What is a Sales Funnel?
A sales funnel is a model that helps to build relationships with people, taking them from strangers to loyal customers.
While there are many complex sales funnel models available, it’s important to remember that the core principles of a simple model will work for every business.
Don’t get bogged down by all the different options and software available, focus on understanding your audience and creating a sales funnel that is tailored to them.
9 out of 10 times, fixing a digital marketing strategy that isn’t working comes down to a simple principle: understanding your audience.
When creating a digital marketing strategy, it’s easy to focus on the technical aspects such as clicks and conversion rates and forget that behind them are real people.
A common mistake is using intrusive and irrelevant ads that annoy users rather than attract them. This is like a stranger on the subway asking you to get matching tattoos, it’s just weird.
To avoid this, you need to create a sales funnel that is optimised for your business and audience.
Also Read: The Ultimate Guide to Building a Successful Digital Marketing Plan in 2023
Stages of a Powerful Sales Funnel
The benefit of using a sales funnel in digital marketing is that it provides a clear set of objectives to achieve. Building an effective sales funnel involves selecting the appropriate tactics at each stage to reach those objectives.
First, let’s look at the different stages of a sales funnel.
1. Top-of-the-funnel
This stage is all about reaching a large audience. Your goal is to drive a significant amount of traffic to your website, online listing, social media accounts, or other platforms.
This can be achieved through tactics such as search engine optimisation, digital advertising campaigns on platforms like AdWords or Facebook, creating engaging content on social media, partnerships with other businesses, and earning press coverage.
Essentially, anything that brings in new and relevant visitors to your content is considered a top-of-the-funnel tactic.
It is important to be creative and experiment with different tactics, as long as they help to attract and engage with new audiences.
2. Middle-of-the-funnel
The middle-of-the-funnel focuses on turning traffic into leads and then nurturing those leads. A lead is an individual who has expressed interest in your offering and with whom you can establish contact.
The most important aspect is the ability to contact them. Therefore, the main goal of the middle-of-the-funnel is to obtain contact information from as many people as possible to reach out to them in the future.
Examples of converting traffic into leads include:
- signing up for an email newsletter,
- scheduling a call,
- becoming a social media follower,
- agreeing to receive push notifications,
- downloading an app,
- enrolling for a free trial,
- subscribing to a YouTube channel, and more.
By providing contact information, these people have shown interest in what you have to offer. This is a great time to establish trust and prepare them for your bottom-of-the-funnel offer.
Some digital marketing tactics for the middle-of-the-funnel include:
- providing additional content or freebies in return for an email address
- requesting your YouTube viewers to subscribe to your channel
- offering a free trial or consultation, or creating a demo of the product for which users must sign up
- hosting live webinars on topics that interest your target audience
- sending subscribers valuable content via email newsletters
- getting users to buy a low-dollar offer
- executing a remarketing campaign on Facebook for your website visitors
It’s important to experiment with different tactics, as the one that works for you, your business, your industry, and your users may vary.
3. Bottom-of-the-funnel
This is where the real work begins. The main goal at the bottom-of-the-funnel is to drive actions that have a significant impact on the business’s bottom line.
This involves pushing the leads that were collected in the middle-of-the-funnel to take a specific action.
For an e-commerce site, this might be making a purchase, for a doctor’s practice, it could be booking appointments, and for a two-sided marketplace like Airbnb, it could be both booking a place to stay and creating a new listing.
Identify what is most important for your business and implement tactics that help to achieve that goal.
Some digital marketing tactics for the bottom-of-the-funnel include:
- decreasing the number of checkout form fields
- launching a limited-time or seasonal discount
- bundling different products at a special price
- implementing an affiliate program for others to promote your products
- launching campaigns to reduce cart abandonment via email or Facebook ads
- adding testimonials or social proof to the sales and checkout page
It’s important to note that optimising for the bottom-of-the-funnel is not limited to just the checkout page, it encompasses a lot more opportunities to improve the overall stage.
