Telling The Difference Between a Sales Pipeline & a Sales Funnel

Telling The Difference Between a Sales Pipeline & a Sales Funnel

It’s a question you’ll no doubt have asked yourself in many a meeting: what actually is the difference between a sales pipeline and a sales funnel? Don’t they measure the same thing, and give you the same info to analyse at the end? Well, as it turns out, they’re similar but crucially different. Here’s everything you need to know.

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What is a Sales Funnel?

Okay, so our first bite-size chunk: defining the sales funnel.

A sales funnel is a visual representation of each stage that a lead has to go through to become a sale. There is no set number of stages, and no restriction on what kind of stages you have; but typically, a lead goes through the key ones below:

  1. First Contact, where the lead initially discovers your business/where you initially contact them.
  2. Qualification, where both you and the lead find out more about each other and find out if you’re a good fit for one another.
  3. Presentation/Proposal, where you outline what you’re offering in specific terms to the lead.
  4. Negotiation, where you and the lead thrash out an agreement over costs and services.
  5. Closing, where you and the lead agree to a deal and they become a client.

Your sales funnel might have more stages, fewer stages, or different stages. That doesn’t particularly matter when it comes to definitions (i.e. whether you’re talking about a pipeline or a funnel). What does matter is what you do with the data you collect.

A sales funnel tells you how many leads went through each stage over a given time, typically a month. So, for example, you might have had 1000 leads that became aware of your business and contacted your business. Perhaps 700 went through qualification, 300 liked your proposal, 200 got through the negotiation, and 100 closed and became clients.

…Which is why we call it a funnel! The point of it all, though, is how you use the data. A sales funnel shows you past performance, and you can use that to tell you where leads are dropping out of your ‘funnel’, if not why. Which brings us to the sales pipeline!

What is a Sales Pipeline?

A sales pipeline is very similar to a sales funnel, which is why people can easily confuse the two. Again, the pipeline is made up of the same key stages as the funnel: awareness, qualification, proposal, negotiation and closing (and more depending on what’s useful to your business). But what a pipeline represents is different. Instead of showing how many leads went through each stage over the course of the last month/year, a sales pipeline shows you how many leads are currently at each stage as of this very moment.

So, instead of the example above, a pipeline might show you that right now:

  • 400 leads have reached out to our business that we haven’t yet qualified
  • 350 leads have been qualified, but we haven’t sent a proposal to them yet
  • We’ve sent a proposal to 100 leads that haven’t responded yet
  • 150 leads are currently in negotiation
  • We’re closing 20 leads today

As you can see, a sales pipeline shows what your sales team is up to at the moment!

What are the Key Differences?

Since both sales pipelines and funnels use the same stages and denote similar things, it’s little wonder that people confuse them. Here are the key differences between the two, so that you can tell them apart, or learn how to use both in your business:

1. Funnels Measure Performance

First off, the main difference between the two is what you can do with them. You can use data from your sales funnel to tell you exactly how well your sales team or sales teams have done in the past. Say for example that there’s a bigger-than-usual drop-off between proposal and negotiation; it means that for whatever reason, your proposals aren’t grabbing your leads’ attention. Of course, this could be due to price or the service you offer, but it could also be because your sales team aren’t at peak performance.

You can break it down further by making a sales funnel for every member of your team to identify their weaknesses and strengths. You can use that data to train your staff, move them to a different team, or whatever will make your sales team stronger.

2. Pipelines Guide Activity

By contrast, sales pipelines let you see what you have on your plate right now. Say for example you have a number of sales teams that don’t work with leads over their lifetime, but by stage (so one team for a particular stage, and another for another). You could identify which stage typically has the most leads at any given time and strengthen the team in charge of that particular stage. Or, if one team has a lot of downtime, you could have them work generally on other teams’ leads during their spare time.

3. Both Can Improve Practice

Both sales pipelines and funnels can be used to help you improve how you sell. They can tell you:

  1. Who’s top of the leaderboard for a day, a week or a month
  2. Where individuals tend to lose their leads
  3. Who can build rapport with their leads, but can’t close them
  4. Which team is better than the rest, and how they could do better

With a CRM, you can generate data and reports on sales figures much quicker than before. You can even set your platform up to send you notifications, for example if somebody’s sales figures drop, if somebody’s on a hot streak or if your overall averages go up or down.

So there you have it: the difference between pipelines and funnels really isn’t in their structure, but in what they show and how you use what they show to guide your sales department. The next time someone asks you, impress them with your sales knowledge! Just make sure to ‘be on your way somewhere’ before they ask you any more questions…