Sales Pipeline vs Sales Funnel: Spot the Difference

Preface:

If no one will say it, I will. Because, when it comes to sales pipelines vs sales funnels, we’re all thinking the same thing!

Who decided to name these important sales processes after plumbing items? 

Anyways, once you make your peace with the fact that these names are here to stay, the second question you’re probably asking is: Aren’t they the same? 

Because let’s admit it- We've all done this! look at a term and pretend we know what it is, but googled it up just in case? That’s what sales pipelines and funnels are like for most sales folks! They’re there and they’re important, but corporate jargon has left you confused about what these actually mean and why you should know more about them, especially in the context of a B2B SaaS marketing funnel.

Don’t worry, we got you! We jotted down everything you need to know about sales pipelines vs sales funnels in this article. 

‍Table of Contents: 

1. Introduction
2. The Sales Pipeline
3. The Sales Funnel 
4. Sales Pipelines vs Sales Funnels: The difference is in the data! 
5. Final Thoughts

Introduction:

For many sales folks, these might seem like nerdy marketing definitions, more suited to lecture halls rather than the real world of sales. But, in reality, knowing the key differences between these two terms can be the first step towards optimizing your sales process! 

So, if you are a salesperson who’s wondering why you can’t seem to close a deal or how many leads do you need to make a sale, keep reading. 

If you are involved in B2B sales, your team probably has a sales process in place. A sales process is essentially a series of recurring steps that your reps take to make a sale, aligning with your B2B marketing OKRs. How are the leads distributed amongst reps? When and how does the first outreach happen with a prospect? What preparation needs to happen before a demo? All of those decisions, tasks, and to-dos from first contact to closing make up your sales process – a bible that your reps swear by, so to say.

To put it simply, a sales pipeline reflects the major milestones in a sales process while a sales funnel represents conversion rates through the sales process, and understanding these nuances becomes more accessible with the help of insightful sales funnel templates.

If that’s a little confusing, don’t beat yourself! These two terms have been used interchangeably so often that it can be difficult to wrap your head around the differences. 

‍The Sales Pipeline:

We’ve already established that a sales pipeline reflects the major milestones in a sales process. What this means is that the actions in a sales process are divided into pipeline stages.

Each of these stages represents a major milestone that has to be reached before a lead can move forward. Once the goal of each pipeline stage is reached, the prospect is advanced to the next stage. 

‍A sales pipeline can, therefore, be defined as a series of stages that a prospect moves through as they progress from being a new lead to finally becoming a customer. The effectiveness of each stage often depends on the strategic implementation of a well-defined sales cadence.

The confusion sets in when a lot of sales people use the term “pipeline” to state the quantity or value of the deals currently in their pipeline, instead of referring to the stages. So it’s quite common to hear reps complain that their pipeline looks rough because they couldn't do enough prospecting that week. 

Organizations are diverse and so are sales pipelines. However, some of the more common pipeline stages are:

Lead Generation:

This step will require the sales teams and the marketing teams working in tandem to generate leads for the b2b pipeline. Most businesses already know the type of customers they are looking for and how they plan to get their leads. The most common method is using both inbound and outbound marketing. The sales teams will stick to their rituals: cold calling and social media prospecting on platforms like LinkedIn. On the other hand, marketing teams could use a range of methods: Pay-per-view advertising, email campaigns, word of mouth marketing and so on. 

‍Qualifying leads:

This step is quite crucial for reps as they get to decide whether or not a prospect they came across during lead generation is a good fit for their product or service. Qualifying leads makes the sales process more efficient by prioritizing quality over quantity. At this stage, chances are that the rep has already talked to the prospect over a call, or through messages on social media or even in person. The rep therefore has a fair idea if the prospect has the budget necessary for a purchase and if the solution is what the prospect is looking for. 

‍Demo/meeting:

If the sales associate vs sales rep sees real potential in a prospect, they will then proceed to engage with the prospect in a more hands-on, detail-oriented manner. The rep will most likely work to score a demo or a meeting with the prospect to discuss the solution in detail. If the prospect feels that the solution is the right fit for them, they may give the sales associate vs sales rep a green flag to proceed further.

