What Is Funnel Analysis? Why It’s Important

Picture of Phil Hughes
Phil Hughes

Imagine you’re running a lemonade stand and want lots of people to buy from you

To sell more lemonade, it helps to think about the steps people take to become customers.

Are they walking down the street? On the opposite side of the road? Do they need to cross over? How do they know what’s on offer?

This is a “marketing funnel”.

We’ll learn what it is and why it’s important.

It’s key to have this understanding of what a funnel is, to be able to do funnel analysis to see if a campaign is working.

What is a Marketing Funnel?

A funnel is usually wide at the top and narrow at the bottom.

And the term ‘marketing funnel’ is the journey people go on to become customers.

It’s called a funnel because lots of people start at the top, but fewer make it to the bottom.

At a high level. There are 3 stages of a marketing funnel, awareness, consideration and purchase.

Let’s look at them relating back to our lemonade stand

Awareness – The top is when people first learn about your lemonade stand.

Consideration – The middle is when they think about if they want to buy

Purchase – The bottom is when they decide to buy a cup of lemonade

So let’s say your funnel may be: 50 people see your sign, 10 come to check out your stand, and 5 decide to buy.

What is Funnel Analysis?

So what is funnel analysis?

A more “professional” definition could be: ” Tracking steps from initial contact to conversion.” This is very true in the world of digital marketing.

Let’s make it a little easier to understand.

Funnel analysis means looking at how many people move from the top to the bottom

You want to know how many people:

See your lemonade stand (awareness). Come to check it out (consideration). Actually, buy lemonade (purchase)

This helps you understand where you might be losing people.

Which parts of the funnel have a “leak”? Whereabouts are people leaving, where the attention is lacking.

For example, if lots of people see your sign but few come to your stand. It could be that your sign needs to be more exciting

Or if many people come but don’t buy, another option is your lemonade is too expensive.

Funnel analysis is like being a detective to figure out how to sell more lemonade!

Why is Funnel Analysis Important?

Funnel analysis helps you see where you can improve your marketing.

Which stage do we need to focus on? Is it a case of getting more people to the top of the funnel? Or is there a leak that we need to plug at the purchase stage?

It’s like a teacher grading a test to see what you got wrong so you can learn and do better next time

If you know a lot of people aren’t making it from one stage to the next, you can focus on making that part better.

This helps more people make it to the bottom of the funnel and become customers.

For your lemonade stand, you find out you need a bigger sign, a special recipe, or lower prices.

Funnel analysis shows you how to make your marketing better so more people buy from you

Conclusion: Funnel Analysis

Marketing funnels show the journey people take to become customers.

Funnel analysis means tracking how many people move through each stage. Going from awareness to consideration. Then, fingers crossed to the purchase stage.

This is important because it helps you see where to improve your marketing.

By making your funnel better, you can get more people to buy your products!

If you like to know more about how data and analytics can help you with your funnel analysis? Check out this article on Data-Driven Marketing.

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