conversion rate from enquiry to customer tells you almost nothing about what to fix. Broken into stages, it points straight at the problem. A funnel losing 60% between qualification and proposal is a different business problem from one losing 60% between proposal and close, and they need opposite responses.
How It's Measured
Stage conversion rate = (Opportunities reaching the next stage ÷ Opportunities entering this stage) × 100. Calculate it for every stage. The weakest number is where to start.
Who Owns It
Sales owns the stages from qualification onwards. Marketing owns everything before it. The handover between the two belongs to both, and in most businesses that means it belongs to nobody, which is where the largest single drop off usually sits.
HOW IT WORKS
A sales funnel maps the stages an opportunity passes through on the way to becoming a customer. Stage names vary, but most B2B funnels contain the same five:
- Enquiry. Someone has made contact.
- Qualified. You've established they have the need, budget, authority and timing. See qualified lead.
- Discovery or demo. A proper conversation about their situation.
- Proposal. Something in writing with a price on it.
- Closed. Won or lost.
The value isn't the diagram. It's the conversion rate between each pair of stages, because that tells you where opportunities stop moving.
Making the stages mean something
A funnel only works if everyone agrees what each stage means and what has to be true before a deal moves. Without that, one salesperson marks a deal as proposal when they've sent a price by email and another waits until it's been presented. The stage names become labels rather than measurements and the forecast becomes guesswork.
Write down the exit criteria for each stage. What must be true before this deal moves forward. It's a short document and it makes every number that comes out of your pipeline mean something.
Sales funnel versus marketing funnel
The marketing funnel covers everything before someone becomes a named opportunity: awareness, interest, consideration. It deals in audiences and behaviour.
The sales funnel picks up when a person becomes an identifiable opportunity and runs to close. It deals in named deals and dates.
They join at qualification, and that join is where most businesses lose the most. Marketing measures up to the handover, sales measures from it, and nobody measures across it. See customer journey mapping for how to make that visible.
Sales funnel versus pipeline
These get used interchangeably and there's a useful distinction. The funnel is the model, the set of stages and the conversion rates between them. The pipeline is what's in it right now, the actual deals with values and dates attached.
The funnel tells you how your business converts. The pipeline tells you what this quarter looks like. You need the funnel to fix anything and the pipeline to forecast anything.
Our sales management work starts by getting the stages and exit criteria agreed, because nothing downstream is reliable until that's done.
WHAT THIS LOOKS LIKE IN PRACTICE
A firm generates 100 enquiries a quarter. 40 qualify. 30 reach a demo. 20 receive a proposal. 8 close.
The overall rate is 8%, which tells them very little. The stage rates tell them a lot: 40% enquiry to qualified, 75% qualified to demo, 67% demo to proposal, 40% proposal to close.
Two numbers stand out. Six in ten enquiries never qualify, which points at where the leads come from. And six in ten proposals don't close, which points at either qualification being too loose or follow up stopping too early. Neither was visible in the 8%.
IS THIS COSTING YOU REVENUE RIGHT NOW?
Test your own pipeline against these:
- Could every member of your sales team define each stage the same way?
- Are the exit criteria for each stage written down?
- Do you know your conversion rate between each pair of stages?
- Do deals sit in one stage for months without anyone flagging it?
- Do you know your average time from enquiry to close?
- When a deal is lost, is the reason recorded in a way you can report on?
Two or more no answers and your funnel is a set of labels rather than a measurement system.
SEE WHAT YOUR COMPETITORS ARE DOING THAT YOU AREN'T
We'll analyse two of your competitors against your own site and show you where they're winning conversions you should be getting.
WHAT WE SEE IN THE FIELD
Most pipelines we look at have stages that nobody can define. Ask three people what qualifies a deal to move from discovery to proposal and you get three answers, so the numbers coming out describe nothing consistent.
Fixing that takes an afternoon and no software. Agree the exit criteria for each stage, write them down, and hold everyone to them. Every forecast after that is worth more than every forecast before it.
Reviewed by Ian Wilson, MSM.
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