Marketing Funnel Explained: How To Build & Why It Matters

Companies use marketing funnels as journey maps to plan out the process through which a customer is acquired.

By building out your own marketing funnel, you can uncover: 

• The stage at which most people drop off
• Which marketing efforts map to each stage a customer is at 
• The marketing tactics to double down on and where to pull back
• How to thoughtfully grow your business 

We spoke with Amanda Tallon, Account Strategist at growth marketing firm Shoelace, to learn how to create a more effective marketing funnel. Let's start now.

What is a marketing funnel? 

A marketing funnel depicts the path a customer follows from the first encounter they have with your business, such as reading a blog article, through the moment they make a purchase. Marketing funnels have many phases that correspond to various stops along the journey.

The largest group of potential customers is drawn in by the broadest portion of the funnel. They move down the horn when you interact with them through marketing or direct conversation, either dropping off or manufacturing a product.

A more straightforward funnel may only have three steps: conversion, contemplation, and awareness. The stages of awareness, interest, consideration, intent, evaluation and purchase might be included in a more complicated funnel. Others include an inverted funnel that connects advocacy and loyalty. You may divide your marketing funnel into three easy pieces or ten separate ones, depending on what would work best for you.

To keep things simple, we'll concentrate on the acquire, consider, and concert stages as well as post-purchase loyalty. Your top of the funnel (ToFu), middle of the funnel (MoFu), and bottom of the funnel (BoFu) will be covered by this.

💡 Did you know? E. St. Elmo Lewis pioneered the marketing funnel idea in 1898. His theory, currently referred to as AIDA, includes the following elements: attention, interest, desire, action, and satisfaction.

Why ecommerce businesses need marketing funnels

📈 Funnels encourage more meaningful growth. With the use of funnels, you can more easily arrange your marketing strategies and determine which strategies are most effective at each level of the funnel. For example, you may discover that TikTok videos are effective at raising awareness of your company but do little to encourage transactions. This enables more strategic development since you can expand on what succeeds and cut down on what doesn't.

❤️ Develop better customer relationships. To whom are you marketing? What interests them? What kinds of marketing are effective with them? Setting up a funnel enables you to understand your target market and what they want to be enthusiastic about purchasing from you.

💵 Master your purchase cycle. Your average order value determines how long it takes for merchandise to sell. It will take longer to sell an heirloom-caliber diamond necklace that costs $15,000 per piece than a piece of costume jewelry that costs $39, for example. But on average, how long does it take for both expensive and inexpensive things to sell? The marketing funnel provides you with insight into where to invest your money (and when) to get those items to sell within the average timeframe.

How business stage impacts your marketing funnel

Based on prevailing cultural trends, the products you sell, and the stage your business is in, your marketing funnel will progressively expand and mature. It's a model that changes. Similar to how you wouldn't construct a home and then leave it unattended, a building needs upkeep, care, and attention to survive.

The two primary elements that distinguish the marketing funnel of an established business from one that is just starting are brand awareness and revenue.

The ease of attracting new customers determines the amount of brand awareness your business has. If your brand is well known, you'll spend more on consideration and conversion and less on the awareness and acquisition legs of the funnel. Lower brand awareness necessitates early promotion and word-of-mouth, requiring more time and money spent on attracting new products to your offerings.

How much you can spend on marketing initiatives depends on how much money you bring in. The more revenue you bring in, the more money you have to spend on paid acquisition and getting fresh goods. Your marketing tactics will cost money if you're just starting and have a limited budget. Consider increasing your use of social media, blogs, and email marketing.

How to develop a marketing funnel

We'll construct the marketing funnel that is most appropriate for your business together. We go into the tactics for brand awareness and acquisition, consideration, conversion, and the loyalty end of the funnel.

Get to know your target audience 

Knowing your target market and customers is the first step, says Amanda. She advises doing a customer persona analysis if you haven't already determined your target audience.

Quantitative data for such an analysis may be gathered using Google Analytics or a third-party data source. You should seek out data on your clients' demographics and geographic locations.

A deeper understanding of your target audience will be provided by collecting qualitative data as well. You may get this information by speaking with customers directly after they've bought your product.

After that, you'll begin analyzing the data. Your choice of marketing channels and approach will be influenced by what you discover. You probably won't need to run LinkedIn ads, for instance, if you sell exclusively to adolescent females between the ages of 15 and 20.

