How to Create a Lead Funnel

With his wife’s birthday six weeks away, Karl was racking his brain. What could he give Janelle that would not only delight her, but also something she could use going forward? She deserved something special, and maybe this year he could afford something more expensive than usual.

Karl was mowing the lawn on a Friday. The sun was casting long shadows across the neatly trimmed grass when he thought of it—a gazebo! Janelle loved to spend quality time with people, and a stately structure in the backyard, surrounded by dark mulch and bright bushes and flowers, would be perfect.

Last spring, Karl had bought a shed for the mower. The shed company—Sunshine Sheds—occasionally sent them a flyer. He was pretty sure there were gazebos in the flyers.

Karl called Sunshine Sheds the next morning and asked about gazebo prices. When Karl said he was just “checking around,” the sales rep invited him to stop in at their sales lot to see the different options firsthand.

Karl wanted to get a good deal, and after searching online for “gazebos near me,” he found another gazebo builder—Mountaintop Outdoor Living—in a nearby town. A neat feature on the website called “Design Your Own Gazebo” let him select different options for the color, roof style, shingle type, layout, and more. He clicked “Send me a free quote” and entered his email address. Within minutes, an email from the company landed in his inbox.

About a week after Karl first contacted the companies, they both contacted him. Sunshine Sheds left a voice message, and Mountaintop Outdoor Living sent him an automated email asking him if he had any questions about the quote.

Then one evening in a stack of mail on his desk, he saw a flyer announcing “Sunshine Sheds Customer Appreciation Day.” The next Saturday, Karl went to the event and, munching on sticky caramel popcorn and taking advantage of the event discount, he placed his order.

Sales Funnel

The lead funnel

Karl has just completed a journey—a journey from being a sales lead to a paying customer. Sales and marketing people visualize the buyer’s journey as taking place within the shape of a funnel, wide at the top and narrow at the bottom.

When using a real-life funnel, a lot of stuff is poured into the top, and the funnel narrows it down—only a small amount comes out the bottom. In this sales and marketing model, people are “poured” through the funnel. A lot of people (leads) enter the top of the funnel by hearing about your product or service, but only some make it all the way to the bottom of the funnel—the purchase.

Lead funnel stages

The lead funnel, or sales funnel, as it is also known, can be divided into four stages. The number and names of these stages vary, but the concept is the same:

  1. Awareness—the top of the funnel. Karl became aware of two businesses who could sell him what he wanted.
  2. Interest—Karl contacted the two businesses to learn more information to help him make a decision.
  3. Decision—Karl arrived at the point where he needed to make a decision which gazebo to purchase (or to purchase none at all).
  4. Action—the bottom of the funnel. Karl took action and became a paying customer (again) of Sunshine Sheds. Mountaintop Outdoor Living will likely keep him in their lead funnel and market to him in hopes he will purchase from them someday. At this point, he is near the top of their funnel.

While a lead funnel is nothing more than a diagram or a way of thinking, it imposes structure on a complicated process and helps us better understand the journey from being a lead to becoming a customer. If we understand where customers are in the funnel, we can market or sell to them more effectively.

Steps to create your lead funnel

Let’s take an overview of the four steps to create a lead funnel.

1. Define your target market.

Your product or service has little appeal to most people, even those who are aware that your company exists. Don’t let that statement bother you, because it is true for all of us in business. The key, then, is to locate and market to the people who are most likely to be interested (preferably right now, but also in the future).

Creating buyer personas is one way to focus your marketing on the right people. In her book Buyer Personas, Adele Revella says, “In the simplest terms, buyer personas are examples or archetypes of real buyers that allow marketers to craft strategies to promote products and services to people who might buy them.”

A buyer persona is a profile of your ideal customer that includes details such as the following: age, gender, skills, interests, hobbies, education level, values, and goals. If you are in business-to-business sales, describe the person who will make the buying decision.

If you serve a widely diverse customer base, you may need several buyer personas. Probably fewer than you think, however. Keep it simple. If possible, start with one that covers 50% or more of your customers.

Your buyer persona(s) is a stand-in for—a representative of—your target market and helps you make marketing decisions. For example, let’s say you’ve named your persona Scott. Now ask yourself questions like these: “Would this ad appeal to Scott?” “When it comes to this particular issue, what is important to Scott?”

