The Classic Leads Funnel Explained!

Josh Stailey

Wednesday, June 8th, 2011

Josh Stailey of the Pursuit Group explains this classic concept from leads, to prospects, to sales to maximize its potential.

Hi, my name is Josh Stailey from The Pursuit Group. I want to talk a little bit today about the classic leads funnel where the concept is that you've got a number of leads coming in this end, they go through a marketing or selling process and you end up with sales down here. I did green because it's the color of money, that's the important point out of all of this. And the goal is to make this sales funnel as efficient as possible and to bring as many people through and out the bottom end in terms of revenues for your organization.

There's been some interesting research that's coming up in the last few months about this and I think there's some relevant points to understand out of it. And some of the numbers are a little startling and perhaps disheartening as well. A company called Serious Decisions has just shown some numbers based on some of their research and they're researching bigger companies than most that I'm talking to right now. And in this case, they're talking to companies that are the best in breed of their organizations, of their industries, out there so that we're talking about good organizations when you look at these numbers. And these are some simple numbers, they go through some steps that I'll talk about briefly that you may not go through, but they're still important to understand; there's some interesting takeaways here.

Let's start with 1,000 leads that go in here. You're organization gets 1,000 leads in. These companies get 1,000 leads in. And according to this, they've got a level here they call, Marketing Qualified Leads. That means that sales hasn't seen them yet, but marketing... the marketing people, have decided, oh these are good leads. We've got to give them to the sales force. And out of the 1,000, you get about four percent of those that actually come out and are qualified prospects from that big batch of leads that come in.

Now, the better companies actually have two sales levels before you get to sold. One is called sales accepted leads, meaning sales says, "Sure, we'll take those, they look good to me too." And then there's the sales qualified leads where they reach out and talk to a prospect and go, "Oh wow! We've got to put some time in on this guy, he's gonna buy." And those are called, Sales Qualification leads.... Qualified Leads. All right?

Out of these 41, sales will accept about 25 of those. That's 62 percent, which is probably a good record. It means marketing is doing a good job. That means that that four percent actually is a good number. If they were doing 100 and only 25, it means they're not doing a good job of qualifying. Now, out of these that they've accepted, then they go to talk only about half of them are actually qualified leads that they're ready at that moment to put some serious selling time into. And the number out of that that they close, three, about 25 percent.

So, look at this funnel. You've got 1,000 coming in the top; you got three coming out the end. Now this isn't necessarily true of everybody, but it is true with people who track this information and no one understand it that actually have named leads going into the top. People they can track all the way through.

Your experience could well be very different from this, but I think there are some important things to understand coming out of these takeaways for the small business. One is, is whether you're at this kind of ratio or better, or not. You're still going to have a lot coming through here before you get to this, which means that you need to do these early stages as inexpensively as possible and these later stages as carefully as possible.

Two is that you need to understand that in many cases, this particular group right here, it's important to understand that even if they don't end up one of the three, they still may well be highly qualified leads who buy, just not in your original time table.

So they don't go away, they are refed into the system at the proper point so that you never lose a qualified ready-to-buy-but-not-right-now kind of prospect in the organization.

Finally is, it's still a numbers game no matter how creative and how careful you can get in your selling. And what's important for most small companies is, is that they put leads in here and they get these sales coming out and then they're so busy servicing these new customers that they forget to put new leads in the top and your funnel empties out and now you're done down here and you need some new customers and there's not enough in the funnel to support. So that instead of making this a rush, we got to do this, then rush, we got to serve and then, oh my god, we're out of leads again. You have to make this a steady flow. You create a funnel mechanism that maintains a constant velocity of leads being qualified, being turned over to sales and being sold.

About Josh

Our friend and contributor Josh Stailey passed away unexpectedly on September 10, 2011. We have valued his expertise and willingness to share his insights with us. We discussed the appropriateness of sharing content he provided before his death with his business partners at The Pursuit Group and they agreed sharing his expertise was a fitting tribute to Josh.

Josh Stailey was a 40-year veteran of the marketing and sales wars, a journalism-trained professional who understood the role of information and technology in today’s business world. A consultant and writer, he was a founding partner of The Pursuit Group, which specializes in designing and implementing demand-generation systems for small- and medium-sized businesses. He has also consulted with Fortune 500 companies on customer experience management and content system design.

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