After doing this investigation, you should be better able to understand the purchase process of your audience and the platforms they use most.

The following is a summary of the many things you may undertake to identify your target market:

• Look at cumulative purchase history across all customers. 
• Use digital analytics tools to gather quantitative information.
• Run an online survey through a tool like SurveyMonkey.
• Conduct one-on-one interviews with past customers.
• Do industry research to explore consumer trends and behavior. 
• Complete a competitive analysis by looking at competitors’ audiences.

Using these customers, develop buyer personas that describe the traits of the primary customer types that visit your shop.

Establish average order value and a consideration timeline

The average value of your clients' purchases is your average order value (AOV). Your AOV, for instance, would be $20 if your shop's revenue were $2,000 and there were 100 orders.

The AOV determines how much attention you give to each step of your marketing funnel. If you sell exquisite jewelry and your AOV is $1,000, your funnel's consideration stage will last a lot longer than it would for a store with a $20 AOV. A customer will likely give that big purchase more thought than they would a smaller one.

We can think about how this relates to the marketing funnel in this way:

The focus you place on the various components of your funnel and where you put your budget may be distinguished using this approach, according to Amanda.

Phase 1: Acquisition and awareness

Anyone who learns about your product and business is represented by the funnel's widest section. This may happen as a result of your own marketing efforts, a friend's referral, a Google roundup article, or a social network post. These people are aware of the existence of your business and may or may not need one or more of your products.

Your target audience and AOV will determine the approach you take at each stage of your funnel. However, there are a few activities that are typically appropriate for awareness and acquisition. You can run paid advertising at this stage of the funnel, but creating organic content and collaborating with influencers can position you for longer-term success.

In addition to assisting you with SEO traffic, blogging on your website encourages customers who are interested in learning more about your goods, company, or sector in general.

A social media presence has comparable benefits. Asking questions, writing comments, or sharing content with friends enables prospects to learn more about your products, get a feel for your brand's personality and voice, and engage with you.

Sometimes traffic just doesn't come. There are occasions when traffic is successful but conversions are unsuccessful. You must combine the two to grow and grow profitably.

John Hart, VP of Operations & Ecommerce for Peepers

Another excellent technique to interact with customers and engage them in learning more about your products is to invite them to join your email list. To get customers to sign up, several people provide a discount coupon. Other companies just make alluring content promises. Regardless of what you choose, giving someone the choice to subscribe provides you with a method to remain in contact with them even if they haven't made a purchase yet.

When you want to reach more people, consider working with micro-influencers.

It's becoming increasingly costly to acquire new audiences via sponsored search and social networks, Amanda told us, so I highly advise businesses to work with micro-influencers or leverage the audience they already have built up.

Between 10,000 and 50,000 people follow micro-influencers on social media. According to Amanda, if your brand aligns with that micro-influencer, there is a good probability that their followers will do the same for your company.

⚠️ Choose your acquisition tactics carefully

Even though we are now discussing awareness and acquisition, the strategies you use to increase traffic to your site should target prospects who have the potential to convert. For instance, a podcast might help you increase the amount of traffic to your website. Although the listeners are interested in your product, they are not your target audience and will never buy anything from you.

Peepers, a brand that offers fashionable spectacles, had a similar problem. The business, like many other e-commerce customers, is attempting to diversify its customer acquisition and shop traffic strategies. Although the team used excellent advertisements and compelling content, their non-traditional approaches only increased traffic, not sales.

You sometimes fail to acquire traffic, as John Hart, Peepers' VP of Operations and Ecommerce, told us. There are occasions when traffic is successful but conversions are unsuccessful. Both of these must be combined to expand both geographically and economically.

Phase 2: Consideration

The focus of consideration is on fostering and growing your connections with the people you met during the awareness phase. When a prospect reaches the consideration stage, they have discovered a need for your product. They could need it to make something, bring happiness, or offer it as a present. When a person reaches this stage, they are knowledgeable about your business, what you do, and the types of products you sell. They might be a subscriber to your email list or a fan on social media.

According to Amanda, email marketing is the top strategy for attracting prospects in the marketing funnel's consideration stage. The advantage? Because they are on your email list, these people have already committed to your brand in some way.

With email marketing, you may create a compelling personal narrative, according to Amanda. “You can promote your brand quite a bit in someone else's personal inbox.”