If you create more than one persona, what is the same about them? What is different? Should the same marketing messages be used for each persona or should they be customized? Use your personas to tailor messages to your real-life prospects’ specific needs or desires.

2. Determine how to generate leads.

Now that you have defined your target market, the next challenge is to fill your funnel with leads. Advertising to and educating your market attracts new leads. Sometimes leads come looking for you the way Karl searched for a good gazebo retailer.

Determine ways to get your message to your target audience. Ask yourself questions like these:

  • Who already knows these people? (for example, media they consume and businesses they patronize).
  • What are low-cost ways we can get in front of them?
  • If we had unlimited resources, what would put our offer in front of every person who matches our persona(s)?
  • What would we need to do to get face-to-face meetings with them?

Leads near the top of the funnel are usually not ready to purchase. They want to compare options and do more research on their problem, possible solutions, and the quality of the potential product or service provider. Or perhaps their circumstances have not reached the point where they must make the purchase (the roof started leaking, but a bucket will do for now).

Give them clear direction for the next step. In the marketing world, this is called the Call to Action (CTA). For example: “Click here for a free quote.” Sometimes this includes an incentive for following through on the CTA. For example: “Call now for a free buyer’s guide.”

3. Plan how to convert leads into paying customers.

Not every lead in your funnel will make it all the way to the bottom.

  • They may decide to buy from a competitor.
  • They may decide not to buy at all (the status quo may be your strongest competitor).
  • They may decide to buy a different kind of solution altogether.
  • They may decide to delay a buying decision.
  • They may forget their initial interest (life happens).

For those still in the funnel, your objective is to coach them around their objections, answer their questions with empathy and competence, and demonstrate your ability to help them achieve their own goals (not yours!).

Through this process, leads narrow down their choices, perhaps until only your business and one other option remains. Plan how you will incentivize them to take action. A compelling offer? Free samples? Free and useful information? Product demos? A free 30-day trial? A warranty or a no-risk money-back guarantee?

Depending on the type of business, leads that progress through the funnel will transfer from marketing to sales. For example, it is the job of marketing to inspire someone to call your number or visit your location. It is the job of sales to guide the lead to make a purchase.

Both marketing and salespeople should use customer relationship management (CRM) tools to help them follow up with leads and existing customers. A CRM system enables you to personalize messages when you follow-up on contacts, as well as send automated emails (or direct mail) to leads who have contacted you. However, you don’t need computer software to run an effective CRM system. You can use a notebook to keep lead records and a calendar to organize and schedule follow-ups.

4. Create a system for testing and measuring.

Plan how you will track the sources of your leads. Knowing this information will tell you which advertising and marketing efforts are working, and which need to be discontinued or changed. For example, you can test different marketing messages and calls to action (CTAs) to see which one performs the best with a particular segment of your audience.

Testing and measuring can be a challenge, so start simply and refine your process as you go. Your website’s analytics will reveal data on how website visitors are finding you, where they are from geographically, and much other data. Offline, use codes in ads, and ask people, “What brought you in today?” or “How did you hear about us?”

Collecting data is the first step. Next, evaluate the data and tease out information revealing insights you can use. For example, keep track of the percentage of leads who convert to customers (conversation rate) to ensure your marketing remains effective over time.

Compare lead sources. Which one produces the most leads? Which one has the best conversion rate? Remember, a huge quantity of leads is worth little if they do not convert to satisfied customers. Testing and measuring give you the information you need to improve your lead funnel efficiency.


A fun exercise is to observe how companies you relate to as a consumer handle you as a lead. While a lead funnel is only a mental or visual concept, it has real-life value for your business. The lead funnel model helps you better understand the buyer’s journey so you can increase the effectiveness of your marketing.

One final note: While models like this are abstract and impersonal, never forget that a lead—whether or not you ever meet him—is a living, breathing person with a unique personality and a unique situation!

About the Author: Roy Herr is the senior marketing consultant at Rosewood Marketing. The Rosewood team guides business owners through marketing challenges into sustainable growth. Contact Roy at