‍Proposal:

After a successful demo, the rep will send a detailed proposal to the prospect outlining the cost, the length of contract and any other terms of agreement. 

Closing:

The prospect may engage in final negotiations and sign the contract. At this stage, the prospect is now officially your customer. 

‍The Sales Funnel:

Let’s talk about funnels now!

While a sales pipeline reflects the major milestones in a sales process, a sales funnel represents conversion rates through that sales process. The steps in a sales funnel are therefore very similar to those in the sales pipeline, hence the confusion. 

‍To state it clearly, a sales funnel represents the quantity and conversion rates of prospects throughout your sales process. 

So, if you got a 100 leads last quarter, what percentage of them moved from the awareness step of the funnel to the interest stage, and eventually how many ended up becoming your customers. 

It’s called a funnel because of its shape: wide at the top as prospects enter and narrow at the bottom as prospects drop out. 

Like sales pipelines, funnels too are unique depending on company needs. Best practices suggest that your funnel should have the following stages:

‍Awareness:

This stage involves the lead becoming aware of your product, service or company. This can be the result of your sales and marketing efforts, or the buyer’s own research. During this stage, you can expect the buyer to:

• Research about your product or service
• Read online reviews 
• Look at what your competitors are offering
• Ask others for recommendations

Due to your sales reps’ lead generation and qualification efforts, some of the prospective buyers will move to the next step of the sales funnel. 

‍Interest:

At this stage, the customer has a fair idea of what your offerings are, so they may be seriously looking at competitors’ offerings to get a fair idea of all the options available to them. A potential buyer is most likely to ask you for a demo or a meeting and may expect you to elaborate on:

• Cost
• Features
• Benefits 
• Testimonials

Based on this demo or meeting, the customer will then proceed to analyze whether your solution is the right choice, supported by valuable insights from a robust Sales pipeline calculator.

Decision:

If you’ve reached this stage in your funnel, it means that the buyer decided to go ahead after the demo or the meeting. Reason to celebrate? Yes, and no. While you’ve moved ahead in the tunnel, the buyer is yet to go through your contact and make sure this is the best option for them. 

Prospects are likely to dig deeper into pricing, make sure that your proposal has everything they need and it's within budget.

‍Action:

Like the closing stage in the sales pipeline, the prospect may engage in final negotiations and sign the contract. At this stage of the funnel, the prospect is now officially your customer. 

Sales Pipelines vs Sales Funnels: The difference is in the data!

Once you crunch the numbers in a sales pipeline and a sales funnel, what you can do with each report looks very different. 

Analyzing your pipeline data, possibly with the help of a sales commission calculator can help you get a better understanding of timescales. You may get answers to questions like: How long do leads take to convert? Pipeline data may also allow you to point out bottlenecks in your sales process. You may find out that some steps in your pipeline are unnecessary and could be removed to improve the lead flow in the pipeline. 

On the other hand, sales funnels will give you valuable information about the ROI of marketing. Because you can see how many leads are needed to generate a sale, you are in a better position to set company goals and plan growth. Sales funnels will also give you a clear picture of how many relevant leads you’re getting out of various channels, and this may help you identify those channels where conversion rates are significantly lower. Understanding the types of sales leads that enter your funnel allows you to fine-tune your marketing strategies for each lead category, optimizing your overall sales process.

Final Thoughts: ‍

No matter what industry you’re from- Finance, Life-sciences, Manufacturing- the top priority for a sales leader is to find qualified sales leads and closing deals. Sales Pipelines and Funnels are both effective tools that can be used for course correction when sales figures fail to hit the margin or simply when the organization wants to see a rise in sales figures. 

However, while emphasis has been placed on finding leads and closing deals, effective sales performance management recognizes that the sales process is a lot more than that. Managing and optimizing your sales pipeline is more crucial than ever! With more competition than ever before, it is important that sales managers and reps remain proactive. Therefore, a well-defined sales funnel, supported by robust sales performance management strategies, is the only way to consistently generate reliable streams of new prospects.