4. Retention, monetisation, and advocacy
This stage is often overlooked, but it is crucial for long-term success. Retention refers to keeping customers engaged and satisfied, reducing the number of cancellations or refunds.
Monetisation refers to increasing a customer’s lifetime value by encouraging repeat purchases. Advocacy refers to getting existing customers to promote your product to others.
This stage can have a significant impact on the business’s bottom line.
Unlike the previous stages, in this stage, you are dealing with customers who have already trusted you and made a purchase.
Therefore, it is easier to convince them to stay, buy more, and recommend your product to others.
In digital marketing, some tactics for retention, monetisation, and advocacy include:
- upselling or cross-selling supplementary products,
- launching a referral or loyalty program,
- implementing product onboarding, checking in on customers to ensure satisfaction,
- offering discounts for annual plans, and wishing customers a happy birthday.
It is important to note that for businesses that are just getting started, it is best to focus on acquiring customers first before focusing on retention, monetisation, and advocacy.
Also Read: Digital Marketing 101: The Ultimate Beginner’s Guide
Building Expressways and Return Paths for Your Customers to Move Between Funnels
These are not stages of the funnel, but rather methods for moving people through the stages.
The funnel model provides a clear path for moving people from one stage to the next, but in reality, things can be more complex.
Some people will move quickly through the stages, others will go back to a previous stage, and some will drop off altogether. Expressways and return paths provide ways to address these scenarios.
Expressways are paths that allow people to bypass certain stages and convert faster.
For example, publishing a pricing page or allowing users to purchase a product directly from the site can be an expressway, as it allows users to convert quickly without having to go through multiple stages.
Return paths are ways to get people who have dropped out of the funnel or gotten stuck on a stage to continue moving through the funnel.
This can be achieved through tactics such as Facebook remarketing campaigns for cart abandonment or sending newsletters to re-engage with people who stopped moving through the funnel.
It’s important to note that while some tactics used for expressways and return paths may belong to one or several stages of the funnel, it’s helpful to think about them separately to ensure that the funnel is as efficient as possible.
How to Assess the Effectiveness of Your Sales Funnel?
Measuring the success of your sales funnel is crucial to ensure that your efforts are paying off and to identify areas for improvement. There are several metrics that you should consider when evaluating the performance of your sales funnel:
1. Traffic (top-of-the-funnel)
It is a key metric to track at the top-of-the-funnel as it measures the number of people visiting your website or platform. However, it’s important to remember that the traffic should be relevant to your target audience for it to be valuable.
Tools to use for measuring traffic
There are numerous website traffic tools available such as Adobe Analytics, Fathom, Clicky, and Matomo. However, the most commonly used tool is Google Analytics. The latest version is called GA4 or Google Analytics 4.
It is simple to set up if you follow these steps:
Step 1: Create a Google Analytics account.
1.1 Unless you already have an Analytics account, your first step is to create one. Unless you want to create a separate account for this website and/or app, skip to creating a property. For example, if this website and/or app belongs to a different business, you may want to create a separate account.
1.2 Click Create Account in the Account column of Admin.
1.3 Give your account a name. Control which data you share with Google by configuring the data-sharing settings.
1.4 To add the first property to the account, click Next.
Step 2: Create a new property in Google Analytics 4.
2.1 To add properties to a Google Analytics account, you must have the Editor role. You have the Editor role by default because you created this account.
An Analytics account can have up to 100 properties (any combination of Universal Analytics and Google Analytics 4 properties). Contact your support representative to increase this limit.
2.2 To make a property, do the following:
- Are you continuing from the previous step, “Create an Analytics account”? If yes, then you can skip step 1.2. Otherwise, check the Account column in Admin to ensure you’ve selected the correct account. Then, in the Property column, press the Create Property button.
- Enter a property name (for example, “Your Brand Name website”) and select the reporting time zone and currency. If a visitor arrives at your website on a Tuesday in their time zone but it’s Monday in yours, the visit is recorded as occurring on Monday.
- Google Analytics automatically adjusts for time changes if you select a time zone that observes Daylight Savings Time. If you do not want GA to modify for Daylight Savings Time, use Greenwich Mean Time.
