Sales Funnels – The Complete Guide
A sales funnel refers to the journey a customer goes through in making a purchase.
Most experienced marketers think of funnels as a series of steps designed to optimize the sales process so that the average cart value per customer is maximized.
Average cart value (AVC) which is also called Average Order Value refers to the average amount paid by a customer per transaction. It is the total revenue divide by the total number of orders.
Assuming you have a hundred customers buying from you in a month and each person spends $10 on your shop, your ACV is $10.
Using a sales funnel, you can map out the customer purchase journey to get the customer to buy more than $10 worth of goods per transaction.
In the article I wrote about increasing sales, one of the three main ways to increase sales is to get customers to spend more per transaction, rather than trying to get new customers.
Now let us look at an example:
Assuming you sell soft drinks for $1 a bottle and sell 100 bottles a month to 100 customers. Your average cart value is $1.
If you manage to increase the number of bottles sold per month from 100 to 200, you would have increased the total revenue, but your average cart value is still the same.
But if you decide to start selling pie in addition to your soft drinks, assuming the pie goes for $2 apiece, each customer who buys the pie and drink will be paying $3. Now without increasing the number of customers buying from you, you can still increase your revenue.
This is the thinking behind a sales funnel. While the idea behind it might sound simple enough, the implementation is certainly not.
I am not one to see the proverbial glass as just half full or half empty. I see the glass as share full AND half-empty; it’s the duality of life. Not everything is white or black.
Key Sales Funnel Concepts
Before we get into the nitty-gritty of sales funnels, let us first understand some key concepts behind funnels.
The Hook – Story – Offer
The Hook – Story – Offer basically refers to the strategy used in getting more potential clients into your sales funnel.
The Hook is the thing that grabs their attention; it should be something that speaks to the needs and desires of your target customers.
Your hook could be a free report, a free e-book, a free product or a discount sale.
The Story explains the reason for the hook. It is used to rationalize the hook and give the customer more reason to take it.
Your story doesn’t necessarily have to be an actual story; it is more of a sales copy. Explain the product or the service to the customer and give the user the feeling of gratitude; this will make the customer develop a sense of goodwill towards your brand.
The Offer is basically what you are actually giving to the customer.
So, the customer sees your hook telling him/her to download a free report, the person clicks on it and is taken to a landing page with The Story, the story gives the customer more reason to download the free report (which is your offer). Once the customer inserts the name and emails to download the report, the person is now officially in your funnel. And the work begins.
The Value Ladder
I first heard about the term Value Ladder from my marketing mentor, Russell Brunson. He is the king of sales funnels and has built a multi-million dollar business on the idea that sales funnels works.
Here’s a short video of him explaining the concept of the value ladder (I have added a summary of the video below, just in case you don’t want to watch it yet)
A value ladder means that, as a customer goes from one level of your sales funnel to another, you keep giving them increasingly more value (usually at a higher price) than the previous level.
Don’t forget that a sales funnel based on giving something of value first to the customer such that the customer feels indebted to you, before asking for anything from them.
When trying to determine what products to put in your value ladder, think of products that complement each other or a product that solves the problems that may arise from the previous product.
Assuming you sell gold bars, one likely problem your customers face is how to store their bars. So you can sell a highly secured briefcase for keeping gold bars. Not everyone would buy it, but quite a number would.
When I was a child, I’d go to the market to buy shoes with my father. After selling us the shoe (which they always claimed was super strong and would last many years), the shoe seller would then ask us to sew the shoe’s soles to make it strong and last longer. And every time, like clockwork, my father will ask them to sew the shoe (it never lasts as long as the shoe sellers promise though!)
One thing this example shows is that this is not an entirely new concept. It’s one that has been around for many years; it has just been baptized and given a new name. And it works (when done right)
Up-sell, Down-sell and Cross-sell
An upsell is a higher (usually more expensive) product shown to the customer after taking the offer.
A downsell is the next product (usually cheaper) shown to the customer after rejecting the upsell.
A cross-sell is a supplementary product shown to the customer (usually before checkout) after deciding to buy any product from you.
Here’s an example to help you understand these concepts.
Suppose you own a mattress showroom, and your clients are usually from the upper class – people looking for luxury and style.
One quarter, business isn’t going so well, so you decide to run a lead generation campaign to attract more potential customers.
The Offer you give is a free bedroom redecoration. It so happens that some rich people feel it’s time to redecorate their bedrooms, so they show up at your shop, or they book an appointment.
Your employees go to their homes and help them paint a picture of what their bedroom will look like if they decide to redecorate. It turns out one of the first things your employees ask them to change is their bedroom mattress (surprise surprise).
They are offered a 25% discount if they decide to buy one of your premium Queen sized beds (the first upsell). Fortunately, they are rich enough and so decide to buy it. Then your sales representative informs them that the bed’s height is longer than the one they currently have, so for safety reasons she suggests they buy two footrests for either side of the bed. This client is safety conscious, so they agree to it (the second upsell).
Feeling lucky, your sales rep goes on to suggest that given the style of the new bed they just agreed to buy, they should change the lamps by the bed to fit the new style of the room (third upsell). Unfortunately, the lamps were given to them by their grandmother during their wedding, so the clients decline the offer.
Not one to take no for an answer, our determined sales rep then decides to offer them a 50% discount for a new set of bedsheets and blankets (downsell). Well, they just changed their mattress so they might as well change the bedsheets right? So our couple agrees to the purchase.
With a smile on her face, our sales rep walks out of their home, feeling she might win employee of the month.
This is an example of how a sales funnel could work for a physical store. However, the same method can be applied to an online store.
Regardless of the industry, you operate in, the products or services you offer, you have a funnel.
