A sales funnel is a helpful analysis tool which represents the pattern of customer behaviour with regards to sales. The sales funnel is similar to a typical funnel which is wide at the top and narrow at the base – a metaphor for the entire sales process.
The sales funnel symbolises the wide spectrum of people who initially express interest in a product, but as the journey progresses, many drop off for a variety of reasons. The narrow end of the funnel represents the remainder of the people who actually purchase the product [end users].
Analysis of the sales funnel is significant as it can show at what point people are deciding not to purchase a product and why this is so. Further research can then be undertaken to put effective processes in place to reduce loss of potential customers and to maximise final sales.
Observing and understanding the sales funnel is extremely valuable as it helps to:
- Predict customer behaviour
This allows funds, efforts and strategies to be put in place to target high-return customers who are most likely to purchase products.