- Changing the time zone does not affect existing data. When you change the time zone for an existing property, you may notice a flat spot or a spike in your data as a result of the time shift forward or backwards. After you update your settings, report data may refer to the old time zone for a short period until Analytics servers have processed the change.
- Click on the Next button and then choose your industry and business size.
- Click on the Create button and accept the Analytics Terms of Service and the Data Processing Amendment.
Step 3: Add a data stream.
3.1 If you are continuing from the previous step, “Create a new property” you can proceed to step 2. Otherwise, in Admin, check the Account column to ensure that your desired account is selected. Then, check the Property column to ensure that you have selected your desired property.
Click on Data Streams and then on the Add Stream button in the Property column.
3.2 Select iOS app, Android app, or Web.
To calculate the monthly website traffic growth rate:
[(#) Sessions from Current Month – (#) Sessions from Previous Month] / (#) Session from Previous Month X 100 = (%) Monthly Growth Rate
To calculate the yearly website traffic growth rate:
[(#) Sessions from Current Year – (#) Sessions from Previous Year] / # Session from Previous Year X 100 = (%) Yearly Growth Rate
Apart from website traffic, Google Analytics can also help you track other important metrics such as engagement, bounce rate, new and returning users, retention, revenue, events, demographics, and conversions.
2. Bounce rate (top-of-the-funnel):
This metric measures the percentage of people who leave your site without interacting with it. A lower bounce rate is a good indicator of high engagement and relevance of your content to your audience.
The formula for calculating the bounce rate
Single Page Sessions / Total Sessions = Bounce Rate
3. New leads (middle-of-the-funnel):
The main goal at the middle-of-the-funnel is to gather as many leads as possible from your top-of-the-funnel traffic. This can be tracked through email subscribers, relevant actions on your site, or qualified leads through a CRM.
4. Sales (bottom-of-the-funnel):
This is a straightforward metric that measures the number of sales made. Even if you work at a non-profit or don’t make sales online, you should still track this metric as it’s an indication of the quality and quantity of leads generated by your site.
5. Lead-to-sale conversion
The lead-to-sale conversion rate, also known as the sales conversion rate or lead conversion rate, is the percentage of a company’s qualified leads that result in actual sales. The metric is essential for assessing the effectiveness of a brand’s sales funnel.
The formula for calculating the lead-to-sale conversion rate
(Number of leads / Total number of visitors) x 100% = Lead-to-Sale Conversion Rate
6. Daily active user (DAU)
The number of unique users who interact with your app in 24 hours. DAU is frequently used by companies where users are expected to engage with the app daily, for example, news apps.
7. Monthly active users (MAU)
MAU is a key performance indicator (KPI) used by businesses to track the number of unique users who visited a site in the previous month.
8. DAU to MAU ratio
The Daily Active Users to Monthly Active Users Ratio or DAU/MAU Ratio measures the number of active monthly users daily.
In other words, this engagement metric counts the number of days per month when users engage in an activity that identifies them as active users. A higher DAU/MAU Ratio usually indicates high stickiness, which means that users return to the app regularly.
The formula for calculating DAU/MAU ratio
Daily active users / Monthly active users = DAU/MAU Ratio
9. Average order value (bottom-of-the-funnel):
This metric measures how much, on average, each customer spends when making a sale.
The formula for calculating Average Order Value
Revenue / Number of orders = Average Order Value
10. Churn Rate (Retention):
For subscription-based businesses, it’s important to track the churn rate, which is the percentage of customers who cancel their subscriptions during a period. Keeping this rate low is crucial for retention.
The formula for calculating Churn Rate
[(Lost customers / Total customers at the start of the period) x 100] = Churn Rate
11. Customer lifetime value (retention):
This metric represents the total revenue generated by a specific customer throughout their relationship with your company. The goal is to increase the customer’s lifetime value as much as possible.
