Understanding The Difference Between The Sales Funnel And Pipeline

Difference Between The Sales Funnel And Pipeline

Published on December 8th, 2023

You’ve heard and seen the words before, probably in passing conversations or an online resource or two.

They’re a sales funnel and sales pipeline. You might believe they’re referring to the same process, although they’re not. Yes, they do work in tandem. But a sales funnel and a sales pipeline aren’t really the same.

If you’re staring at this in disbelief, it’s OK. A lot of words get thrown around casually without clear explanations. Plus, more than a fair share of language is known for its potential double meanings.

But if you work in sales or marketing, it helps to understand the differences. Here’s how you can distinguish between the two.

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Process vs. System

By now, you’ve seen the illustrations of a typical sales funnel. It’s wider at the top and progressively gets narrower the further down you go.

A sales funnel consists of various stages, with awareness at the top and purchase and customer retention at the bottom. Typically, more leads make it to the top stages than the bottom.

Ad and digital marketing agencies like Hawke will tell you the sales funnel is the process potential buyers go through. Say you realize your house is too small.

You’ve got a problem you need to solve, so you search online for solutions. You find a few blog posts that talk about renovating versus selling.

You decide selling is the way to go, get in touch with a few real estate agents, and select one.

When all is said and done, you sell your home and buy a bigger one. You’ve officially gone through the sales funnel (the buyer’s journey).

In contrast, the sales pipeline is the system organizations use to qualify leads while moving them closer to a purchase.

This system operates from the seller’s point of view, from lead contacts and qualifications to meetings, proposals, and closed deals. A pipeline also tracks where each prospect is in the system.

Pipelines Are Linear, Funnels Aren’t

Despite what the images of sales funnels portray, buyers don’t always move through them in a linear fashion.

They might go back and forth between different stages, even as customers.

While non-linear movement through the sales funnel can apply to nearly any product, auto insurance is an example. If you drive a vehicle, the law in most states mandates minimum liability coverage.

Consequently, most people know they need an insurance policy if they drive a car. But they’re more likely to view it like they used to perceive their parents’ instructions as a kid.

It’s something they’re begrudgingly going to do because they have to. So many will bounce between carriers based on the lowest premium price. At the same time, who keeps a car forever?

You get the picture. A State Farm policyholder can move between the purchase stage back to the consideration stage multiple times.

Price hikes, new vehicles, life stages, and loan or lease stipulations may prompt non-linear movement. A sales pipeline, however, moves sequentially. Leads move on to the next step, or they don’t.

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Conversion Definitions Vary In A Funnel

In a sales pipeline, the definition of a converted lead has a single meaning. It’s a prospect who inked a deal.

In a sales funnel, the definition of a conversion widens quite a bit. It’s whatever action the company wants potential buyers to take at various funnel stages.

As far as the sales funnel goes, there’s more than one way to measure conversion rates. After you get people to your website, the desired action may not be a purchase.

It might be downloading gated content, such as an exclusive case study. Maybe it’s registering for your upcoming webinar. A conversion can mean much more than just those visitors who mosey over to your online store and click “buy.”

It all depends on what stage of the funnel your prospective customers are in. And you can have multiple ways for prospects to convert during each of those stages.

Someone who goes from awareness to consideration might fill out a contact form or sign up for an email newsletter.

Likewise, a prospect who moves from evaluation to purchase might place an order or go into a store.

Potential Insights Hold Different Value

Since a sales pipeline operates from a company’s point of view and a sales funnel from a customer’s, insights vary.

Sales pipeline data reflects how many leads come in, where they get stuck, and how many become customers. These insights can point toward opportunities for the company to improve its system.

For instance, qualification measures could need an overhaul. You could be wasting your time with unqualified buyers if too many aren’t agreeing to meetings with reps.

Say you notice a high percentage of leads drop out after receiving a sales proposal. There could be an opportunity to refine the pitch, the product, or both.

Sales funnel data, on the other hand, shows what’s bringing leads to your door. You can determine what solutions capture your prospects’ attention.

Sales funnel data also reveals where you’re getting your leads from. Are they coming from Google searches, paid social media ads, or live events? These insights could point you toward more cost-efficient ad spend and marketing budgets.

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Sales Funnel vs. Pipeline

These terms are often used interchangeably, but they don’t mean the exact same thing. A sales funnel is what the prospect or customer does.

It represents where they are in the buying process. A sales pipeline is a system to turn a lead into a paying customer. It represents the sequential actions a sales team takes to close deals.

Another way to think of funnels versus pipelines is the differences between marketing and sales.

Marketing leverages the funnel by attracting and appealing to buyers at different stages of their journeys.

Sales uses the pipeline to convince as many buyers as possible to move from the lead to the customer category.

Each has value and can work together to show a company where it can generate additional revenue.

Feature Image Source: Austin Distel