What is a sales funnel? A comprehensive guide

What is a sales funnel?

Long Form Copy: A sales funnel illustrates the stages a prospect goes through before becoming a customer. It resembles an inverted pyramid—starting with potential customers at the top. As your sales reps start to engage them, only your most qualified prospects move to the next stage. Your most committed paid customers are at the bottom of the funnel.

The sales funnel and buyer’s journey are the two sides of the buying process. The buyer’s journey is the process buyers go through before purchasing. This journey is from the buyer’s point of view. 

It’s typically broken down into three stages:

• Awareness stage (Top-of-the funnel): The buyer becomes aware of their problem or issue. They look for solutions, discover products or services, and pursue opportunities.

• Consideration stage (Middle-of-the funnel): A buyer evaluates different products to address challenges and engages with sellers.

• Decision stage (Bottom-of-the funnel): The buyer decides on a solution for their needs.

The sales funnel and buyer’s journey have distinct differences. However, the two overlap when the buyer enters the consideration stage and moves toward conversion. This stage represents the moment a buyer enters the sales funnel.

Why is the sales funnel important? 

The sales funnel is a cornerstone of the marketing and sales world when it comes to driving success. This conceptual framework represents the customer journey from their initial awareness of a product or service to their decision to purchase. It provides businesses with a strategic roadmap they can use to guide their marketing and sales efforts. The sales funnel helps companies categorize their customers, letting them create targeted marketing strategies that lead to better engagement and conversion rates.

The sales funnel is also used to track and measure the effectiveness of a sales or marketing campaign. Businesses can analyze data and metrics at each stage of the funnel to gauge how well they are attracting, nurturing, and converting leads. This data-driven approach lets companies make informed decisions, optimize their strategies, and allocate resources where they can have the most significant impact. In addition, it allows for the identification of potential bottlenecks in the sales process, enabling businesses to swiftly address issues and optimize the customer journey.

Lastly, the sales funnel facilitates customer relationship management and retention. It's not just about acquiring new customers but also about nurturing existing ones. By understanding where customers are in the funnel, businesses can implement targeted retention strategies to keep customers engaged, satisfied, and loyal. This ongoing relationship-building is essential for long-term profitability and brand loyalty, as it can lead to repeat business, referrals, and positive reviews – all of which contribute to sustained growth and success.

Benefits of creating a sales funnel

The sales funnel offers many benefits, making it an essential part of sales and marketing efforts. One of its most significant advantages is its ability to bring clarity and structure to the complex customer acquisition process. By breaking down the customer journey into distinct stages, businesses can gain a deeper understanding of how potential customers move through the buying process. This approach helps companies create targeted marketing campaigns and sales strategies tailored to each stage, increasing the chances of successfully converting leads into customers.

Another key benefit of the sales funnel is that it guides resource allocation. It allows businesses to allocate their finite resources—including time, budget, and personnel—more efficiently by pinpointing areas with the highest impact potential. For example, if a company discovers that it excels at lead generation but struggles with conversion, it can redirect resources toward improving the conversion process rather than losing money by continuing to invest in lead generation. On top of cost savings, this optimization results in improved return on investment (ROI).

Furthermore, the sales funnel is a powerful customer retention tool. While customer acquisition is important, nurturing and retaining existing customers is equally crucial for long-term success. The sales funnel allows companies to segment their customer base and implement targeted retention strategies. By understanding where customers are in the funnel, businesses can provide personalized content, offers, and support to keep customers engaged and satisfied while fostering brand loyalty.

Lastly, the sales funnel benefits businesses by facilitating data-driven decision-making. By diligently tracking and analyzing metrics at each stage of the funnel, businesses gain invaluable insights into the success of their campaigns. This allows them to make data-backed adjustments to their sales and marketing strategies to increase their effectiveness. It empowers companies to make informed decisions, refine their messaging, and continually enhance their customer acquisition process.

3 Sales funnel stages

Each business has its way of managing the sales process and buyer journey. However, the number and name of each stage may vary based on the business type and sales process of the company in question. A lead looking to buy your product enters the sales funnel but may or may not pass through each stage. 

Let’s look at how sales teams approach leads in each stage of a well-defined sales funnel and why conversion rates matter in each.

1. Top of the sales funnel: Awareness

In this stage, potential customers are facing a challenge and are looking for a solution. They want to discover products and services that can solve these pain points.

At this point, they could’ve discovered your solution via inbound lead generation strategies, such as SEO, lead magnets, campaign landing pages, social media, or something else.

