In sales, terminology and buzzwords are thrown around lazily. Sales managers and marketers often use the term pipeline and funnel interchangeably.
But do they mean the same thing? Is there a slight or tangible difference between a sales pipeline vs sales funnel?
Before digging further, let’s review the definition of both terms.
What Is a Sales Pipeline?
A sales pipeline offers a holistic picture of your sales process. A pipeline in sales enables your sales team to organize and manage the entire sales process.
With a pipeline, marketing teams and sales reps can forecast revenue by identifying the stages where opportunities lie and predict how many prospects will become customers during a defined timeframe.
I like Panda Doc’s definition of a sales pipeline. They describe it as a “predetermined sequence of steps” a prospect travels through from lead to customer.
As the prospect completes each stage of the pipeline, they move to the next step until they become customers.
In some cases, a prospect may skip several stages in your pipeline and move from initial contact to interacting with a decision maker in your company.
Just as the sales cycle and process differ across companies, your sales pipeline should be unique and representative of the buyer’s journey.
Stages of a Sales Pipeline
While the structure may vary across businesses, these are the common stages of the sales pipeline.
The first step in sales is to bring leads into the pipeline. That means finding sales leads who need your product or service.
Leads enter at the top, usually unaware about your company or what you do. Interest is low and they’re reluctant to buy.
Prospect or lead qualification is where you prune the list. Is the prospect a good fit or not? A buyer persona is the best way to answer this question as it contains the characteristics of your ideal customer.
Use lead scoring to assign a score to each lead based on specific criteria such as engagement, email activity and pages clicked.
Usually, qualified leads are decision makers at their company such as the head of marketing, the CEO or director.
This is the most important sales pipeline stage as you’ll end up with lower conversion rates if you send an unqualified lead through the pipeline.
A sales rep from your team meets with the prospect to discuss the best solution that fits their needs.
The lead moves to the next stage if the meeting goes well and they request further information such as a product demo.
At this point, you have a clear picture of your prospect and the specific problem they have.
A sales rep puts together a proposal detailing how you intend to solve a problem for them based on your sales meeting.
Close the Deal
The lead’s journey through your sales pipeline is complete when they sign the deal or you move them to “lost.”
Why Is a Sales Pipeline Important?
The Harvard Business Review states that companies with effective sales pipeline management have an average growth rate of 15% increase.
Companies that mastered three specific sales pipeline practices had a 28% higher revenue growth.
What are these practices?
- A clearly defined sales process that shows how the pipeline is designed, measured and used to drive sales rep performance.
- Spend at least three hours every month on sales pipeline management.
- Train sales managers on pipeline management.
But that’s not the only reason why you need a sales pipeline. Here are a few more:
Accurate Sales Forecasting
You need a tool to forecast possible revenue on a month-to-month basis, quarterly and annually.
A sales pipeline shows areas of your sales that are close to the quota and weak points that are far behind.
The data helps you determine leaks in your pipeline so you can adjust your sales strategy and reach your financial goals.
Targeted Resources Allocation
It’s easier and more efficient to allocate resources when you know which pipeline stage the prospect is at.
Sales managers can make decisions about new opportunities, goals and individual targets that require more resources to close or those that need more oversight.
With a sales pipeline, team members can track pipeline deals in real-time throughout the year’s sales cycle.
The data helps managers to understand the volume of new and repeat business the team generates.
It also determines if you need to hire additional sales reps to meet demand and if you’ll meet your sales goals for the year.
What Is a Sales Funnel in Business?
A sales funnel is the one process that turns a cold prospect into a hot lead. The sales funnel is a visual representation of your prospect’s journey from the first contact until completed purchase.
A sales funnel is widest at the top where awareness is low and narrow at the bottom where awareness is high.
As prospects progress through the funnel, unqualified leads who are not a good fit for your offer drop out and qualified leads move to the next stage.
Stages of the Sales Funnel Include
Awareness – At this stage, the prospect is looking for resources to better understand the problem.
Consideration or researching solutions – They’ve defined the problem and are looking for possible solutions.
Decision – The prospect has defined the problem, knows about the existing solutions and are ready to make a decision.
Sales Pipeline Vs Sales Funnel
|Sales Pipeline||Sales Funnel|
|Visualization||Shows the quantity, value and stages of various open deals.||The funnel offers valuable insight into the volume of open deals at a given time.|
|Tracking||Tracks active leads at different stages of the pipeline.||Tracks conversion of leads on a stage-by-stage basis.|
|Measurement||Measures the quality of leads you drive to the pipeline.||Measures the efficiency of your lead generation efforts.|
|Reporting||Sales pipeline report shows lead activity during the sales process to help sales teams determine where to focus more resources for higher conversion rates.||Sales funnel report shows conversion rates throughout the sales process. Sales teams use the data to improve individual stages of the sales process and prevent leaks in the funnel.|
|Buyer journey representation||From the viewpoint of the sales rep||From the viewpoint of the customer|
|Focus||Activity and value-oriented||Performance and quota oriented|
Here’s an example
When a sales rep says a lead is stuck in the pipeline, that’s means they understand that a prospect needs a little push to move them to the next stage. It could be a proposal or initiating contact.
But a prospect doesn’t “get stuck” in the sales funnel because the funnel stages represent how successful or unsuccessful a prospect converts from the point of initial contact to decision making.
If you want to identify drop off points through year-to-year, the sales funnel shows where deals fail and help your sales team brainstorm solutions.
Do I Need a Sales Pipeline or a Sales Funnel?
It’s important to ask if your sales strategy would benefit from one option or integrating both. The choice you make depends on what your sales process needs.
For brands with a high-value product that requires a complex sales process, a pipeline streamlines your efforts.
A pipeline helps new sales reps to quickly understand your sales strategy and track opportunities that may take longer to progress.
But if your company focuses on B2C or you have a shorter sales cycle, a funnel could be a better fit for your team.
Focusing on conversion rate helps team members to identify and eliminate problems while establishing a metric of success for each stage of the funnel.
For instance, if you notice lower conversion from the lead qualification stage to the proposal stage you’ll want to review your process for lead qualification.
Conversely, if you have trouble booking meetings with qualified leads, you may need to adjust your sales qualifiers.
Diversify your efforts through activities like content marketing to drive more qualified leads into your sales pipeline rather generic prospecting.
Can I Use a Sales Pipeline and Sales Funnel Together?
Why choose one when you can both options? For sustainable business success, I recommend integrating a sales pipeline and a sales funnel.
Together, they offer valuable insight into how your sales strategies can evolve for higher conversion and close rate.
Using both sales visualizations enable the sales team to identify if your sales process needs more steps or less.
Sales reps can tweak the sales process to include multiple stages such as product demos, reviewing proposals, identifying decision makers and having more sales meetings with leads.
This leads us to the big question. How do you combine both a sales pipeline and sales funnel?
A sales CRM simplifies the process for you. The built-in lead gen tracker automates the movement of leads through the pipeline.
You can also track performance at each stage of the pipeline, monitor growth, and adjust the sales process when needed.
Discover how Engagebay can help you to increase sales. Our award-winning CRM solution enables instant lead follow up for higher conversion rate and continued lead tracking for improved efficiency.