A marketing funnel is a marketing model illustrating the virtual path of a client from initial customer awareness to a sale. It is a simplified depiction of a tactical scheme representing an entire customer journey step-by-step.
Such marketing concept can have various names:
- Sales pipeline
- Sales funnel
- Purchase funnel
As a vital part of the digital marketing process, you need to be able to detect weak spots in the sales funnel in due time for your business to keep moving forward and stay productive. Conducting a consumer journey research and making up a specific operation model based on its results is what you need to achieve positive results.
The reality can be quite different, and customers can often take a non-linear approach to a bargain — some of them roll back to earlier stages, some even give up and leave. However, a sales funnel is a necessary element of any marketing concept, which allows a sales team to locate and treat problematic stages.
- Origins 101
- Funnels According to Business Types
- Lead generation – filling the top of the funnel
- On local goals and clusters
- How to optimize marketing funnel
- The role of CRM
- To sum it up on how a marketing funnel works
In 1989 E. Saint-Elmo Lewis presented the world with the first ever consumer journey model via AIDA scheme — an abbreviation formed after names of each stage a prospective customer goes through:
- Attention. That’s where you grab a potential customer’s attention through any source of information — from articles to advertising materials.
- Interest. A potential customer is interested in the product and wants to know more, starts looking forward to finding additional information about the product.
- Desire. A desire to own your product lights a prospective customer, thus a willingness to submit to your commercial offer commences. A customer is now involved in the buying process.
- Action. A purchase decision made. Close the deal. Profit.
William W. Townsend first proposed the funnel model in his book “Bond Salesmanship” published in 1924, where the author combined the concept with AIDA.
The sales funnel had the objective to turn a prospective customer into an actual buyer. It helps:
- control sales process;
- analyze each manager’s efficiency;
- evaluate the conversion rate of each separate stage;
- predict and plan sales based on average stats
Funnels According to Business Types
Marketing funnel stages are individual for each business. It must be adjusted throughout the process to succeed since you can’t build a perfect model right away: test first, then adjust.
Here are the funnel types:
- “From initiation to closed deal” — reflect stages of initial interest, preliminary works, and actual sale.
- “Sales only” — reflects on the sales cycle only. Has qualitative or quantitative indicators (e.g., number of visitors who transitioned to the next stage or an estimated staff efficiency and quality of work at a particular stage.
- “Sales + Service” — also includes stages following the sale: delivery, warranty, installation, etc
- “Cross-sales and additional sales” — after the sales stage the funnel ends with several additional purchases like expendable supplies and materials, extended warranty service, etc.
There is no universal sales funnel; thus each type of business requires a specific funnel to operate. Funnels vary depending on product specifics, sales pattern, distribution channels and the scale of business.
B2B marketing funnel
That is how a B2B sales funnel may look like:
- Cold calls: informing potential clients
- Presentation: product choice
- Commercial offer: intention to purchase a product/service
- Invoice issue: make a deal
- Payment and shipping: close the deal
- Repeat purchase: additional sales (grow repeat customers/execute post-purchase follow-up)
For some small businesses the chain of steps is going to look primitive: information — visit — payment. An online store is going to require more steps:
- Online Ads
- Product selection (evaluation stage/consideration stage)
- Add to shopping cart
Post-deal stages may extend this standard funnel: ask to leave a review (or a post on social media to raise brand awareness), offer accommodating products and extra services, offer warranty or suggest to extend the one already included. Make clients go back to you eventually.
E-commerce marketing funnel
Let’s take an online store as an example and describe the primary stages of its sales funnel.
- Views to clicks
|SEO||Change a set of keywords|
|Context advertising||Increase CTR|
|Targeted advertising||Find the target audience|
- Clicks to leads
|Special offers||Special offer countdown timer|
|Discounts||Discounts for specific products|
|Reviews||Loyalty program for those, who leave reviews|
|Lead-magnet (free product sample)||Free product sample in exchange for contact info|
|Guarantees||Quality certificates, official warranty|
|Delivery & payment||Delivery and courier service, various payment methods|
- Leads to sales
|Salesman motivation||A well-developed motivation system, tied to results|
|Sales scripts||A detailed sales scenario|
|Voice modules (premade answers on customers’ questions)||A well-established system of complaints response, live support, and FAQ|
|Website workflow optimization||Minimize page load time, decrease purchase stages, analyze usability|
- Repeat sales
|Retargeting — context ads and social networks ad campaigns||Special offers for those who visited your website before|
|Remarketing — through social networks and context ad systems||Present customer with related products suggestions|
|Newsletters and push-notifications||Use accumulated customer database for repeat sales|
|Client support — tech support and service backup||Suggest extra services and accessories|
Sales funnel is a basic marketing tool. It allows you to control sales, track managers’ efficiency and make all the right adjustments. Couple it with a CRM-system and you get yourself a great solution to increase the growth of both — number of clients and profit volume.
