This is the age-old question for VPs of Sales and sales managers when first designing their sales process: just how many sales funnel stages should I have?
You can’t just Google this topic and find an answer, because there is no one-size-fits-all approach when it comes to sales funnel stages and sales pipeline management. Sales organizations are all different, with their own unique sales processes. While there are best practices that can guide you, there is no magic bullet answer.
To that end, we want to share some of those best practices to help you decide just how many sales funnel stages is right for your sales team.
What do Industry Benchmarks say?
Even if there is no one right answer, there are a couple of industry benchmarks that you can safely ascribe by when mapping out your sales funnel. Most sales experts agree that:
Having 2 sales funnel stages is not enough. You want to have some kind of progression of the buyer’s journey – it is very unlikely that a buyer will find out about your product (stage 1) and then immediately be ready to buy (stage 2). No matter your industry or team, 2 sales funnel stages is just not enough to provide meaningful insight.
Having more than 6 sales funnel stages is too many. At that point, the process becomes too diluted, and there isn’t real meaningful drop-off or difference between each stage. The progression from stage 6 to stage 7 is likely to be a small change, and can credibly be combined into one stage.
So now we know that 2 is too few and more than 6 is too many. We’re making progress.
Think like a Buyer
When designing your sales process, it is natural for sales managers to put themselves in the shoes of their closing reps and try and map out all the things that these reps do – from creating an opportunity, to working and nurturing it, and finally closing the deal. After all, this is the side of the battle that you’re on, so it’s expected that sales managers would have this perspective.
This is wrong.
In fact, the ideal way to think about a sales process is to picture what the buyer has to go through to buy your product. For example, they might start by discovering your product and what it can do. Then, they might read some marketing content to really solidify their interest. The buyer might then want to sign up for a trial or demo to actually play with the product first-hand. From there, financial terms and contract details might be negotiated. Finally, the deal is ready to close. Look at this chart to see how the perspectives change when your thinking is framed from the buyer’s point of view, versus from your’s.
Of course, it’s not all about the buyer. Once you have outlined some of the steps buyers go through, you can then start thinking about the exit criteria at each stage. Only by satisfying the exit criteria of that one particular stage can the buyer be progressed on through to the next one.
For instance, at stage 2, the clear achievement that the buyer has to undergo might be to download some gated marketing content that requires them to fill out a form, providing personal information. Or, at stage 4, the buyer must first sit through a demo with the sales rep. Clarifying these exit criteria will crystallize the progression and the drop-off between stages.
The Right Shape
Finally, your sales funnel should look like, well, a funnel! The concept of the sales funnel – a progressive drop-off of unqualified prospects, as exit criteria becomes more stringent, leaving only the most likely buyers at the bottom – creates a funnel, or reverse staircase
The staircase analogy is particularly salient, when considering the indents of each funnel stage. When building a staircase, you don’t want the steps too far apart for strides to reach, or so narrow that they can’t fit their foot on the stair. You want a nice, smooth and even gradation between each step. The funnel is the same way. You want, ideally, an even indent between each stage. Too-wide steps or a too-narrow – where the funnel looks like a barrel – will produce a sales funnel that doesn’t give you the insight you need.
There you have it, the best practices for choosing the number of sales funnel stages you need. Most organizations typically have between 3-5 sales funnel stages – how many does your organization have?