• Revenue Operations Sales Execution

Sales Funnel vs. Sales Pipeline: What's the Difference?

Headshot photograph of Marisa Krystian, Senior Editor at Clari

Marisa Krystian
Senior Editor, Content and Campaigns, Clari

Stylistic illustration of a sales funnel

If you’re a company with a product or service to sell, securing customers is your bread and butter. But once you get a prospect in the door, how you interact with them and measure your (and their) progress through their buyer journey makes all the difference. 

That’s where the sales funnel and sales pipeline come in. These concepts help revenue operations organizations better understand who their customers are and how they can best serve them, so that their reps can win more business and achieve predictable revenue.

But while these concepts might be complementary, they’re not interchangeable. Read on to learn more about the sales funnel and sales pipeline to understand key differences between the two so your RevOps team can measure not only the amount of quality opportunities, but also the success of your lead generation efforts.

What is a sales funnel?

Simply put, the sales funnel refers to the path that prospects follow to eventually become customers. It’s called a funnel because if you were to look at the visual representation, it would look like a funnel: wider with new leads on top from the broadest most qualified audience, with potential buyers dropping off gradually at each stage until you reach the final number of paying customers narrows at the bottom.  

A standard sales funnel has at least four phases: 

  1. Awareness
  2. Interest
  3. Evaluation and Consideration
  4. Decision

The sales funnel offers insight into the volume of open deals at any given time, helping you track lead conversions at each phase and measure the efficiency of your lead generation and pipeline conversion programs. The best revenue organizations use this data to improve their efforts at each individual stage to move more prospects through the funnel and enhance the customer journey.

What is a sales pipeline?

The sales pipeline refers to the total number of quality opportunities, in all stages, that are being handled by your sales reps at any given time.

The specific stages in your sales pipeline may vary depending on your industry and sales cycle, but they generally consist of the steps outlined below:

  1. Meeting: Is there a need or pain you solve for? If the potential customer bites at the opportunity to learn more, it’s time to schedule a meeting to introduce your product or service to them individually. Reps should do their research to learn everything they can about the prospect’s industry, unique needs, pain points, and future goals.
  2. Qualifying leads: Why buy? At this stage, sales reps are aiming to determine whether prospective customers they’ve targeted are actually valuable leads—ones who will make a purchase. These leads seem most likely to understand the need for your solution.
  3. Pitching: Why buy your product or service? This stage is when you meet with the potential client in order to make your business case for why they should purchase your product or service. Remember to address their specific pain points and show how your solution alleviates stress and produces opportunity. Emphasize the value that your product can bring to this potential customer.
  4. Negotiating: Why buy now? At this stage, reps have ascertained that the potential buyer is very interested, has the budget, and the two have entered contract negotiations. This encompasses everything from the scope of work to pricing and even future expansion.
  5. Close the deal. Ideally, this is when the prospect officially becomes a customer and the deal is closed. At this stage, you’ve gotten signatures on all paperwork, from both internal and external stakeholders. This stage is also known as closed-won. If the prospect decides not to purchase your product or service, this is referred to as closed-lost.
  6. Customer nurture. Just because a deal has closed, doesn’t mean the job is done. It’s critical, especially in the first weeks and months after a customer signs the dotted line, that the sales team carefully hands them off to customer success. They’ll want to ensure their new customers are onboarded properly and regularly monitor the progress of the account to address any hiccups or additional needs. 

Managing the sales pipeline is critical to the success of the revenue operations team. A well-managed sales pipeline produces predictable revenue, which in turn allows the organization to plan and grow. In fact, Harvard Business Review found that companies that manage their sales pipelines effectively see a 15% higher growth rate than those that don’t.

Comparing sales funnel and sales pipeline

A simple way to differentiate between the sales funnel and the sales pipeline is to consider the primary actor: The customer and their journey are the focus of the funnel, while the sales rep and the sales process are the focus of the pipeline. The sales funnel is outward-looking: The buyer journey is viewed from the standpoint of the customer. The sales pipeline is inward-looking: The buyer journey is viewed from the perspective of sales leaders and reps.

While the sales funnel and sales pipeline are complementary tools, they are fundamentally different, and teams must form strategies and analyze data for both. 

For example, tracking your sales funnel—looking at metrics such as your conversion rate (the number of prospects who eventually become customers) and average volume of sales—can offer valuable insight into how well your company is generating leads, the quality of those leads, and the ideal customer profile and industry sweet-spot for your products or services. 

Meanwhile, tracking your sales pipeline—using sales metrics such as win rate, sales cycle length, deal slippage, churn rate, and CRM score—can show you the quantity, stage, and dollar value of the deals your reps are working on. Plus, if you monitor that data effectively, it can also reveal gaps and delays in your sales process, deals at risk of slipping, opportunities to maximize revenue through cross-selling and upselling, opportunities for achieving higher conversion rates, and closing more—and better—deals.

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