Or, your sales team could have reached out to the prospects through cold outreach channels like personalized cold emails or cold calls. Either way, these prospects came into contact with your sales team.

At this stage, your sales reps are only trying to educate prospects about their problem. 

They’re not pushing for a sale yet. 

Marketing materials like blog posts, videos, whitepapers, and infographics can help prospects become more informed about topics that matter to them.

Once your sales reps get in touch with prospects, they become leads in the CRM system. That means it’s time to move them to the next stage by either calling them or meeting face-to-face. This is where reps can ask qualifying questions and move them further down the sales funnel.

Sales Activities: Cold Email and Cold Call

Cold emailing and cold calling are common sales activities used to initiate contact with potential customers who have no prior relationship with the business.

Cold Email

A cold email is an unsolicited email sent to a business or individual who has had no prior interaction with the sender. It typically serves as an introductory message that aims to generate interest, offer value, and eventually initiate a conversation or conversion. Its success relies on effective targeting, a compelling message, and compliance with email marketing regulations.

Cold Call

A cold call is an unsolicited phone call made by a salesperson to a prospect with whom they have no prior relationship. The goal is to introduce the business, assess the prospect's needs, schedule a meeting or product demo, and potentially close a sale. Success depends on the salesperson's ability to engage the prospect, build rapport, and present a compelling offer during the call.

2. Middle of the sales funnel: Qualify

At this stage, your leads understand their problems and are actively looking for solutions to help achieve their goals. Your sales reps will schedule a discovery call, sales meeting, or demo with the prospect to identify challenges. They’ll also subtly explain how your solution can solve the prospect’s pain points. At this stage, sales teams must impress the lead by ensuring that the discussions during the sales meeting agenda are well-prepared and focused.

There are various sales qualification techniques like CHAMP, MEDDIC, GPCT, BANT, and more but it’s best to choose a framework that best suits your customer journey. The most common sales qualification framework used by most businesses is BANT (budget, authority, need, and timeline). When using BANT, sales reps should ask themselves:

1. How much is the prospect willing to spend? 

2. Am I in contact with the ultimate decision-maker?

3. Does the lead have a strong need for our product?

4. How long will it take for this lead to decide?

BANT and other qualification techniques ensure that your sales reps focus ‌on prospects with the best likelihood of converting.

Only leads that meet the qualification criteria become potential opportunities and trickle down the funnel. Pushing leads without proper qualification into the sales funnel clogs your sales pipeline and won’t necessarily lead to revenue.

Marketing content like in-depth guides, product webinars, competitor comparisons, ebooks, how-to videos, and use case blogs can help leads in this stage.

With these aids, the lead discovers more about your services and the benefits of working with you. If they determine you’re right for their needs, they proceed to the next stage to become an opportunity.

Sales Activities: 

• Discovery Call: This is a conversation between a salesperson and a prospect to uncover the prospect's needs, pain points, and the solutions they could benefit from.

• Qualification Techniques - Champ, MEDDIC, and GPCT: Sales qualification techniques like CHAMP, MEDDIC, and GPCT help sales teams assess prospects. CHAMP focuses on Challenges, Authority, Money, and Prioritization. MEDDIC considers Metrics, Economic Buyer, Decision Criteria, Decision Process, Identify Pain, and Champion. GPCT evaluates Goals, Plans, Challenges, and Timelines. These techniques guide effective sales strategies.

• Demo: A product demo is a presentation or trial of a product's features and benefits to potential customers with the ultimate goal of converting them into buyers.

3. Bottom of the sales funnel: Decision & close

At this stage, the lead decides on buying your product or service. Getting the decision-maker on board as soon as possible is crucial in the negotiation stage. Your sales reps present proposals, terms of the contract, and other agreements to win their business. 

Your sales reps present proposals, terms of the contract, and other agreements to successfully win their business. The outcome of the opportunity may sway either way— win or loss—depending on the prospect’s interests at this stage. Although sales reps set the table for success—handling sales objections and negotiations—when it comes to closing the deal, win rates are quite unpredictable.

If the deal is won, your sales reps move the deal to the won stage in the pipeline and begin onboarding the new customer. Some leads may slip through the cracks for reasons beyond your sales techniques' control, like budget constraints. It is important to keep a record of the lost leads to track why you lost them and nurture those prospects in the future to win back their business and relationship.

The resources that will help them make the purchasing decision are feature comparisons, case studies, competitor battle cards, product videos, etc.

