Sales funnel analysis may be the thing you consider least within your business. Even though you know that sales are fundamental to your success. A lot of businesses work this way, and there’s a good reason why.
The problem is caused by the terminology – the sales funnel. How exactly is that supposed to work?
The Sales Funnel
Your sales process is unique to your business but will most often be patterned after a popular sales technique. One of the most common forms of the sales process is known as a sales funnel.
The concept of the funnel is simple – many potential customers are poured in at the top of the funnel, and a few come out at the bottom ready to buy. In fact, it’s more like a water filter than a funnel.
With a water filter, a reservoir is filled at the top, and the water with all its impurities flows through a smaller channel. This channel blocks and filters out the undesirable elements, leaving pure water (exactly what you need) at the end.
The sales funnel filters out the people who aren’t interested, who aren’t ready to buy, who won’t commit. At the end, it leaves you with just what you want – the paying customers.
The Benefits of Sales Funnel Analysis
With a water filter, there’s no reason for the user to analyze what’s going on inside the filter until it becomes ineffective. When the impurities are coming through too often, the filter needs changing. This is true of a sales funnel (if too many non-buyers get right to the end, you need to change the process). But, you will also need to see what is happening inside to ensure you get the best results.
There are two things to monitor. First, the progress of individual leads within the funnel and the effectiveness of each stage of the funnel.
Individual Customers within Funnel Analysis
The benefits of being able to track individual customers include the ability to push them further and to build your ideal customer profile.
Someone may become stuck in the funnel, and don’t proceed but also don’t abandon the funnel entirely. Then, you need to know whether they are worth pursuing. By understanding how your customers think, you’ll be able to determine how to help this customer along to the next step.
You might know that your customers get stuck because they don’t like the pricing structure. More often, they don’t understand it fully. If that’s the case, contact this customer and clarify your pricing. Offer a discount if it will help.
Customers might get stuck because they don’t know enough about your products or services to make an informed decision. Get in touch and answer their queries, make it easy for them to make the purchase.
Knowing how your customers tend to progress will help you identify the most likely of all your leads to purchase, and you can concentrate your efforts on them rather than the ones who will never buy.
Funnel Analysis Keeps Your Business on Track
To further break down your sales funnel, analyzing each stage of the process and the number of people in each stage will help keep your business on track and maximize sales.
There are many variations on the sales funnel model, but it generally works by building awareness, generating leads, turning leads in interested prospects, closing the sale. Awareness is quite difficult to track and is more directly related to your marketing activities, whereas knowing how many leads, prospects, and people ready to buy is much more straightforward.
You may think the ideal situation is to get everyone into the “closing the sale” section. While this is important, a strong flow all the way through is more important.
How could it be more important than actual sales? Imagine this scenario – 10 people are ready to buy, you have 0 prospects and 0 leads. You close all 10 sales – well done! What next? There are no prospects to work on and you’ll have to start marketing to even begin the process.
A better scenario is to have 1 person ready to buy, 4 prospects, and 20 leads. You can easily move everyone through the funnel as you need to, and if your number of leads begins to drop, just bump up your marketing plan.
Funnel Analysis Promote Efficiency
Getting those leads into your sales funnel is important, but on occasion, you may find that the opposite situation occurs – you have more leads than you can handle.
Monitoring each step of your funnel will allow you to make a wise decision relating to this. Perhaps you need to cool off on your marketing activity, or maybe you need to change the requirements for each stage of your funnel.
You might even be in a position where your business is ready to expand – you might need to enhance and enlarge your sales team to cope with the extra demand. Again, without monitoring what is happening, you won’t know how to react most effectively.
You want your sales team to always be busy, but you don’t want them to be too busy to treat the leads properly. Extra-busy periods are fine, but when it becomes the norm rather than the exception, you may need to carefully examine how your business is performing. Then, make changes to ensure you always get the best from everyone – both your sales team and your customers.
Why Funnel Analysis Matters
You wouldn’t drive a vehicle without making sure there was fuel in it, and you can always check how much fuel you have – there’s an indication right there on the dash. You wouldn’t let your phone battery run flat if you could avoid it, and there’s an indication of the charge left right there on the screen.
It’s just as important to know exactly where you are with your business and your sales funnel. If no new leads are entering the funnel, you’re going to run out of sales/fuel/battery and can’t do anything about it. When you can’t make sales, your business can’t survive.