SaaS marketing funnel
In the context of online services (like SaaS, PaaS, etc.) I’d say marketing funnel consists of
- User acquisition
- Onboarding process
- and (final step) everything else that follows to build up relationships, upsell, and increase Lifetime Value in general
Though funnels are different, they all follow specific rules, regardless of the type of business.
- If you use several customer acquisition channels, create a dedicated funnel for each one. That is important because a consumer journey is different in each case, but the body of each funnel stays the same.
- Funnel stages can match business processes and can also unify several of those.
- Strictly define the borderlines of each stage. It is going to make a consumer’s buying journey clearer.
- You can only place the same action into different stages of the funnel, when your goal changes: say, you go from a cold call to a specific commercial offer on a particular product.
- Consider that a customer is capable of traversing the funnel in a non-linear way — back and forth.
- Use CRM-systems to automate funnel workflow.
- Trying to develop a “perfect” funnel. Just start with the one that works and keep gradually improving it as you gain more and more experience.
- Emphasize on irrelevant stages. Only track those actions that are meaningful.
- Getting stuck on a stage. There’s no need to get fixated strictly on potential opportunities — it is crucial to lead the client through all the steps.
- Returning a lead to the start. If a decision maker changed, end the deal and start a new one. Otherwise, be prepared for some conversion stats errors.
Lead generation – filling the top of the funnel
Lead generation is a process of establishing a constant flow of potential buyers acquisition.
The phenomenon of lead generation is related to applied marketing tactics. Its purpose is to find potential consumers by studying a specific target audience. It develops methods of attracting customers through advertising in search engines and the use of relevant websites.
Leads are people who become interested in purchasing products or and leave their contacts after visiting your website. They are still not buyers, but already an interested party.
Special lead magnets are used to collect user contacts and transfer them to suppliers, which is a perfect example of inbound marketing. Merch by Amazon can be another example of inbound marketing: artists can sell merch with their design through Amazon. Artists provide design and implement a lot of content marketing techniques to promote the merch (like t-shirts) and eventually drive traffic to Amazon. Usually, companies try to negotiate the subject of cost per lead beforehand. Every business needs leads because only specific buyers bring specific profit.
Here is our monstrous guide on lead generation (beware the rabbit hole)
Essential parameters and characteristics of the marketing funnel
Each lead-generation channel has its own set of indicators. Sales management becomes impossible without analysis.
The following distinctive features are typical for lead-generation channels:
- The quality of leads in each channel. The quality is better monitored through further lead conversion. The generation can differ from channel to channel;
- Cost per lead: divide the total budget by the number of generated leads;
- Conversion to the first-touch leads;
- The number of “first touches” over a certain period;
- Channel budget.
Why do we need to analyze the characteristics at the stage of lead generation?
- To work out all the “touch points”;
- To measure overall performance;
- To correctly use what is related to direct marketing. It is necessary to avoid using tools with performance challenging to calculate.
Improvement of indicators and consequences
Many steps lead to an increase in lead generation.
- The use of advertising: so that potential buyers display their interest as quickly as possible;
- A competent and complete study of proposals by all indicators;
- Elaboration of each “touch point”;
- Gathering contact info from the maximum number of leads possible;
- High-quality review of touch points for a specific target audience;
- The thorough segmentation of a particular target audience;
- Increase the number of channels;
- Eliminate channels that do not generate direct response.
After a while, it always happens that there are too many lead generation channels. They become too complicated from a technical perspective and require more and more time to work with. Outsourcing some channels is one of the solutions in this case. You can use special affiliate schemes that also can make the work easier.
Such solutions can be beneficial in several situations:
- When contact databases resold;
- When you partner with non-competitors. Lead contacts are given out in exchange for small cash rewards;
- When you organize partnership schemes using exclusive technology;
- When you set up advertising campaigns through search engines.
You can choose numerous ways to solve problems and get more profit:
On local goals and clusters
For those who think funnel-wise, businesses divided into clusters. Each group has a separate objective. It is different from the goals that the company has globally. For example, contextual advertising is created not to sell products, but to sell transitions to the website. Work efficiency greatly enhanced through the use of such narrow clusters.
Each funnel has levels, and each level has its own rules of operation. Manipulating all levels correctly makes work more efficient.
