The Complete Beginner’s Guide to Sales Funnels
You’ve heard the term “sales funnel,” but maybe you’re not sure exactly what the term really means.
Fear not. It’s not nearly as complicated as you think.
Many new marketers jump directly to the tactics of a sales funnel—before understanding what makes a good funnel work in the first place.
This is a mistake—one that can cost you hundreds of hours and thousands of dollars in lost effort and advertising fees.
By the end of this article, you’ll know a lot more about what sales funnels really are, how they work, and (most importantly) how they make you money.
Sales Funnel: A Simple Definition
At its core, a sales funnel is nothing more than this:
- A series of steps you create to guide potential customers as they become familiar with your product or service, then decide whether or not to buy from y0u.
Think of it like stepping stones.
Your potential customers don’t know anything about you right now.
Your job as a marketer is to catch their attention, gain their interest, build desire, then invite them to take action.
Get this wrong and you’ll waste piles of time and money trying to promote your product or service—with little results.
But get it right and you’ll see significant growth, revenue, and profit for you, your family, and your business.
The AIDA Sales Funnel
The sales funnel has been around for way longer than you might think.
American advertising executive E. St. Elmo Lewis was the first to lay it out in detail—way back in 1898.
Lewis based his funnel on data he gathered from the life insurance industry after looking for trends in the way agents sold policies.
He concluded that there were four “stages” to every sales process:
Thus the AIDA funnel was born.
Modern Sales Funnels
Today, over a century after Lewis and his AIDA funnel, we still use AIDA as the foundation of our modern sales funnels.
Unlike Lewis, however, we use three tiers in our funnels, instead of four. Creatively, we call them:
- Top of the funnel (TOTF)
- Middle of the funnel (MOTF)
- Bottom of the funnel (BOTF)
Don’t be fooled. Despite the 21st century terminology, our modern three-tier sales funnels are just updated versions of Lewis’ AIDA funnel.
You can take any modern funnel and lay it directly over Lewis’ AIDA funnel, like so:
The Sales Funnel, One Section at a Time
What I love most about funnels is that they work a bit like Legos.
You build them in pieces, almost independently. Then put them together to make a complete item.
Let’s take a moment to look closely at each section:
The Top of the Funnel
Since you’re reading this, I’m assuming you have something awesome you sell to the world (or that you’d like to sell the world, if only you could find customers).
If so, I have good news.
If you sell something great, there are thousands (maybe millions?) of people who would love to spend their money with you.
But here’s the problem:
That audience of potential customers doesn’t know you—or your product or service.
And the vast majority aren’t actively looking to spend money on a product or service like the one you sell. At least not right now.
This is the point of a sales funnel. To guide people from complete unawareness all the way to the moment they make a purchase with you.
The first step in the journey—the top of the funnel—is to attract the attention of these thousands or millions of people who’ve never heard of you.
That’s the job at the top of the funnel—not to make a sale—but just to catch people’s attention.
The Middle of the Funnel
Congrats! Your TOTF work is paying off.
You (or your product or service) is turning heads. People are asking questions. They’re paying attention.
Now you have a new problem.
How do you take that attention and get people interested in buying something from you?
This is the middle of the funnel—where your job is to generate interest and desire in the minds and hearts of your potential customers.
We’ll talk about how marketers generate interest and desire in a moment.
For now, notice that only some of the people you attract with your TOTF efforts will make it to the interest and desire step in your sales funnel.
To put it another way, not everyone converts from the TOTF to the MOTF.
Some people will drop out, and that’s totally normal.
This is why we call it a funnel—because the audience in each section gets smaller as you get further into the funnel.
The Bottom of the Funnel
Your MOTF efforts are starting to work.
You’re getting buying signals from your audience now.
People are asking about your prices, your terms and conditions, or whether or not you have availability to work with them.
This is the bottom of the funnel.
It’s time to ask prospects for the sale.
Again, we’ll look at how that’s done in a moment.
But here again, notice that not everyone in the MOTF converts to the BOTF, and not everyone who makes it to the BOTF sales will convert into a paying customer.
Tools of the Trade: What Marketers Use in Each Step of the Funnel
Now that you know the stages of a modern sales funnel, let’s look at the tools we use in the different stages.
Some of these you’ve probably already guessed.
But I bet there are also some here you haven’t thought of as part of a “sales funnel.”
Top of the Funnel Marketing Tools
Top of the funnel tools are designed to catch the attention of people who are completely unaware of you and your product or service.