The formula for calculating Customer Lifetime Value
[(Average Purchase Value x Average Number of Purchases) x Average Customer Lifespan] = Customer Lifetime Value
Retargeting to Boost Conversions
A consumer is exposed to approximately six to eight different marketing touch-points before making a purchase decision.
The main issue is that the majority of visitors will never return to your website to complete the transaction. So, how can you follow up and initiate six to eight contacts necessary to earn trust and interest all through the marketing funnel? Digital ad retargeting is the solution.
What is retargeting?
Ad retargeting, also known as remarketing, is a bottom-of-the-funnel campaign strategy in which you target users who have currently engaged with your website, content, or social media but have not yet converted for a sale.
Retargeting is a digital marketing technique that shows ads to users who have previously expressed interest in your product using data collected from various sources, including first-party data.
Where does retargeting fit in the sales funnel?
Whatever retargeting audience you choose, reaching users at the bottom-of-the-funnel will enable you to display your ads to people who have already indicated an interest in your brand.
During the conversion stage, you are interacting with customers who have all of the necessary information to make a purchase; all they need is the right offer. This is the point at which the content of your communications and the frequency with which you advertise could perhaps shift to a conversion strategy.
A retargeting campaign can assist you in delivering your best deal to the right audience, at the right time, and in the right place.
Consider a marketing campaign with a longer marketing cycle that aims to convert into a high-value sale. Retargeting is a strategy that can be used to focus on conversions as part of a larger strategy to move users through the sales funnel.
Example:
A car dealership utilised retargeting as a tool to reach users who built and valued a car on the website to move them further down the sales funnel. Their retargeting campaign enabled them to reach users who had completed other incremental goals such as finding a car dealer or requesting a quote.
In addition, to effectively target their most interested customers, the dealership used recency and frequency optimisation tools to fine-tune impressions and bids depending on the recency of the users engaging in the desired behaviours.
While retargeting is very effective in the later stages of the sales funnel, the success of your top-of-the-funnel campaigns will determine your overall results. These brand-building and educational efforts will provide an engaged group of people for your retargeting campaigns to actively pursue your best offers.
Types of retargeting strategies
1. Site retargeting
When most people think of retargeting campaigns, they envision site retargeting. You can create audiences of recent visitors to your website by leveraging the first-party data you’ve collected through your website. This will allow you to maintain contact with an engaged audience that has already seen some of your content.
2. Search retargeting
Search retargeting is a strategy that uses search engine data and user browsing history to target an in-market audience depending on the keywords they are searching for. With the help of specialised data partners, you can create search behaviour segments that can power your retargeting campaigns for in-market clusters.
3. Cross-channel retargeting
You can market to your ideal audience across all of their devices by utilising targeting data that can be collected from campaigns connected to TVs, desktops, and mobile campaigns. You can stay in front of shoppers after they visit your website or see your ads by layering retargeting tactics with your previously engaged audiences.
4. Creative asset retargeting
You can use creative asset retargeting to target users who have interacted with one of your ads in the last 60 days. This is an excellent audience to retarget by showing them additional ads to augment the content with which they have already engaged.
5. Social retargeting
Coordination and optimisation of your marketing efforts across social channels will allow you to continue reaching your audience on both the open web and closed social platforms. Social retargeting can be a highly effective way to increase sales and build relationships with customers who have left your website.
6. Conversion retargeting
If you are an entrepreneur of a business that has longer sales cycles and higher value conversions, targeting buyers who have transitioned to lower sales funnel activities will guarantee you are advertising to users who are already aware of your brand and ready to make a purchase.
7. Retargeting audiences for exclusion
You can also retarget to ensure that only new customers are reached throughout the marketing funnel. Using the same retargeting group, you can create a blocklist for campaigns, allowing you to target your brand message to prospective consumers before driving them down the sales funnel.
Sales Funnel: Frequently Asked Questions
Q1. What exactly is a sales funnel system?
The sales funnel is the purchasing process that businesses guide customers through when purchasing products.
Q2. What exactly is sales funnel AIDA?
AIDA is an acronym that stands for:
A: Consciousness
I: Interest
D: Desire
A: Action
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