Sales pipeline vs. sales funnel: what’s the difference?

Sales pipeline vs. sales funnel: what’s the difference?

In the business world, buzzwords and terminology are thrown around with abandon. And that’s before the endless acronyms. Among the most frequently used phrases are ‘sales pipeline’ and ‘sales funnel.’

But, what’s the difference between these two terms? Don’t they mean the exact same thing? Not quite.

Before you begin using the terms sales pipeline and sales funnel interchangeably, let’s review the definition of each.

What is a sales pipeline?

Sales pipelines enable salespeople to organize, manage, and have a pulse on every stage of the sales process.

As a result, a sales pipeline is defined as a predetermined sequence of steps required to transform a prospect from a lead into a customer. Upon completion of one stage or step, leads move on to each subsequent step until they make a purchase or become clients.

The stages of a sales pipeline

While every business’ sales pipeline is unique, common stages of the process include:

1. Prospect qualification

First, sales reps must qualify candidates to determine whether they have a need and available budget to make a purchase. Once the sales team learns more about the lead’s goals, they can decide whether or not to move forward with the sales process and/or pipeline.

Qualified leads are often the decision makers at a company, such as a manager, President, or CEO. Of all the sales pipeline stages, the first is of the utmost importance. If you send an unqualified lead through the pipeline only to end up with no deal, it will be a waste of the entire sales team’s time and resources.

2. Sales meeting

The second step in the sales pipeline is the in-person or over-the-phone meeting. This meeting serves as a way to further discuss, in depth, the value your company can provide to the potential client via your products, services, and other offerings.

If this meeting goes well and the lead requests further information or next steps, the sales rep can move on to the next stage.

3. Sending the proposal

The sales rep then puts together a thorough proposal detailing all the products/services, fees, and other information discussed during the meeting.

4. Closing the deal

If the qualified lead agrees all is in order and signs the deal, the lead’s journey through the sales pipeline has been completed.

What are the benefits of a sales pipeline?

A sales pipeline provides businesses with a multitude of advantages.

First, sales pipelines enable teams to track the amount and status of potential deals. This also provides insight into whether or not sales teams are on track to meet their predetermined targets.

This form of pipeline management allows sales leaders to make decisions about goals, new opportunities, and individual targets.

Using the sales pipeline, teams can also track the number of deals at any given time throughout the year’s sales cycle. This, in turn, helps sales managers understand how much business the team is generating, whether they need to hire new sales reps to meet demand, and whether they’ll reach their goals for the year.

What is a sales funnel?

A sales funnel is a visual representation of average conversion rates as prospects and qualified leads make their way through the sales process.

This tactic is aptly named due to the funnel-like shape of the process. The funnel narrows as sales prospects go through the steps of qualification, and eventually, some number of them become customers.

What is the difference between a sales pipeline and sales funnel?

The stages of a sales funnel are the same as a company’s sales pipeline, only represented differently.

Sales pipelines communicate the value, quantity, and stage of various open deals at any given time. Sales funnels, on the other hand, help sales teams understand the volume of deals in total and the percentage of those which have passed through each stage of the sales process.

For instance, if you wanted to check up on a particular deal that has yet to be closed, you can look at the sales pipeline and determine which stage the deal is at. Or, if you wanted to get an overview of the status of all current sales efforts, you can use the sales pipeline to understand how many deals are at each stage of the process.

Additionally, if you wanted to identify where your deals are falling through year-over-year, the sales funnel can demonstrate this drop-off and help you visualize possible sales solutions.

When you’re trying to remember the difference between the two terms, remember this:

A sales pipeline report shows what a seller does during the sales process, and a funnel report shows the conversion rates through the sales process.”

Should I use a sales pipeline or sales funnel report?

Again, this depends on your sales goals and problems as an organization. Both types of reports are beneficial for businesses of all sizes.

If you are having difficulty managing all of the open sales opportunities in your department, a sales pipeline will help you organize these efforts. Using a sales pipeline, you’ll have the ability to determine how many deals are at the four main stages:

  • Qualifying;
  • Meeting;
  • Proposal;
  • Closing.

When using a sales funnel, you’ll have the ability to see the conversion rates from each stage of the sales process to the next.

For instance, if you notice a major decline in conversions from the meeting to the proposal stage, you may want to review how your sales reps are performing during the meetings. How are their sales tactics? Are they sending a follow-up message or letting deals pass by?

On the other hand, if you’re having difficulty scheduling meetings with qualified candidates, this may mean your sales qualifiers need adjustment. Work with your marketing team on various efforts such as social media and content marketing to drive qualified leads into your sales process rather than general prospects for the best results.

Using the sales pipeline and sales funnel together

Additionally, using the two types of sales visualizations in tandem will enable you to identify whether more steps need to be added to the sales process.

For example, perhaps you sell a complicated manufactured product to a specific industry. These products don’t have quickly quotable costs that enable the sales process to zoom by. Instead, sales representatives must take a nuanced approach that might include multiple other stages, such as:

  • Identifying decision makers;
  • Marketing efforts;
  • Product demonstrations;
  • Multiple sales meetings with committees;
  • Reviewing proposals.

If you have both reports available to your sales teams, you can work together to fine-tune your sales process and approach to generating new leads.

These two types of reports also provide benefits to other teams in your organization. Marketing teams can use the data to develop new sales materials for each stage of the process, including lead generation. Product development teams can use sales feedback to understand potential customers’ questions. The possibilities are endless.

Does your team use a sales pipeline and/or sales funnel to visualize and track your sales processes? Which do you find to be the most useful in your organization? Let us know in the comments section below!

Yauhen is the Director of Demand Generation at PandaDoc. He’s been a marketer for 10+ years, and for the last five years, he’s been entirely focused on the electronic signature, proposal, and document management markets. Yauhen has experience speaking at niche conferences where he enjoys sharing his expertise with other curious marketers. And in his spare time, he is an avid fisherman and takes nearly 20 fishing trips every year.

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