Spend more than a few minutes around a marketer, and you will be guaranteed to hear a reference to the proverbial “funnel.”
The sales and marketing funnel is a simplified representation of how a given person moves through various stages to become a paying customer (or user of your product). It provides a model for sales and marketing teams to measure and visualize how effectively they are influencing positive outcomes.
Why a funnel?
The inverted triangular shape derives from the simple reality that for most companies, the size of the population of each “funnel stage” is somewhat smaller than the one that precedes it.
For example, there are significantly more people who are completely unaware of your product than those who know it by name.
The funnel suggests sequential, one-directional flow through it. This is a useful constraint on the model as it means that one cannot skip a stage of the funnel nor can one move backwards*.
What are the stages of the funnel?
Here’s where things can get a bit confusing.
Many bloggers, marketing vendors, and consulting firms have drawn and redrawn their variation of the definitive funnel.
However, all of these iterations boil down to some version of:
- Awareness: You become conscious of some problem or need and decide to solve it.
- Consideration: You take stock of the constraints (budget, timeline, etc.) and the possible solutions.
- Evaluation: You begin to assess one or several potential solutions that fit your constraints.
- Conversion: You select the solution and take the action required to enable it.
Remember: these stages look very different depending on what “user journey” is being modelled.
Example 1: Traditional brick-and-mortar retail
|Awareness||You’re walking through the mall when you feel your stomach rumble. You realize you haven’t eaten since breakfast and you’re hungry.|
|Consideration||You spot the sign for the food court and walk in its direction. Upon arriving at the food court, you scan the dozen or so storefronts and weigh your options. McDonalds? Too unhealthy. Chick-fil-A? Closed today. Subway? That’ll do.|
|Evaluation||You step up to the counter at Subway and scan the menu. Noticing a sale on footlong subs, you decide that’s the best value for your money. You narrow down your choice to a classic club.|
|Conversion||You tell the cashier your order and pass her your credit card.|
Example 2: E-commerce
|Awareness||Your nephew’s birthday is in two weeks and you need to find him a present.|
|Consideration||You open up Amazon and search “gifts for 5-year-olds.” After scanning the first few results, you refine your search by price.
A cool looking set of walkie talkies catches your eye and you click through to the product page.
|Evaluation||When you notice this particular set of walkie talkies has an average rating of only 3.5 stars, you decide to look at a different set with a higher rating from the list of “Related items.”|
|Conversion||Happy with your new choice, you add the item to your cart and complete the checkout process.|
Example 3: B2B
|Awareness||You’re a software engineer at an airline. You work on your company’s mobile app that allows your customers to view their upcoming reservations, check in for flights, and track their frequent flier mileage balance.
In your sprint meeting, your manager shares that the project to enable new reservations to be made in the app has been prioritized by senior leadership and work is to begin this month.
Collecting credit card payments through the app is not something you’ve done before.
You type “mobile app payment SDK” into Google and scroll past several ads before spotting a StackOverflow thread entitled “Which payment API should I use?”
|Consideration||By the time you have finished skim-reading the thread clicking on any relevant links, you have opened several new tabs. One of them is for a blog post entitled “5 Considerations for Selecting Payment Gateways.” You click the “Get started free” link at the end of the post. You create an account in a few minutes.|
|Evaluation||You build a POC using the free version of the service and the available documentation. You present your findings to the team.|
|Conversion||Your manager decides to proceed with your idea and sends a request to the procurement department to buy an annual subscription to the payment processor you selected.|
💡 Conversion funnels
In each of these examples, the stages of the funnel described can be subdivided further.
For instance, completing the checkout on Amazon.com requires you to complete several clicks, scrolls, and form fields. This too can be modeled using a funnel where “drop-off” at each step can be measured and optimized.
This is an example of a conversion funnel.
Moving between funnel stages
How do you move from one funnel stage to another?
Marketers will often use the term conversion to describe the transition from one funnel stage to another.
Driving conversions is a major focus of marketing and is often how marketers measure and evaluate their work.
💡 What does "conversion" mean?
The term “conversion” can take several meanings.
In the most general sense, it means moving from one stage to another. Used in isolation, this term most often refers to the conversion from not a customer to being a customer.
However, it can also mean any movement from one stage to another: converting from an unknown web visitor to a cookied prospect, converting from a marketing lead to a sales opportunity, and so on.
Think of conversions as gates from one funnel stage to the next. The rate at which people pass through this gate is the conversion rate.
A conversion rate is the number of people who entered a funnel stage divided by the number of people who entered the stage before it.
Based on the specific conversion a marketer is trying to influence, different tactics are deployed.
- Marketers at brick and mortar retail stores measure their conversion rate as the number of customers who make a purchase divided by the total number of people who enter a store. Retailers might encourage conversion by advertising discounts to customers or by arranging the store in a way that encourages visitors to pass by products they may otherwise have overlooked.
- Marketers at eCommerce companies measure the rate of prospective customers who add an item to their cart compared by the number of people who viewed the page for that item. They might increase this by moving the “Add to cart” button closer to the top of the page or experimenting with the button colour.
- Marketers at B2B companies measure the rate of free trial sign-ups divided by the total number of web visitors that come to their website from external sites. Providing the option to use existing credentials (like GitHub or Google) to create an account can improve this conversion rate.
The funnel is dead. Long live the funnel.
The funnel provides a useful approximation for how people behave and a flexible mental model for how that behaviour can be influenced.
With each new way of consuming content and buying products emerges, many in the marketing world will claim the funnel has at last met its demise.