How We Built an AI-Powered SMS Funnel That Converts Dead and Cold Leads into Paying Customers

Introduction

Tired of chasing leads that ghost you? We were too—so we built an AI funnel that doesn't sleep, require an expensive salary, or get burnt out. Manual outreach is time-consuming, inconsistent, and difficult to scale—especially in the SMS space where compliance and personalization are non-negotiable.

In this post, we’ll walk you through

• the three principal components of our AI-powered SMS funnel architecture

• the platforms we use to implement these components

so you can start thinking about and implementing AI powered lead engagement in your business.

If you want to go even deeper, click here to get a free expanded e-book version of this article with a step-by-step implementation walk-through that includes screenshots.

What Is an AI-Powered SMS Funnel?

Like most things in the world of AI in 2025, the definition of what exactly is an AI-Powered SMS Funnel can be a hard thing to pin down. In this article, we are going to go with the following concrete definition:

An AI-Powered SMS Funnel is a system that uses AI (like GPT-4) to engage leads through SMS in natural, context-aware conversations that qualify, nurture, and convert without human intervention.

Sounds pretty nice, huh? Well, you are in luck, because today we are going to show you exactly how to do this for your business.

Core Components of an AI-Powered SMS Funnel

There are many different architectures for implementing an AI-Powered SMS Funnel. There are, however, some core components that can be described at a high level that you will need regardless of the implementation you choose (keep reading to see the specific tech stack we choose to implement this for the majority of our clients!).

Because this article is intended to speak to AI-Powered SMS Funnels specifically, we are going to skip over the more obvious components that exist in traditional SMS Funnels such as a Customer Relationship Management (CRM), Lead List Generation, Call to Action (CTA) Generation, Conversion Tracking, Data Analysis, and so forth.

Lead Ingestion Component

For any sales funnel AI-or-otherwise to be useful, there must be a mechanism for adding people to the funnel (preferably, a mechanism that is simple, scalable, and as automated as possible). This will vary by platform, but common ways are:

• Adding a funnel trigger tag to a lead

• Adding a list of leads directly to a funnel

• Adding a lead to a funnel in response to a form submission

For SMS campaigns, unless both you and your leads are based in a very special place, there are compliance requirements that must be met.

We are going to hand-wave away this aspect of our architecture in this article and work with the assumption that your business and the leads you add to your AI-Powered SMS Funnel meet your local compliance requirements (…and if you are curious on how to build a compliant lead list in Canada and the US, stay tuned for our article on Building Compliant Lead Lists for AI-Powered SMS Funnels).

Conversation Loop Component

What the heck is a conversation loop? It’s not a boring, Groundhog Day-esque nightmare from which you can’t escape. In fact, quite the opposite. This is the component which will give you back all the hours you spend on time-consuming direct outreach conversations that go nowhere. The Conversation Loop engages your lead in a natural language conversation with a Large Language AI Model—a truly useful paradigm shift made possible thanks to the recent developments in AI.

I am not going to lie, getting this part right is very tricky. Part of the reason we are confident that giving away our end-to-end tech stack for free isn’t a foolish decision is because this is so hard to do well. At Ratio Machina, we spend countless hours developing our prompts and agent design in a way that is both tailored to individual clients and is built on the rock-solid foundation we have developed while pioneering in this space. We have many stories, some of which we will share in future articles.

At a high level, the Conversation Loop Component listens for SMSs from a lead in your funnel, analyzes the incoming SMSs in the context of the conversation history, and then crafts a response to that lead in a way that drives towards the business goal of the conversation (for example, getting the lead to click on your CTA).

There are many, many (often perilous) considerations that must be made here such as

• “Should the AI present itself as AI or as a ‘real’ person associated with my business or as an AI Assistant?”

• “How should my AI Agent handle sales objections?”

• “Should the agent respond to the conversation at all hours of the night?”

Honestly, each consideration here could be an article in itself, and there are a lot more we won’t even mention. For the interested reader, we will be deep diving into these considerations and more in future articles.

CRM Sync Component

So you’ve got a lead talking to an AI Agent. The AI Agent is building rapport with them and overcoming their objections to your sales material. Its even sold them, sent them your CTA, and they made a purchase! But one question remains—how do we integrate all of this into your existing business platform?

Enter the CRM Sync Component. The CRM Sync Component takes the results of the conversations between AI Agents and your leads and updates the data in your CRM accordingly. This can serve many purposes. Perhaps it tracks context from your conversation about the lead for use in future warm lead campaigns, perhaps it updates your Data Analysis pipeline with rich, conversational data that can be used to improve prompting and AI Agent design.