TOTF tools can be “interruptive,” such as advertisements—they “interrupt” something else you were doing (e.g. watching a TV show or browsing Facebook).
Or they can be “native” such as guest blog posts—designed to be informative, helpful, or interesting—but really built to introduce you to a person, product, or service for the first time.
Examples of TOTF marketing tools include:
- Ads of all kinds (TV commercials, Facebook ads, Google search ads)
- Twitter hashtags
- Press releases
- Cold calls
- Door-to-door sales
- Guest posts
- Publicity stunts
I could go on, but you get the idea.
Notice that many of these can be done without massive financial investment. Some are even free, as long as you don’t mind putting in the hours and effort required to make them work.
Anything you do to reach people who’ve never heard of you before: that’s a TOTF tool.
Middle of the Funnel Marketing Tools
I spend my days writing marketing content, which means I spend most of my time in the middle of the funnel.
The job of the MOTF is to take the attention from the TOTF and convert it to interest and desire within the hearts and minds of prospects.
Sometimes this can be done quickly. Other times it takes many interactions an audience begins to become interested in a product you have for sale.
For most companies, the website is the biggest, most important MOTF tool. It’s the place people go when they want to learn more about a person, product or service.
But websites are not the only tool at your disposal in the MOTF.
Just like the TOTF, you can create and use a huge variety of tools:
- Product pages
- Email sequences
- White papers
- Physical books (like the ones sold on Amazon)
- Follow-up phone calls
- Product demo videos
- YouTube “how-to” videos
Bottom of the Funnel Marketing Tools
The bottom of the funnel is where you make your money.
These are the sales pages, video sales letters, and direct response mailers of the marketing world.
In a few specific industries, you can sometimes get away with creating one amazingly good sales letter—and still make money.
But I need to warn you: this is exceptionally rare.
The very best sales letters in the world convert at about 2% to “cold” traffic.
But to an audience that’s been “warmed up” with TOTF and MOTF content, a BOTF sales tool will often convert far better than 2%.
Tools we use in the BOTF include:
- Sales page
- Video sales letters
- Direct response mailers
- In-person sales visits
- Consult calls with a “close” at the end
Whatever tool you use, the goal here is to create action.
Measuring the Effectiveness of Your Funnel
As you’ve seen by now, sales funnels are modular.
You use one tool at the top of the funnel, a second tool at the middle of the funnel, and a third tool at the bottom of the funnel.
You might even use multiple tools in each section—testing to see which ones work better.
By trying a few different tools, you can use the data you gather to improve the performance of each step.
You will almost always find that one part of your funnel is performing well, but another part is lagging behind.
To improve the effectiveness of your funnel, don’t throw the whole thing out and start over.
Just find the part that’s not performing well, then improve just that part.
This is how small changes can lead to significant improvements in the overall revenue generated by your sales funnel.
AIDAP: Adding the Final Step
To wrap things up, let’s return for a moment to E. St. Elmo Lewis and his AIDA funnel.
In 1911, Lewis added a fifth step to his funnel, adding “permanent satisfaction” to AIDA, making it AIDAP.
Lewis did this emphasize the importance of customer satisfaction on repeat purchases.
This is a critical point.
Selling to current or previous customers is almost always cheaper and easier than selling to brand new customers.
But to do that, you have to deliver an amazing product and an amazing experience to your customers after they make a purchase from you.
No sales funnel—no matter how effective—can create repeat sales from lousy products or a poor customer experience.
“Permanent satisfaction” means you must make customers happy at all points in the purchase process, especially after a purchase has been made.
The payoff for getting this right his huge, because the AIDAP funnel has the potential to be far more profitable than the AIDA funnel.
The AIDA funnel is about making the first sale.
The AIDAP funnel is about making the second, third, fourth, fifth, and 50th sales.
I hope I’ve inspired you to learn more about this fundamental tool we call “the sales funnel.”
I’ve found when you understand the mechanics of funnels work, it’s much easier to set up, execute, and improve a sales funnel as you go.
Let me leave you with a parting thought:
You had a sales funnel long before you read this article.
But I’m guessing many of you have never stopped to lay out your funnel step by step.
Today, take a few minutes to fix that.
Lay out the steps you’re currently using to move people through the purchase process. Write them down on cards. Then lay them out on a table in front of you.
These steps are the lifeblood of your business. Improve any one of them, and you will improve the effectiveness of your funnel, and your sales numbers too.
And isn’t that the point?