📩  Read more: 5 Best Email Marketing Tips to Grow Your Small Business

⚠️ Don’t leave consideration out in the cold

It's easy to overlook consideration and focus on the funnel's two ends—awareness and conversion. Although some customers may convert right away once you get them, Amanda cautions that sometimes they need more persuasion to really make a purchase.

Phase 3: Convert

This is the big moment; you've posted some excellent social media content, sent pertinent emails, and maybe even collaborated with a few influencers. It's now time to emphasize the advantages of your product, your company's mission, and your distinctive value propositions to persuade that potential customer to buy.

Run advertisements during the purchase stage if you don't have much money to spare and want to maximize your spending on revenue.

Amanda Tallon, Account Strategist at Shoelace

Two tactics are particularly effective at this stage:

💬 Customer conversations. Only when a customer is really interested in buying from you will they likely get in touch with you. They'll rely on you to take out any barriers in their way. Product explanations (Can I see a picture of the earrings on?  ), shipping queries (Will you ship from England to Canada?), or special requests (Can you make these in blue?) are a few examples of questions that could be asked. Speaking directly with a customer may help you win their trust, show them who you are and how you work, and allay any last-minute worries they may have.

📰 Paid ads. At each point in your marketing funnel, you may run sponsored advertisements, according to Amanda. But if you're tight on money, run ads throughout the purchase stage to maximize your return on revenue. Because prospects are already familiar with you, what you do, and the products you sell, paid ads may reach farther down the funnel at this stage. Advertisements are meant to act as reminders, so they should include language that emphasizes why your brand and products are superior to those of the competition.

The inverted funnel: inspire loyalty and get customers to return

One of the most cost-effective ways to increase your average order value is to get prior customers to return. “Getting a new customer may be quite costly for a business. “The ideal case scenario is for a customer to return and make a second, third, fourth, etc. purchase and increase their lifetime value,” says Amanda.

Starting with product creation, the Peepers team considers how to increase repeat business at every stage of their business plan. The team employs premium materials, produces products with outstanding designs that set them apart from rivals, and charges prices that are quite competitive.

The next step in that process is to provide the best customer experience possible, which is something John has tried to focus on even more. 

Here are three marketing initiatives we advise for the loyalty phase of the funnel, in addition to providing excellent customer service.

Try out a direct-mail campaign. The Peepers team uses direct mail to increase website traffic. There is so much here to play around with. Send a handwritten letter, a fun brand sticker set, or a postcard with a unique discount code—the possibilities are endless.

Ask for user-generated content. Amanda advises sending an email after a customer makes a purchase asking for a picture of their purchase and a review. You may send a coupon code for use on a future purchase when customers submit the required content. This provides you with new content for the funnel's awareness stage, encourages people to return, and encourages them to use their discount coupon.

Create a loyalty program. Loyalty programs are another technique to promote repeat business. Customers who make repeated purchases are rewarded via loyalty programs. A loyalty program run by Girlfriend Collective gives benefits depending on a customer's lifetime value. As a customer makes more purchases over time, they have access to incentives like free shipping and returns and early access to specials.

Tracking attribution through data and surveys

After completing your marketing funnel, the last step is to confirm that you are fully aware of the source of your traffic. This indicates where you should step up your efforts and where you should cut them down.

Relying entirely on analytics tools for attribution doesn't provide the whole picture since they don't take into consideration the content that has nurtured customers to the point of purchase. Amanda suggests creating post-purchase surveys to close this gap.

She remembers that after seeing low conversion rates on both the platform and Google Analytics, one customer was prepared to give up on TikTok as a marketing channel. TikTok, however, came in third place in their post-purchase survey for new buyers.

Despite being the second highest, Amanda says that “we considered the average order value to be much lower than other channels in the business in general.” We increased our TikTok ad spend as a result, realizing that it was creating a whole new market for us.

Include the following question in any post-purchase surveys you run: “How did you hear about us?” Make sure to provide a comment section and an “Other” option so that readers may give a precise reaction.

Unlock new opportunities with a marketing funnel

Some people have a quick and easy journey to becoming customers. Others take a circuitous route that passes through several barriers before committing.

Even though it provides a clear structure for marketing efforts, the marketing funnel does not accurately represent the journey of many customers. It is normal for certain customers to go through the acquisition, consideration, and conversion stages. Others will vacillate before making a decision.

In the end, marketing funnels assist you in clearly outlining your marketing initiatives for everyone, from ardent followers to strangers.