The value added by an AI-Powered SMS Campaign is two-fold

• It helps you scale your direct outreach campaigns without having to pay expensive salaries for a sales team

• It automates the capture of a new kind of highly valuable data that can help you level-up the conversion rate of your future campaigns

At Ratio Machina, we understand that skilled, expert humans and AI working as a team will outperform AI or a skilled expert working alone. An AI-Powered SMS Funnel augments and acts as a force multiplier for human-directed business processes (…you’re not attempting to build a business solely because of AI hype and have an existing business to augment, right?).

Implementing the Core Components of an AI-Powered SMS Funnel with High Level, Make, and OpenAI

A simple implementation of the above core components can be achieved with a few tools you may already be familiar with. These platforms alone can be used to implement a bare-bones version of our tech stack. With the right setup, you can run AI-Powered SMS Funnels in production campaigns for your business if you so choose.

To implement we will use the following platforms

• HighLevel - a CRM and automated workflow platform with rich SMS functionality

• Make - an integration and automated workflow platform with a easy-to-use OpenAI and HighLevel integrations, as well as a nice visual interface for building workflows

• OpenAI - the AI company behind the development of ChatGPT, the OpenAI API, and the GPT-4 model we will use in this implementation

How We Use HighLevel

Like most modern CRM-esque platforms, HighLevel contains a lot of functionality. We use two important data structures in HighLevel to implement our AI-Powered SMS Funnels: Contacts and Workflows.

• A Contact is a data structure in HighLevel that stores data about some entity (usually a person). In HighLevel you can do things such as create custom fields, apply tags to Contacts and even associate a Contact with a phone number to use HighLevel’s built-in SMS sending functionality. For our purposes, each lead that we wish to add to our AI-Powered SMS Funnel will be represented by a Contact in HighLevel.

• A Workflow in HighLevel is a very general automated workflow management tool that allows you to implement your business logic such as sending data to other platforms (e.g. Make) and updating the state of a Contact. A Workflow is composed of Actions. You can do pretty much anything with a Workflow, so here we trimmed the fat and focused only on the parts we need for this implementation.

We use Workflows to

• define the business logic needed to manage the flow of a lead through a funnel

• integrate with other platforms such as Make via webhooks

• manage the state of the Contact associated with a lead

How We Use Make

We use Make to encapsulate our interactions with OpenAI. While there is AI Agent functionality directly available in HighLevel, we prefer Make for its visual editor and because it makes our AI layer CRM-agnostic. The data structure we use in Make in most of our implementations is the Scenario.

• A Scenario is another very general automated workflow management tool that exists in Make. It is similar to an Automation in HighLevel but each has their own strengths and weaknesses (for instance, loops such as the conversation loop cannot be cleanly implemented using primitive operations in Make at the time of this writing).

We use Scenarios to

• expose a webhook that can be called by an Automation in HighLevel

• encapsulate the logic around calls to OpenAI

• update the state of a Contact in HighLevel via its GoHighLevel Lead Connector

How We Use OpenAI

OpenAI is the company behind ChatGPT and the recent explosion in AI tools. Terms like AI, LLM, and AI Agent often get conflated and misused. We sometimes do this intentionally ourselves to enable understanding for a wider audience that may not be as familiar with the AI lexicon. However, as a software engineer, I believe speaking in percise terms of constructs exposed by APIs when implementing things as it results in the least amount of friction. OpenAI calls the construct we use on their platform an Assistant. We don’t use all of the functionality nestled within Assistants, so here is a trimmed-down definition that covers our usecase

• An Assistant is a configurable, persistent prompt deployed on the OpenAI platform. Assistants are designed to perform tasks or provide information based on a defined purpose, model, and optional tools.

We use Assistants to

• provide a platform to deploy the prompts tailored to the funnel we are implementing

• organize our prompts in a clean, practical manner across clients

Conclusion

This article was written to help you wrap your head around this new, often-confusing concept. If you want to learn more about how you can make AI truly valuable for your business, apply for a free consultation with Ratio Machina.

Or, if you are interested in getting your hands dirty, get our free e-book that walks you through the process of setting up an AI-Powered SMS Funnel using HighLevel, Make, and OpenAI. This e-book includes detailed screenshots and a step-by-step guide to implementing a simplified version of an implementation we have used in production.