Sales Activities: 

• Sending Proposals: Sending a proposal is how a company formally outlines its offerings and pricing to potential customers for consideration.

• Handling Sales Objections: Handle objections skillfully by addressing and resolving concerns or hesitations raised by potential customers. This shows you have a genuine interest in helping the customer and that you possess profound product knowledge. 

• Negotiations: In sales, the negotiation stage involves discussions and compromises between the seller and buyer to reach mutually agreeable terms for a successful transaction.

Terms of Contract: This is the sales activity in which the conditions, obligations, and responsibilities of both parties are specified to ensure clarity and alignment.

Tailoring your sales funnel by industry

Description: When crafting the perfect sales funnel for your business, it’s crucial to keep your industry in mind. You can’t simply mirror another business’ sales funnel in an unrelated industry and expect it to work for your audience. That’s why it’s so important to study your industry—including your target audience and competitors—when planning your sales funnel. 

Here are a few things to remember when crafting a winning sales funnel based on industry factors.

1. Who’s your audience?

Determine who you’re selling to. 

For example, if you’re a B2B enterprise, it’s important to remember that a B2B sales funnel takes longer. Typically, the offer has to pass through multiple parties before money changes hands. That means you’ll spend more time on each pitch than a B2C company, where conversions come faster. 

2.  How expensive is your product/service?

How much can your product or service costs can directly impact the sales funnel.

If you’re selling something simple and affordable, you can sell based on pricing. But businesses with more costly wares need to sell based on value, which will directly impact each stage of the funnel. 

3. Does your product or service recure?

It’s important to foster a high customer lifetime value if you want to maintain profitability over time. That’s why it’s pivotal to build retention into your sales funnel. 

For example, if you’re in the SaaS industry, you could run your product on a subscription model. Therefore, making a sale leads to monthly recurring revenue. 

However, if you’re selling computer hardware, then you’ll have to build remarketing into your sales funnel or adopt a flywheel model. In this case, after a prospect converts into a customer, they go back to being prospective customers for repeat purchases. In other words, you’ll need to contact them regularly to see if they need additional products and services. 

Retention is typically covered in a flywheel model, which we’ll get to in a bit.

Sales pipeline vs. sales funnel

Sales funnel and sales pipeline are often believed to be the same thing. However, a sales funnel focuses on converting leads, while a sales pipeline focuses on closing deals.

A sales funnel that encompasses the various sales process stages your target audience goes through before becoming customers. A sales pipeline consists of every stage in the sales process that a sales rep takes to move a deal from start to close. Ideally, your sales process should align with the buyer’s journey.

For example, a sales rep sees all the opportunities within the pipeline, along with each prospect’s place in the sales funnel. The pipeline should show where each prospect is and outline what kind of outreach they need. The pipeline is very specific, with actions reps must take at each stage to move the customer along. For example, when a prospect enters the funnel, a rep must qualify them ‌as a lead before they move into the pipeline. 

In other words, a sales pipeline is the series of actions sales reps ake. It keeps track of potential opportunities to make sure nothing slips through the cracks. The funnel, meanwhile, is an overall look at how customers enter the pipeline and where they drop off. 

Sales funnel vs. flywheel

Long Form Copy: While the sales funnel focuses on reaching prospects and converting them into paying customers, the flywheel takes things a step further. 

Flywheel reaches prospects, converts them into paying customers, and focuses on the future. The goal of a flywheel is to take a more customer-centric approach. It transforms customers into brand promoters, who'll not only recur over time but also bring in referral business. 

The sales funnel resembles an upside-down pyramid. The flywheel, however, is typically depicted as a circle, creating a never-ending retention loop. 

For example, a SaaS company selling cloud-based software on a subscription basis might prefer the flywheel model because it’s designed to generate recurring revenue. However, a business focused on the singular goal of conversion might have more luck with a sales funnel. 

The SaaS company’s profitability depends on customer success. That means it needs to strengthen the customer experience and continuously prove its worth to keep customers returning for more. The flywheel more accurately showcases the customer journey for a business like this because it’s never-ending. Meanwhile, the sales funnel template has a very clear beginning, middle, and end. 

You might consider using the sales funnel to nurture leads into customers, and the flywheel to nurture leads into clients. 

For instance, a “customer” may be temporary — they might buy from you as needed or just once and move on. “Clients,” on the other hand, are loyal customers who come back for more. These are people you intentionally build long-term relationships with.

Sales funnel management: Best practices

The sales funnel depicts how leads traverse through your sales process from start to close. 