Since you now understand the key concepts of a sales funnel, you have a fair idea of how a sales funnel works.
Let us look at the types of sales funnel and what they are used for.
Types of Sales Funnel
There are several types of sales funnel; each one is based on the campaign’s goal. In this section, we will analyze the various types of funnels and their uses.
- Lead Funnel
- Unboxing Funnel
- Presentation Funnel
- Application Funnel
1. Lead Funnel
The Lead funnel is also known as the Landing Page Funnel. It is used for one purpose only – to generate leads.
Wait a minute! Isn’t the purpose of every funnel to generate leads?
Well, technically, the goal of every funnel is to turn leads into customers. So lead generation is just the beginning of the funnel.
However, the goal of a lead funnel is only to generate leads for your other funnels.
So in your lead page, there is no selling going on, all you do is collect leads and then pump those leads into your email funnels.
Think of it this way; if I give you something for free and immediately ask you for a favour in return, you’d doubt my intentions, right?
But if I give you something for free today and two days later I send you an email giving you something else for free, if I send another email 3 days later asking you to buy something from me, you’d be more likely to respond positively to my request, no?
For this reason, most lead pages are done to grow an email list, and the selling is done to the list… Sounds fun, right?
Here’s a simple squeeze page funnel template from ClickFunnels
2. Unboxing Funnel
The unboxing funnel is usually called, “The Tripwire Funnel”. It is a funnel designed to initiate a transactional relationship between you and your potential customers.
It is usually a small offer with a price point that is not too high for your target market or a price that won’t feel like a financial commitment.
Most marketers say the price should not be more than $47, but it can be as low as $0.99 or free!
The price is to make the potential customer think, “what do I have to lose?”. It should basically feel like a low-risk purchase.
The offer you show the customer in a tripwire funnel should be worth more than the price. This is so that the customer will feel like any transaction with you in the future will be worth the price and will be more likely to pay more for future offers.
Here’s an example of a tripwire offer.
The “free book” plus shipping is one of the most famous tripwire offers used by marketers.
You’ll be asked to cover the book’s shipping, and it will be sent to you for free. And once you fill the form, you are already in the funnel…
3. Presentation Funnel
One example of a Presentation Funnel is the Product Launch Funnel (PLF). PLF is a type of funnel developed by a marketing grandmaster called Jeff Walker.
The PLF is a series of video funnels (usually 4 steps long) used to warm up prospects towards a product’s launch.
The funnel is designed to convert completely cold leads into high paying customers, once they reach the funnel’s end.
This type of funnel uses an approach known as “prospect nurturing “. In each stage of the funnel, you nurture the prospect up for sale. When done right, by the time the client gets to the end of the funnel, they’ll be begging you to take their money in exchange for the product.
This funnel is ideal for selling high ticket coaching services or digital courses, although it can be used to sell anything as well.
Each stage in the funnel is designed to break barriers to closing the sale and is made up of just videos, no long sales pages.
It is believed that videos are more effective in increasing conversions that text or images.
The example below is a PLF by Anik Singal, a traffic marketing coach.
During the third video, the customer is then shown the offer by which time they are already sold on the product, and all you have to do is show them where to click “Buy”.
4. Application Funnel
An application funnel is used to sell high ticket products (expensive products, usually $500 and above). The goal is to get people to apply for something (say a high ticket event) and then sell them via the phone.
You might be wondering why a special funnel is needed to sell high priced items. The reason is quite simple.
To sell a high priced product/service to a customer online, you need to do a lot more convincing to get the customer to take out the card and make a purchase.
There are several barriers to the sale that you have to breakdown in the mind of the client. Hence the need for a special type of funnel.
The first part of an application funnel is the landing page containing your Video Sales Letter (VSL).
A video sales letter is used rather than plain text or pictures to show credibility.
If you are an entrepreneur and founder of the company, it’s best you make the presentation in the video yourself. However, any other high ranking member of the company or a sales representative can make the presentation.
This is to show credibility. Imagine walking into a big chain grocery store (like Shoprite, Walmart etc.) and the owner(or CEO) of the store is standing at the entrance, welcoming you with a smile.
It gives you the confidence to buy even more from the store because you’ll feel special.
While this cannot be done on a large scale for physical stores, it can happen in an online store.
The Application Form
After mesmerising the customer in your VSL page (the landing page), the customer is then taken to the application form page, where they fill out their details. You should take all the relevant details that will help you qualify the customer to see if he/she is the type of customer you are looking for.
Don’t let your customers choose you, learn to also choose your customers.
The Close Call
After the customer fills the form, you send an email requesting the customer to schedule a call. Once the person schedules the call, you call the customer and explain into details what he/she will benefit from your product/service and then you close the sale.
As I said earlier, high ticket items aren’t sold like low ticket items because with high ticket items there are more barriers to close the sale than there are for low ticket items.
So things like your VSL, the application form and the close call, help to build trust between you and the customer which will eventually lead to the sale.
Here’s a simple application funnel from ClickFunnels
There is truly much to be said about sales funnels, and the topic cannot be exhausted in a single article.
Entire companies are built around the concept of sales funnels, and entire industries rely on sales funnels to attract and retain customers.
In subsequent articles, we will take a deep dive into the different types of sales funnels and their uses. We will also have case studies to evaluate how others have applied sales funnels in different aspects of their business and how it worked out for them.
No matter what business you are in, you can implement a sales funnel to attract and retain customers.
Most people assume sales funnels are for online businesses, but they forget that what was done in stores is now being done online. E-commerce is just an online version of a brick and mortar retail shop.
So in the same way, what is done online can be done offline. All you need is a bit of creativity to implement an offline sales funnel.
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