What is this?
The marketing funnel is an invaluable concept for visualising your business process and how that interacts with your customers.
Also referred to as a conversion funnel or sales funnel, it is a way of describing the journey a customer takes:
- from someone who had never heard of you
- to someone prepared to part with their hard earned cash in exchange for services you offer
Why is it called a funnel?
Well, since you ask…
Example funnel for clients acquired through Facebook advertising
Example funnel for walk-in clients
Between each stage, there is a ‘dropoff’ or ‘conversion’ – these are just two opposite ways of saying the same thing, and always total 100% between them e.g.
The dropoff for the first stage in the FB funnel is 98% (1000 viewed, 20 clicked).
98% dropoff = 2% converted
The dropoff for the final stage in the walk-in funnel is 25% (8 came in for a chat, 6 booked a service).
25% dropoff = 75% converted
For now, the numbers and dropoff/conversion rates don’t matter so much. The key principles here are that:
- The customer journey is marked by several points where they can choose to remain in the journey or ‘dropoff’.
- There is nearly always a dropoff. Indeed, if you are seeing 100% conversion rates (0% dropoff), investigate further – it’s more likely that there is an issue with your data.
The funnel exists whether you know it or not.
By being aware of it, you have much more influence over it, not least in troubleshooting, and in targeted actions to reduce your dropoff rates (sometimes referred to as optimising the funnel).
How is this useful to me?
1. Help with troubleshooting
Fix specific bottlenecks that are preventing you from acquiring new clients through this journey (obviously each distinct journey needs its own funnel for consideration).
2. Avoid ‘too much, too soon’
During the early stages of the funnel, going in for the hard sell will likely put off most potential clients. Considering the customer journey helps you keep the tone of voice in line with the situation.
3. Help with business planning
The funnel visualisation makes it easy to see that whatever you want to end up with, the start of your funnel needs to be x times as big.
Understanding what “x” is, helps you to plan for the future.
In the FB funnel example, for every 3 new clients, the business has to generate approx 1000 Facebook views. Therefore, if 30 clients are needed, then approx 10,000 Facebook views are required.
4. Help with your zen
To understand funnels is to accept dropoffs for what they are – an inevitable part of the process. When you next lose a potential client at any stage of the process, remind yourself it was just one of the ones that were destined to dropoff. The show goes on…
Want to really get into the detail?
Here’s a great read on marketing funnels.
And here’s another wonderfully erudite explanation.
Other useful Minutes
Bite sized guides to concepts that could help you attract clients, reduce costs, or run your business more efficiently:
- A few minutes to understand… business systems
- … cash flow
- … Key Performance Indicators (KPI’s)
- … opportunity cost
- … the Planning Principle
- … profit & loss (P&L)