You'll probably find a huge dip if you analyze the number of leads who enter your funnel and the number who convert to customers. Sometimes prospects drop out of your funnel when their needs don’t match your services. While it’s nearly impossible to retain every prospect who enters your funnel, your sales team needs to try to retain the ones who are ready to buy.

But, given the volume of leads that fill your funnel, sales teams have a hard time converting leads into customers because they cannot discern the hot from the cold. This results in unqualified hot leads at the top of the funnel that either drop out due to slow response times or remain stuck in the middle of the funnel, eventually becoming cold leads. This means missing out on golden opportunities for a business.

Here are five ways to ensure you don’t lose leads at different funnel stages.

• Move the right prospects down the funnel: You need to nurture only some leads that enter the funnel — the ones that fit your customer persona. Develop detailed buyer personas that represent your target customers. Understand their needs and pain points. This will help you tailor your marketing and sales strategies to resonate with your leads at each funnel stage. Personalization based on buyer personas can significantly improve engagement and conversion rates.

• Manage leads: Use sales funnel software like a CRM where you can qualify leads, track their activity at every stage of the buyer journey, and follow up automatically at the right time. Adopting a CRM with sales funnel management capabilities positively impacts sales teams’ performance.CRM is also the most beneficial tool for funnel building and pipeline management. It helps you define your sales process, identify leaks in the sales funnel, and streamline the conversion process to bring leads down to the bottom of the funnel. A CRM also lets you capture and analyze data, automate repetitive tasks, and personalize communication.

• Nurture prospects: Implement nurture campaigns to engage and educate your prospects at every stage of their journey. Provide value and try to address the prospects’ problem areas. Offer personalized communications and keep leads moving down the funnel. Automation tools can help streamline and automate this process, ensuring consistent and timely communication.

• Implement lead scoring: This technique assigns a score to leads based on their behavior and characteristics. By implementing lead scoring, you can prioritize and focus on leads that are more likely to convert, saving time and resources. Assign scores based on criteria such as engagement level, demographics, and purchase intent. This allows your sales team to prioritize high-scoring leads and customize their approach accordingly, increasing the chances of conversion.

• Review and optimize: Continuously monitor and analyze your sales funnel performance. Identify areas that need improvement and optimize them to maximize conversion rates. Regularly review critical metrics, such as lead generation, conversion rates, and customer retention, to identify trends and make data-driven decisions.

How to build a sales funnel in 6 easy steps

From defining funnel stages to automating emails, be sure to set up your sales funnel software to help your salespeople advance leads. This will also stop leads from leaking out of the sales funnel.

Here’s what we’ll cover in the next several sections to help you build your funnel:

• Organize leads entering the funnel

• Qualify leads in the funnel

• Engage leads through the funnel

• Automatically move leads down the funnel

• Create opportunities in the pipeline

• Nurture leads in the funnel

Organize leads entering the funnel

One of the ways sales funnel software will speed up the sales process is by helping you organize data. It’s broken down into modules for managing leads, customers, and opportunities.

Capturing leads is the first step in the sales process. You can capture leads through web forms, chatbots, or referrals through your existing customer base. 

Here's how to organize your leads:

• Capture leads through web forms or chatbots

• Segment leads based on specific customer criteria (i.e., by needs and pain points) and assign them to the right reps

• Move prospects through various stages, i.e.,

• Discovery call done

• Demo booked

• Demo completed

• Price negotiated

Qualify leads in the funnel

The biggest challenge for a sales rep is to be able to identify sales-qualified leads.

AI-powered sales funnel software can qualify leads based on various criteria, saving you time and energy. AI-powered funnel software also helps sales reps identify the right leads by creating an effective lead-scoring system.

We recommend configuring lead scoring rules to match your ideal buyer persona, for example:

• Add 20 points if the lead is within your service area. 

• If the lead doesn’t belong to an industry you serve, subtract 10 points. 

• Customize scores for email, app, and web activity. 

Needless to say, have sales reps prioritize the highest scores since they fit your buyer personas more accurately. 

Engage leads through the funnel

The next step for sales reps will be to reach out to the priority leads over the phone or by email. Tracking conversations can be a great feature that illustrates how to plan your next course of action. But if you still use separate tools to email and call your leads, visibility into different touchpoints at different stages in the funnel can be difficult. 

Instead, use a sales funnel software tool with built-in email and calling features.

Here’s how this can help you optimize this part of the sales process: 

• Create or use email templates in your funnel software to quickly reach out to leads.

• Automate welcome emails and send them to new leads.

