What Is a Sales Funnel and How Does It Work?

by The MNTN Team

10 Min Read

When visualizing your buyer’s journey from prospect to actual customer, a conceptual framework can help you understand how to interact with them at different points of their journey. That’s where the model of the sales funnel comes in.

What Is a Sales Funnel?

A sales funnel is a structured path that guides potential customers from initial awareness to final purchase, optimizing every touchpoint along the way.

There’s natural attrition, of course, as sales leads filter down. But by visualizing the sales funnel and its stages, your task of maximizing conversions and inspecting each stage for “leaks” is that much easier.

Before we continue, if you’re looking for an article with more of a B2B slant, check out our B2B sales funnel piece.

Sales Funnel vs. Marketing Funnel

There are subtle differences between sales and marketing funnels.

The marketing funnel typically precedes the sales funnel and focuses on building awareness and interest in the product or brand. The sales funnel is the buying journey, starting from that initial awareness to becoming a customer. Before entering the sales funnel, a potential buyer may be designated a marketing-qualified lead or MQL.

MQLs are potential customers who have interacted with your brand in some capacity, perhaps by clicking on a banner ad or reading some of your materials. When they’re interested enough to talk to your team about your products or are seriously considering a purchase, they become sales-qualified leads or SQLs. That means they’re worth your sales team’s attention.

Benefits of a Sales Funnel

There are numerous benefits of sales funnels:

1. Streamlined Lead Nurturing

A well-structured sales funnel guides potential customers through a seamless journey, delivering relevant messaging at each stage. This ensures prospects stay engaged, reducing drop-off rates and increasing the likelihood of conversion.

2. Improved Conversion Rates

By qualifying leads and addressing objections early, sales funnels help move prospects from awareness to decision faster. Targeted touchpoints ensure the right message reaches the right audience, driving more efficient conversions.

3. Better Sales Forecasting

With a structured funnel, businesses gain clearer visibility into their pipeline, making revenue projections more accurate. Consistent tracking of lead progression enables data-driven decision-making and resource allocation.

4. Enhanced Customer Insights

Sales funnels collect valuable data on customer behavior, revealing patterns that inform marketing and sales strategies. These insights help optimize campaigns, refine messaging, and improve overall customer experience.

5. Increased Marketing Efficiency

Automating key steps in the funnel reduces wasted ad spend and improves ROI by focusing efforts on high-intent prospects. Marketers can allocate budgets more effectively, ensuring campaigns drive measurable results.

5 Sales Funnel Stages

How is a sales funnel structured? There are five sales funnel stages, from abstract interest at the top of the funnel to action and engagement at the bottom.

1. Awareness

During the awareness phase (top of funnel marketing), your customer may be curious about switching coffee brands, for example, and is doing some research — a little web searching and visiting some recommended sites and blogs.

This is your chance to let customers know who you are and what you stand for, which you could do via social media, YouTube, or Connected TV (CTV) ads. When planning these advertisements, prioritize authority and quality.

2. Interest and Evaluation

During this phase (mid-funnel marketing), your potential customer’s interest is solidifying. They’re committing to the idea of a new coffee brand and are perhaps weighing up different brands, including yours. Maybe they’ve signed up for an email newsletter or are actively engaging with your site.

Help firm up your presence in their mind with informative blogs and videos that subtly push the benefits of your coffee — for example, “Did You Know? Not All Coffees Are Created Equal.”

3. Desire

In this stage, your product has become one of a few final choices. Video testimonials can help sway consumers, providing “social proof” that they’re making a smart choice.

4. Action

Your consumer is about to buy at the bottom of the funnel. But even if they have your coffee beans in their cart, they may still walk away and forget about it. A special offer or discount can encourage them to follow through with the purchase.

5. Loyalty and Re-engagement

Ideally, you want to build an ongoing relationship with your customers. That means offering inducements to keep them coming back, by providing good customer service and sending friendly follow-up emails, for example.

How to Build a Sales Funnel

Funnel building may sound complicated, but the steps you can take to build a functional and effective sales funnel are simple.

Step 1: Define Your Target Audience

Create an “ideal buyer” character or persona based on data and demographics for your product, including their age, gender, education level, geographic location, and so on.

You can define multiple specific audiences, and then target each separately. The more data you have, the more accurate your target audience will be; but if you’re just starting, you can guesstimate your target audience by modeling them on those of your competitors.

Step 2: Create a Lead Magnet

A lead magnet is something you offer prospective buyers in exchange for their contact information. It could be something as simple as a discount or something you create, such as an e-book or informative webinar. Your product and your target audience will dictate the kind of lead magnet you use.

Step 3: Create a Landing Page

The landing page is the page prospects arrive at after clicking on your ad, email, or video link. It’s distinct from your homepage and has to be enticing, so make sure yours is unique and attractive.