Level one: views to clicks
For example, we use the Internet to attract customers. Direct, SEO-optimization and contextual advertising — that’s what we start working with when the funnel level responsible for clicks generation on the website established. The following actions increase the number of clicks:
- Increase in CTR;
- Change in keyword phrases of your ads;
- Bid Management.
Thus, more clicks go to the lower level in the funnel.
Level two: clicks to leads
Here we deal with elements that make more visitors turn into buyers. They make the website an easy-sell. These include countdown counters, promotions, warranties, and reviews.
Level three: leads to sales
In this case, it is essential to pay attention to the motivation of people who work with at this level.
The following indicators become of significance:
- System of remuneration of labor
- Speech modules;
It is necessary to carefully work out the general system of motivation along with payment at all levels of business. Every employee should have an extra incentive, including top management. Limited time offers and promotional offers are especially useful to arrange.
Level four: repeat sales
It’s okay if there is tech support, but it is best to track not only the moment of purchase but also the first time of its use. Buyers should not have any questions or complaints.
How to optimize marketing funnel
- Remember that every customer must go through all the stages of the funnel.
- Find the “bottleneck” (the problematic place where you lose the most significant number of clients) and adjust the situation accordingly.
- Expand the area of the funnel: work to increase the number of consumers at each stage.
- Search for the most conversions-rich groups of people, sales channels and products, and then direct the efforts of managers to these areas.
- Track conversions. The increase in incoming flow doesn’t guarantee a proportional sales growth, so always improve the conversion of each stage.
Another important tip is to expand the top of the funnel to increase coverage. You’ll need:
- A unique selling proposition: what kind of product do you offer; what benefits will the client receive; what is the advantage of buying from you?
- To choose the target audience precisely.
There is a particular bottleneck method. It allows you to find problems that arise during the consumer journey.
Test questions are:
- Are there too many consumers going in at one stage?
- Do you pay attention to data on the transition of users from one stage to another?
- Do you evaluate the effectiveness of the transfer of counterparties by stages?
- How well are the business processes aimed at eliminating problematic points worked out?
- Is the work of managers evaluated?
- Is there a system to analyze the transfer of counterparty from one stage to another?
- Are the most effective sales channels identified?
- Do programs to increase touch points with consumers work?
- Do you classify leads according to the portrait of the target audience?
Growth points (solutions):
- Sales channels [expand the borders of the funnel and increase its bandwidth: as many leads as possible should go into each stage]
- Product quality
- Lead classification [calculate the most convertible target groups, products, sales channels and direct the efforts of managers and marketers into them]
- After the funnel launched, it must be regularly assessed and adjusted. Consider the conversion correctly. An increase in the incoming flow not always does contribute to sales growth. Therefore, don’t overlook and improve the conversion of each stage of the funnel. Start by correcting the most problematic stage. That is where you lose the most customers.
What to analyze:
- Conversion by stages and periods.
- Key performance indicators for managers.
- The duration of the whole deal and each stage.
- The bandwidth of the funnel.
- The average receipt of the transaction.
- The number of incoming and finalized contacts.
All this can be calculated automatically using the marketing funnels in CRM.
Method 1: Lead Qualifications
This factor can seriously affect funnel conversion: if managers do not communicate with your target audience, then regardless of their skills and product, there will be no result.
To understand who your client is and create a customer portrait, do an ABC XYZ analysis. Do not hesitate to check everyone for compliance with these parameters right at the funnel entry point.
Next, determine how much of the total volume of purchases of a specific product a customer buys from you, and how much from competitors. Ask yourself a question: what should you do to get the customer entirely switch to your service? Correct the business proposal accordingly and watch the sales grow.
Method 2: angled optimization
You need to build a sales funnel and analyze the journey of each potential buyer, to understand where the weaknesses of the sales department are and make a clear plan for its development. It is crucial to configure CRM to have automatically generated reports.
If you decide to take the development of the sales department seriously, start by building a funnel. Identify stages, such as a cold call, presentation, commercial offer, invoicing, payment.
However, this will not be enough for complete control over the business process. The funnel shows the big picture, but this data is not enough to answer this question: “What specific efforts will lead to an increase in sales?”. Therefore, the head of the sales department should be able to work with it in several planes of view.
- New customers. This angle gives an insight into how are the sales going with new customers. You can easily track the conversion between stages, measure their length, and see problematic areas. You should work on difficult stages with your managers to increase sales.
- Current customers. This funnel allows you to do the same as the previous one, but it can also help you control the second, third and next purchases.
- Sales channels. Learn which channels are most efficient and bring you the most significant number of potential customers: cold calls, email lists (email marketing), outdoor advertising, conferences, webinars, etc.