• Use email metrics to test your performance and craft better emails to increase open rates.

• If the lead shows interest in your emails, set up calls, log and record calls, or transfer calls to other agents using your CRM’s built-in phone.

Automatically move leads down the funnel

When managing your sales funnel with funnel software, be sure to update data consistently. 

As leads progress, you should be able to analyze them by stage to make sure your funnel is always filled to the brim. Know the stage of each lead in the sales funnel and take appropriate actions, such as:

• Use a CRM to automatically move leads down the funnel based on their actions and interactions. 

• Set up workflow automation in the CRM to change lead stages based on specific activities.

• Use CRM software to automate tasks and reminders to follow up with leads.

• Automate everyday business activities with workflow templates provided by your CRM.

Create opportunities in the pipeline

After you’ve met or spoken to the lead, you’ll have to quantify the value of the opportunity. This is where the sales pipeline in CRM helps: 

• Track each opportunity with maximum visibility. Visual sales pipeline provides an overview of your deals by stage, allowing you to spot bottlenecks. 

• Gives sales reps a quick estimate of their targets and their current position and urges them to add more leads during funnel building.

• Actively engage with leads through targeted campaigns, networking, referrals, and strategic partnerships to create opportunities in the pipeline.

How to nurture leads in the sales funnel

Sales funnels defy gravity. In other words, only some leads who enter your funnel find their way to the bottom. A CRM can help you nurture your leads and nudge them toward conversion. For instance, you can:

• Use tools like sales campaigns to stay in contact with leads from when they enter your funnel up to when they purchase.

• Use templates and send out scheduled emails based on the lead’s behavior.

• Track campaign performance in the CRM. See what doesn’t work and tweak it to perform better conversions.

Best practices for managing a sales funnel

The sales funnel depicts how leads move through your sales process from start to close. 

You'll find a huge dip if you analyze the number of leads who enter your funnel and those who see it all the way through and convert to customers. Sometimes, prospects drop out because their needs don’t match what your services offer. It’s impossible to hold and convert every prospect who enters your funnel. 

That’s why your sales team must capitalize on those who are ready to buy.

But, given the volume of leads that fill and sometimes clog up a sales funnel, teams have difficulty converting leads into customers. That’s because they can’t discern hot leads from cold. 

This issue results in unqualified hot leads at the top of the funnel that either drop out due to slow response times or remain stuck in the middle of the funnel. Eventually, they become cold leads and lost opportunities. 

What causes this? Poor sales funnel management. 

Here are five best practices that can help foster smooth sales funnel management:

Move the right prospects down the funnel

You can’t nurture every lead that enters the funnel. Instead, focus on those who fit your customer persona. Develop detailed buyer personas that represent your target audience. 

Understand their needs and pain points, along with any budgetary needs. This will help you tailor marketing and sales strategies that resonate with leads at each funnel stage. Personalization based on buyer personas can encourage improved engagement and conversion rates.

Manage leads 

Use sales funnel software like a CRM to qualify leads. 

These tools also track activity at every stage of the buyer journey and help you follow up automatically at the right time. Adopting a CRM with sales funnel management, capabilities positively impacts sales team performance. A quality CRM is also the most beneficial tool for funnel building and pipeline management. 

It helps you define your sales process, identify leaks in the sales funnel, and streamline the conversion process. 

You’ll be able ‌to bring leads down to the bottom with features like lead scoring and email integration. A CRM also captures and analyzes data, automates repetitive tasks, and personalizes communication. 

Nurture prospects 

Implement lead nurturing campaigns to engage and educate prospects at every stage of their journey. Provide value and try to address problem areas. 

Offer personalized communications and keep leads moving down the funnel by segmenting your emails. Automation tools, like email marketing software and quality CRMs can help streamline and automate this process, ensuring consistent and timely communication.

Implement lead scoring 

This technique assigns a score to leads based on their behavior and characteristics. By implementing lead scoring, you can prioritize and focus on leads that are more likely to convert, saving time and resources. 

Assign scores based on criteria, such as: 

• Engagement level

• Demographics or firmographics

• Purchase intent

• Needs and pain points

• Funnel stage 

This allows your sales team to prioritize high-scoring leads and customize their approach accordingly, increasing the chances of conversion.

Review & optimize 

Continuously track and analyze your sales funnel performance. Identify areas that need improvement and optimize them to maximize conversion rates. 

Regularly review critical sales metrics like lead generation, conversion rates, and customer retention to identify trends and make data-driven decisions.

