A sale is an arduous, grueling process; you begin with a large number of leads, determine which ones are interested in your product, determine which ones have the authority and resources to actually make the purchase, and finally, at some point in time, complete the sale.
This sales process often leads to what is referred to as a sales funnel – you start with a wide base of leads and funnel your way down to a number of completed sales.
In my opinion, most sales teams are so focused on getting those sales that they don’t take the time to inspect their sales processes and determine where they might be losing a disproportionately large number of leads. Our most recent Working Smarter article, "Working Smarter with Sales Funnel Charts," addresses this issue and explains how your sales team can convert more leads by refining their sales process using Sales Funnel Charts.
Why Sales Funnel Charts?
Sales funnel charts are very intuitive; the top of the inverted pyramid is the widest because you have the most leads at that point of the sales process – as you qualify your leads based on interest, authority and ability to buy, you move to narrower and narrower sections of the pyramid. The last section of the pyramid, the narrowest section, represents all of your final sales at the end of the sales process.
Sales processes are large and complex – if you wanted to optimize and refine your sales process right off the bat, the task would be impossible due to the complexity of your sales process. There are simply too many steps, too many leads, and too much information to try and optimize your entire sales process at once.
The value of the sales funnel chart comes from being able to break down your sales process into sequential steps. By breaking down your sales process into a funnel, you can accomplish the following objectives:
Sales Funnel Charts Simplify the Entire Sales Process
Breaking down your sales process into individual steps makes it much easier to appreciate how the entire process works. So what does this do for your business?
Well, for one thing, it makes it infinitely easier to communicate your sales process to new employees, to investors, and to your superiors in the company!
Sales Funnel Charts Quantify the Sales Process
It’s the year 2008; if you can’t measure the efficiency of your sales process in quantifiable terms, you’re doing something wrong—period. Using historical data, you can use your sales funnel to determine:
- How many leads result in sales
- And how much money it costs you to convert a single lead into a sale.
Take this example, for instance:
- You distribute emails to 20,000 prospects;
- 500 prospects request additional information;
- The telemarketer qualifies only 20 prospects as having the authority to buy;
- And 10 prospects agree to purchase the product at the given quotes.
Notice that I followed the steps laid out by my sales funnel in my analysis – what does this data tell you? Without the sales funnel, you would have known that you converted only 10 of your original 20,000 prospects—a conversion rate of 0.05%.
However, with the sales funnel you learn some additional facts about your sales process – for instance, most of the prospects who were interested in your product do not have the authority to buy. You're losing a disproportionately large number of leads at the qualification phase! This means that your initial email campaign is targeting the wrong people!
Breaking down your sales funnel data using a sales funnel chart as a guideline can help lead to additional insight like the kind I demonstrated using this simple example.
In addition, a sales funnel chart also enables you to understand just how much work goes into converting each lead into a sale – based on the example sales funnel chart that I’ve included in this blog entry, you can tell that your sales team has to contact the lead five times before a sale is completed:
- Once to simply email the prospect;
- Once to send information to an interested lead;
- Once to qualify the lead’s authority to buy;
- Once to deliver a price quote to the lead;
- And once to close the sale.
Using that information, you can determine how much money it costs you in terms of the sales team’s time to close a single sale. It would be much harder to make this determination without breaking down each sale into a process of sequential, measurable steps.
In conclusion, it’s a good idea to use a sales funnel chart to communicate your sales process easily and, more importantly, to help measure the efficiency of your process.
Learn More about Optimizing Your Sales Process
If you'd like to see how to draw and use a sales funnel chart, please view our screencast "Refine Your Sales Process with SmartDraw."
Also, if you'd like to try SmartDraw, you can download a free trial of SmartDraw.
SmartDraw 2008 Owners: To get the templates discussed in this document, download and run this file: http://www.smartdraw.com/downloads/sd2008/sd2008_Marketing.exe
