The Light at the End of the Funnel

Once upon a time, in an office not so far away, a new joiner joins a Sales meeting. Let’s call him ‘Newcomer Newmann’. During the meeting, the boss screams: “Show me your Pipeline!”, “Push them down the funnel!”, “Enlarge your funnel!”. Newmann was wondering if the company is running a plumbing business on the side, little he knows that The Funnel is no funny business.

After the meeting, the newcomer asks his colleagues about the funnel, but he gets different answers from different people. Some says it is a concept converting a stranger into a buyer in stages; the other would say it is the step-by-step to profile a contact in his conducts of business with the company. Newmann is not aware yet with the principle of ‘asking the wrong people will you the wrong answer’.

Thank goodness he found this post.

What is the Funnel? 

The ‘Funnel’ is an illustration of the different stages of buying process (people who call it ‘purchasing process’ is still seeing things from an inverted, self-centered perspective). It starts from where the prospects are unaware of the existence of your company or product (or even the nonexistence of their needs of the product) until they purchase your product or service. The function of the Funnel is to measure and visualize the number of prospects or opportunities that you have in different purchasing stages.

Typically, the Funnel will include the following purchasing stages:

• Awareness: when people are aware of their needs, or your company
• Consideration: when people are looking for different options of products or services available to fulfill their needs
• Evaluation: when people are selecting the ideal option of offer for them 
• Purchase: when people are making the purchase

Side note: Some people equates the Funnel with ‘Buyer’s Journey’. Similar concept, but nope, they are not the same. We are going to talk about that another time.

Why is the Funnel so important?

Since the Funnel measures and visualize your prospects along the stages, it helps you to analyze the situation of your potential revenue stream. Take this for an example:

In this case, when the top of the Funnel is significantly small, it is clear that there is not enough Promotional activities taking place (or not not good enough), meaning there is not enough of people who know you, meaning there will not be enough customers for you. This is a classic case of companies who believe that “good products will sell itself”. Sometime happen, but not always.

How does the perfect Funnel look like?

Ideally, the Funnel should be perfectly balanced, meaning when you have 100 people who are aware of your products, 100 of them will consider you, and 100 of them eventually buy from you. That is the best scenario of course, but it will never happen, because there are “leaks” along the Funnel. Except if you are running a monopoly, which is a rare thing.

What is a ‘leak’?

A ‘leak’ or ‘leakage’ is a portion of Funnel that does not proceed to the next stage. For example, you may be losing prospects from Awareness to Consideration stage because your offer is not relevant to the prospect’s needs, the prospect’s project is cancelled, your website sucks, your brochures are sub-standard, your salesperson sucks, and so on.

Why bother looking at the Funnel if it is not going to be perfect?

It helps you to continuously identify the bottlenecks and leaks, and eventually improve your sales performance. You do not look at the Funnel once a year. It is a fluid assessment of your current situation, so that you can take a clear, logical action to counter the risk.

What should the bottom of the Funnel?

This is for people who like to stretch things. Should a bottom of the Funnel measure the number of customer who has given their order, or should it show the repeat customers who are loyal to you, or should it show the list of all your customers that you have served in your lifetime?

First of all, showing all your customers that you have served is a bad idea, because some of them may have shut down or hate your guts. Data like this is useless. Secondly, if you want to measure the level of customer loyalty, you do not use the Funnel to measure it. It is like using chopstick to measure the occurrence of eclipse. To measure loyalty, you use Net Promoter Score (NPS) and stuff. The Funnel is only useful if it gives you the number of active, buying, customers that you have at hand.

What is a Pipeline? Are they the same thing?

Big question here. ‘Pipeline’, ‘Funnel’, what’s the difference really? Amateurs will claim that they are the same, but if you are reading this, and you ought to know better.They are as different as tomato and potato, let’s call the whole thing off. Funnel is a Marketing thing, and ‘Pipeline’ is a Sales thing. It is an illustration of the stages of sales process. It typically include:

• Quotation sent
• Order confirmed
• Products / Service delivered
• Revenue collected

In this example, you can see that there is a bottleneck (no, do not call it ‘pipeneck’, additional terminology is the last thing we need) on in the amount of quotation sent (Sales could face some challenges in finding new customers, help them), and the delivery of product of service (so you probably need to schedule your sales order, or hire more operational people).

To highlight the biggest difference between the two: ‘Funnel measures the numbers of deals or prospects, Pipelines measures the monetary amount of the sales, in absolute dollars.'

You see, Mr./Mrs.Newmann, The Funnel and Pipeline can help you to make rationale business decision. You are welcome, and you may pay me in beer.


Note that the world is flooded with different definition of the Funnel and Pipeline and it can be confusing. Choose what you want to believe in. Once you understand this big picture, you can then drill deeper to Marketing Funnel and Sales Funnel. Follow the above and you will see the light at the end of the Funnel.