Common sales funnel mistakes to avoid

Description: It’s vital to make sure your sales funnel is effective and accurate. 

Here are a few common sales funnel mistakes that many businesses fall victim to. Understanding them from the get-go can help you hit the ground running and create a winning sales funnel that accurately represents your audience. 

No lead scoring

Lead scoring allows businesses to assign a numerical score to each contact. It represents not only their place in the sales funnel but their overall likeliness to buy. It does this by examining customer interactions and online habits. 

If you’re not using a lead scoring system to keep track of your hot leads, then you’re likely allowing opportunities to slip through. Most CRM solutions have a lead scoring function, and it’s crucial for identifying ideal customers primed for conversion. 

The lead score gives you an easy way to track your sales funnel and determine who is where in the process. 

Tracking manually

The days of hand-written notes on Rolodex cards are long since over. If you’re manually tracking your sales funnel leads, you’re not only likely missing out on potential opportunities, but you’re also wasting a lot of valuable time. 

A quality CRM solution like Freshsales can track this data for you. It even compiles in-depth sales analytics. 

Not adapting over time

Your sales funnel will change over time. That’s the nature of business. As technology and buying habits evolve, business owners must change their sales funnel to reflect them. 

Not updating your sales funnel only helps your chief competitors. Here are some sales funnel examples.

5 key sales funnel metrics to track using a sales CRM

Monitoring KPIs and conversion rates at every stage is essential for sales teams to get a clear picture of the sales funnel. With holistic sales management software like a CRM, you can easily track sales funnel metrics with funnel reports.

Let’s dig into this further.

Key sales funnel metrics to track using a good sales CRM

1. Lead velocity rate

This metric refers to the growth in your qualified leads, month on month, and it measures how many leads you’re currently working on converting into customers. 

This metric is a real-time indicator of growth and sales revenue, so if you have a high lead velocity rate, you can expect high sales revenue for the months ahead.

Lead Velocity Rate = (Current Month's Leads - Previous Month's Leads) / Previous Month's Leads * 100

2. Conversion rate

Measuring how well your sales team converts leads is crucial to determining the quality of leads and an individual sales rep’s performance. 

With sales funnel software, you can create funnel reports to see how your leads are converting through different stages by sales reps and campaigns. Analyzing which leads are moving down the funnel and converting allows you to plan better conversion strategies.

Lead Conversion Rate = (No. of Conversions / Total No. of Leads) * 100

3. Opportunity win rate 

This metric calculates the percentage of opportunities that result in a successful sale. 

Here, you’ll want to ensure you have a good balance of leads at each stage of your sales funnel. If you notice excessive leads at any stage, your reps may be struggling to move them down the funnel. That's a cause for concern.

Opportunity win rate = (No. of Opportunities Won / Total Number of Opportunities) * 100

4. Sales cycle length

Sales cycle length refers to the average time it takes a lead to move through the sales funnel from initial contact to closing. 

A shorter sales cycle often indicates a streamlined and optimized sales process, resulting in faster revenue generation and improved customer satisfaction. 

By tracking the sales cycle length, businesses can identify potential bottlenecks or areas where leads get stuck in the funnel. That allows them to implement strategies to accelerate the sales cycle.

Sales cycle length = Average No. of days from initial contact to deal closure

5. Customer lifetime value

Customer lifetime value (CLV) is a metric that estimates the total value a customer brings to a business over their entire relationship. It considers the average purchase value, purchase frequency, and customer lifespan. 

By calculating CLV, companies can identify their most valuable customers and focus on retention strategies to increase customer loyalty and maximize revenue. 

CLTV = Average purchase value * average purchase frequency * average customer lifespan

 Use Freshsales for your sales funnel management.

Your sales funnel is an evolving, vital piece of the profitability puzzle. By understanding and tracking it, you’ll be able to identify opportunities and capitalize on them for the betterment of your entire organization. 

But you can’t do this without a quality CRM. 

Freshsales is a full-fledged CRM software with sales funnel management capabilities designed for sales teams to manage leads from start to close. It’s also a sales funnel software that handles every step of the sales funnel, allowing you to focus on the right leads at the right time. 

With our software, you get complete visibility into your funnel—from real-time insights on lead behavior to how quickly your team converts leads to sales. 

Freshsales CRM also comes with a built-in phone, email features, and funnel reports. This means all of your customer data is accessible in one place. It’s also a sales automation software that can automate tasks, create your sales pipeline, and schedule sales campaigns.

Still have questions about sales funnels? Read on for answers to FAQs on the subject.