Sales pipeline and sales funnel both describe the flow of prospects through a sale, but there’s an important difference between the two commonly confused terms. If you’ve been using “pipeline” and “funnel” to mean the same thing, you might want to pay attention…
What is a sales pipeline?
A sales pipeline is a specific sequence of actions that a sales rep needs to take in order to move a prospect from a new lead to a customer. Once each stage is completed, the prospect is advanced to the next stage.
Sales pipelines allow sellers to keep track of the status of every deal and understand whether they have an appropriate distribution of deals in order to meet their sales targets.
A pipeline report shows the value and quantity of all deals in each stage of the pipeline at the moment when the report is run.
Though the structure of a sales pipeline can differ from company to company, here are some of the more common stages:
The rep asks questions to determine if the prospect has the need, budget, and authority to buy in the near future.
The sales rep and prospect discuss the solution that would best fit the prospect’s needs.
The rep sends the prospect a detailed quote laying out what will be provided, at what cost, and for how long.
Final negotiations are made and contracts are signed. The prospect is officially a customer.
What is a sales funnel?
Unlike a sales pipeline, which focuses on the set of actions taken by sellers, a sales funnel visually communicates the conversion rates of prospects through the pipeline stages.
It’s called a “funnel” because of its shape: wide at the top as prospects enter, then increasingly narrow as they are disqualified or decide not to buy.
Unlike a pipeline report, which shows the value and quantity of deals at the moment when the report is run, a funnel report is based on a cohort. This means that a funnel report can tell you, for example, of the 100 leads you received last quarter, what percentage of them advanced through each stage of your pipeline.
A sales funnel report is important for sales leaders because it can help them forecast sales based on current lead volume and identify where deals are getting stuck so they can improve their process and better coach their team.
So when you’re thinking about the difference between a pipeline and funnel, remember this:
“A pipeline report shows what a seller does during the sales process, and a funnel report shows the conversion rates through the sales process.”