Step 4: Nurture Leads Through Email

It’s up to you to create an ongoing relationship with your leads through content that’s funny, appealing, and shareable. When you’re considering your strategy here, remember that emails containing videos can increase your click-through rate by 200-300%.

Step 5: Create an Appealing Offer

You can lead a horse to water, but you can’t make it drink — you can, however, make the water look fresh, crisp, and thirst-quenching. So make sure your offer addresses a genuine customer pain point and is clear, well-priced, and attractive.

Step 6: Create a Sales Page

A sales page is designed purely to sell your product: it clearly sets out the product’s benefits and how it will solve the potential customer’s problem. When designing your sales page, think about how to make yours stand out — what would make you pull the trigger on a purchase?

Step 7: Set up an Order Form

Order forms should be simple, clear, and frictionless. Make sure yours is as straightforward as possible; for example, customers shouldn’t have to enter the same information multiple times.

Step 8: Create a Post-Purchase Sequence

Your customer’s journey doesn’t end with the purchase. Reliable tracking emails, offers, and helpful tips on using the product all help create an ongoing sense of the relationship between your brand and your customer.

Step 9: Continually Test and Optimize

Even if you’re a small business, you can always improve, whether by making your videos more compelling or by strengthening your sales funnel. That doesn’t mean you need to overspend; keep things efficient so you can always pivot and tweak.

How to Optimize a Sales Funnel

Once you’ve built your sales funnel, the next step is funnel optimization. Here’s how to do it:

Analyze Your Existing Sales Funnel

Using your site data, you can see where you’re losing sales leads and where you need to tweak your strategy or reallocate resources.

Set Specific Goals and KPIs

You can’t improve your sales funnel if your goals aren’t measurable. There are many ecommerce key performance indicators (KPIs) that can help you quantify success. One such KPI is your click-through rate, which measures how many people are actually clicking on your ads.

Split Test Lead Magnets and Landing Pages

You can conduct real-time experiments by testing two or more different lead magnets and landing pages to see which one gets more clicks. This is very helpful if you don’t already have a lot of data to analyze.

Refine Your Email Marketing Campaigns

Just as you can retarget consumers with CTV, you can constantly refine your messaging and tone.

Split Test Different Sales Pages

Try different sales pages to see if your audience responds more to maximalist or minimalist design approaches.

Streamline Your Checkout Process

If your customer gets frustrated, they may question how much they really need your item. Make sure that doesn’t happen! The fewer clicks to purchase, the more likely a potential customer is to convert.

Test Different Post-Purchase Sequences

Make sure you’re not bombarding your customers with surveys and offers they don’t want. You want your communications to be amusing, informative, and useful. Leading with emotion always helps.

Sales Funnel Examples

Different industries have slightly different approaches to what a sales funnel is. For example, software-as-a-service (SaaS) funnels may involve more product demos than most ecommerce funnels. Other sales funnel examples include:

The lead magnet funnel, which starts with offering a webinar or white paper (for example) to attract customers.
The tripwire funnel, which starts by offering a product at a deep discount.
The product launch funnel, which builds anticipation by touting an upcoming product’s debut.

There are many others, but they all play on the basic five-step structure.

Measuring Sales Funnel Success

Sales funnels are ultimately defined by the sales conversion rate. If your sales funnel isn’t driving conversions, you’ll need to rethink your approach. But conversions aren’t the only KPI that matter — you might have funnel metrics you want to use to measure your success. These may include lead generation and lead attrition (awareness), blog post or video views (desire), and number of positive reviews and customer lifetime value (retention).

How CTV Advertising Can Keep Your Funnel Full

Optimizing your sales funnel starts with reaching the right audience—and MNTN Performance TV makes that easier than ever. MNTN’s performance-driven CTV advertising platform helps marketers move prospects seamlessly through the funnel with targeted, measurable campaigns. Here’s how:

Automated Optimization: AI-powered adjustments ensure your ads reach high-intent viewers at the right moment.
MNTN Matched: Advanced audience targeting connects your brand with prospects most likely to convert.
Verified Visits™: Track site visits directly from your OTT advertising campaigns, proving real impact on your funnel.
Reporting Suite: Access real-time insights to refine messaging and improve conversion rates.
Creative-as-a-Subscription™: Scale high-quality ad creative effortlessly to maintain engagement across every funnel stage.

Turn CTV into your most efficient funnel-driving channel with MNTN’s self-serve software. Sign up today.

Sales Funnels: Final Thoughts

So what is a sales funnel? When used correctly, it’s an effective way of understanding your customers and their buying journey so you can effectively guide prospective buyers to purchase your product.

With the right partner, like MNTN, that can be an enjoyable, creative, and tech-enabled endeavor — one that gets you the results you want.