What is a lead funnel?

Consider the following scenario. You are selling CRM software and your target audience are business owners. You've obtained a list of all registered businesses in the state of… California (because why not?).
Since these companies know nothing about you, they are called cold leads and they are the top of your lead funnel. Now, you start warming them up by sending emails to those companies, inviting them to participate in a free webinar, etc. Those who clicked on the webinar link, clearly show some interest so they are moved to the next lead stage - warm leads.
Then, after the webinar, a certain portion of your webinar listeners registered for a free trial. They are moved onto the next lead stage and are now considered hot leads.
Finally, a certain portion of those hot leads decide to purchase the product. That's the bottom of the lead funnel, where leads convert to customers.
Lead funnels inside CRM give you three main advantages.

• It helps you better understand your sales process or a customer journey
• It shows conversion rates for each stage and shows which stages are most critical
• It allows you to accurately forecast how many leads you need in each stage in order to hit the desired sales target