- Products. Analyze which products are selling better/worse. Which set of products is popular, which is typically purchased with a particular product. Such monitoring will tell you which product sold with higher conversion. That is a piece of helpful information. You will be able to increase your efficiency by building an optimal product line.
- Target audience. See who your target customers are: gender, age, marital status, activity, etc. Perhaps it will be much more useful to focus on a specific niche and not waste resources on less profitable ones.
- Region. Explore where your sales do better and why. Put more effort in this direction, and review your marketing strategy in areas where your product does not sell as good.
- Staff. That is important to understand at what stages your employees lack knowledge, experience, and skills. It will help create a training program for managers following identified problems, improve lead management and make your marketing team more productive.
Method 3: apply proportional expansion.
Say there were 200 visitors, four calls and only one bought the product. It is enough to increase the number of visitors to 2000: there will be 400 calls and ten sales.
You need to work with traffic on the first level of your funnel to improve the result.
There are different methods to solve the problem:
- affiliate links;
- banners and contextual advertising;
- cold call scripts.
The amount of money at the output end of the funnel increases with a proportional expansion of the upper level (if the funnel has a positive conversion).
Method 4: Stretching
Imagine someone trying to turn the funnel into a pipe. In this case, the efficiency increases at each level — not just at the top. Suppose a conversion for a website should not be 1%, but 3%. Well, this also applies to other levels.
Method 5: Key Level
This method is considered to be the easiest, the most accessible to assimilate and with the right actions, its results will be surprisingly good.
The description of the method of operation will be as follows: first, you find the level of the funnel, where conversion stays at its maximum. Make sure that as many people as possible reach this level.
Method 6: Bottle Neck
The bottleneck method allows you to competently interact with the “narrow,” problematic stages of the sales funnel. To find out if you have problems with the conversion from stage to stage, pay attention to the following essential points:
- Whether too many leads accumulate at one of the stages of the sales funnel?
- Have programs been launched to improve customer contact points?
- Does the consolidated collection of data on transitions from stage to stage function?
- Whether the efficiency of the transfer of counterparties from stage to stage in the context of sellers evaluated?
- Whether business processes are sufficiently developed to address the difficulties of individual stages?
- Whether the skill model evaluates the work of employees through development sheets?
- Whether the system of training on “the narrow stages of the sales funnel” organized?
- Whether the analysis system is configured to transfer a potential buyer from stage to stage?
- Whether lead qualification implemented according to the portrait of the target audience?
- Have the most effective sales channels been identified?
The four frequent errors
Error #1: creating unnecessary stages in the funnel. It is necessary to understand which steps are acceptable and which are not when you build funnels. The following customer states should not be included in any of business or funnel stages:
- “in the process”;
- “In work”;
- “Customers for later”;
These statuses carry no information and should be discarded.
Error #2: keeping customers on the same funnel stage. It is often the result of a previous mistake when you have a large number of potential buyers in prior stages, who can no longer advance through the funnel.
The reports may still indicate this client is a potential deal. The task of the head of the department is to identify those who do not buy your product soon and stop wasting time on them.
Error #3: creating multiple duplicate steps in the funnel. For example: in some companies, the funnel may contain the following stages: an agreement negotiation — an agreement being in development — a deal delivered to a client. That all is the same stage. It all only confuses and creates a waste of employees’ time.
Error #4: returning a lead to the upper stage. Remember that the movement of the client occurs only in one direction — in the course of finally closing the deal. A lead cannot return to the previous stage.
If this happens — due to any force majeure — then you end the old deal and start a new one. Otherwise, the conversion will be miscalculated, and result in wrong management decisions.
The role of CRM
CRM is a customer relationship management system. It is software that allows you to monitor and automate the sales process.
What you should pay attention to while choosing a sales funnels automation software
There are just a few points that deserve attention in this case:
- The convenience of the interface that allows you to enter information as quickly as possible;
- The ability to organize analytics on various data;
- Use of the knowledge base and database, the transition between which is just one click away;
- The ability to use advanced functionality;
- The presence of a role-based interface that supports different groups of users;
- A quick start that requires minimal investment in IT infrastructure.
To sum it up on how a marketing funnel works
To build an effective sales pipeline, one should realize that it is (1) ongoing process of improving every part of it via (2) trial and error method:
- Top of the funnel = customer acquisition = lead generation
- Nurturing Leads
- Maintaining and growing relations (building up a base of loyal customers)
Also remember: lead nurturing (e.g., educational content) is important at every stage of the sales funnel. As of right now, this guide has the ultimate goal to provide you with general information on the subject. More niche and topic-specific articles (on b2b, startups, landing pages some case studies, etc.) are on the way. Stay tuned.